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Netherlands' Political Stability and the Attractiveness of Foreign Direct Investment

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The Netherlands enjoys a vibrant economy, driven by internal and external trade. Income from agro-industries, machinery equipment, chemicals, and fuels drives the economy (CPB Netherlands Bureau for Economic Policy Analysis, 2011). In contemporary times, Dutch trade has significantly increased, and so has the role played by the Netherlands as a major distributing country in this trade. Employment and unemployment management in the country has been effective. Labor market challenges are quickly addressed by the relevant authorities, making a favorable destination for FDI since investment firms prefer stable and consistent labor markets.

The fiscal climate in the country is one of the most favorable in the Eurozone (Allard et al. 2008, p. 223). Individuals, firms and government investments that are based in the Netherlands enjoy numerous tax advantages. This country observes a tax rate that is below the average set by the European Union for the corporate sector. On the same note, the country integrates creativity and innovation in investments. It, therefore, stimulates innovation fiscally, a scenario that lacks in many other potential FDI destinations. The Dutch government advocates for a fiscal policy that promotes internal and external welfare for investors especially in FDI.

This reduces the economic risks associated with investment practices. This is another critical factor that primarily attracts or drives away FDI. De Nederlandsche Bank (DNB) is responsible for the regulation of the Netherlands’ insurance market. Since its installation in the year 2004, more private and government investments have been directed to the Netherlands compared to the period before it was set up. Insurance is an essential complement in investment activities due to the need to account for the uncertainty that poses risks to investors and their portfolios (Nicoletti, 2003, p. 148).

The Netherlands’ financial system is fully developed compared to other economies in Europe and beyond.

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