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News : Irish Economy Last Updated: Feb 26, 2014 - 9:24 AM


Irish Economy 2014: Gilmore launches Lilliputian wish-list on trade and tourism
By Michael Hennigan, Finfacts founder and editor
Feb 25, 2014 - 6:38 AM

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Irish Economy 2014: Eamon Gilmore, tánaiste (deputy prime minister) and foreign affairs/ trade minister, on Monday launched a report titled, 'Review of the Trade, Tourism and Investment Strategy,' [pdf], which updates what was a 2010 wish-list. It's a Lilliputian endeavour that characterises much of modern policy making in Dublin.

The word 'strategy' was common at official level in December when a "medium term strategy" was launched covering the period 2014-2020. What was published was a brochure and the new report is in the same boat.

Key recommendations are:

  • the establishment of a ‘new market approach’ by disaggregating Ireland’s 27 priority markets to ensure that Ireland engages with high-growth markets in Asia, South America and Africa;
  • the inclusion, for the first time, of a 2015 target of €900m for the international education sector from €682m in 2010, in recognition of its growing economic contribution;
  • the maintenance of existing targets for the creation of 150,000 new jobs directly associated with exporting enterprises, a 33% increase in exports by indigenous State agency-assisted companies and 780 new inward investment projects through IDA Ireland, should be maintained.
  • the report says that despite a particularly strong performance by the tourism sector in 2013, the targets attributed to this area in 2010 are not likely to be met because of a significant drop in visitor numbers in the first two years of the Strategy, particularly from the UK. The tourism target is cut to 7.2m visitor numbers from 8m in the original plan.

How many additional places for international students will be required? Not known.

The report says "Enterprise Ireland client companies created 42,666 full-time jobs from 2010 to 2013, while IDA client companies created 50,054 new full-time jobs in the same period. The IDA expects to meet its target of securing 780 new investment projects by the end of 2015. Enterprise Ireland expects to have achieved its end-2015 target of increasing client company exports by 33% by the end of 2013 and is in the process of developing new export targets for the period to 2016."

An increase in the number of new jobs directly associated with exporting enterprises by over 150,000, in manufacturing, tourism and internationally trading services, and "with the creation of a similar number of new indirect jobs":

  • IDA Ireland: 75,000;
  • Enterprise Ireland: 60,000;
  • Tourism: 15,000.

Impressive surely?

It would be impossible to discern a relevant reality from this political report that was produced by civil servants to please their political masters (presumably, at least one of them knows why computer services exports surged by almost 50% in five years - -  see below):

Jobs in foreign-owned and indigenous exporting enterprises at end of 2013, were below the level in 2000, when the workforce was 20% smaller:

Full-time jobs in indigenous exporting firms in 2013 below 2000 level

Jobs in Ireland's foreign-owned sector in 2013 below level in 2000

The report says "Ireland is a strong performer in services exports, which grew by 11% in 2012 and account for 50% of  total Irish exports. This reflects the growth in ICT and e-business sectors with a number of Irish services companies and large foreign-owned multinationals operating and exporting from Ireland. Ireland is also home to the service operations of many manufacturing firms as well as financial services, leasing and computer services firms. Some important services sectors within the Irish economy include:

  • Computer Services: accounting for 40% of total services exports in 2012, realising a 49% growth over a five year period."

Impressive surely?

This is a classic example of Irish political spin and fantasy in policy making.

The rise in computer services exports is overwhelmingly related to the booking for tax avoidance purposes of big chunks of global revenues in Ireland by companies such as Microsoft, Google and Facebook. Were 2,200 Google employees in Dublin responsible for over 40% of Google's global revenues in 2012? 

Irish Medium-Term Economic Strategy 2014-2020: Exports to plunge by €50bn - Parts 1-8

Irish Corporate Tax 2014: How official spin and distortion works - in short-term

This report was produced by civil servants and last year Prof Frank Barry in a paper, 'Politicians, the Bureaucracy and Economic Policymaking over Two Crises: the 1950s and Today' [pdf], compared the disastrous Irish policy making of the Lilliputians of  recent times with the times of giants like TK Whitaker, who was appointed secretary of the Department of Finance in 1956.

Barry said the philosopher Plato could not explain 'where he would find the wise men who would govern his ideal state'. Experience since seems to show the best results come from the paradox of competing sources of power jockeying for their own advantage.

He says this is the key that draws together the findings of the three independent reports of 2010 and 2011 into the weaknesses and failures of the Department of Finance, the Central Bank and Financial Regulator - - besides 'deference and diffidence', the reports refer to 'groupthink'.

Prof Barry says that this is less of a problem of course if the institution in which it prevails is only one voice in the mix.

The paper says:

As far back as 1987, TK Whitaker said that he would like to see “a restoration of the old (civil service) principle that you were independent of ministers. You gave your views on any new proposals fearlessly, critically, honestly. You did not care whether your views were likely to commend themselves to the minister, whether for their own sake or politically. Once a decision was taken by minister or government, however, you carried it out as loyally and efficiently as you could. That was my understanding of the function of senior civil servants but I’m afraid it has been undermined. The young men who are preoccupied about this generate deep disappointment in me by telling me that that was an old world that has vanished. In the new world, the civil servant is all the time trying to please the minister, over-conscious of what might be politically acceptable, arranging the options so that they will appeal, rather than in strict order of eligibility”]

It would surely be a good thing!

A Reality Check

What would be worthwhile, would be a warts-and-all analysis of why the indigenous sector has performed so poorly over the last half century despite low taxes?

What size of firm merits public investment in exporting efforts; separating indigenous geographical market data from supplies by multinational firms to know the reality of teh hard slog that's involved in developing new markets outside Europe, would also help.

In relation to China for example, for indigenous firms, opportunities would be in niche areas and limited. Their exports account for about 5% of exports from Ireland

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  very tiny slice of the pie!

In November 2009, Irish companies were warned by several senior executives who have had experience of running 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,”
Liam O’Mahony, former CRH CEO, 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 was until recently chair of 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.

O'Mahony’s advice was repeated by John Moloney, then Glanbia chief executive, and Seán O’Driscoll, Glen Dimplex chief . “China is a long-haul, a slow-burn,” O’Driscoll said.

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