Netherlands Defense Industry

Despite its relatively small size, the Dutch defense industry supplied the majority of defense items to the Netherlands. The Netherlands' defense industrial base is best described as one that supports major projects. This means that while the Dutch may lack the wide variety of industrial resources necessary to develop and produce what we in the United States may call a "major program," they certainly do not lack the skills and expertise to be major participants in such programs.

Perhaps one way to achieve an appreciation of The Netherlands' industrial base is to review their industrial organizations and research and development institutes. In a country known for its organization and compartmentalization of nearly every aspect of daily life, it is easy to appreciate that these industrial organizations would reflect their national capabilities. Several manufacturers' organizations are directly and indirectly involved in defense related activities. For example, the Contactgroep van Werkgevers in de Metaalindustrie (Contact Group of the Employers in the Metallurgical Industry) represents the interests of the metallurgical, electro-technical, and optical industries in The Netherlands. This organization was founded in 1951 to advise its members and represent them to the Government of The Netherlands, and other organizations and institutes.

Another player in the industrial cooperation arena is The Industrial Marketing Association of The Netherlands for the Procurement of Defense Orders (NIID). This independent group is financed by Dutch industry and aims at promoting optimal participation of Dutch industry in the field of defense production for both national and foreign forces. NIID operates in close liaison with the Ministeries van Defensie en Economische Zaken (Ministries of Defense-MOD, and Economic Affairs-MEA). They also assist foreign companies with offset obligations in finding potential partners in The Netherlands. NIID also assists small and medium sized Dutch firms in obtaining defense orders, especially as subcontractors.

At the other end of the spectrum of specialization, Metallunie, (a multifaceted organization that has been in existence for over 80 years), unites over 5300 entrepreneurs in the metals industry. Its members include metalware factories, fabrications and mechanical engineering, shipbuilders, and metal foundries. Also represented are companies for installation, maintenance, machinery and farm implements, plastics and resin manufacturing and coating, surface treatments, electronics, subcontracting, and distribution services.

Another diverse organization, Mikrocentrum Nederland, specializes in advanced technology. Its strength lies in the complementary nature of its members' capabilities that include precision mechanical and electrical engineering, tool manufacturers, plastics, glass, instrumentation, vacuum techniques, machine manufacturers, electronics and optics companies. A more specialized organization, The Association of Mechanical and Electrical Engineering Industries (FME), represents over 80 percent of the total engineering industry in The Netherlands. FME provides an excellent resource of information on its over 2000-member companies.

The aviation and space interests of Dutch industry are represented by The Netherlands Aerospace Group which is composed of small and medium sized companies who generally operate in the subcontractor mode. Within this group is found substantial capability and experience concerning the design, manufacture, and maintenance of a wide range of aircraft subsystems and components. Product lines of the member companies include pure engineering, aircraft structures, overhaul of gas turbines, fuel system components, galley/cabin interiors, machining and precision manufacturing, ammunition, passenger handling systems, airport equipment, and avionics. Closely associated with the Aerospace Group is the Vereniging Gas Turbine (Dutch Association Gas Turbine). This highly specialized group develops and coordinates activities to stimulate the technical and economic interests of the Dutch gas turbine industry and its related companies. These activities include coordination of research and development, discussion with Government of agencies and customers, and promotion of top level quality within the industry.

The close link between Dutch industry and government is also apparent in research institutes and laboratories. To a large degree, intellectual support for these agencies is provided by the excellent technical universities at Delft and Leiden. These institutes and laboratories are supported directly and indirectly by the Government of The Netherlands, by the Dutch industries and industrial associations, and by revenues from contract research and development efforts. For example, the National Aerospace Laboratory (NLR) conducts contract research for both military and civilian organizations on an increasingly international scale. They are active in several fields, including fluid dynamics (operating several wind tunnels, including Europe's largest low speed tunnel), flight mechanics, testing and operations, structures and materials, information technology, and space technology and remote sensing.

Strong links to the government are also evident in The Netherlands' Organization for Applied Scientific Research (TNO). Specific defense related projects are carried out by the National Defence Research Organization, which is composed of three laboratories. The Physics and Electronics Laboratory specializes in operations research, information technology, radar and communications, physics, and acoustics. The Prins Maurits Laboratory specializes in chemical research, such as organic and analytic chemistry, and technological research, such as propulsion, ammunition functioning, and explosives. The third laboratory, the Institute for Perception, conducts specialized research in vision/thermo-physiological, hearing and speech, experimental psychology and human engineering. This organization of laboratories also advises the Ministerie van Defensie on a wide range of scientific and technical matters. They participate actively in NATO defense research and maintain extensive contacts within the NATO countries.

The historical maritime orientation of The Netherlands gives rise to a strong interest and expertise in naval related research and development. Extensive facilities are available at the Maritime Research Institute of The Netherlands (MARIN) which performs research and development for the country. Their efforts include consultive services, mathematical modeling, and model experiments for shipbuilding, shipping, and offshore industries. The Dutch Navy has also established the Marine Elektronisch en Optisch Bedriff to help keep abreast of the high technology necessary for a modern navy. Their activities range from repair and maintenance, to design, development, and production of special equipment. They are heavily involved in optical and underwater acoustics, as well as magnetic measurement and structural/vibration analysis.

These diverse, yet highly specialized laboratories and industrial organizations reflect the nature of The Netherlands' industrial base--one which serves to support major projects. This implies that while the Dutch may lack the range and depth of industrial resources necessary to develop and produce major weapon systems, they certainly possess the requisite skills and expertise to be strong participants in a wide variety of such programs. While the Dutch produce many excellent subsystems, components, and parts, they also are involved in the final assembly and testing of major defense products.

The prime example is the F-16 coproduction program. In this case, The Netherlands' Fokker Aircraft Company does the final assembly and testing of the F-16 A/B. Additionally, many F-16 components and subassemblies are produced within The Netherlands for shipment to other countries under the auspices of the European Participating Government (EPG) group; for example, the center section of the F-16 C/D is produced in The Netherlands and then assembled in the United States.

The Dutch are also an excellent source of repair for such components as turbine engines and electronics. An example of a Dutch developed and manufactured weapon system is the Goalkeeper, a ship mounted Close In Weapons System (CIWS). Although it does use a General Electric gun, this outstanding Dutch product is the result of combining Dutch radar and fire control technology with an American gun to create an effective weapon system.

With its diverse industrial capability, The Netherlands is a country expecting continued growth. As such, the Dutch often are politically motivated to insist on industrial offsets when they find it necessary to purchase major weapons systems abroad. While this policy may not be totally palatable to all concerned, it is a reality within The Netherlands. The Dutch political and economic situation simply will not tolerate massive, one-way expenditures outside their borders. This reality serves as a strong motivator for defense industrial cooperation.

The United Kingdom and the Netherlands have often selected U.S. products over European products, while France has only purchased major U.S. defense items when a comparable French or European option was not available. The United States is the largest supplier of defense imports to both the Netherlands and the United Kingdom. Both of these countries have stated open competition policies that seek the best defense equipment for the best value. In the major defense competitions in these countries in which U.S. companies won, U.S. industry and government officials stated that the factors that contributed to the success included the uniqueness and technical sophistication of the U.S. systems, industrial participation opportunities offered to local companies, and no domestically developed product was in the competition. For example, in the sale of the U.S. Apache helicopter to the Netherlands and the United Kingdom, there was no competing domestically developed national option, the product was technically sophisticated, and significant industrial participation was offered to domestic defense companies.

The Dutch and Belgian defense markets provide excellent commercial environments for U.S. companies. The two defense markets together are valued at $10.9 billion -- $3.2 billion for Belgium and $7.7 billion for Netherlands. Throughout Europe, defense budgets are being cut, but the Belgian defense budget is expected to remain stable in the short-run. The Belgian Army spent the last five years modernizing its forces and transforming them from an obsolescent army of cold war vintage to a technologically advanced army capable of participating in coalition peacekeeping, peacemaking or combat operations. This transformation is expected to create new opportunities for U.S. suppliers of defense equipment and services.

In The Netherlands, the market is highly receptive to U.S. defense equipment. The Netherlands is the United States' eighth largest export market and the U.S. has its largest bilateral trade surplus with The Netherlands. U.S. defense equipment is recognized as state-of-the-art, and approximately one-fifth of Dutch defense contracts are awarded to U.S. companies. The acquisition, replacement and modification of a large quantity of material is expected to stimulate industry activity and government procurements in both countries over the next five years. Technological partnerships offer prospects as the vast majority of future military investments are going to be in new technologies.