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Analysis/Comment Last Updated: Oct 22, 2010 - 7:09:02 AM

Building an indigenous Irish exporting base; Being prepared for a hard slog and the sheltered workshop that is RTÉ
By Michael Hennigan, Founder and Editor of Finfacts
Feb 12, 2010 - 9:33:03 AM

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Taoiseach Brian Cowen and Intel Ireland General Manager Jim O'Hara celebrating the 20th anniversary of Intel in Ireland, in 2009

On Monday February 8th, the day journalist George Lee abandoned the national parliament within months of his election to return to the security of the sheltered workshop that is the State broadcaster RTÉ, the former head of Ireland's biggest industrial enterprise and most significant foreign direct investor said the FDI (foreign direct investment) era is over; real economic investment will be indigenous and growth will come from investment in new ideas. However, developing a significant  indigenous exporting base is a huge challenge; it requires people prepared for a hard slog and a modern political system underpinning prudent economic policymaking.

Craig Barrett was Chairman of the Board of chip giant Intel from May, 2005-May, 2009. He became Intel’s fourth President in May of 1997 and Chief Executive Officer in 1998. Prior to joining Intel in 1974, Dr. Barrett was an Associate Professor at Stanford University in the Department of Materials Science and Engineering. He is a leading advocate for improving education in the US and around the world and was one of the key people in the decision to locate in Ireland in 1989. So when he told delegates at a diaspora business conference last September, that there were about 14 reasons why Intel came to Ireland , but that only one remained - - our tax rate - - it was a sucker punch. At that event he also zapped the spin about the quality of the Irish education system. He couldn't be easily dismissed as another begrudger.

On Monday, in an address at the Royal Irish Academy in Dublin, Barrett said while Ireland experienced its economic boom and the whole world went property-crazy amidst a flood of easy credit and questionable banking crisis, another revolution was unfolding. With the collapse of the Soviet Union and the abandonment of socialist principles in nations like India, for example, an estimated 3 billion additional people entered the free world economic system.

“And guess what, they also want good jobs and have a rich educational heritage. You have 3 billion new customers, you also have 3 billion new competitors.”

Craig Barrett said the reality is Ireland is now over-reliant on FDI and needs to come up with a new blueprint for the economy of the next 20 years.

During the boom years, when many believed that we invented the free lunch, we at Finfacts highlighted ad nauseam that dependence on foreign companies for 90% of our exports and a property bubble was unsustainable.

We were the second biggest investors in European commercial property in Europe while less than €200 million annually in venture capital investment was available for Irish business.

Only a fool would now expect that years of neglect will result in short-term results.

The educational system should be a priority and  Barrett says the goal should be the No 1 in the PISA rankings for maths (see below).

Polls of university students in France regularly show that the preferred job choice is the civil service. In Ireland, we claim to have an entrepreneurial spirit but do we?

Most start-ups fail; two parents working and a need to spend long periods travelling overseas, is not everyone's cup of tea.

Besides, George Lee heading back to a cushy number in RTÉ, rather than face the challenges of changing a broken political system, is probably closer to the truth about our enterprise culture.

Craig R. Barrett (born August 29, 1939) was the Chairman of the Board of the Intel Corporation until May 2009.
People in comfortable armchairs can talk easily about opening new markets but most of them have never sold a bean.

There is also the challenge of dealing with official spin.

The Irish Times reports today that the number of “spin-out companies” from Irish third-level colleges increased by 250 per cent in 2009, according to new figures from the Irish Universities Association (IUA).

The data shows 35 companies were created directly from campus research last year, compared to 10 in 2008. About half of these are in the information technology sector, and half are in the bioscience or food areas.

The IUA’s figures also show a trebling of licensing activity last year, where new technologies or processes created by campus-based research teams are licensed to outside third parties. There were 102 licensing deals last year, compared with 33 in 2008.

It seems impressive but key data is missing and the IUA didn't bother putting any information on its website  --  not an untypical Irish situation where the web is often an afterthought.

Enterprise Ireland claims a 90% survival rate for spin-outs, which is ridiculous.

A study undertaken by the Swiss Federal Institute of Technology (ETH), one of the world's top 30 universities, shows that out of 130 university spin-offs from 1998-2007 only eight (6.2%) had a trade sale exit and one (0.8%) an IPO exit. Two thirds of these exits were by VC-backed spin-offs, including the one IPO case.

ETH Zurich’s 130 spin-offs incorporated since 1998 had by December 2007 created 918 jobs - - so don't expect university spin-outs to have a huge direct jobs impact.

Most alarming of all in the context of Craig Barrett's recommendation to focus on developing indigenous technology companies, is that the latest promising hope of the 1990s to either collapse or be acquired by a rival, is Cognotec. But who at official level wants to consider bad news and learn any lessons? We just carry on regardless and search deep in the tool box for vacuous superlatives.

In December, Finfacts examined the challenges faced by Irish exporters:

The challenge of creating 160,000 new Irish jobs

Trade with the key emerging economies, China and India, is very low and overwhelmingly dominated by the multinationals.

Goods exports to China in 2008 were lower than to Switzerland while total trade with India was valued at €440m.

Meanwhile the Financial Times reported on Friday that bilateral trade between India and Israel has risen quickly, reaching about $4.1bn in 2008, excluding a growing defence trade. An Israeli official said a trade agreement had been "under discussion for quite some time". He predicted bilateral trade could rise to $12bn (€8.5bn, £7.5bn) within five years once a pact was in place.

Other relevant articles:

Feb 2010: Good secondary-schooling key to ongoing educational, job success OECD study shows

Feb 2010: George Lee and the job he hated

Jan 2010: Foreign-owned firms responsible for 89% of Irish tradable goods and services exports in 2008; Jobs in sector down 44,000 since 2000

Jun 2009: Innovation Ireland: Science Foundation claims 8 spinout companies from university research; Enterprise Ireland claims over 100

Apr 2009: Schools must do more to motivate tomorrow’s scientists OECD study shows;  Finland and New Zealand in the lead for science excellence; Ireland gets 19th ranking

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