Ireland: Celtic Tiger or Mouse that Roared

1
Ireland Celtic Tiger or Mouse that Roared?

• Dr David Stewart
• March 27, 2003

2
Economic Growth

• 1994-2000 GDP Growth 9 pa
• 2001 GDP Growth
• US 1.1
• UK 2.3
• Ireland 5.0 (OECD Economic Outlook)

3
Economic Growth

• Unemployment
• 1987 2000
• 17 4.1
• 2001 --- Labour shortage
• FDI Flows
• 1985 2001
• 164 m 9775m (UNCTAD)

4
Economic Growth

• Foreign Companies
• 1992 2001
• 860 1237 (44)
• Employment
• 1992 2001
• 78583 138009 (76)

5
Economic Growth

• Exporting
• In 60s Exports were
• Largely agricultural
• Targeted on one country UK
• And Now

6
Economic Growth
7
Reasons for Growth

• No single reason.
• Series of National Development Plans
• Targeted Export oriented FDI
• Investment in Education (improved skills)
• Investment in infrastructure
• Low Corporate Taxes (0, 10, 12.5)
• Consistency for 40 years.

8
Reasons for Growth

• Membership of EU
• Market Access
• Development funds from EU
• Social Partnerships
• Govt, Industry and Labour
• ESR and SBG groups

9
Consider FDI

• Impact of Foreign Companies
• Foreign companies
• account for 75 GNP
• Account for 80 of Total Exports
• 2/3 FDI stock from US
• In 1999 93 of Sales exported.

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Consider FDI

• ROI for US firms
• is 28
• EU average is 12 (Eurostat)
• 34 FDI is Greenfield
• Benchmark globally 15
• In 2001 FDI dipped.

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Consider FDI

• IDA Effective Targeting
• In manufacturing weightless products.
• Export-led not tariff jumping.
• Greenfield investment (34)
• Focus on growth sectors.
• Concentrate on US (because EU)
• Build Clusters (agglomeration)

12
Consider FDI

• Targeted 4 sectors initially
• IT
• Electrics
• Chemicals
• Pharmaceuticals

13

• One sector targeted was IT
• Largest software exporter
• 40 packaged software sold in Europe is produced
  in Ireland.
• 120 foreign 450 indigenous software firms.
• 70 indigenous sales exported.

14
The Irish Package

• Gateway to Europe
• Relatively low wage rates
• Young, highly educated population
• Low corporate tax rate
• Grant incentives
• Excellent prospecting/support structure
• IDA, Enterprise Ireland

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Threats

• Slowdown in Global Economy
• FDI has dipped
• 5-6pa loss in jobs anyway
• Rising inflation
• Prices amongst highest in Eurozone
• Wages are third highest in Eurozone

16
Threats

• Labour supply in Science and Engineering
• 2002 Degree enrolments
• Computer Science 37 ?
• Telecom. 35 ?

17
Threats

• Threat from Eastern European countries
• EU Expansion, 2004
• Hungary, Poland, Czech Rep.
• Access to structural funds

18
Threats

• Irish Hungary and Estonia
• Corporate Taxes --15, 0
• Wages in Hungary 30 Irish
• Trade deficit with Hungary in IT

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Conclusions

• Days of impressive growth in past
• 2003 3.5 2004 4.5
• Wage and Price inflation
• Next level of FDI
• Population 3.8 million.