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Economic security policy in the Netherlands

The economy's impact on critical infrastructure, sectors and processes could threaten national security in a number of ways. Researchers examined relationships between the economy and national security, focusing in particular on the characteristics and performance of the economy of the Netherlands and the consequences this may have for its national security.

National security is a term that is often understood and expressed by the threats faced by a state, for example from terrorist attacks. However, its scope can be broader than that: National security can also be understood as the protection of infrastructure and sectors that are critical for the uninterrupted functioning of a nation’s economy.

This interpretation of national security highlights the strong interconnectedness between security and the economy in a system that is complex, interdependent and involves multiple variables.

This study is intended to support the National Coordinator for Counterterrorism and Security in exploring the concept of economic security based on a broad and international range of perspectives.

The study involved different approaches, including a review of academic and policy documents, interviews and the development of an analytical framework used to conceptualise the relationship between the economy and national security.

Building on the international literature and the conceptual framework, researchers analysed what developments and trends within the global, EU and Dutch national economy can have an impact on the national security of the Netherlands, and where vulnerabilities may exist within the Dutch system.

The impact of the economy on critical infrastructure, sectors and processes could threaten national security in a number of ways:

Foreign direct investment (FDI) and ownership of critical infrastructure and sectors can increase the risk that foreign entities gain influence and control over their operations.

Espionage and access to sensitive information could be enabled by the close proximity or ownership of critical infrastructure and sectors by a foreign body.

Natural resource dependence on imports from foreign countries could give foreign actors undue influence on the national economy.

Supplier dependence for the provision and maintenance of critical infrastructure and processes can arise when there is a skills and technology gap, which leads to a reliance on an external provider for talent or services.

Government intervention through expenditure, economic policy and regulation can have a strong influence on the quality, availability and resilience of critical infrastructure, sectors and processes.

Corruption and fraud could undermine the resilience of critical infrastructure and potentially open up opportunities for malicious actors to obtain physical or digital access to sensitive assets and information.

Socio-economic inequality resulting from factors such as economic policies and neoliberal market forces could reduce the ability of citizens to provide for themselves, as well as risk social unrest and domestic instability.

In addition, a number of global economic and geostrategic trends could present risks to critical infrastructure, sectors and processes and therefore should be considered alongside an analysis of risk vectors linked to macroeconomic events and variables. These trends include:

Digital transformation and the implementation of industrial Internet of Things could bring challenges in relation to the security of supply chains, cyber security, and risks of data espionage in critical sectors and processes.

Globalisation and interdependence between the critical infrastructure, sectors and processes of one country with others could magnify risks to its national critical infrastructures.

International economic trends shape growth opportunities as well as the complex risks that face critical sectors of the economy.

The political and economic paradigm of foreign states may have implications for national security, with different national economic models impacting the competitiveness of critical sectors and processes.

Uncertainty in relation to resource security could pose risks, for example due to a reliance on foreign suppliers for energy and the uptake of alternative energy generation, distribution and storage technologies.

Potential concerns with regard to information integrity and trustworthiness may act as an avenue for malicious actors to disrupt critical processes such as elections and democratic decision-making, and gain influence in critical sectors such as telecommunications or political institutions.

In a context of globalisation and further economic integration in recent decades, the relationship between the economy and national security has become increasingly interlinked. For the Netherlands, these connections represent both opportunities and potential threats for the country's national security. The open and interconnected nature of the Dutch economy creates vulnerabilities from potential internal and external threats. In recognition of this, economic security has emerged as an important strategic priority for the Dutch government, with the connection between economic security and broader national security subject to particular emphasis in the most recent National Security Strategy .'Threats to vital economic processes' has been cited in the Integrated International Security Strategy 2018-2022 (IISS) as one of the six most urgent national security threats.

Given these growing international interdependencies within Dutch national security, as well as recent concerns raised by planned foreign investments into Dutch strategic sectors, there is a recognised need for assessments of the potential risks to national security that may emerge as a result of such economic activities. Given the importance of certain sectors to the effective functioning of the Dutch society, there is a need for a deeper conceptual understanding of the economy-related threats that may impact Dutch society.

Definitions of national security have an important economic dimension and the economy cannot be easily separated from National Security. The relationship between the national security and economic spheres is complex and characterised by many close interconnections and feedback loops. For the purpose of this study, national security is understood through those aspects that relate to the protection of critical infrastructure, sectors and processes that are vital for the sustainable functioning of [Dutch] society.

The potential threats to national security from economic factors can be understood through 'risk vectors', which highlight the avenues through which the interaction between the components of 'the economy' and 'national security' takes place. A range of complex interactions of varying strengths exist between different risk vectors, their underpinning drivers and the global economic and geostrategic environment.

Contextual and country-specific factors will have a bearing on how the different risk vectors may manifest themselves, as well as the degree to which each vector is important for any particular critical sector. These country-specific factors include: the size of the critical sectors and the level of government ownership, privatisation and regulation; the nature of the economy and the broader integration of the state in regional and global structures; the proportion of foreign ownership of companies in critical sectors; and the presence of skills gaps or insufficient R&D and innovation in critical sectors.

Certain country-specific economic factors and characteristics of the Dutch economy are closely linked with the country's national security. These factors and characteristics include high reliance on international trade within critical sectors, low FDI restriction, skills gaps in digital literacy, STEM and ICT, and heavy reliance on imports of raw materials.

Based on the unique characteristics of the Dutch economy, a number of risk vectors are identified as presenting particularly relevant to national security in the Netherlands. These include low FDI regulation in critical infrastructure, sectors and processes, technical skills gaps, and heavy reliance on imports of raw materials to meet the energy, food and resource needs of the Dutch society and economy. These risks vectors may constitute security threats if not managed effectively.

Dutch policymakers face a number of trade-offs in terms of managing the potential national security risks resulting from economic activities. To inform the analysis of trade-offs in relation to specific economic activities, a range of questions can be considered to better understand the nature of the security risk presented by economic activity in critical sectors and processes. These questions should examine: the vulnerabilities of the sector in question and the costs to the Netherlands if the vulnerability is exploited; the nature of the threat posed; and the likely security consequences if the threat were to materialise. Applying these questions to the Netherlands' critical sectors, infrastructure and processes may allow for a more complete understanding, and subsequent management of, the nature of the risks posed by economic activities to national security.

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