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News : Irish Economy Last Updated: Sep 12, 2012 - 10:01 AM


Irish Economy: Exports, performance and confusion
By Michael Hennigan, Finfacts founder and editor
Sep 11, 2012 - 8:35 AM

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Irish Economy: The IMF (International Monetary Fund) wonders in a recent report about rising productivity not being reflected in increasing exports' market shares. Some of the locals are also gripped by confusion.

The charts above come from a June IMF report [pdf}   

We reported last Friday on an Irish Times feature on Irish exports.

On Monday, Dr Proinnsias Breathnach, a lecturer at NUI Maynooth, had a letter published in The Irish Times in response to the article. He had misread my comment in relation to headline export data in the past decade and the limited economic impact of the increase. Jobs in the both foreign-owned and indigenous exporting firms are at the 1999 level, even though there has been a huge rise in exports in the interval.  

A chara, – In a side panel accompanying a major article on Ireland’s export prospects (Business, This Week, September 7th), Michael Hennigan argues that Ireland’s service exports have “limited impact on the real economy”, asserting that, in 2011, about 9,500 Irish workers were responsible for 73 per cent of all services exports.

This is a distortion of the actual situation. According to the annual Forfás survey of the economic impact of firms in receipt of assistance from the State enterprise development agencies, in 2010 foreign firms based in Ireland generated sales of €53.3 billion and employed some 46,600 workers. Since 96 per cent of these sales were export sales, it follows that about 44,800 people were employed in export services.

On the same basis, we can calculate that about 18,500 workers in Irish firms were engaged in export services, giving an overall total of some 63,300. This does not include firms engaged in export services which are not in receipt of State support.

These figures are a far cry from those suggested by Mr Henning and show that export services are a major source of employment creation.

Furthermore, this is generally high-quality employment, and the average payroll cost of workers in foreign services firms in 2010 was €61,000.

In addition, foreign service firms spent over €6 billion on Irish materials and services in 2010, over 40 per cent more than was spent by foreign manufacturing firms based here.

Combined with the total payroll contribution of these firms (€2.8 billion in 2010) and their corporation tax contribution, total expenditure of these firms in the Irish economy was of the order of €10 billion. And this is not counting the considerable contribution of services exports by Irish firms.

This hardly constitutes the “limited impact” suggested by Michael Hennigan.

Mr Hennigan is also wide of the mark with his assertion that the computer services sector has seen no growth in employment levels since 2000.

According to population census data, the number of people in computer software occupations rose from 19,598 in 1996 to 37,770 in 2002 and 50,282 in 2011. That’s an increase of over 150 per cent in 15 years. – Is mise,

Dr PROINNSIAS BREATHNACH,

National Institute for Regional and Spatial Analysis,

National University of Ireland,

Maynooth.

I refer below to Dell's former PC plant in Lodz, Poland (now owned by Foxconn, the giant Taiwanese contractor) where production from Limerick was switched to in 2009. It looks from the accounts that the output is booked in Ireland even though most of the PCs assembled there would never reach Ireland.

The following is my response, which has not yet been published:

Sir,

Dr Proinnseas Breathnach of NUI Maynooth accuses me of distortion in respect of service exports. However, I stand by my claim about the headline data in the past decade and the related economic impact. I was not referring to the actual impact of all those involved in service exports.

Last month, Forfás published its 'Annual Employment Survey 2011' and in the 2002-2011 period covered, service exports rose from €29 billion to €79 billion.

Full time permanent employment in both Irish and foreign-owned firms in 'computer services' (a Central Statistics Office classification) rose from 57,000 to 60,000 while employment in foreign firms rose by 2,000 to 46,000. There was no change in 'business services' employment in foreign firms

'Computer services' exports jumped from €10 billion to €32 billion without any significant change in employment. 'Business services' exports more than quadrupled to €22 billion.

The number of 9,500 relates to Microsoft, Google, Apple, Oracle, Dell, aviation leasing (about 1,000 direct workers) and Facebook. With the exception of Apple, 2011 staff and revenue estimates were based on published data

Apple Cork's Irish financials have not been available publicly since fiscal 2004. The CSO gets the data and the company is responsible for the world beyond the Americas and China. We have estimated Irish-booked sales at €12 billion.

Dell Computer is mainly a service business in Ireland and is ranked in fifth place in 'The Irish Times Top 1,000' database, with annual sales revenues of €9 billion.

Looking at its fiscal 2011 accounts, it appears to be booking the output of its former PC plant in Lodz, Poland (now owned by Foxconn, the giant Taiwanese contractor) in Ireland.

We estimate that only 50,000 Irish direct workers are responsible for 69 per cent of annual Irish exports, based on the headline total value of €164 billion for merchandise and services exports in 2011. That amounts to 2.5 per cent of the Irish workforce of 2 million, including the unemployed.

It's time to plan for an uncertain future, based on reality not fairytales.

While Microsoft had a global revenue per employee of $777,140 in fiscal 2011 and $27 million in Ireland, Google had a global revenue per employee in 2010 of $1.33 million and $8.52 million in Ireland.

The data shows that Ireland has miracle workers but 309,000 of them are officially unemployed.

Regards,

Michael Hennigan

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