The Netherlands holds its ground in top 10 of world’s most competitive economies
The Dutch remain in the eighth place in the Global Competitiveness Report compiled by the World Economic Forum (WEF). The Report assesses the competitiveness of 144 economies, providing insight into the drivers of their productivity and prosperity. Data for the Netherlands was collected by research institute INSCOPE: Research for Innovation at Erasmus Research Institute of Management (ERIM), and was led by Professor Henk Volberda.
INSCOPE is part of ERIM, a joint research institute of Rotterdam School of Management, Erasmus University (RSM) and the Erasmus School of Economics (ESE). In the Global Competitiveness Report 2014-2015, the most important findings about the Netherlands’ economic competitiveness are:
- The Netherlands has secured a strong position in the top ten – owed to its excellent educational system, world-class infrastructure and increasing investment in innovation.
This year, Dutch competitiveness has remained stationary in the No. 8 position according to the WEF study. Prof. Henk Volberda from RSM writes in his analysis https://www.rsm.nl/typo3/#_msocom_1“Excellent higher education (No. 3), the swift application of new technologies (No. 9) and ICT (No. 8), as well as the continuous focus on innovation (No. 8) contribute to having highly advanced companies (No. 5) that occupy an important position in the high-value international value chains.” On top of that, Prof. Volberda says a world-class infrastructure (No. 4), plus the competitive (No. 5) and open markets (No. 6) play an important role in the country’s ability to retain a top-ten position on the global competitiveness index.
- The Netherlands is, however, still being hampered by an inflexible labour market and a highly vulnerable financial system.
Despite the strengths of the Dutch economy, the country’s competitiveness is being affected by continuing rigidities in the labour market. According to Prof. Volberda, the high costs of hiring and firing workers (No. 123) and the lack of flexibility in wage development (No. 135) are hurting the Dutch economy. In addition, the Dutch financial system remains vulnerable. Dutch banks are still under pressure (No. 80), says Volberda, which continues to slow down credit provision to SMEs (No. 48). To further improve Dutch competitive strength, the Dutch government needs to further reform the labour market and improve access to credit.
- The “world-class sectors” policy, pursued by the Dutch government, is beginning to bear fruit: the Netherlands is scoring better on innovation.
After a slow start, the government’s policy of giving top priority to the country’s world-leading economic sectors is starting to yield results, finds Prof. Volberda. “Whereas recent years saw a critical shortage of knowledge workers, at present there are considerably more technicians and engineers available (No. 30),” he says. “Also, co-operation between universities and companies in the world-class industries has improved greatly (No. 9). At the same time, corporate investment in research and development has increased (No. 17). Finally, scientific research institutes in the Netherlands are first-rate (No. 6).”
On a global level, important findings in the report include:
- Switzerland and Singapore have stayed ahead of the pack. The USA has entered the top three, while Sweden had made the biggest drop in the top ten.
By investing in talent and innovation, Switzerland (No. 1) and Singapore (No. 2) have remained on top of the heap. Finland (No. 4) had dropped out of the top three on account of worsening macro-economic conditions. After losing ground over many years, America is continuing to climb the ranking for the second year in a row, now moving to third place. Good-quality higher education, a flexible labour market and a great many highly innovative companies are making the difference. Germany has dropped one place on the ranking (No. 5), due to insufficient investment in infrastructure and higher education. Japan climbed by two places to No. 6, having invested heavily in R&D, talent and innovation. Sweden suffered the largest drop in ranking, sliding from No. 6 to No. 10. Causes are its rigid labour market and extremely high tax rates.
The gap between Northern Europe and Southern and Eastern Europe is not being bridged, although those countries, which pushed through reforms, have enhanced their competitiveness.
Despite the presence of six European countries in the top 10, many European countries are doing markedly less well. A wide gap remains between Northwestern Europe’s leading countries and stragglers in Southern and Eastern Europe. Even so, among those lagging behind, differences are arising. Those countries that are reforming their economies to the benefit of their competitiveness are climbing the global competitiveness index. Specific examples are Portugal (moved up by 15 spots to No. 36) and Romania (gone up by 17 places to No. 59). By contrast, countries such as Italy (No. 49) and France (No. 23) are showing little improvement.
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