The Netherlands trainer believes Wednesday's encounter will be a tough test for his depleted side as they look to build a squad capable of winning the World Cup in 2014
Two of Europe's biggest rivals go head-to-head in Amsterdam in what looks set to be an entertaining encounter but van Gaal believes his team have a long way to go until they can challenge the likes of Germany for football's major trophies again.
"Germany have more quality than the Netherlands. It is about who has the best team," he told a press conference.
"They play fantastic football nowadays. Low deserves credit for that. He plays the 4-2-3-1 system. All the German teams, like Schalke and Dortmund play that way now and they do it very well in the Champions League.
"If we want to be the world champions, and that is the aim, we must ensure that we have the best team. It is a given that we do not have the best squad.
"We must look at the team process. Tomorrow is a suitable match for viewing."
The Dutch have had to deal with a number of withdrawals from the original squad chosen by Van Gaal including that of Robin van Persie on Monday, and the former Bayern Munich trainer is wary that his opponents will be able to draw on a wider range of players, than the Dutch, despite having absentees of their own.
"I want to see how the players interact. Actually, it is now more difficult and less predictable," he continued.
"Germany can draw on a wide range of players and new players who all play at Champions League level, so it is not an easy night."
Much has been made of a the new generation of German players who have come through the ranks and progressed into the national team in recent years, and van Gaal believes these players will pose a threat on Wednesday evening.
"The new generation I know well. Mario Gotze, Ilkay Gundogan and Sven Bender play at the highest level. Lukas Podolski also. Marco Reus is a great player of the new generation. Bayern also wanted him, but he chose Dortmund. Thomas Muller from Bayern I know well too.
"These are not second-class players. On the contrary, they will be very motivated to prove themselves. This also applies to our team, but to a lesser extent. We can draw from a smaller arsenal of players."