The Politics and DV Engineering working group analyses current political developments in the defence sector. It provides independent facts and interpretation from the technological knowledge and experience of engineers.

The Politics and Defence Engineering working group of the Royal Institute of Engineers (KIVI) has the following recommendations for the cabinet formation.

Download a PDF with the recommendations here

Security and stability of our country and the world is essential for a healthy and sustainable economy. However, the world around us is becoming increasingly unsafe. As a result, threats to our prosperity are building and risks are increasing. The geopolitical situation and associated developments in the power politics of Russia, China and Iran necessitate a more assertive defence and foreign policy. Also in terms of technology and equipment.

An assertive policy includes legislating and budgeting at least 2% GDP for defence spending target of NATO. This standard has long been ignored by European countries but is now increasingly being taken seriously. In the Netherlands, an initiative bill for this purpose is pending.

Increasing the budget should take into account that an effective deployment of Defence requires long preparation in terms of technology, equipment, personnel and training. For effective deployment, getting technology and advanced equipment up to scratch is a decisive factor, as more than 50% of the defence budget is spent on equipment, 20-30% on investments and 2% on R&T. Besides Defence itself, this requires a very good knowledge infrastructure and effective Defence industry.

Our working group' s main recommendations for the next cabinet period are:

a. Legislate and implement in the budget at least 2% GDP defence spending based on the NATO norm.
b. Invest in resources to strengthen the armed forces for deployment at the higher end of the violence spectrum. Focus on air defence, unmanned systems, cyber, protection infrastructure and large weapon systems.
c. Stimulate energy transition for Defence with technologies, which are specifically indispensable for Defence.
d. Stimulate the strengthening of the defence industry through guarantees and long-term contracts, which will allow pension funds, among others, to invest.
e. In the European context, strive for a cluster structure for product and system development and scalable licence production throughout the Union. Also in the Netherlands.
f. Strengthen the knowledge infrastructure within defence, knowledge institutes and industry, so as not to lose touch with the big countries.
g. Enable more through innovation initiatives, procurement procedures and private financing. Not only for big business, but also for startups and scale-ups.

The sections below elaborate and explain the different aspects.

National legislation

1. Important catch-up is necessary for an armed force that can perform its tasks.
Catching up on investments in Defence is crucial due to years of neglect of Defence and rising tensions worldwide. These investments serve not only to put the armed forces in order, but also to bring technological developments and the national Defence industry up to desirable levels. In some areas, potential opponents have already outpaced the Netherlands technologically. The defence industry will not be able to achieve the desired development and production levels without additional measures. Financially, a minimum 2% GDP norm should be the guiding principle in this respect.
Specifically: Implement the Initiative Bill Financial Defence Obligations dated 2 May 2023 by MPs Stoffer, Valstar, Boswijk and Dassen.

Financial policy

2. Enable pension funds to contribute to accelerating major projects and innovation.
For a healthy armed forces, it is important that companies in the defence industry can get financing. This is increasingly complicated by stricter ESG regulations and central bank requirements. However, private funding is very common in other sectors. Also for government tasks.
For large defence investments, it is therefore desirable to be able to use other forms of financing in addition to government funding. This may also potentially free up public money to realise other important objectives in areas such as climate, education and healthcare.
Various pension funds and asset managers can and want to contribute, provided they can continue to fulfil their primary mission of paying pensions. The government will have to enable these investments in consultation with the sector.
Specifically: Use the Belhaj (2019) and Valstar (2022) motions as a basis for alternative forms of financing, in which pension funds can indeed play a role. Some form of guarantees and/or long-term purchase agreements is important in this regard.

Equipment policy

3. Increase the investment ratio to at least 30% of the Defence budget over the next 10 years.
Spending 21% of the Defence budget on the development, purchase and construction of new equipment was considered necessary in the past to keep Defence equipment in order. Years of neglect and decline in the investment ratio to barely over 10% have also greatly delayed replacements and acquisition of new advanced equipment. It is therefore important that the investment ratio increases significantly to get and keep the armed forces up to date.
Also in light of increasing automation and the pursuit of a labour-extensive armed forces, we foresee that a structural level of 30% is desirable in the future.
Specifically: set the investment ratio structurally at 30% or higher over the next 10 years.

3. Maintain and develop vital military-technical knowledge for an effective Dutch role in EU and NATO.
A high level of scientific knowledge of technology is vital for guiding product development, selecting systems and deploying them in the most effective way. Such knowledge is needed at Defence, knowledge institutes and the companies that develop and build equipment for Defence. For a small country with a relatively limited Defence budget, a relatively high investment in knowledge is of extra great importance to keep up with the big countries.
Due to the increasingly rapid technological development, we recommend increasing the budget for scientific research to 3% of the Defence budget, above the EDA standard of 2%.
In doing so, it is important that the expertise also grows within the armed forces, in order to be able to assess and deploy the usefulness and results. Broad cooperation in knowledge networks in which industry is also represented can support a good deployment of the knowledge. Such as, for example, in "Netherlands Radarland".
Specifically: Increase the budget for scientific research to 3% of the Defence budget in order to be in line with other EU and NATO countries. Let the expertise within Defence grow along with this and guarantee good application in knowledge networks, in which industry is also represented.

5. Opt for development of the latest systems instead of obsolete COTS/MOTS systems.
Policy in recent years has mainly focused on purchasing Commercial Off The Shelf (COTS) or Military Off The Shelf (MOTS) systems: out-of-date and proven. However, the technology level of 'proven' systems is often 10-15 years behind the current state of the art. To have state-of-the-art assets with the greatest chance of military success, instead of opting for COTS/MOTS, it makes sense to place development orders yourself much more often or to collaborate on state-of-the-art systems in a European context. Important examples from the past include the F-35 and many naval ships. This could involve large companies, as well as startups and scale-ups.
Specifically: Place development orders yourself more often and start them on time to fulfil the desire for a technically advanced armed forces.

6. Strengthen cooperation with partner countries.
Joint procurement and deployment of assets together with partner countries, as COMMIT (the defence equipment and IT organisation) did in 2023 with reconnaissance vehicles, among others, is a good and realisable example of effective regional cooperation. The same goes for joint development of naval vessels, as has been done with the Air Defence and Command Frigates (LCF). It results in lower development costs and more effective procurement procedures. The recent accession to OCCAR can also contribute to this.
Specifically: To meet the growing need for more resources, European cooperation within Europe and with other partner countries is more important than ever. Also through OCCAR.

7. Building on a labour-extensive armed forces to reduce personnel needs.
With the current and future shortage of personnel, it is vital to continue building an innovative, technically sophisticated and, above all, labour-extensive armed forces. More automation, remote operation, artificial intelligence and autonomous systems can help.
Specifically: Focus on weapon systems that require fewer personnel.

8. Increase focus on simulation.
The technological possibilities for training through simulation (of processes or with Extended Reality technology) continue to increase rapidly. With the introduction of artificial intelligence (AI), this will only increase further. It deserves attention to invest more in this to make exercising cheaper and more effective. These technologies also make it possible to improve operational processes and train for high-risk and dangerous situations. Furthermore, it can reduce the burden on natural areas by the army and above our country by the air force. International pooling of simulation systems increases capabilities, is more efficient and strengthens cohesion with partners. Good examples are the helicopter simulators in Den Helder, which are used by several countries.
Concrete: Strive for advanced international simulation facilities to make training and education more effective, efficient and cheaper....

9. Strengthen armed forces with large weapon systems (such as aircraft, tanks, air defence and frigates).
Inter-state conflict and other threats make it important to further strengthen land forces. Already, small-scale participation in the higher end of the violence spectrum is difficult near Israel and in the Red Sea. Medium-range (up to 300 km) battle tanks and missiles are needed for the land force, additional fighters and drones for the air force, and additional frigates, submarines and unmanned systems for the navy.
Nationally, completion of maritime capabilities for missile defence, national air defence against drones, protection of North Sea (underwater) infrastructure is important.
Specifically: Strengthen the armed forces with weapons systems for the higher end of the violence spectrum to withstand emerging threats. Whether national, European or global.

10. Strive for a high level of protection for special national security threats.
Better protection of data traffic, critical infrastructure (including in the North Sea), cyber security are of great importance for national security and autonomy. The government should aim for a very good level of protection in these areas.
Specifically: Deploy artificial intelligence, space technology and unmanned systems for protection of critical infrastructure, data traffic and cyber security.

11. Energy transition specific to Defence.
Energy transition is important for Defence in relation to its desired strategic (energy) independence and CO2 emissions. Targeted research and development of sustainable technologies for specific Defence applications is necessary as not all civilian technologies are suitable for application in the armed forces. Given the long lifetime of new large weapon systems, a modular and flexible approach for existing and future energy carriers and associated systems is desirable.
It is essential for Defence to have large-scale availability of synthetic fuels for non-adaptable weapon systems such as (fighter) aircraft. Such fuels could be produced using nuclear energy, thus contributing to strategic (energy) independence. In February 2023, we published a position paper on this topic (link) with 13 recommendations.
Concrete: Underline the importance of strategic (energy) independence. Also for Defence. Allow indispensable sustainable energy carriers for Defence to develop themselves, if they are not available in the civilian market. For instance, by stimulating corporate initiatives as launching customers.

12. Protect and preserve the Dutch submarine knowledge infrastructure.
The replacement of submarines is the largest Defence project to be decided in 2024. The investment amount was previously estimated at EUR 3.5 billion and there are major international interests. The military-technical knowledge required for this construction is of great importance for national security and has economic advantages in future European cooperation and exports.
A tendering procedure is currently under way with three parties. While these must have a significant part of the work carried out in the Netherlands, the military-technical content varies widely: from subcontracting parts to almost the entire design. The first Dutch submarine was built in 1906 in Vlissingen. Since then, TNO, MARIN and the Royal Netherlands Navy together with industry have accumulated 115 years of knowledge and experience in the required technology and system integration of submarines. This knowledge is undisputedly unique in the world and vital for the effective deployment of Dutch submarines.
Specifically: When choosing a supplier for the new submarines, it is important to include the preservation and deployment of the Dutch knowledge infrastructure as an important element.

Defence industry

13. Develop an industry strategy adapted to the changed security situation.
With defence budgets rising, we see significant growth in the order volume of defence orders. This is the time for the Dutch government to position and support the national industry within the European context. The Netherlands can and must do its bit for strategic European defence capabilities.
A good starting point for this will be the European Defence Industry Policy, which the European Union will publish in the spring.
Specifically: Developing and adopting a Defence Industry Strategy (DIS) adapted to security developments should be a key theme for the next cabinet.

14. Maritime Manufacturing Industry.
On 26 October 2023, the ministers of Defence and Economic Affairs and Climate presented a sector agenda for the Maritime Manufacturing Industry (MEA). Promoting the cohesion and vitality of that sector is of great importance. Also for Defence. In September 2023, we published a position paper (link) for this sector agenda with ten recommendations.
Specifically: Strengthen the Maritime Manufacturing Industry together with naval construction as a successful cluster for the development and construction of civilian and naval ships.

15. Strengthen Defence Industry.
With the wars in Ukraine and Gaza and the ever-increasing threat from Russia, China and Iran, among others, it is of great importance that production capacity of equipment and consumables, such as ammunition, missiles and drones, is greatly strengthened. Not only in Europe, but also in the Netherlands.
Replenishing stocks through resources given away to Ukraine is already problematic. The increased demand has already caused the price of howitzer shells to rise from €3000 to €8000 each, for example. In addition, major suppliers in the United States are shifting their focus for production to the protection of Taiwan and in Israel to its own armed forces.
However, Dutch companies cannot make investments in machinery and raw materials without certainty that they can deploy and recoup them. For example, through long-term contracts or guarantees.
Specifically: Develop securities for companies so that they are able to make short-term investments in machinery and raw materials.

16. Dutch role within the framework of a European strategic autonomy.
Better European cooperation in the defence industry can make the development and production of Defence assets more effective and efficient. The European Union seems to be pushing for a rapidly growing role for the European Commission and the European Defence Agency.
To play a serious role in European and NATO defence, it is also important for the Netherlands to make a proportional contribution to it. Therefore, prepare the Dutch defence industry for more intensive European cooperation.
Specifically: Maintain companies of vital importance to the Netherlands and encourage innovative companies that can excel in Europe. This applies in particular to self-creating naval construction in the Netherlands.

European Union

17. Longer-term industrial policy.
The European Defence Industry is hugely fragmented and member states have a focus on national companies. As a result, these are hardly viable in many member states and the systems supplied are often non-compatible. The European Commission is working on a European Defence Industry Policy, which will be published in spring 2024.
In the lower term, a cluster structure for product and system development could reduce the number of developing companies and thus strengthen quality and interoperability. For resilient production, scalable licence building of resources by multiple companies across the Union is the recommended solution.
Our working group, together with Eurodefense, will publish an opinion on this topic in the first quarter of 2024.
Specifically, push for a European cluster structure for product and system development and scalable licence production across the Union, including in the Netherlands.

18. A level European playing field for defence equipment exports.
To ensure a level playing field for the Defence Industry, much better coordination of arms export policy in the EU is necessary. Dutch arms export policy should be seamlessly aligned with that of the other EU member states. Now there are large differences in the application of policies by member states. This results in unequal opportunities and barriers for companies based in EU member states.
Specifically: push for a European directive and coordination for arms export policy.

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The Hague, 18 December 2023
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Disclaimer: The facts and opinions given are based on open sources and on the knowledge and experience of working group members.
This is not an official position of KIVI. The association accepts no liability for anything put forward by the working group or its members.

Photo: Lower House