While economic growth has fallen from double digits, it is still at an impressive 5% - more than double the EU average; unemployment at 4.3% is at the lowest in the European Union; the debt/GDP ratio will be about 29 per cent at year end -- compared with 65 per cent in 1997; Employment has risen by 30% in 9 years and almost 100,000 new jobs have been created in the past year. The most dramatic change for Irish people has been the transformation to being an immigrant country after a century and a half of emigration, in the aftermath of the catastrophic potato famine that seared deeply into the Irish psyche. In 2002, there were more than 224,000 non-Irish residents in the Republic of Ireland, in a total population of 3.9 million.
Despite the apparent golden scenario, there is a very evident sense that Ireland is currently operating in two parallel universes.
In one world, there are the primarily American-owned world class firms who are responsible for most of Ireland's exports. Last week, US financial services giant Citigroup was named as Irish Exporter of the Year.
These powerhouses are the key drivers of the Irish economy.
Last Friday, in an article in The Wall Street Journal, an American investment strategist wrote that "Ireland is ...a beautiful example of the power of tax cuts to boost growth and lift living standards."
Early in November, the same newspaper outlined how the big American companies use Ireland's low corporate tax rate of 12.5% and zero tax on patent income, to funnel profits from other overseas locations through Irish registered companies to reduce their global tax payments. This specific use of Ireland as a tax haven may result in as much as €2.5 billion in additional revenue for the Irish Exchequer - sufficient to fund more than 5% of the Irish Government's planned current and capital spending in 2006.
On Monday December 5th, the Bank of Ireland published a survey which says that only 3% of Irish SMEs are medium size with more than 50 employees. Overseas expansion and exporting are dependant on businesses growing to a medium sized enterprise, yet the research indicates that only 7% of Irish SMEs intend to expand abroad in the next twelve months. This contrasts sharply with the UK where medium enterprises, which employ 30% of the workforce, are the powerhouse of the economy.
Iona Technologies and Trintech, two onetime stars of the high-tech boom period, together with international drugs firm Elan, reported losses this year.
The wealthy Irish have invested billions of euros in commercial property in both the UK and mainland Europe. Capital for local business has been chicken feed by comparison.
Ryanair has been one stunning success on the international stage over the past decade.
The European Commission confirmed today (Tuesday, December 6th), that Irish R&D expenditures were 1.2% of GDP in 2004 compared with 3.7% in Sweden (see report link at bottom of page)
As we overwhelmingly depend on the foreign-owned sector not only in funding our public services but in providing high-paid employment for graduates both directly and indirectly through services provided by leading law and accounting firms, how prepared are we for large-scale movement of mobile capital in the age of globalisation?
Focusing on entrenching Ireland as a base for high-paid knowledge based jobs is one strategy. However, we are deluding ourselves if we believe that most workers will not still have to do repetitive monotonous work, whether in manufacturing or services.
The nirvana of a land of high-paid graduates will have to contend in a decade, with both China and India, which will be significant R&D centres, with huge numbers of high calibre graduates entering their markets each year.
Only 10,000 full-time Irish farmers will be left by 2025 compared to just over 40,000 now if current trends continue, according to a State-funded report launched last month.
The Rural Development 2025 report was produced by an Inter-Institutional Working Group drawn from the universities NUI Maynooth and UCD and the State agricultural agency Teagasc. It is an assessment of the prospects for rural Ireland to 2025.
The authors said that developments in the broader rural economy will not offset losses and other weaknesses in the natural resource sectors. Growth in exports from the dominant indigenous enterprises will remain relatively low. Moreover, it is likely that a large part of manufacturing output from foreign owned enterprises will move to lower cost economies. In these circumstances, employment in building and construction will not continue at current high levels.
Minister for Agriculture Mary Coughlan claimed that her figures for the depletion of farming numbers differed from the report. In a radio interview, one of the authors said that she was using 2115 year figures. Why expect a politician to plan for 2025?
Ireland's agricultural sector is the largest per capita beneficiary of the Common Agricultural Policy - almost €500 for each Irish adult and child, paid by other European taxpayers. The net receipts from the EU Budget amounted to €1.6 billion in 2004.
Our total receipts in cash terms since 1973 exceed €36 billion but that gravy train is due to end in 2007 and the Common Agricultural Policy will likely be subject to more reform by 2013.
Ireland is the top exporter per capita in the world (excluding Luxembourg where a large proportion of its workforce live in neighbouring countries).
Nevertheless, Ireland supports France in opposing concessions on EU farm tariffs in the Doha Trade Round talks, beyond what was agreed in 2003.
Ireland would have remained an economic basket case, if other countries had in the past taken a similar position to industrial goods' tariffs.
The freeport at Shannon Airport would have remained a dream if finished goods re-exported to the US, had been subject to high tariffs.
In addition to the prognosis for the manufacturing and agricultural sectors, the current dependence on construction, is also scary.
Almost 13% of the workforce is in the construction sector (more than 17 per cent of the private non-farm workforce). The corresponding proportions for the UK and US are 7 per cent and 5.4 per cent respectively. Economist Jim O'Leary writing in the Irish Times said: Since 2000, total employment in the economy has risen by about 260,000 (16 per cent). Of this, almost 100,000 is due to the public sector. On the other hand, there are 17,000 fewer engaged in agriculture. Private sector non-agricultural employment, therefore, has risen by about 180,000. Of this, the construction sector has contributed 76,000. Thus, more than 42 per cent of the private non-farm employment increase of the past five years is accounted for directly by construction. This is before including rising employment in construction-related activities such as building suppliers, materials manufacturers, estate agents, mortgage brokers, etc. If we allowed for these, we would comfortably account for more than half of the private sector employment gains since 2000, and that's before speaking about multiplier effects.
A large number of construction workers are computer illiterate and will need re-training when the boom will wind down. They will also have to adjust to work without a large amount of overtime and allowances.
Dublin's International Financial Services Centre (IFSC)
The International Financial Services Centre in Dublin has been a significant success but can we rest on our laurels?
On Monday December 5th, it was reported thatUS banking giant JPMorgan Chase is planning to hire 4,500 graduates in India over the next two years with the aim of moving 30 per cent of its back office and support staff at its investment bank offshore by the end of 2007.
The Financial Times says that the plan is the most ambitious move by an international investment bank to take advantage of the low cost of highly educated staff in India and it underlines the shift in the use of such offshore facilities from traditional areas such as information technology support and call centres to core operational functions and other high-value tasks.
Other investment banks are also planning to move operations to India and Stefan Spohr, of consultants AT Kearney, estimates that US and UK-based investment banks now have about 6,000 staff in India, of which half are directly employed, representing less than 5 per cent of their total headcount. However, he predicts this could rise to as much as 20 per cent in the next few years.
"This is not a trend that will go away. Global resourcing is becoming part of the way of doing business," he said. The FT says that industry analysts say salaries in India are 70-80 per cent lower and total costs about 40 per cent below US levels.
Veronique Weill, head of operations at JPMorgan's investment bank, told the newspaper that it was not just about cost savings.
"The quality of the people we hire is extraordinary and their level of loyalty to the company unbeatable," she said. JPMorgan is also seeking to tap talent that it can use elsewhere in the group and some of those hired for the new operations have already been transferred to the US.
JPMorgan, which had only 200 offshoring staff in India two years ago, is currently hiring between 300 and 400 graduates a month and plans a total of 9,000 by the end of 2007. Some 3,000 will be working for the investment bank with the rest supporting the group's retail and commercial banking operations, including 2,000 call centre workers.
The Irish Ferries Dispute
Irish Ferries plan to make more than 500 staff members redundant and replace them with lower paid workers from abroad, has been handled with staggering ineptness.
The dispute was weeks in progress before any member of the senior management left their bunker to discuss their case publicly but it was too late.
However, for a country that has gladly taken the spoils of offshoring for so long, we've some neck now to begin lamenting the negative impact of globalisation.
Just consider the following news report from last month:
Former General Motors parts unit Delphi, which is in bankruptcy protection, has said that it will close all its US plants unless trade unions agree to wage cuts to rescue America's largest auto parts-maker.
Delphi was spun off from General Motors in 1999 and a strike could cripple both the parts maker and its largest customer GM.
To add to the woes experienced by US car workers, General Motors announced that they would fire 30,000 workers.
If GM had decided to move some of the jobs here, the welcome mat would be unwrapped without a blink.
However, globalisation and open markets are not a free ride and someday surely, the penny will drop.
Parallel Universes at Individual Level
For individuals, while the Celtic Tiger has created a very wealthy elite, and significantly increased the income of the upper tier of the middle class, a lot of people who work, live on subsistence earnings.
The average weekly industrial wage in 2004 was €588.92 for men and €406.83 for women - both of course before tax and social security deductions.
According to the OECD, in 2004, Sweden once again had the highest tax-to-GDP ratio among OECD countries, at 50.7% against 50.6% in 2003. Denmark came next at 49.6% (48.3%), followed by Belgium at 45.6% (45.4%). At the other end of the scale, Mexico had the lowest tax-to-GDP ratio, at 18.5%, against 19.0% in 2003. Korea had the second lowest, at 24.6% (25.3%), and the United States had the third, at 25.4% (25.6%). Ireland's ratio is 30.2% compared with 29.1% in 1975.
One household earner, on the average industrial wage, and with a number of school-going children, would have difficulty making ends meet.
Only about half the private sector workforce are in an occupational pension scheme.
A very big contrast between the lot of low-paid people working in SMEs and those in companies like Irish Ferries, is that the former generally get the basic redundancy terms of 2 weeks pay for each year of service when fired.
Redundancy terms provided by big companies, be it Irish Ferries, Aer Lingus etc., are generally a multiple of the basic rate.
Irish public sector pay is on average around 120 percent of private sector earnings, having risen from 113 percent in the past five years, according to Davy Stockbrokers.
In a weekly market comment, Davys said last month that figures from the CSO (Central Statistics Office) indicate that average earnings in the public sector are now more than €43,000 a year. This compares with €33,500 in the private sector.
"Moreover, these crude comparisons take no account of the superior pension entitlements available to the public sector," Chief Economist Robbie Kelleher said.
The benchmarking awards have widened the gap significantly even though these were supposed to help the public sector catch up. The final instalment of the average 8.9 percent increase was paid last June.
The point being made here is not that all public sector workers are being overpaid but to illustrate the adverse position of a large section of the private sector.
In contrast with a tax-free lump sum of 1.5 times earnings at retirement together with a pension of half final earnings, in the public sector, many in the private sector have to depend on a small State pension.
While taxes are lower than the Nordic countries, the standard of public services is Third World by comparison.
This writer had the recent experience on a Sunday, of a 5-hour wait in the emergency outpatients' clinic of one of Dublin's leading hospitals, St. Vincents, Elm Park.
Passing the Buck
The Taoiseach (Prime Minister) Bertie Ahern is noted as a political fixer rather than a person of ideas and vision.
He is currently riding the tiger of anti-globalisation, offshoring and outsourcing that has been unleashed by the Irish Ferries dispute and he has abjectly failed to address the issue of globalisation and how Ireland will have to positively address the threat of the outflow of jobs to low-cost locations.
The Irish Ferries dispute is a particular issue but hiding under a rock while others are calling for employment protection legislation that will in effect speed the flow of jobs abroad, is hardly the answer. Is there anything to learn from France's experience and its 35-hour week?
Last September, Bertie Ahern rode to the rescue of the farmers by defending the EU's Common Agricultural Policy with figures that the OECD said he had misinterpreted.
The majority of the Irish Cabinet have limited or no management skills and it is very evident. Believing that they have been instrumental in the creation of the Celtic Tiger, they have moved with the speed of a glacier in introducing long overdue change in both the policy and administrative areas.
Political partisans will always find some morsel to counter claims of failure and the Progressive Democrats even claim credit for deregulation of the taxi trade when it actually resulted from the implementation of a High Court ruling.
It has taken years of public pressure to produce a public response to the widespread perception of what is termed "Rip-off Ireland." However, there has been little change in the closed-shop non-competitive sector of the economy for fear of angering vested interests.
It was only in response to media and public concern about wasteful use of public funds used in infrastructural and other public projects that the Minister for Finance Brian Cowen was motivated to introduce new rules on public tendering.
Computer illiterate ministers have sanctioned hundreds of millions of euros on IT projects and while they were clueless themselves, it never occurred to anyone of them to ask why political flunkeys in their offices should be paid from the public purse while the State could not have employed senior staff with credible international experience in the IT sector?
Of course, why would ministers bother about issues like that when there's another riibon-cutting function to attend? Should one wonder how many of the 30 reports that were commissioned by Micheal Martin, when he was Minister of Health, did he actually read?
The buck simply stops nowhere.
Ministers pass the buck to public servants who are now subject to the regime called benchmarking, as referred to above, with phanthom targets and so on.
It's a joke of course and no matter how big the blunder may be, nobody is accountable. This is one benefit of decision by committee.
So as the sands of globalisation, move under our feet, there is staggering incompetence at the heart of government and certainly no interest in contemplating how long will the good times last?
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