Here’s a clue…we’re particularly good at producing this product primarily because of our crappy weather!
Multinationals have been pretty good for Ireland Inc. One thing that has perhaps been forgotten since the economic crash in 2008 is that from the early ‘90s to 2002/2003 (and before the property boom took hold), Ireland had in fact experienced a real economic boom. It wasn’t one based on mad speculative land deals or free-love type bank lending either – it was driven by foreign direct investment (FDI) in the tangible traded goods and services sector. Sectors such as speciality computer components, medical devices and pharmaceuticals. During this period, Ireland practically became a 51st State for American multinationals looking for a European hub to produce and export to Europe and beyond. Our low corporation tax, well educated workforce and proximity to Europe put us in a unique position.
And despite what some feared in terms of the rush to lower cost economies, FDI has continued to play a hugely important role in helping to stabilise the Irish economy in the face of the severe downturn in both our export and domestic markets. A critical factor in this has been the particular sectors foreign owned companies in Ireland operate in. Throughout the downturn, export demand for pharmaceuticals and medical devices has remained relatively buoyant which has protected our export performance to a very real extent.
So it’s all good then, this FDI mullarky? It’ll pull us out of this recession and get us back on the boom train once more?
Probably not.
Two comments recently made by pretty smart people should prompt us to take a fresh look at this strategy;
Robert Shapiro, a senior economic adviser to US president Barack Obama, said: ‘‘FDI is a transition strategy, not an end-game strategy. The key to Ireland’s next stage is to make the entire economy a modern economy - and not one that depends on the success of foreign companies.”
Shapiro had a simple message: promote local, rather than rely on global.
He’s not alone.
“The FDI era is over (for Ireland). Real economic investment will be indigenous and growth will come from investment in new ideas.” Those were the words of Craig Barrett, former Intel chief in Ireland.
Now, we’re not economists, but if Obama’s advisors are telling us to “wean” ourselves off FDI we get the hint. Might it be that they’re planning for change to the American tax regime that would alter the relative attractiveness of Ireland as a host nation for American multinationals? That the former chief of one of our largest (and most committed) multinationals is singing a similar tune – well, that brings a new urgency to things.
The problem is that our focus on FDI was at the expense of indigenous industry. It didn’t grow at the same rate that Foreign Direct Investment continuously washed up on these shores and so it tended to take a bit of a back seat. Sure, our export figures skyrocketed but, in a sense these figures weren’t real. Multinationals engaged in transfer pricing and pushed goods through Ireland to take advantage of the tax breaks.
One of the harshest lessons we’ve had to learn in this post Celtic tiger era is that multinationals tend not to have the same level of loyalty to their host country, their roots never run quite as deep as indigenous firms. So, when a more attractive opportunity comes along they have a tendency not to stick around. As cities such as Limerick have seen with the closure of Dell, the impact of this can be devastating on a community.
There was, however a quiet revolution during the heady days of the false economic boom. Throughout Ireland artisan producers and manufacturers began to pop up producing products as diverse as surfboards, sushi, golf buggies and cheese. Few, if any, have yet transitioned to global brand status. But many could. With the right support and resource allocation, they can become the next generation of global Irish brands. And shamefully, that’s still a pretty exclusive set. Put into context, Ireland has no more than a handful of international brands; Jameson, Guinness, Kerrygold, Bailey’s, U2 and Ryanair come to mind. Not many more. The youngest of these brands is 25 years old and the oldest and unarguably the most recognisable celebrated its quarter millennium on Irish soil recently.
So we need new blood here.
Which brings us back to that green, green grass. Hard to believe that we continue to import almost half a billion euro worth of dairy products into the country (that’s milk, cheese and yogurts to you and me). Did you catch that number? That’s €500,000,000 worth of stuff shipped-in annually that we are super-well positioned to produce on our own doorstep. We’re leading Europe in terms of our dairy industry cost competitiveness and we have major capacity to increase production once EU quotas are lifted in 2015.
What on earth are we at?
Building the next generation of global Irish brands takes commitment. These fledgling Irish companies will need help. They’ll need government support. They’ll need strong policies and they’ll need investment. And while the likes of Enterprise Ireland and IDA have a huge role to play in our recovery, as Irish consumers, we have perhaps the biggest role to play.
By supporting Irish made and Irish grown we can make a huge difference and in time, secure a place for some more Irish brands on the global stage.
