Ireland Manufacturing Distribution

Ireland is one of the most globalised countries in the world. The country has benefited from extensive external trade and investment links. It is also one of the world's most dynamic, with annual growth rates in excess of averages for the developed world. Ireland's economy has performed consistently well compared to EU averages. It is the home to some of the largest manufacturing and distribution business in the world, and offers a world class supply source. Ireland is seen as an attractive economy as it offers a global competitive advantage across multiple sectors. (Financial Services, Manufacturing and Product Distribution). (www.enterprise-ireland.com) Ireland offers a high-tech export-led Industrial economy, with a young, educated and multi-skilled workforce. Ireland experienced a record growth period throughout the 90's, with a 10% average recorded for the period 1997-2000. This in turn was followed by an international slowdown for the period 2001-2003, where growth rates were running at the 4-5% range. These figures were still seen as amongst the highest within the EU and OECD. (www.enterprise-ireland.com) Ireland has now established itself as one of the wealthiest countries in the Europe. This is highlighted by the fact that GDP per capita was reported at the equivalent to €38,000 in 2005. This was the second highest in the EU after Luxembourg. (www.enterprise-ireland.com) In recent decades Ireland's economy has switched from being one of a traditional manufacturing based economy to one based on the high-tech and services industry. (www.esri.ie)

However this was not always the case. By the mid 1980's Ireland was suffering from high un-employment, a huge emigration problem and the government's finances were is a poor state. (Burnham J. 03) What was required was a transformation of the economy in order to move forward. These would include drastic change in fiscal policy, and a sound foundation for sustained policies in the matters of taxes, education and telecommunications. (Burnham J. 03) The government declared a tax amnesty, which netted a £500 million windfall. A program for national recovery was implemented, and the government sought to bring their finances under control. These measures improved the countries reputation amongst foreign investors. This set the stage for reductions in marginal tax rates for both individuals and corporations in the 90's. These steps were necessary ingredients for the boom of the 90's. (Burnham J. 03)

The Boom Years

Since the beginning of the 1990's, economic growth has seen the level of GDP almost double in size. The main reasons for this would be:

EU membership and access to the common market

Low corporation tax

Large Multinational Investment

A high percentage of the population are of a working age

Increased participation in the labour market

Reversal of a trend of emigration towards immigration

Investment in education and training

Social partnership agreements

Stable public finance

Subsequently the rate of un-employment has dropped to historical low levels in recent years. (www.ersi.ie) These factors still remain in place today.

The state of the governments finances, have subsequently improved since the late 1980's. This was attributed to the programme of public expenditure reform, which kick started the economic recovery. The servicing of government debt as a percentage of government expenditure has fallen. Tax revenues remain in a healthy state, while the continued investment in infrastructure is strong. The government have also taken steps to pre-fund future pension liabilities through a National Pensions Reserve Fund. This is the equivalent to 1% of current GDP. (www.enterprise-ireland.com) This also places Ireland in a strong future funding position.

In January 2003, Ireland marked its 30^th anniversary of EU membership. Accession to the EEC in 1973 was a decisive opportunity to open up Ireland to a global economy and to reduce its reliance on the UK. EU membership has had a positive impact on Ireland, with surveys showing that there is a large level of support for EU membership. EU payments under the CAP and Structural Cohesion Funds have been significant, and have helped to improve Irelands infrastructure. In recent years, Ireland's net receipts have fallen and are now below 1% of GDP. Ireland will soon become a net contributor. This in itself symbolises the success of the EU convergence process. (www.enterprise-ireland.com) Ireland's decision to join the Eurozone, was another statement of commitment to Europe. This was seen as a logical step for integration of European markets. The lower interest rates that have resulted have helped to stimulate investment, and in turn have been a factor in sustaining higher growth rates.

A key factor in Ireland's success has been the expansion of our export market. Since the mid 90's, Ireland's export growth rate in goods and services has consistently been in the top five of the 30 members OECD. Ireland's services exports have continued to grow, which further highlights the openness of the economy to services trade. IT services, Financial, Insurance and other services are some of the leading exports. Ireland now ranks 13^th in the world for exports of commercial services. (www.enterprise-ireland.com)

Inward investment in Ireland has played a crucial role in our economic development. This in turn has provided new jobs, which in turn provides higher tax revenues to the government. Ireland's highly skilled workforce, have also played a part in enticing foreign investment to these shores. By 1993 the percentage of Science and Technology graduates, in the 25-34 age group where the highest of any OECD country. (Burnham J. 03) The government invested in new universities and RTC's in the 80's and this provided the highly skilled workforce to take up these positions.

Since the 1990's, Ireland's population has been on the increase. This is largely due to the high levels of immigration and the natural increase, along with the increased levels of female participation in the labour force. The population of Ireland is on the increase year on year, and is a crucial factor in sustaining a high level of economic growth. Continued growth in the labour supply underpins Ireland's growth projections.

As Ireland is now seen as knowledge based economy, the provision for further training and education is paramount for sustained growth. This has been further emphasised under the NDP 2000-2006. Investment of €12.6 billion (99 prices) to cover areas as third level access, skills development and apprenticeships has been allocated. Over the past 10 years, the number of full time students in third level has increased by 80%, while the number of students pursuing technical courses has more then doubled. (www.enterprise-ireland.com) These graduates will possess the required knowledge and skills to help to further sustain growth.

The adoption of low tax rate policies has been an example of Ireland's economic success. Ireland offers a highly attractive corporate tax rate. This has been seen as a major advantage in recruiting foreign mutli-national companies. Even though the tax rates are low, they still account for 15% of total tax revenues.

While there are further areas that have contributed to Ireland's economic boom of the past 18 years, the ones highlighted above have been seen as the more important ones. Ireland has prospered since the early 90's, and the hope is that it may long continue.

The Challenges ahead

The fundamental factors driving the Irish economy remain favourable, however there are dangers to be looked at. As an economy we must ensure that we remain competitive moving forward. (Barry F. 06) Our over reliance on the construction sector, rising levels of household debt and escalating costs, and the constant change in energy prices could lead to undue pressure being put on the economy. The government must act to ensure that a Science, Technology and Innovation policy ranks high on the agenda. There is a problem of secondary schools not receiving adequate funding. This is essential if individuals wish to pursue further and higher education. This is especially important in disadvantaged areas. As Ireland has advertised itself as a knowledge economy, with constant streams of third level graduates required. This is only possible if there is a completion of a secondary educational cycle. (Barry F. 06)

The medium to long-term outlook would depend on Ireland remaining competitive, in what is now seen as a high wage economy. This is the most important factor. While the potential for growth is not near the levels of the late 90's, all is not lost. Many commentators still believe that the economy can still perform at the 4-5% rate per annum past the end of the decade. (www.enterprise-ireland.com) Moreover, it is still worth nothing that large payoffs can be had from better economic policies in the presence of favourable external factors. (Burnham J. 03) Even though there have been improvements in Ireland's competitiveness, we still lag behind some of our EU neighbours (e.g. Sweden, Austria and Denmark) (www.enterprise-ireland.com) If further improvements can be made and Ireland remains competitive, then the outlook for the future remains healthy.

Bibliography

Barry F., 2005. ‘Future Irish growth: opportunities, catalysts, constraints', ESRI Quarterly Commentary, Winter: 34-58. www.esri.ie

ESRI 2005. ‘What drives the economy', chapter 2, IN: Medium-term review 2005-2012 Dublin: ESRI http://www.esri.ie.

Burnham, J. B. 2003. Why Ireland boomed Independent Review, Vol. 7, Issue 4: 537-557

Ireland Economic Profile, August 2006. (www.enterprise-ireland.com)

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