In response to the sharply increased budget of the Dutch Ministry of Defense, APG chief economist Thijs Knaap stated during the radio program BNR Zakendoen that such a situation offers opportunities in addition to pitfalls. Possibilities that may not always be immediately considered. Later, during the investor panel discussion, he raised the question: why is the Netherlands still so dependent on fossil fuels for its energy supply?
The Dutch Ministry of Defense’s procurement organization has gone from shrinking budgets to a large budget in a short period of time. Knaap indicates that this is a big task. "A lot of money has to be spent, but that also has to be done in the short term. One of the pitfalls here may be to think too small. A large budget gives more possibilities. Not only to buy more stuff, but also to enter into partnerships and thus achieve economies of scale."
Faster money from the market
These partnerships can be entered into with other countries, for example, says Knaap. "Collaboration offers many opportunities. While you have to combine different needs, each country has specific benefits that you can take advantage of as a whole. For example, one country can get money out of the market faster than another."
“Without in any way wishing to shortchange the Defense organization: it is very difficult to transform a large procurement organization to deal with the pitfalls and challenges of a sharply increased budget”, says Knaap. From the perspective of an institutional investment organization, he advises considering as many different circumstances as possible. "The hardest thing about investing a lot of money is that it never goes the way you thought. Therefore, you must consider all possible scenarios. What do you do in each of those scenarios, if they occur?"
In addition, Knaap advises to also focus on all the knowledge of the financial world in the Netherlands.
Leading financial sector
"When expanding the defense apparatus, it is good to make use of the skills we have in the Netherlands. You should not only think about hardware; The Netherlands also has a very prominent financial sector. It can be useful in this case. Much of what is happening now at the Ministry of Defense is investing for the long term, on a project basis, for production with a small number of customers. We have a lot of experience with this, including in infrastructure investments. Knowledge about management of the risks surrounding such a project, how to make maximum use of the financing you have at your disposal by allowing other parties to participate. Knowledge about due diligence, about signals from the market, about how to deal with unexpected price shocks. I would use the knowledge that our country has about this, so that - with the budget we have - we get as much bang for the buck as possible ."
Geothermal heat
In response to an article in the Financieele Dagblad about the sharply increased gas price (Dutch), Knaap says: "Yesterday, the gas price rose by 37 percent, a quarter has just been added. This makes the job of the European Central Bank more difficult. Such an increase will be reflected in inflation and people are worried that the ECB will raise interest rates. For a country like the Netherlands, the gas price is important - in addition to the oil price, which you feel at the gas station - because we have always been able to extract gas ourselves and have therefore become dependent on it. Of course, that price does not have to stay that way. But why are we still so dependent on gas anyway? What about geothermal energy? We can compensate for 25 percent of the gas with that."
However, to make it possible for institutional investors to invest in geothermal energy, the law in the Netherlands must be changed, Knaap indicates. "Legally, only public organizations are now allowed to be active in this sector. That excludes pension funds."