Embassy of Ireland, Helsinki
Embassy of Ireland, Helsinki. Contents 1.Introduction – Ireland in Summary 2.Changes in the Irish Economy 3.The Drivers of Ireland’s Success 4.The New.
Jan 23, 2016
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Embassy of Ireland, Helsinki
Contents
1. Introduction – Ireland in Summary
2. Changes in the Irish Economy
3. The Drivers of Ireland’s Success
4. The New Challenges for Ireland
5. Resource Slides
1. Introduction – Ireland in Summary
Ireland - A Changing Country
• Total population: 4.2 million
• Highest birth-rates in EU at 15.3 births per 1000 population
• Relatively young population with an average age of 35.6 years
• Rapid increase in Immigration1987: net migration -44,0002006: net migration +70,000
Economic History
► 1922 – 1958
• a basic agricultural economy• self-sufficiency and protectionism strategy
► 1958 – 1973• opening up and joining Europe (EEC)
► 1973 – 1987• some success, adjustments, but crises also
► 1987 to date• exceptional development and growth
6
The Celtic Tiger
Europe’sshining light
MAY 1997
1988 1988 –”Poorest of –”Poorest of
the Rich”the Rich”
1997 – 1997 – “Europe’s “Europe’s
shining light”shining light”
What Changed the Irish Economy ?
2006 –”The luck 2006 –”The luck of the Irish”of the Irish”
An Economic Snapshot of Ireland, 2007
• GDP €174.7 bn
• Exports €138 bn (2006)
• Imports €120 bn (2006)
• Trade Surplus €18 bn - 10.6% of GDP
• Total at work 2+ million (was 1.1m in 1990)
• GDP per capita €40,275
• National Debt €37,559 million euro
• The average annual rate of increase in Irish GDP has been5.4% over the 6 year period 2000 – 2006
Source: Central Statistics Office
A Decade of Growth
Economic Performance IndicatorsUnemployment %
199512.2%
20074.4%
Gross Government Debt as a % of GNP
82% 21.7%
Personal Tax (Lower/Higher Rate)
27/48 20/41
Irish GDP/Capita as a % of EU GDP/Capita
79% (EU-15)
119% (EU-15)
Irish GNP/Capita as a % of EU GDP/Capita
70% (EU-15)
101% (EU-15)
Sources: CSO and Eurostat
UN’s Human Development Index ranked Ireland 5th in 2007
Business-friendly policies
►Young, vibrant and highly-skilled workforce;
►Consistent public policies, including low tax;
►Strong developmental focus nationally, with strong, informal network links;
►Rapid responses e.g. skills development;
►Successful development of high-technology, high-productivity, trade-based FDI;
►Agility, creativity, flexibility and ‘can do’.
Economic Growth
0
1
2
3
4
5
6
7
1970-79 1980-87 1988-93 1994-2006
EU
US
Ireland
AverageAnnual% RealGDPGrowth
Source: OECD Economic Outlook
The Basis for Success
►Results from development decisions of earlier decades and from EU membership
►European Single Market and Eurozone►Social partnership and economic stability►Demographic gains and education►Low corporate tax – now 12.5% on profits►Foreign Direct Investment (FDI)►Performance of Irish management and
Industry►Export focus and global orientation
Social Partnership
►1987 - a ‘time for reform’• rising unemployment (17%) and emigration• public finance deficits and debt (120% of
GNP)• loss of jobs and of national confidence
►National Social Partnership Agreement• employers, trade unions, farmers &
government• moderate wage increases and tax cuts• consensus on development priorities• shared efforts to achieve national goals
Trade relationship with the Global Economy
Destination of Irish Exports in 2006
Source: CSO /Forfas
Geographic distribution of Irelands Imported Goods in 2006
Source: CSO/ Forfas
Strategies in place by economic agencies to increase Irish exports
►Asia Strategy – focused on increasing exports to the growing economies of the Region
►Targeting existing Markets in Europe and North America for continued growth
►Targeting the potential of new markets in Mexico, Brazil, the Gulf, Russia and South Africa
The Drivers of Ireland’s Success
Irelands Open Economy
Key Milestones:►Industrial Development Authority (1952)►Dismantling of import tariffs/quotas (early
1960s), ►Ireland joins the GATT (now WTO) (1967)►Ireland joins the EEC (now EU) (1973)►Creation of Single European Market (1993)►Introduction of Euro in physical form (2002)
IR1
FAB14
FAB24IR6
IR4
IR5
IR2 FAB10
Ireland Campus
5,000 Staff; $5bn+ invested – Over 3,000 employed
FAB24-2
Competitive - but not at the cost of Irish Workers – Second Highest Minimum Wage
Source: Eurostat / Federation of European
Employers
Industrial Disputes and Social Partnership
Decline in Industrial Disputes
0
50
100
150
200
250
1980 1983 1986 1989 1992 1995 1998 2001 2004
No
. In
d.
Dis
pu
tes
wh
ich
beg
an
Source Forfas:
Education, Skills and Research
‘LEADERS OF
TOMORROW’
Investment in Education and Skills• 1960s heavy investment in primary and
secondary education begins;
• 1967 free secondary education introduced;
• 7 Universities, 3 in Dublin, 1 in Cork, Galway, Limerick and Maynooth;
• 14 Institutes of Technology located regionally;
• Increased third level participation over the three decades.
Post-Leaving Cert/High School Structure of Irish Education
‘Ladder - Up’ approach to Advanced Learning
Education and Skills
►57% of graduates are in science, engineering, computer or business studies
►Government initiatives to meet future needs:• Expert Group on Future Skills• Educational Technology Investment Fund• Focussed technology courses
Full-time Third level students - 1975/76 to 2004/06 in thousands (000)
0
10
20
30
40
50
60
70
80
90
100
1975/76
1980/81
1985/86
1990/91
1995/96
2000/01
2004/06
Source: Higher Education Authority
% Population aged 25-34 having at least Third Level Education
05
101520253035404550
Source: OECD Education at a Glance
Breakdown of Higher Education Graduates
Info Technology
10%
Sciences
9%
Engineering
13%
Medical &
healthcare
12%
Arts & Social
Sciences
24%
Business &
related
32%
Arts & Social Sciences
Business & related
Engineering
Sciences
Info Technology
Medical & healthcare
Source:HEA
Human capital development objectives…
28%
7%
40%
45%
32%
48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Ireland's currentskills profile 2005
Vision proposedby EGFSN for
2020
% l
abo
ur
forc
e
Third & Fourth Level(Levels 6-10)
UpperSecondary/FurtherEducation (Levels 4,5)
Lower Secondary orbelow (Levels 1-3)
Research & Development
‘LEADERS OF
TOMORROW’
R&D in Ireland
►Strategy for Science, Technology and Innovation 2006-2013
►Strong Government commitment and funding, to double both enterprise R&D and doctoral output by 2013
►Science Foundation Ireland (on NSF model) is attracting world-class researchers to universities
►Strong industry - academic links ►Notable developments with Bell Labs, GSK,
IBM, Intel, HP, Wyeth, Bristol-Myers Squibb and many other companies
►50% of overseas medical technology companies have an R&D responsibility
Irish R&D – who finances it?
GERD = Gross Domestic Expenditure on
R&D
R&D Tax Credit
► 20% Tax Credit for “Qualifying Expenditure” on “Research and Development”
► Research and Development, includes• Basic research• Applied research• Experimental development (including process
development)
► Applies to both Revenue and Capital
► No requirement to retain ownership of resulting IP in Ireland
Business Sector R&D
Researchers in Higher Education
Source: National Competitiveness Council, 2007
3. The New Challenges for Ireland
The future will be different
►Globalisation, technology and digitisation
►New Markets / New Competitors
►Changes in economic conditions
►New business models and virtual companies – new patterns of investment
►New aspirations and expectations in society
►Higher value activities and higher skills
►More sophisticated and complex jobs
►Premium on flexibility and responsiveness
Vision and Strategy
►Higher value, skills and knowledge based economy
► Innovation placing Ireland at global leading edge in clusters or niches, using enabling technologies
► Ireland will differentiate on the basis of:• performance based on sophistication and
quality of operating environment, • our expertise and research, and • flexibility, speed and agility.
Enhancing Productivity Growth
Source: National Competitiveness Council, 2007
Addressing Productivity Growth and International Competitiveness►Enhancing Human Capital through
development of education and life-long learning
► Increasing infrastructure efficiencies►Review and reform of the Public Sector►Focus on moving up the value chain – private
sector►Productivity Improvement Fund►National Competitiveness Council►Expert Group on Future Skills
Bridging the Infrastructure Gap
National Development Plan, 2007-2013
Raising the Economy’s Productivity Growth PotentialProgramme €billion Annual % of Current
GDP
Economic Infrastructure
€54.7 5.5%
Enterprise, Science & Innovation
€20.0 2.0%
Human Capital €25.8 2.5%
Social Infrastructure €33.6 3.3%
Social inclusion €49.6 4.9%
Total €183.7 18%
Human Capital Development
Human Capital Development
►National Skills Strategy, January 2007 ► Increase upper secondary completion
to 90%► Increase progression to third level to
72%►Prepare for occupational changes ►Move 500,000 people in workforce
one-step-up the qualifications ladder by 2020
►Full integration of migrants into education and training system
►GDP growth has been consistently higher than the OECD average over the last decade.
►GNP per capita levels are now in line with the OECD average.
►Ireland maintains an open and attractive environment for overseas investment.
►Entrepreneurship rates are relatively high and the Labour Force is very strong.
►Long standing advantages in our tax system continue to be of benefit.
Positive signs for the future …
Corporate Tax Rate
• Stable Corporate Tax Rate of 12.5%
• There is full domestic political support for the low tax rate
• European Commission has indicated that 12.5% does not constitute harmful competition
• Ireland has selected the “high road” of “full and fair competition” and is “setting the example” (Jeffrey Owens – OECD March 2003)
Comparison of Corporate Tax Rates
Ireland 12.50% Netherlands 25.50% United Kingdom 30.00% China 33.00% Belgium 33.99% France 34.43% Germany 38.60% USA 39.50% Japan 39.54%
Source - Deloitte & Touche, 2007
Tax Reform
• Wide base, low rates• Corporate profit taxes• Capital gains taxes• Income taxes• Employer social security taxes• Consumption taxes• Property taxes• Self-assessment system
The Top Pharma Companies are in Ireland
Energy
• 2007 Energy White Paper Objectives: • Security of Supply, Environmental
Sustainability & Economic Competitiveness• Creation of all-island energy market 2008• 33% of electricity from renewables by 2020 –
(currently 93% of energy from fossil fuels)• Electricity inter-connection to UK & Europe• Building additional generation capacity• All-island gas storage by 2008• Retain State ownership of transmission
networks• Reduce ESB all-island market share to 40% • €150m investment in energy research• Review of regulatory framework proposed
eCommunications
► Strong Progress• High capacity and competitive international
connectivity• Strong private sector market participation in
fixed, mobile, wireless and services• State investment in metropolitan area
networks• Strong rates of broadband take-up
► Government supported regional broadband programme
► Priorities• Rapid development of Next Generation
Networks• Pro-competitive regulation• Reinvigorating eGovernment and Knowledge
Society agendas
Composition of Ireland’s Exports 2000 -2005
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2000 2001 2002 2003 2004 2005
Mill
ion
€
Food, Beverages and otherAnimal ProductsChemicals
Manfactured GoodsClassified by MaterialMachinery
Other
Source: CSO
Composition and Destination of Irish Service Exports - 2005
0
2500
5000
7500
10000
12500
15000
United
Kingdom
EM
U countries
North A
merica
Asia
Other R
egions
Not
Geographically
Allocated
Mill
ion
€
Business Services
Royalties/Licenses
Computer Services
Finanical Services
Insurance
Communications
Tourism and Travel
Transport
Other
Source:CSO
Geographic breakdown of Ireland’s Service Imports 2005
-
2,500
5,000
7,500
10,000
12,500
15,000
17,500
United
Kingdom
EMU
countries
North Am
erica
Asia
Other R
egions
Not
Geographically
Allocated
Mill
ion
€
Business Services
Royalties/Licenses
Computer Services
Finanical Services
Insurance
Communications
Tourism and travel
Transport
Other
Destination of Irish Outward Direct Investment – 2005 /06
UK35%
Africa1%
Eastern Europe16%
Latin America & Caribbean
3%
North America9%
Developing Asia Pacif ic
6%
Developed Asia Pacif ic3%
Western Europe ex UK27%
Human Capital Development
►National Skills Strategy, January 2007
► Increase upper secondary completion to 90%
► Increase progression to third level to 72%
►Prepare for occupational changes ►Move 500,000 people in workforce
one-step-up the qualifications ladder by 2020
►Full integration of migrants into education and training system
Social Partnership Agreements
• 1996 fourth pillar introduced – social/community pillar
• Current agreement Towards 2016
• Social Partnership grown far wider than wage negotiations
• 10 year framework to address ‘key social challenges’
• Social partnership is regarded as having benefited all pillars and as a major contributor to Ireland’s success over last 20 years
Enterprise Development► Indigenous enterprise
• Scaling growth oriented companies, internationally focused and innovation-led
• Promoting innovation based start-ups and entrepreneurship• Driving productivity growth, management skills, technology
use and marketing capability in existing enterprises• Improving access to equity and finance
► Foreign Direct Investment • High value inward investment in advanced manufacturing,
sophisticated business services and research and innovation• Gateway approach to regional economic development
► Enhancing our tourism product and developing a market-oriented seafood sector
► Enterprise networks► Higher education and enterprise collaboration ► Open competitive markets and regulatory reform
Strategy for Science, Technology & Innovation, 2006-2013
► Objectives: • Step-change in enterprise R&D• Double PhD output to 1,312 by 2013
► World Class Research • Funding excellence in frontier research • Investing in core infrastructure, postgraduate
training and early stage researchers and research collaboration
► Enterprise Research & Innovation • Holistic in-company R&D support scheme• Competence centres and higher education
collaboration • Innovation Vouchers
► Commercialisation and technology transfer reform► Orienting sectoral research around policy priorities
62
Thank You
Resource Slides
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