The Netherlands’ first Productivity Agenda was submitted to the House of Representatives at the beginning of September. This Agenda aims to address the country’s sluggish labour productivity growth, which threatens future economic strength, living standards and the long-term sustainability of public services. “The Dutch economy is currently one of the world’s most productive, but productivity growth is stagnating, growing by a mere 0.4% per year over the last ten years compared with prior increases of 1.5%. This has huge consequences for our living standards,” said Vincent Karremans, minister of Economic Affairs, who commissioned work on the Productivity Agenda on behalf of the Dutch government.
If no action is taken, pressure on health services, education quality and security will continue to mount. The Productivity Agenda contains plans to boost Dutch labour productivity and ensure that the country can continue to afford care, education and other services in the future. It also describes possible solutions to labour shortages and population ageing. Increasing productivity would allow businesses and workers to perform the same tasks faster or more easily, or produce more without the need to hire more staff. “If we want to safeguard the quality of care and education, we must support smarter working practices and innovation among business and the public sector,” said Karremans as he presented the Productivity Agenda.
Read the Productivity Agenda – only available in Dutch
Measures
The Agenda sets out measures in five areas to boost productivity:
- Digital transformation and innovation
- Competitiveness and cutting red tape
- Funding for business
- Education and life-long learning and development
- Job market
This article focuses on the first point: digital transformation and innovation as key productivity growth drivers. The government has identified four action points in this respect:
- Increasing R&D spending
- Creating a Dutch AI factory
- Supporting SMEs’ digital transformation
- Scaling experiments in the construction and metals industry
This article provides more details on these four plans.
Increasing R&D spending to 3% of GDP
Compared with other countries, the Netherlands is falling short when it comes to making targeted investments in technology and economic resilience. The Netherlands currently invests 2.2% of its GDP in R&D, lower than leaders such as the USA and South Korea as well as neighbouring countries.
As we reported in a previous article, the Dutch government intends to increase R&D spending to 3% of GDP. This would benefit Dutch labour productivity, as smarter working practices offer the potential to generate more value from labour and capital, both of which are in short supply. This could take the form of process innovation (producing more within the same number of hours) or product innovation (developing new products and services). The Dutch government is driving these changes by creating supporting framework conditions, stimulating collaborations and removing productivity bottlenecks.
The government is considering the following measures:
- Increasing R&D investment among current SMEs;
- Facilitating and scaling new R&D-intensive companies;
- Improving the Dutch business climate for innovative businesses.
The nine measures also include the potential creation of a national agency for disruptive innovation (following the example of the USA’s DARPA) – AI Plan wrote an opinion piece on the topic, containing specific advice for the Dutch context (original article in Dutch). The government also has plans to set up a R&D launch platform, mobilise 3 billion euros of institutional capital, improve access to experimental facilities for tech start-ups and scale-ups, set up a national investment institution and explore the added value of innovation vouchers within the funding instruments available.
Dutch AI factory
Alongside increasing R&D investments, the government is seeking to create the right conditions for digital infrastructure developments. For instance, it has plans to construct a Dutch AI factory in Groningen, which will host an AI-optimised supercomputer and a knowledge centre. Read more.
The proposed AI factory aims to develop and research AI models and applications across sectors such as defence and security, manufacturing, energy and farming as well as health and care. The AI factory focuses on innovative applications, groundbreaking research, improving domestic AI expertise and attracting and training talent.
The factory also aims to strengthen the Netherlands’ strategic position within the European AI ecosystem. It will attract new talent, create jobs and stimulate the growth of the digital sector in the Groningen region, contributing to the government’s ambition to foster a pioneering ecosystem for AI research and innovation.
The government plans to earmark 70 million euros for the AI factory and has submitted a European co-financing application to the EuroHPC, totalling 70 million euros. The provincial government of Groningen and municipalities in Noord-Drenthe have pledged a maximum of 60 million euros. The outcome of the application will be announced this month, and the government is expected to notify the Lower House this autumn.
Supporting digital transformation among SMEs
The government is extending funding for the European Digital Innovation Hubs (EDIHs) until 2028 inclusive, focusing on AI applications for SMEs. It is also continuing the Smart Industry Programme to further accelerate the digital transformation of the Dutch manufacturing industry, working towards its ambition for advanced digital technologies to be used by at least 75% of Dutch SMEs by 2030. These measures aim to boost labour productivity by supporting businesses in their digital transformation, making processes more efficient and generating greater value using the same number or fewer workers.
Together with the EU and provincial governments in the Netherlands, the central government is awarding additional funding to the EDIH network, extending operations by three years (to 2028 inclusive). The five EDIHs offer knowledge and testing facilities for innovative SMEs, providing training, performing digital scans and assigning innovation coaches to help companies to implement digital technologies. The focus over the coming years will be on AI applications and cybersecurity, the two Digital and Information Technologies for which Topsector ICT is currently developing Action Agendas. You can find the latest news here (only available in Dutch).
To make it easier for SMEs to understand and access the support available and improve the quality of support, collaborations between the hubs will be intensified and alignment with national programmes and networks will be improved. We will soon publish a joint interview with Tijs Koops, Programme manager for internationalisation and innovative SMEs, and Arthur Leijtens, the National programme manager for European Digital Innovation Hubs on the subject.
Topsector ICT is currently running a call for digital innovations, focusing on public-private partnerships within SMEs. A total of 4 million euros in funding is available. See this page for more information.
Scaling up policy experiments
The government is exploring the potential to scale policy experiments (Shaping the Future of Work) in the construction and metals industry. This plan focuses on SMEs, aiming to help them develop and apply process innovations that save labour while boosting productivity in sectors that will play an essential role in the climate transition from 2026 to 2031.
An explorative study for a national scaling plan for policy experiments was completed earlier this year. The scope of that study is now being elaborated by the Ministry of Economic Affairs. The government will then assess whether this plan is eligible for funding and determine the appropriate form of support. The scaling plan has two parts:
(1) a grant scheme for regional innovation clusters within which SMEs, knowledge institutions and management-employee representatives can collaborate on implementing productivity-improving technologies in sectors facing labour shortages, such as construction, tech and manufacturing;
(2) a knowledge centre to act as a nationwide hub for knowledge-sharing, support and scaling for successful innovations.
Topsector ICT’s view of the Productivity Agenda
Frits Grotenhuis, director of Topsector ICT, believes that digital transformation and innovation represent the key drivers of productivity growth. “Human work has physical and mental limits, which is why labour productivity is likely to flatline without support from digital technologies. We need to work smarter rather than harder. Digital technologies such as AI, data analysis and immersive technologies like AR and AR allow people to get more work done in less time, all while making fewer errors. Robots and software could take over routine tasks, freeing up time for employees to perform work that adds more value.”
Grotenhuis also believes that new technologies have the potential to make work faster, cheaper and more flexible, while data analytics could be used to improve decision-making. “Digital skills increase employability and agility: employees who possess those skills can more easily adapt and leverage new technologies.”
About development and the job market
The National Technology Strategy (NTS) highlights the lack of highly skilled professionals with technical expertise as a major bottleneck preventing the Netherlands from achieving its digital innovation ambitions. It outlines a doubly challenging situation: the country is producing too few ICT graduates while also facing intense competition from abroad, making it hard to retain both domestic and foreign talent.
The Dutch education system also places too little emphasis on valorisation and entrepreneurship, Preventing leading Dutch research outcomes from finding business applications.
The Dutch government recently published its Development Pathways for ICT, a milestone for transparency in terms of features, growth and training programmes for the digital market. You can read more in this article.
In this article by AG Connect, Frits Grotenhuis, director of Topsector ICT, and Pieter Moerman, director of Platform Talent voor Technologie say why investing in digital talent has become a matter of urgency.