Attraction of the Irish market Essay

In a span of a decade, Ireland has transformed itself from a rural country to a modern highly industrialized economy. It is still among the fastest growing countries of Western economies with growth rates approaching 8 per cent in G.D.P in 1999. Figures are not that impressive in 2002, because of the global recession, but still remain above the euro area average this year (3.6 percent1). The Celtic Tiger was essentially created, not by Irish, but by foreign, in particular American high-tech multinationals. How come Ireland, such a small market, became so attractive?

A. IRELAND’S ASSETS:

1. EUROPEAN FUNDS:

Before getting a dizzying and successful economy, Ireland was a rural economy, heavily dependent on exports to Great Britain and poorly developed in terms of infrastructures and telecommunications. The Irish government used properly the funds granted from the European Union so as to modernise the country (roads, ports, airports, health, universities, telecommunications, etc.).

2. SOCIAL CLIMATE:

In 1987 was released a three years agreements between social partners in order to ensure a peaceful social climate. It worked quite well and efforts are still being made to guarantee this “quiet” consensus. For instance, a compromise was set up to restrain the wages in return of a reduction in the income tax.

3. “QUALITY PEOPLE”:

Ireland is quite proud of its population as it is one of the youngest among the EU. With 702 per cent of them aged under 25 and 40 percent under 44 years-old of age ( future estimations : 35.5 per cent in 2010), the working population is one of the youngest in the Community. It also means that people are more flexible and movable. Furthermore, the education system is well valued by companies with a great proportion of students with scientific and engineering degrees3. Another competitive aspect is the fact that the employment costs are lower than most of European countries. And are a good reason too to set up a business in the country.

4. CORPORATE ENVIRONMENT:

Ireland receives one third of U.S. investment in the European Union. Why are American firms so attracted to Ireland? One of the key reasons is the rock-bottom 10 per cent rate of corporate tax4 (compared with 40 per cent in Germany, 32 per cent in the U.S,, 30 per cent in Great Britain). Unfortunately, this favourable fiscal system is changing a bit as a 12.5 per cent corporate tax rate is planned to be launched in January 2003 to trading profits in all sectors (companies created before July 31st 1998 are not included in this new system).

B. STRATEGY AND INITIATIVES:

1. GETTING INTO LINES WITH OTHER EUROPEAN COUNTRIES:

To catch up with European standards and to erase its laggards, Ireland launched in 1993 a National Plan for Development to enable the country to enter the Euroland in January 1st 1999 and to reduce the unemployment rate based on the budget deficit. This plan was totally fulfilled thanks to the reasons described above and to an outward-oriented strategy.

2. A STRATEGIC APPROACH:

* Developing trade: Trade has become the basis of the plans of development of the country. A promotional strategy was initiated by the Industrial Development Authority that merged with Entreprise Ireland recently, so as to attract foreign direct investments and to become an “export-plateform”. Multinationals bring inflows of capital that can be used to set up a steady economic growth. Sectors like the high-tech industry, electronics, telecommunications, pharmaceuticals are mostly in the hands of American, British and German foreign capitals5 (Dell, Cisco Computers, IBM, Intel, etc).

* Taking advantage of the European economic situation : Plus, one should keep in mind that the competitiveness of the economy was partly based on the weakness of the euro, that benefited to foreign based companies and to the economic growth.

* High-technologies and Telecommunications : Ireland has made itself the place for E-Business and new technologies and made of them the key sectors for foreign companies to get into. Ireland is closely involved in the development of new Digital Parks in order to stimulate the e-Business and internet developments in the country. Ireland has already substantially invested US$5 billion in the telecommunications infrastructure over the last 10 years and offers a reliable telecommunications system meaning that Ireland has one of the most advanced telecommunications systems in Europe.

3. PRIVATE AND PUBLIC PARTNERSHIP:

A public private partnership is a partnership between the public and the private sector for the purpose of delivering a project or a service traditionally provided by the public sector. Trying to follow the British liberalization, Ireland chose to go its owned way by setting up a more secure system: the private / public partnership was established in order to keep both an eye on the a economy while promoting private initiatives (they bring about capital and quality of services). Numerous sectors are concerned by the PPP schemes (infrastructures most of all). Can be quoted the 2000-2006 PPP Roads Programme, which will increase the length of the Wareford Bypass; Limerick Ring Road, Second West Link Bridge in Dublin, Kilcock/Kinnegad motorways. The budget surplus is partly used in that sense to limit excessive privatisation.

4. GROWING IRELAND:

The 2000-2006 National Plan for Development is mainly supported by public capital, European institutions and international bakers’ money. Because there is still a lot to be done to modernise the country, tender bids invitations are being multiplicated and competition is wild. Roads, environment, water supplying, public transports, wastage control, housing are sectors still “under construction”. There is there an opportunity to be taken and French companies saw it right as they are already presents on roads (M50) and on water supply (Vivendi Waters).

Ireland offers investors a profitable and English-speaking base to cope with the European demands and beyond. Ireland has become the best place for more than 1200 companies from all origins. Even if Ireland is a small market, an economic need must be addressed : infrastructures have to be renovated, people are willing to improve their standards of living, etc. Ireland has made a giant leap and its finantial capacities should not be neglected by foreign companies. The advantage is that Ireland benefits from a “demonstration effect” which means that companies that have been successful on the Irish ground is in itself a good point to attract other foreign multinationals.