TAMIL NADU NATIONAL LAW SCHOOL

B.A.LL.B., (HONS.), THIRD SEMESTER 2015-16

ECONOMICS PROJECT

ON

COUNTRY ECONOMIC ANALYSIS OF NETHERLANDS

PROJECT BY: - SUBMITTED TO:-

SIDDHARTH PANDEY PROF. S SATYAMOORTHY

BA0140061

SECTION-B

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ACKNOWLEDGEMENT

At the outset, I thank the Almighty who gave me the strength to accomplish this project with sheer hard work and honesty.

I take this opportunity to observe protocol to show my deep gratitude to our revered contracts Course Teacher,PROF. S SATYAMOORTHY (FACULTY) for his kind gesture in allotting me such topic as research project, which is full of knowledge and is related to our future study of the constitution. Her timely advice, direction and valuable assistance tremendously boosted me during the making of this project.

Secondly, all this wouldn’t have been possible without my parents and friends who gave their valuable time for guidance, boosted my confidence and helped me a lot in completing this project without any drawbacks. Hence I am forever indebted and grateful to them.

Thirdly, I am very much thankful to the staff and administration of TNNLS who provided valuable sources of information in the form of library and database connections.

The successful creation of this project is due to the background work and co-operation of many persons. So I once again take this opportunity and privilege to convey my deepest regards and thanks to all those who was involved directly or indirectly in the making of this project.

Date:-6-10-15

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SUPERVISOR’S CERTIFICATE

This is to certify that the Research Project cum Analysis of the country “Netherlands” submitted to the TAMIL NADU NATIONAL LAW SCHOOL, TIRUCHIRAPPALLI in fulfillment of the requirements for internal component for B.A; LL.B (HONS.), third Semester is an original and bona-fide research work carried out by SIDDHARTH PANDEY under my supervision and guidance. No part of this study has been submitted to any University for the award of any Degree or Diploma whatsoever.

PROF. S SATYAMOORTHY (FACULTY)

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INTRODUCTION

Netherlands is the sixth-largest economy in the euro-zone and is noted for its stable industrial relations, moderate unemployment and inflation, sizable trade surplus, and important role as a European transportation hub. Industrial activity is predominantly in food processing, chemicals, petroleum refining, and electrical machinery. A highly mechanized agricultural sector employs only 2% of the labor force but provides large surpluses for the food-processing industry and for exports. Netherlands, along with 11 of its EU partners, began circulating the euro currency on 1 January 2002. The Dutch financial sector suffered as a result of the global financial crisis, due in part to the high exposure of some Dutch banks to US mortgage-backed securities. In 2008, the government nationalized two banks and injected billions of dollars of capital into other financial institutions, to prevent further deterioration of a crucial sector. After 26 years of uninterrupted economic growth, the Dutch economy - highly dependent on an international financial sector and international trade - contracted by 3.5% in 2009. To recover, the government sought to boost the domestic economy by accelerating infrastructure programs, offering corporate tax breaks for employers to retain workers, and expanding export credit facilities. The stimulus programs and bank bailouts, however, resulted in a government budget deficit of 5.3% of GDP in 2010 that contrasted sharply with a surplus of 0.7% in 2008. The government of Prime Minister Mark RUTTE began implementing austerity measures in early 2011, mainly reducting expenditures, which resulted in an improved budget deficit in 2011. However, in 2012 tax revenues dropped, GDP contracted, and the budget deficit deteriorated. In 2013, the government budget deficit decreased to 3.3% of GDP due to increased government revenue from higher taxes. However, spending on social benefits also increased, due to a rise in unemployment benefits and payments for pensions. The high unemployment rate and tax increases have contributed to continued decreases in household disposable income, causing the Dutch economy to contract.

The Netherlands has a market-based mixed economy, ranking 17th of 177 countries according to the Index of Economic Freedom. It had the thirteenth-highest per capita income in the world in 2013 according to the International Monetary Fund. In 2013, the United Nations World Happiness Report ranked the Netherlands as the fourth happiest country in the world, reflecting its high quality of life1

1 http://www.oecd.org/eco/surveys/economic-survey-netherlands.htm

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ECONOMIC SNAPSHOT

1. Form of government:

Official name is Kingdom of the Netherlands. It is Conistitutional monarch consisting a Bicameral system of government. It has 75 members elected by provincial states and Second Chamber consists of 150 members, directly elected for a four-year term. The First Chamber can only approve or reject bills and may not initiate or amend them

Electoral system

It follows Universal direct suffrage over the age of 18. The whole country forms a single constituency, and the Second Chamber is elected by the system of proportional representation. The First Chamber is elected indirectly

Head of state

King Willem-Alexander, who acceded to the throne on April 30th 2013. The role of the monarch goes beyond the purely ceremonial. The monarch co-signs new acts of parliament, contributes to the formation of new governments and presides over the Council of State (an advisory body on legislation and administrative court)

National government

It consists of Council of Ministers headed by the prime minister, responsible to the crown government of the centre-right People’s Party for Freedom and Democracy and centre-left Labour Party was formed in November 5th 2012 and Mark Rutte (VVD) became the prime minister.

2. GDP:

The GDP in Netherlands was worth 869.51 billion US dollars in 2014. The GDP value of Netherlands represents 1.40 percent of the world economy. GDP in Netherlands averaged 322.57 USD Billion from 1960 until 2014, reaching an all time high of 931.29 USD Billion in 2008 and a record low of 12.28 USD Billion in 1960. GDP in Netherlands is reported by the World Bank Group.2

2 http://www.nationmaster.com/country-info/stats/Economy

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3. Population:The Netherlands is the 64th most populated country in the world and as of July 26, 2015 it has a population of 16,924,632. It the twenty-seventh most densely populated country in the world with an area of 41,526 km and has a population density of 500 per km.

4. Unemployment: Unemployment Rate in Netherlands The was unchanged at 6.8 percent in August, the same as in the previous month and the lowest since February of 2013. In August last year, the unemployment rate was recorded at 7.2 percent.3

5. Country rating: The rankings granted to netherlands by different institutions are as follows; International Monetary Fund: Income per capita in purchasing power parity ranked 9

out of 181 (2011) United Nations Development Programme: Human Development Index ranked 3 out

of 169 (2011) Gallup World Poll: happiness ranked 4 out of 155 (2009) World Economic Forum: Global Competitiveness Report ranked 5 out of 144 (2012–

2013). Institute for Economics and Peace: Global Peace Index[2] ranked 25 out of 152 (2011) The Economist: Democracy Index ranked 10 out of 167 (2011)4

3 http://www.tradingeconomics.com/netherlands /unemployment-rate4 en.wikipedia.org/wiki/International_rankings_of_the_Netherlands

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6. Netherlands TradeThe Netherlands is an export-oriented economy and derives more than two-thirds of its GDP from the merchandise trade. Main exports are: machinery and transport equipment (28 percent of total exports), mineral fuels (23 percent), food (11 percent), clothing and footwear (10 percent) and pharmaceuticals (5 percent). Netherlands main imports are: fuel (29 percent of total imports), machinery (26 percent) and food and live animals (8.6 percent). Main trading partners are Germany (24 percent of total exports and 17 percent of imports) and Belgium (12 percent of exports and 10 percent imports). Others include: China, France, United Kingdom and United States. This page provides the latest reported value for - Netherlands Balance of Trade - plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news. Content for - Netherlands Balance of Trade - was last refreshed on Saturday, October 3, 2015. 5

7. Gini Coefficient:

5 http://www.tradingeconomics.com/netherlands/gdp-growth-annual

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Gini index measures the extent to which the distribution of income (or, in some case, consumption expenditure) among individuals or households within an economy deviates from a perfectly equal distribution.6.

The Gini Coefficient of Mauritius in the index is 28.9.

ECONOMIC HISTORY OF NETHERLANDS

As World War II approached, the Netherlands attempted to retain their neutrality, as they had done in World War I, which resulted in the nation coming out untarnished (Dutch Ministry of Foreign Affairs). Queen Wilhelmina made arrangements with Hitler, prior to the war not to invade her country (Spencer Tucker, Priscilla Mary Roberts, 2005). The Dutch remained confident in this agreement, but in 1935 began arming their military for defensive purposes. The Dutch also maintained their traditional defensive plans which were based on pre-modern warfare; such as “Fortress Holland” which consisted of destroying dikes and dams to create barriers, and did not account for modern weaponry (The Greb Foundation , 2008).

In May 1940 Hitler began his invasion of the country, and claimed victory within five days (Woolf, 1999). At this time the government went into exile in England working to rally Dutch support and maintain morale within their home country (Ganse, 2007). The Netherlands remained occupied and civilly administered by the Nazis throughout the war without major damage to their infrastructure. Hitler ordered occupying officials to work to link the German and Dutch economies together, because the Dutch were considered part of the Arian race. Nazis ordered the country to be put to full use to support the war effort; skilled workers and food production capabilities were exploited throughout the occupation (Spencer Tucker, Priscilla Mary Roberts, 2005).  Nearing the war’s end, as allied powers retook the country, the Nazis retaliated against the Dutch reclamation by attempting to destroy much of the country’s infrastructure. This resulted in mass starvation during the winter of 1944 to 1945 leading to it being called “Hunger Winter.” Mass starvation occurred because of transportation breakdowns from strikes ordered by the exiled Dutch government to assist allied powers advancements, as well as the destruction of dams, dikes, and bridges to defend against the oncoming Allie troops by the Germans. Although the Netherlands may have trekked through German occupation, by the end of World War II, it was considered to be one of the most damaged European nations (Anderson, 1995).

6 http://data.worldbank.org/indicator/SI.POV.GINI

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The Dutch government returned to the Netherlands from its exile in London in 1945. The government, while in London, had created plans which would speed the country’s challenging industrial and economic reconstruction. Queen Wilhelmina and her government already had been working on plans to make the government more democratic than it had previously been (Enyclopedia Britannica, 2008). The government established rations of food and textiles which helped equally distribute goods throughout the country, and created resources to be used in reconstruction (Jonge, 1952).The government established social programs to aid the recovering population, and encouraged rapid industrialization to rebuild the country’s infrastructure using grants, tax breaks, and national business strategies. Much of the money used to assist the country came from the United State’s Marshall Plan.

The post war period set the stage for what makes up the Netherlands today. World War II brought about mass struggle and devastation to the Dutch people, causing the government to react upon their return from exile to create programs assisting the people in starting their postwar lives. The welfare and social programs the Dutch government created to aid post war victims today, on tax payers’ money, instead of money gifted to the country by the Marshall Plan. These programs are considered a model network of social programs by some, but are often a deterrent to multinational corporations as a barrier to invest in the Netherlands economy, because of the higher operating costs from taxes to support the governments’ expenditures.

The Netherlands economy is structured largely by what remained undestroyed of the post war infrastructure. The Netherlands owes that it is the distributer of international goods to Germany’s investment into seaports during Nazi occupation, government economic reconstruction plans, as well as the country being in a key location in Western Europe. The Dutch government after the war invested itself into the private sector, which led to many state owned corporations, many of which continue today. The government’s low cost production plans, subsidies, and wage regulations after the war allowed business income to be reinvested in the economy and guided the country to become a major manufacturer of electronics and chemicals. The government worked progressively to unify Europe for protection and economic success which further pushed it away from its agricultural origins and into the newly evolving global economy.

Following the majority of reconstruction in the Netherlands, the country entered a period of economic expansion that began in 1950 and continued until the early seventies ( Naastepad, Kleinknecht, 2004). This period is known as the “Golden Age” of the Dutch economy; not to be confused with the seventeenth century Dutch Golden Age of economic expansion (Dutch Ministry of Foreign Affairs). It is marked by Western Europe, as well as the Netherlands, completing reconstruction and focusing on constructing their long term economies. The Dutch economy grew between four and five percent per year, the labor force doubled as well as capital

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stock; largely within the manufacturing sector whose labor productivity increased by six percent (N. F. R. Crafts, Gianni Toniolo, 1996).7.

GDP (Gross Domestic Product)The gross domestic product (GDP) measures of national income and output for a given country's economy. The gross domestic product (GDP) is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time.

The GDP in Netherlands was worth 869.51 billion US dollars in 2014. The GDP value of Netherlands represents 1.40 percent of the world economy. GDP in Netherlands averaged 322.57 USD Billion from 1960 until 2014, reaching an all time high of 931.29 USD Billion in 2008 and a record low of 12.28 USD Billion in 1960. GDP in Netherlands is reported by the World Bank Group.8

On the assumption that the purpose of an economic indicator is to give an impression ofoverall economic developments in the future, GDP is in principle a more suitable referenceseries than manufacturing output. After all, manufacturing output accounts for only 15% ofDutch GDP, while the services sector accounts for 50% of GDP. Although it must be said thatthe small share of manufacturing output need not as such be a reason for disqualification in thisregard. For if the industrial sector is broadly as dynamic as the services sector, then the smallshare of manufacturing in the total economy is not a problem. Moreover, GDP has a practicaldisadvantage in that the actual figures only become available on a quarterly basis, whereas

7 http:// andersonmwa.wordpress.com8 http://data.worldbank.org

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manufacturing output figures are published every month.

GDP- PPP

The GDP per capita PPP is obtained by dividing the country’s gross domestic product, adjusted by purchasing power parity, by the total population. This page provides the latest reported value for - Netherlands GDP per capita PPP - plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news.

The Gross Domestic Product per capita in Netherlands was last recorded at 45280.55 US dollars in 2014, when adjusted by purchasing power parity (PPP). The GDP per Capita, in Netherlands, when adjusted by Purchasing Power Parity is equivalent to 255 percent of the world's average. GDP per capita PPP in Netherlands averaged 40815.34 USD from 1990 until 2014, reaching an all time high of 47388.18 USD in 2008 and a record low of 32534.04 USD in 1990. GDP per capita PPP in Netherlands is reported by the World Bank.

GDP Rank

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The rankings granted to netherlands by different institutions are as follows; International Monetary Fund: Income per capita in purchasing power parity ranked 9

out of 181 (2011) United Nations Development Programme: Human Development Index ranked 3 out

of 169 (2011) Gallup World Poll: happiness ranked 4 out of 155 (2009) World Economic Forum: Global Competitiveness Report ranked 5 out of 144 (2012–

2013). Institute for Economics and Peace: Global Peace Index  ranked 25 out of 152 (2011) The Economist: Democracy Index ranked 10 out of 167 (2011)9

GDP Growth (trend for the last few decades)

The Gross Domestic Product (GDP) in Netherlands expanded 1.80 percent in the second quarter of 2015 over the same quarter of the previous year. GDP Annual Growth Rate in Netherlands averaged 2.09 percent from 1989 until 2015, reaching an all time high of 5.80 percent in the fourth quarter of 1999 and a record low of -4.40 percent in the second quarter of 2009. GDP Annual Growth Rate in Netherlands is reported by the Statistics Netherlands.

GDP – Composition by sector of origin

9 en.wikipedia.org/wiki/International_rankings_of_the_Netherlands

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This entry gives the percentage contribution of agriculture, industry, and services to total GDP. The distribution gives the percentage contribution of agriculture,industry, and services to total GDP, and will total 100 percent of GDP if the data are complete. Agriculture includes farming, fishing, and forestry. Industry includes mining, manufacturing, energy production, and construction. Services cover government activities, communications, transportation, finance and all other private economic activities that do not produce material goods.

Nethrelands spends on agriculture: 2.6%,   industry: 25.4%, services: 72.1%, healthcare 7.0% of GDP of its GDP as estimated in the year 2015.

(SOURCES: CIA World Factbooks 18 December 2003 to 28 March 2011 )

Agriculture Agriculture GDP in Netherlands was last measured at 1.65 in 2013, according to the World Bank. Agriculture corresponds to ISIC divisions 1-5 and includes forestry, hunting, and fishing, as well as cultivation of crops and livestock production. Value added is the net output of a sector after adding up all outputs and subtracting intermediate inputs. It is calculated without making deductions for depreciation of fabricated assets or depletion and degradation of natural resources. The origin of value added is determined by the International Standard Industrial Classification (ISIC), revision 3. Note: For VAB countries, gross value added at factor cost is used as the denominator.This page has the latest values, historical data, forecasts, charts, statistics, an economic calendar and news for Agriculture - value added (% of GDP) in Netherlands.10

Manufacturing Gdp From Manufacturing in Netherlands increased to 17441 EUR Million in the second quarter of 2015 from 17287 EUR Million in the first quarter of 2015. Gdp From Manufacturing in Netherlands averaged 16029.54 EUR Million from 1995 until 2015, reaching an all time high of 18817 EUR Million in the first quarter of 2008 and a record low of 12626 EUR Million in the second quarter of 1995. Gdp From Manufacturing in Netherlands is reported by the Statistics Netherlands.11

10 http://www.tradingeconomics.com/netherlands11 http://www.hollandtrade.com/business-information/holland-information

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Tourism

The contribution of the tourism sector to Dutch GDP rose from 3.2 percent in 2010 to 3.6 percent in 2013 according to the latest figures released by Statistics Netherlands today. The tourism sector is mainly growing because more foreign tourists visit the Netherlands and because there are more foreign bookings with Dutch companies.

Netherlands focuses on the development of two sectors government (public administration, defence and subsidised education) and health care (including pharmaceuticals) .

Both sectors are of great economic importance in the Netherlands. In terms of value added, theyconstitute about one fifth of the Dutch economy. In terms of employment and final consumptioneven about one quarter is involved. Furthermore, these sectors have in common that they aremainly financed publicly (by social security contributions and taxes) and that productivitygrowth is relatively slow. Baumol’s cost disease model suggests that this can lead to increasingpressure on public finance and to negative effects for economic growth and inflation.

Government sector

The government sector refers to all activities of the government, such as defence (1% of GDP in2001), education (4% of GDP) and public administration (6% of GDP). Public administrationcomprises a wide variety of activities. Policy preparation and organising the democraticdecision-making process is only a minor part of the activities. The major activities are theprovision of specific services, like police, justice, construction and maintenance of roads, thecollection of taxes and social security contributions and the distribution of social benefits andsubsidies.

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The final consumption expenditure on the services of the government (public administration,defence and subsidised education) will grow in the public scenarios from 13.6% GDP in 2001to about 15 or 16% GDP in 2040. In Regional Communities, the relative importance of publicadministration will increase; this is partly compensated by lower expenditure on education, inparticular due to a decline in the number of pupils and students. In Strong Europe, the relativesize of public administration will grow less and at more selected areas. In this scenario,expenditure on defence and education will increase; the latter is mainly due to demography.The two market scenarios show an entirely different development for government services:a decrease from 13.6% GDP in 2001 to 11% GDP in 2004. In Transatlantic Market and GlobalEconomy, the role of the services provided by the government is more limited, substantialsavings are attained on administrative costs and school fees are raised. In Global Economy, the

Health careHealth expenditure; public (% of government expenditure) in Netherlands was last measured at 20.67 in 2013, according to the World Bank. Public health expenditure consists of recurrent and capital spending from government (central and local) budgets, external borrowings and grants (including donations from international agencies and nongovernmental organizations), and social (or compulsory) health insurance funds.This page has the latest values, historical data, forecasts, charts, statistics, an economic calendar and news for Health expenditure - public (% of government expenditure) in Netherlands.

In 2001, the value added of the sector Health care (Health and social work activities) in thenational accounts was 7.0% of GDP. Expenditure on health care (or final consumption)amounted to 8.7% of GDP.

The sector Health care covers nearly all types of care financed by social-securitycontributions (Medical Health Fund Act (ZFW) and the Exceptional Medical Health Act), taxes(e.g. municipal preventive health care and welfare work), private health-care insurance and paiddirectly by households. However, excluded are pharmaceuticals (1.3% of GDP) and theadministrative costs of running private and public health-care insurance (0,3% GDP). Includingalso these types of expenditure would imply a figure of 10,3% of GDP3. Most of theseexpenditures on health care are financed via social security contributions. In all four scenarios, expenditure on health care as a percentage of GDP will increase, from 10.3% in 2001 to between 16.8% (Strong Europe) and 18.7% (Global Economy) in 2040.12

Ageing and progress in medical technology are major driving factors behind this growth.Ageing does not only increase expenditure on health-care services, but also substantially alters its composition. Progress in medical technology is potentially even a more important driving factor than ageing. However, the impact of medical technology on expenditure on health care depends also on the economic growth and the role of public arrangements. More economic growth

12 http://ssrn.com/abstract=996550

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increases the income available for consuming new technology. Citizens and patients will be willing to spend a substantial part of their increase in material welfare on better healthcare. Lower economic growth reduces the financial means for new medical technology, in particular when public arrangements play a dominante role.

GDP– Composition by sector of origin

a. Main goods/products in each sector

Inflation and interest rateNetherlands Inflation Rate   The inflation rate in Netherlands was recorded at 0.80 percent in August of 2015. Inflation Rate in Netherlands averaged 3.38 percent from 1971 until 2015, reaching an all time high of 11.19 percent in November of 1974 and a record low of -1.30 percent in February of 1987. Inflation Rate in Netherlands is reported by the Statistics Netherlands.13

In Netherlands, the most important categories in the consumer price index are: housing, water, electricity and gas (24.5 percent of the total weight); transport (11.6 percent) and food and non-alcoholic beverages (11.3 percent). The index also includes: recreation and culture (10.3 percent); furnishing and household equipment (6 percent); clothing and footwear (4.9 percent);

13 http://www.tradingeconomics.com/netherlands

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hotels and restaurants (4.2 percent); communication (3.3 percent) and alcoholic beverages and tobacco (3.1 percent). Health, education and other goods and services account for the remaining 20.8 percent of total weight.14. 

Netherlands Interest Rate The benchmark interest rate in Netherlands was last recorded at 0.05 percent. Interest Rate in Netherlands averaged 2.31 percent from 1998 until 2015, reaching an all time high of 4.75 percent in October of 2000 and a record low of 0.05 percent in September of 2014.15

Netherlands Money Last Previous Highest Lowest Unit

Interest Rate 0.05 0.05 4.75 0.05 Percent

Interbank Rate -0.03 -0.02 9.90 -0.03 Percent

UNEMPLOMENT Netherlands Unemployed Persons The number of unemployed persons in Netherlands increased to 604 Thousand in August of 2015 from 603 Thousand in July of 2015. Unemployed Persons in Netherlands averaged 468.06 Thousand from 2003 until 2015, reaching an all time high of 699 Thousand in February of 2014 and a record low of 310 Thousand in August of 2008. Unemployed Persons in Netherlands is reported by the Statistics Netherlands.

Netherlands Unemployment Rate 

The seasonally adjusted jobless rate in Netherlands was unchanged at 6.8 percent in August, the same as in the previous month and the lowest since February of 2013. Unemployment Rate in Netherlands averaged 5.43 percent from 2003 until 2015, reaching an all time high of 7.90 percent in February of 2014 and a record low of 3.60 percent in February of 2008. Unemployment Rate in Netherlands is reported by the Statistics Netherlands.16

14 http://data.worldbank.org15 http://data.worldbank.org16 http://data.worldbank.org

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FISCAL HEALTH, ANNUAL GROWTH, AND FOREIGN EXCHANGES RESERVES

Annual Growth

The Gross Domestic Product (GDP) in Netherlands expanded 1.80 percent in the second quarter of 2015 over the same quarter of the previous year. GDP Annual Growth Rate in Netherlands averaged 2.09 percent from 1989 until 2015, reaching an all time high of 5.80 percent in the fourth quarter of 1999 and a record low of -4.40 percent in the second quarter of 2009. GDP Annual Growth Rate in Netherlands is reported by the Statistics Netherlands.17

Netherlands Foreign Exchange Reserves Foreign Exchange Reserves in Netherlands increased to 35038 EUR Million in August from 34670 EUR Million in July of 2015. Foreign Exchange Reserves in Netherlands averaged 25045.57 EUR Million from 1999 until 2015, reaching an all time high of 44319 EUR Million in September of 2012 and a record low of 15694 EUR Million in March of 2005. Foreign Exchange Reserves in Netherlands is reported by the De Nederlandsche Bank.

17 http://www.tradingeconomics.com/netherlands/gdp-growth-annual

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CURRENCY

The Netherlands began using the euro currency on January 1st of 2002. The Netherlands is a founding member of the EU (European Union), the OECD (Organization for Economic Co-operation and Development) and the WTO (World Trade Organization).

The Netherlands (EUR) has an open, capitalist economy with a flexible labor market. Netherlands's Fundamental Currency Analysis (short term investment): The Netherlands is part of the Euro economic zone, whose currency is moderately valued on a global scale per the purchase price parity analysis. Netherlands's Value Investor Survey (short term investment): The Netherlands’ economic environment is very favorable for long term economic growth due to high scores on government transparency, economic diversity, and the SWOT analysis. Netherlands's Currency Trading Strategy: An moderately valued currency, low investment flow potential, but very favorable business environment leads to a neutral outlook for Dutch investments.

This service analyses and forecasts the credit risk posed by Netherlands and provides a regularly reviewed country risk rating. In addition to the currency, sovereign debt and banking sector risks posed by Netherlands, the service also looks at political, economic policy and economic structure risks. You also receive short- and medium-term economic and political forecasts for the country.18

18 https://store.eiu.com/

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GNP ( Gross National Product)

Gross National Product ( GNP) is an economic statistic that includes GDP, plus any income earned by residents from overseas investments, minus income earned within the domestic economy by overseas residents.

Gross National Product in Netherlands increased to 165016.60 EUR Million in the second quarter of 2015 from 164336.30 EUR Million in the first quarter of 2015. Gross National Product in Netherlands averaged 129675.08 EUR Million from 1988 until 2015, reaching an all time high of 173843.60 EUR Million in the fourth quarter of 2007 and a record low of 76625 EUR Million in the third quarter of 1988. Gross National Product in Netherlands is reported by the Statistics Netherlands.

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FOREIGN INVESTMENT 

A Foreign Direct Investment (FDI) is a controlling ownership in a business enterprise in one country by an entity based in another country.

The origin of the investment does not impact the definition as an FDI, i.e., the investment may be made either "inorganically" by buying a company in the target country or "organically" by expanding operations of an existing business in that country.

Around 6,300 foreign companies have established their operations, including the likes of BASF, Cisco Systems, Microsoft, Nike, Sabic, Siemens and Yakult. The Netherlands is one of the largest recipients of FDI in the world. Foreign companies made inward direct investments worth 589 billion US dollars (431 billion euros). Foreign investors provide 15% of Dutch employment.

The Netherlands is a stable and vibrant parliamentary democracy, recognized worldwide for its transparency, fairness and effectiveness. According to the World Bank, the Dutch government is one of the most effective in the world. Our political system is characterized by plurality and consensus-building, resulting in coalition governments that truly represent the voice of the people. The Dutch were one of the first countries in the world to give women the right to vote (1922).

The legal system is fair and transparent and well equipped to deal with business, trade, taxation and patent issues. There are specialized courts for dealing with criminal and administrative issues, as well as with tax law, planning law, environmental law and trade and commerce. There is a rich variety of world-class law firms – both home grown and large international ones – that can provide assistance with tax law, mergers and acquisitions, and European law. The Hague is the seat of the European Patent Office.

The Dutch tax system has a number of features that may be very beneficial in international tax planning. The relevant factors include a corporate income tax rate of 20% on the first 200,000 euros, and 25% for taxable profits exceeding 200,000 euros, which is well below the EU national average.Companies can benefit from an effective tax rate of only 5% for R&D income from self-developed patented intangible assets and also from self-developed unpatented intangible assets which qualify for the so-called WBSO. The Dutch ruling practice, which provides clarity and certainty on tax assessments in advance, can be obtained on future transactions, investments or corporate structures. There is also a broad tax treaty network. The Netherlands has signed treaties with more than 80 countries that ensure the avoidance of double taxation on income and capital. This reduces withholding taxes on dividends, interests and royalties (for interest and royalties, in some cases, taxes are reduced to 0 %). 

There are no withholding taxes on outgoing interest and royalty payments. Dutch tax law also provides the participation exemption, which states that all benefits related to a qualifying

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shareholding, including cash dividends, dividends-in-kind, bonus shares, hidden profit distributions and capital gains, are exempt from Dutch corporate income tax.Investors can benefit from a 30% tax break for highly qualified foreign employees

The Netherlands offers a highly pleasant living environment. Leisure amenities are within easy reach and Dutch cities have much to offer, such as the centuries-old architecture of Amsterdam, Delft and Leiden as well as cultural activities and world famous museums such as the Van Gogh Museum and the Hermitage Amsterdam. Housing is also fairly affordable compared to other countries, according to IMD. In addition to the various international schools in the Netherlands, a large and growing number of schools  teach in two languages (mostly Dutch and English). Finally, the Dutch healthcare system officially ranks among the world’s best, according to the Commonwealth Fund.19

FDI in Figures

The UNCTAD 2014 World Investment Report classifies the Netherlands as one of the largest potential investors for 2013-2015. In fact, companies active in the Netherlands are more likely to invest abroad. A strong international orientation and a liberal policy towards foreign investment characterise the Netherlands' policies in this field. Many Dutch companies are multinational by nature and some of these are listed on foreign stock markets. There are no regulatory restrictions on foreign direct investment. 

After slowing down in 2012, FDI again recovered in 2013, a trend which strengthened in 2014. In 2013, the Netherlands Foreign Investment Agency was involved in supporting 193 projects, which represented EUR 1.7 billion in FDI and created 8,500 new jobs. As to the number of projects, in 2013 the United States was the largest investor, followed by China, South Korea, the United Kingdom and India.

Foreign Direct Investment

2012 2013 2014

FDI Inward Flow (million USD)

17,655 32,039 30,253

FDI Stock (million USD)

684,397 735,361 664,442

Number of Greenfield Investments**

168 161 166

19 http://www.hollandtrade.com/business-information/holland-information/foreign-investment/

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Foreign Direct Investment

2012 2013 2014

*

FDI Inwards (in % of GFCF****)

11.2 20.6 18.7

FDI Stock (in % of GDP)

83.1 86.1 76.7

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TRADING IN NETHERLANDS (IMPORT-EXPORT)

Netherlands has a liberal economic and trade policy. The country is a member of the WTO, as well as many other regional economic groups (COMESA, SADC, and IOC). The Netherlands earns almost 30% of its income from the export of goods and services. In 2012, the value of exports was 86.7% of the Netherlands' GDP.

Holland’s exports totalled 404.6 billion euros in 2011, up 8.9 % from 2010. Holland’s export trade was the second-highest in Europe after Germany. Our prominence in European exports can mainly be attributed to transit exports to other European countries. In this sense, we really are the gateway to Europe for many products from other regions. Half of our exports consist of transit exports.

As the fifth largest exporter of goods in the world, the Netherlands occupies a prominent position when it comes to world trade. In 2011, the Netherlands exported goods worth a total of more than 638 billion US dollars, which is 3.8 % of the world's total exports.The Netherlands is also a significant exporter of commercial services - exports of commercial services amounted to 131 billion US dollars (Statistics Netherlands 2012) in 2011, which placed the country ninth in the world rankings.

The Netherlands is the second-largest exporter of agricultural products worldwide, after theUnited States.In 2012, Holland's most important export partners were: Germany (24.1%); Belgium (12.1%);France (8.9%); UK (8.0%); Italy (4.8%) and US(4.1%).In 2012, Holland's most significant import partners were: Germany (16.7%); Belgium (10.0%);China (8.4%); UK ( 6.7%); US (6.6%) and France (4.6%).

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THE GLOBAL FINANCIAL CRISIS AND ITS EFFECTS ON THE NETHERLANDS

World trade fell by almost 6% quarter-on-quarter in the fourth quarter of 2008, and even by 11% in the first quarter of 2009. Such near collapses are bound to have considerable consequences for export-oriented open economies like the Netherlands. Figure 1: export of goods and services (% of GDP, 2007) 0 20 40 60 80 100 Greece United Kingdom Spain France Italy Portugal EU Euro area Finland Germany Sw eden New member states Austria The Netherlands Ireland Belgium Luxembourg* * Luxembourg stood at 180% and falls outside the scale.20

The financial crisis affected the Dutch economy through three channels: plummeting global demand, problems with bank balance sheets, and the decline in producer and consumer confidence. To each of these channels the Dutch economy seems to be relatively vulnerable, compared to other European countries.

At the outbreak of the global financial crisis, the Dutch economy was assessed to be relatively well prepared to weather the storm, given its very low unemployment level, large and stable current account surpluses, a low government debt level and, at that time, a budget in surplus. The fact that the Netherlands seemed to remain untouched by the (then) overseas problem, supported this view. Economic growth remained robust and above the euro area average throughout 2007. However, the negative effects of the financial crisis became more apparent in 2008 and economic growth came to a grinding halt in the second quarter. For 2009, GDP growth is expected to show the sharpest contraction ever and to be below the euro area average. In the wake of the crisis, typical Dutch strengths, like the pension system and its strong position in world trade, now have turned out to be vulnerabilities. On the other hand, the capacity of the economy to recover seems to be relatively robust in the Netherlands. It has a highly flexible labour market, a low unemployment and a very high participation rate. Furthermore, the government's budget surpluses of the …supported by a flexible labour market. ECFIN Country Focus Volume 6, Issue 10 Page 7 past years enabled the government to allow the full working of the automatic stabilisers and to implement stimulus measures. Also, the low level of government debt enabled the government to intervene in the financial markets. Furthermore, the considerable current account surplus diminishes the Dutch dependency on foreign capital, making the country less dependent on changes in international capital flows. This does mean, however, that over the coming years a considerable fiscal adjustment will have to be made, not least to address the rising fiscal cost of ageing and the cost of bank rescues, while occupational pension funds will have to recover their losses or adjust contribution and benefit rates. Hence, for all its comparative strengths, tough times are ahead for the Dutch economy.21

20 http://ec.europa.eu/economy_finance/publications/publication16339_en.pdf21 Centraal Planbureau (2008), CPB Memorandum 199.

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SWOT ANALYSISThe Strategy contains a Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis which identified major strengths as political stability, dynamic entrepreneurship, favourable trade agreements, strong public / private sector dialogue and shared goals, and positive economic and social indices. Weaknesses include uncoordinated institutional support, inadequate economic infrastructure, weak technology / innovation base and inadequate R & D, low productivity, product and market concentration and an inward oriented manufacturing sector.

Weakness

(a) The limited attention attached to career guidance, and particularly to contacts with the labour market, within the general education part of the education system.

(b) More generally, the fragmented nature of the guidance system as a whole: arguably, it is not currently a system at all, in any meaningful sense, but a series of disconnected entities.

(c) The lack of accountability, monitoring and quality assurance: this is particularly evident in relation to schools, but is an issue in all sectors.

(d) The lack of clarity regarding the role of government within a decentralised and marketised system. Seven years later it can be concluded that these weaknesses still stand very strongly. More background to the Dutch guidance system and its weaknesses can be found in Jansen, 2006.

Strengths of the Dutch guidance are also pointed out in OECD, 2002. This report mentioned as potential strengths of the Dutch guidance system 3

(a) The extent and quality both of labour market information and of consumer information, for use in guidance.

(b) The formal affirmation within the vocational education system of the central importance of the student’s career path.

(c) The emergent market in career guidance and information services created by the policy of decentralisation and marketisation: still limited and fragile, but with potential for development.

(d) The network of Public Employment Services, in Dutch since 2009 ‘UWV Werkbedrijf’ (formerly known as CWI), alongside the werk.nl website and the proposed customer support centre.

REFERENCES

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1. http://www.oecd.org/eco/surveys/economic-survey-netherlands.htm2. http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Fact-3. http://www.hollandtrade.com4. http://data.worldbank.org/indicator/SI.POV.GINI5. Wikipedia.org6. www.levensontwerp.nl7. http://www.tradingeconomics.com/mauritius/unemployment-rate8. http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Fact-

Sheets/DB15/DB15SSAFactSheetEnglish.pdf9. http://hdr.undp.org/en/content/table-1-human-development-index-and-its-components10. http://data.worldbank.org/indicator/SI.POV.GINI11. http://www.globalfinance.mu/index.php?

option=com_content&view=article&id=115&Itemid=46112. http://www.ukessays.com/essays/economics/impact-of-the-financial-crisis-globally-and-

in-netherlands-economics-essay.php13. http://ec.europa.eu/economy_finance/publications/publication16339_en.pdhttp://

data.worldbank.org/indicator/SI.POV.GINI14. http://www.hollandtrade.com/business-information/holland-information/foreign-

investment15. Centraal Planbureau (2008), CPB Memorandum 199.

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Thankyou

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