| About 90% of Ireland's tradeable goods and services exports are mad by foreign-owned firms, mainly American.
Taoiseach Brian Cowen today announced a 300,000 jobs 'plan' which can
be fairly termed a fairytale. There is no space for inconvenient truths in the
aspirational document titled
Trading and Investing in a Smart Economy(pdf).That of course
is no surprise.
On Monday, the Minister for
Enterprise, Trade and Innovation, Batt O’Keeffe
announced a 'top-level' group to draw up a plan for innovation research
priorities. It was the fourth group to be appointed since December 2008 to
advise policymakers on the flagship enterprise policy known as the 'smart
It appears that the shambolic
strategy of relying on university research to provide an engine of growth is
floundering and the reaction of US venture capital to the Taoiseach's
announcement in New York last July of a planned €500m innovation fund, has been tepid.
One giveaway of the Government's addiction to spin over substance in its jobs
announcements, is the recent development of including indirect jobs in the
headline figure. So 300,000 jobs comprises both a figure of 150,000 plucked
from the air for direct jobs and 150,000 plucked from the thin air for
IDA Ireland is targeting 75,000 new jobs in 780
new foreign direct investment projects; Enterprise Ireland is targeting 60,000
jobs between now and 2015 and tourism will add 15,000.
So we have 30,000 new direct jobs for each year of a five-year period and
the inconvenient fact that each year there will be job losses also, is ignored.
Earlier this year, IDA Ireland published a new jobs target of 105,000 by 2014
in its 'Horizon 2020' plan. On closer examination, there were 62,000 direct jobs
targeted and what the IDA chose to ignore was that there may well be NO
net additional jobs.
In the boom years of 2004-2008, IDA Ireland companies added an average of
11,000 new jobs annually, with 60% in financial services and software. It lost
an average of 9,600 annually. So the IDA Ireland headline target of 105,000 new
jobs by 2014 could end up at zero or below net jobs added, as the international
backdrop to this period will be far less supportive than it was prior to the
Today's document says Ireland’s relative position as a leading
international location for value-intensive FDI remains strong.
In 2008 and 2009 despite these challenging economic
circumstances. Ireland attracted 4.2% of the total number of greenfield projects
entering the EU in 2009, up from 2.5% in 2007. While the number of projects
entering the EU fell by 24% in 2009, the number of projects coming into Ireland
in the same period fell by just 4%.
The data from a United Nations agency on
greenfield projects is provided by a unit of the Financial Times and the
number of greenfield projects logged in 2009 is four-times the level handled by
IDA Ireland which is in the main areas of FDI activity of relevance to the
Despite the spin, the number of new foreign
direct investment announcements this year, has been low.
At 1.9 million, we now have 400,000 more in employment than in 1998 and
200,000 more in unemployment, but employment in the main growth engine of the
economy – the foreign-owned sector - - is at 1998 levels.
State agency Forfás reported last March that total permanent full-time employment in the
manufacturing and internationally traded services sectors amounted to 272,053 in
2009. It was 276,287 in 1998. Employment in foreign-owned firms was 132,596
in 2009 and 140,281 in 1998.
While exports from the
pharmaceutical/medical devices sectors, which account for about 57%
of total merchandise exports, rose 25% in the period 2004-2009,
employment remained almost unchanged at about 40,000. The engine of growth has
to be home-grown start-ups.
Enterprise Ireland, the
State agency which supports Irish-owned firms with export potential, said last July that it had invested in over 800 start-up companies over a 20 year period (1989 -
2009), which has yielded more than €1bn in Irish exports and in excess of
Between 1998 and 2007, there were 11,000 additional jobs added in the
international tradeable goods and services sectors, at a time of unprecedented
So about 1,000 additional jobs each year were added and now this level is
expected to be significantly exceeded with a much more challenging international
There is no credible explanation as to how this can be achieved.
Last March, the Innovation Taskforce report estimated that 117,000 to 235,000
jobs could be produced in a decade from university research and linkages with
existing foreign firms.
It was based on a dream that the US Silicon Valley could be transplanted to
Why deal with facts on the ground that in 30 years, the tech cluster in the
area of Cambridge University in the UK, has many research institutes; it has a
few big tech companies, about 30,000 in employment and most companies employ
less than 10 people?
It's only amateurs who believe that every company in that sector can become a
Google or Facebook.
So, we Irish are very good at announcements and today's scene had a
supporting cast of ministers to add a sense of importance to the occasion but
could bring to mind the comment of English statesman Benjamin Disraeli in
1872 on William Ewart Gladstone's Liberal Party government: "As I sat
opposite the Treasury bench, the ministers reminded me of one of those marine
landscapes not very unusual on the coast of South America. You behold a range of
IBEC, the busines sgroup as expected praised today's announcement but
complained that there were no plans to include a private business representative
on the Foreign Trade Council.
Commenting on the strategy launch, Pat Ivory, IBEC head of international trade
and transport policy said: “Export-led growth will drive Ireland’s economic
recovery, and this new strategy is welcome. However, it is important that there
is a private sector representative on the new Foreign Trade Council, as it is
the private sector that is actually out there in the market every day, selling
Irish goods and services.
“The Irish export sector has performed well this year. Exports grew by 6.9% in
the first half of 2010 compared with the same period in 2009; goods exports grew
by 4.2%; while services imports expanded by 10.1%.
“There is huge potential for companies to increase their market share of high
value goods and services in international markets. The emerging markets of
China, India and Latin America offer new opportunities, in addition to those
provided by an enlarged EU and the Gulf region."
Opportunities indeed. Report: Taoiseach launches aspirational 'plan' for trade, tourism and investment;
Five-year 'strategy' to generate 300,000 new jobs and boost exports from Irish
firms by one third
Easy to say from behind a desk in Dublin!
and Investing in a Smart Economy thread on the
Irish Economy Blog:
There are challenges from the changing model of globalisation for both big
and small rich countries.
There are no easy options but being in denial hardly helps.
Intel co-founder, Andy
Grove, asked in a recent article:"...what
kind of a society are we going to have if it consists of highly paid people
doing high-value-added work - - and masses of unemployed?"
conventional globalization model in having design/R&D done in the US/Europe and mfg/assembly
work done in China
currently works for Apple but it's viewed as a flawed model for other sectors with a
proven risk for companies of losing control of their intellectual capital.
Applied Materials, one of Silicon Valley's big firms has opted for transferring
its key R&D functions to China and its CTO is now based there.
and the rickety state of conventional globalization
year another former Intel CEO, Craig Barrett, said Ireland should reduce its
dependence on FDI. He said
estimated 3bn additional people entered the free world economic system since the
rise of China, the collapse of the Soviet Union and economic reforms in India.
guess what, they also want good jobs and have a rich educational heritage. You
have 3bn new customers, you also have 3bn new competitors.”
likely again this year that the numbers working in
the FDI sector in Ireland will fall.
The most depressing aspect of the Irish scene
is the craven role of the senior management of the State enterprise agencies.
There needs to be a Whitaker who can present
some home truths to the political leadership.
For a company to have export potential, it has
to generally first establish a domestic base/record and unless it has a
compelling product/service (in such a case it's likely to be acquired by a
bigger overseas firm), it needs resources, perseverance and patience.
Putting Mandarin on the school
curriculum is a typical proposal from armchair 'experts' who have no
experience of the challenges of selling in China - - 1.3bn consumers and
all we need is a teeny-weeny slice of the pie!
Yesterday the Taoiseach spoke of more high-level
trade missions and “a greater focus” on the
languages, culture and history of emerging nations
in the education system.
not too long ago when his deputy was pushing for a
complete EU ban on Brazilian beef!
Last November, Irish companies
were warned by several senior executives who run some of the
country’s most successful indigenous companies, to be cautious about expanding
into emerging markets and focus instead on developed markets.
“More fortunes have been lost than made by getting in too early,”
former CRH CEO Liam O’Mahony told a conference on making
businesses international at UCD’s Michael Smurfit Business School.
O’Mahony, who ran the world’s second biggest building materials
company from 2000 to 2008 and now chairs IDA Ireland, said Irish
companies should consider expanding into the US, UK and other mature
markets before looking at countries such as China. “Some of these
markets are very large and there is still scope to grow as long as
you have value propositions,” he said.
Mahony’s advice was repeated by Glanbia chief executive John
Moloney and Glen Dimplex boss Sean O’Driscoll. "China is a
long-haul, a slow-burn,” O’Driscoll said.
- - Michael Hennigan