The Netherlands is investing more in defense because of the international situation. Unlike in neighboring countries, participation by our own industry is not an end in itself. ‘In the Netherlands people seem more afraid of Brussels than of Moscow or Beijing.’
A man whistles a tune. He walks somewhere far away, at least 100 meters away, but the melody is very audible in the immense, empty hall. His whistle is interrupted minutes later by what sounds like a heavy ship’s horn. It is break time for the few employees who still do some welding here on elements of a dredger.
‘Until recently it was very noisy here’, says Louwrens op de Beek, defense director at Royal IHC, one of the largest surviving shipbuilders in the Netherlands. ‘Music was always on, hundreds of people were walking around, and you had to wear earplugs because of the penetrating sound of the steel grinders.’
Now it’s quiet, in the largest covered shipyard in Europe. In September, IHC announced that the yard will be temporarily closed and that 250 employees will be laid off. A smaller yard of the company will remain open. IHC specializes in the design and construction of vessels for the dredging and offshore industry – for example pipelayers, unique designs that are ‘often more complex than most frigates’.
IHC has less experience with weapon systems, but with a design department of 500 to 600 people and highly qualified technical personnel, it says it has capabilities that can hardly be found in the defense after fifteen years of clearcutting. ‘The technical expertise for shipbuilding and maintenance used to be with the Ministry of Defense itself’, says Op de Beek, ‘now the Ministry of Defense is more dependent on companies such as Damen and ours.’
In defense industry is not a priority, is the criticism of many companies in the maritime sector. An example is the tender for four submarines, a saga that has been going on for years and where Dutch industrial participation is not an isolated requirement. As a Dutch partner of the French Naval Group, IHC is one of the companies involved, in addition to the combinations Saab-Damen and the German TKMS.
Surrounding countries invest heavily in their maritime sector
The coalition parties VVD and CDA demanded maximum Dutch industrial involvement through motions, especially when it comes to the construction of naval vessels. But State Secretary for Defense Christophe van der Maat drew a red line in the Chamber last week: ‘Best boat, best price, etc., it is not for nothing that they are also in that order. We comply with the motions, but if the aim is to make it as large as possible (Dutch industrial participation, ed.), then we pull it out of balance again.’
In other words: industrial participation is ‘by-catch’ – not an independent strategic goal. An impression that is confirmed in the recently published Defense Memorandum, which contains the shopping list of equipment to be purchased for the armed forces.
But why not? Surrounding countries are investing heavily in their own maritime sector – partly because of the increased awareness that while China is taking over entire maritime industries, there is a national security interest in being able to continue to make certain ships itself. The Russian invasion of Ukraine has painfully exposed the strategic weakness of European countries – there are neither the supplies nor the equipment nor the industrial capacity to move quickly if necessary. And partly as a result of that invasion, Defense receives not 3 but 5 billion euros structurally.
Meanwhile, reports about the need for industrial policy are piling up – as are those about the need to reduce strategic dependencies. Defense itself also says that the penny has dropped. ‘For future tender processes, where possible within the framework of European regulations, the Ministry of Defense will opt for Dutch suppliers if this is in the interest of national security,’ Minister Ollongren wrote to the House at the beginning of this month. But Defense will stick to the adage ‘the best product for the best price with the greatest possible involvement of the Dutch business community’.
No revolutionary language. The question is therefore whether it will allay the concerns of the Advisory Council on International Affairs (AIV), which, in a report from April, wondered whether the ‘smart industrial policy’ promised by the government will actually materialise. A ‘too hesitant and passive Netherlands threatens to miss the boat in terms of industrial policy in terms of national prosperity and employment’. Neatly worded, but in the AIV context it is tantamount to beating the table savagely with your fists.
‘What the shipbuilding industry needs is continuity’
Back at the shipyard in Krimpen aan den IJssel, we walk past stacks of wooden boxes with holes in the sides. They appear to belong to an old but still used method of quickly sliding a ship down the slope. A few weeks ago, here for the last time, the pins were knocked out of these wooden sand-filled blocks, causing the ship to move.
Op de Beek reminds us that what happens in this yard is the capstone of a pyramid of hundreds of supply companies in the region. Many of these companies, who make beautiful products that we integrate here on the boats we build, actually got through the covid time partly with state support. Now they will have a hard time if the orders are not forthcoming.’
What is most frustrating about the situation, says Op de Beek, is that he sees how governments invest in their own industry in neighboring countries. ‘France, Germany, England: they all want to build themselves, because they don’t want that knowledge and expertise to flow away. A good example of how it can also be done is Germany, which requires that about 80 percent of the project budget be spent in Germany when building new frigates.’
It goes without saying that shipbuilding in the Netherlands, and throughout Europe, is in deep trouble. China and South Korea have already taken over many shipbuilding sectors, but are now also increasingly focusing on offshore wind ships and the dredger and pipelayer market. Now that energy and steel prices have also skyrocketed, and it is becoming more difficult for the oil and gas industry to build, things are going downhill fast.
‘What the shipbuilding industry needs is continuity,’ says Hans Huigen, head of public affairs at IHC. ‘Then you can invest in the future, and you also have something to offer the technicians who are still at school. And then it involves a mix of civil and military work, no Dutch yard could exist solely from defense orders.’
‘Elsewhere, cooperation is self-evident’
Continuity is also what Defense says it is focusing on, with ambitions to create a ‘maintenance valley’ in Den Helder. The practice is more unruly, says Op de Beek. His company started a pilot project three years ago to do maintenance project engineering for the Navy. Orders were issued, which were carried out according to the wishes of the Ministry of Defence. But there is no question of a permanent partnership yet.
The Ministry of Defense says it is looking into this, in response to recent parliamentary questions about IHC. And half of the maintenance is already done by the business community. A miracle seems to have taken place in the Navy since the three commanders nearly shed tears last year in Fidelity defendants about the deplorable state of the armed forces. Half of the fleet is in the port ‘due to a lack of personnel and material shortages’, said Naval Forces Commander Rob Kramer at the time. Now the maintenance backlog is ‘manageable’ and ‘the Royal Netherlands Navy can fulfill orders for readiness and deployment’.
Elsewhere, cooperation is self-evident, says Op de Beek. ‘In England they said: those parties do the maintenance for us, they build the submarines, that party builds frigates. Within the EU, France and Germany are doing the same, Denmark will be doing the same. They call for entire projects and also for the maintenance of a ship for thirty years Art. 346 of the EU treaty or escalate within the procurement frameworks.’
With that article, a member state can stipulate an exception to the European procurement rules if essential national security interests are at stake. The Netherlands also does this with the new M-frigates and the submarines. ‘But we in the Netherlands are much more selective with 346 statements. Almost all contracts for replacement and maintenance, no matter how small, are regularly put out to tender by the Ministry of Defence. Other EU Member States convert Art. 346 much more strategically.’
The problem is structural, according to research by Berenschot. A report published last summer by the research firm states: ‘SMEs are very critical of government support and access to defense projects.’ Key bottlenecks: Recognition of industry contribution and access to contracts. ‘Companies indicate that less paperwork and a more proactive approach from the government is desirable.’
‘There has to be a mentality change at Defense’
Is the Netherlands the crazy henkie of Europe by complying with EU rules more strictly than other countries? You won’t hear them say that at IHC, but says Op de Beek: ‘People in the Netherlands seem more afraid of Brussels than of Moscow or Beijing.’
There is also dissatisfaction in the House of Representatives, especially among coalition parties VVD and CDA. Peter Valstar (VVD), who until recently worked for the Ministry of Defence: ‘A mentality change is needed at the Ministry of Defence. You have to be bolder about it, we are very decent if you compare that with France.’
Those voices can also be heard in the CDA, as with Mustafa Amhaouch: ‘If we are going to invest billions, we must also look at what can remain in the Netherlands, in interaction with Europe. We shouldn’t be naive about those European procurement rules.’ According to Amhaouch, a ‘tipping point’ has been reached in politics and the role of the manufacturing industry is moving higher up the agenda, including in defense.
That the picture is mixed is evident from the announcement by Damen Shipyards this week that it is further expanding its yard in Gorinchem with additional repair facilities and a ship lift. We see that more work will be done for Dutch customers in the Netherlands in the future AD a spokesperson. Referring to changes in the world, he adds: ‘The choice of our customers is: rather close than far away.’
Defense expert Dick Zandee van Clingendael does not yet see this change and adds that there are also limits to what can be expected from the Ministry of Defense in this area. ‘After the end of the Cold War, the Ministry of Defense became less and less involved in the industry, which may also have been related to a fall in investments and fewer equipment purchases. Then Economic Affairs became leading, and that is still the case, also in the triangle of government, knowledge institutes and industry. The position of Defense seems clear to me in this regard. Their needs must be leading.’
The last jobs are completed in the large empty hall in Krimpen before the yard is mothballed on 1 January. Three people will still be there every day, if only to keep the gigantic cranes there, ten in total, rolling every so often. Is the moment approaching when IHC needs state aid again, as in 2020? Op de Beek: ‘We prefer a consistent policy from the government for the maritime manufacturing industry in the Netherlands. We’d rather build ships than hold hands.’