The Netherlands invests relatively little in research and development (R&D) compared to surrounding countries. Whereas both Belgium and Germany consistently increased their R&D spending over the past two decades, the Netherlands failed to grow. The Netherlands' R&D investment amounted to 2.3% of gross domestic product (GDP) in 2022. This is more than EUR 6.7 billion below the EU target value of 3% of GDP, also known as the Lisbon standard.
This is according to a TNO analysis of R&D spending by the three countries. TNO mapped and compared R&D investments since 2020. Both Belgium and Germany both invest more in R&D than the European target, at 3.5% and 3.1% of GDP respectively. Belgium has met the European target since 2016, while Germany achieved the target in 2019.
Striking difference with Belgium
Netherlands continue to lag behind. TNO cites the difference in development between the Netherlands and Belgium as particularly striking. For instance, both countries spent about 2% of GDP on R&D at the turn of the century. Belgium has shown steady growth in its R&D investments since 2005. The Netherlands, however, shows a more volatile picture. Whereas investments first decreased since the turn of the century, they later increased before finally stabilising.
TNO states that the three neighbouring countries have each made different choices in terms of R&D investment. This is particularly visible in the years following the outbreak of the financial crisis in 2008, the subsequent recession and the euro crisis.
Direct public funding
Using the Government budget allocations for R&D (GBARD), TNO's analysis provides insight into the direct public funding of R&D, as included in a country's government budget. It shows that since the adoption of the Lisbon Standard in 2020, direct public funding of R&D in the Netherlands has doubled. At the beginning of this century, growth in Dutch GBARD is almost in line with the increase in total government spending, TNO reports.
However, the GBARD analysis also shows that from the outbreak of the financial crisis in 2008, this form of public funding has partly lagged behind the development of total public spending. For instance, the shows that Belgium and Germany invested heavily in R&D between 2009 and 2017. The Netherlands opted for a substantial increase just after 2017. Because of this difference, growth in Belgium and Germany has been 1.5 times stronger than in the Netherlands, TNO calculates.
Substantial contribution from National Growth Fund
That R&D investments in the Netherlands have increased in recent years, the research organisation attributes a "significant part" to the National Growth Fund. On an annual basis, this fund provides around 0.2% of GDP in additional public R&D funding.
TNO also comes with a warning. If additional policies are not implemented, contributions from the National Growth Fund to R&D investments risk drying up. TNO calls this a risk for the Netherlands' future earnings model, as this spending stimulates new businesses, grows existing ones and supports the creation of wealth and welfare.
It also points here to the election manifesto of several political parties. These include plans to cut the currently available budget for the National Growth Fund, or even to abolish it completely without creating an alternative. "It would be good if a new cabinet continues to see the development of R&D spending towards 3% GDP as a priority," TNO writes.
Further information is available in this paper by TNO.
Author: Wouter Hoeffnagel
Image: Michal Jarmoluk via Pixabay
