IDA’s overwhelming success in attracting high-quality investors to Ireland is also its weakness: the next IDA CEO will need to focus on central and rural Ireland to avert a chronic social divide.
Last Tuesday I was at the amazing Cashel Palace Hotel, Co. Tipperary and gave a presentation on the future of the Irish economy. My prediction was that we are headed for ever deeper and ever more dangerous divisions. And the setting of my presentation spoke volumes.
Frequented by the crème de la crème of Irish and global business, this magnificent hotel symbolizes a resilient, multinational, high-tech side of our economy where resources abound. But to be close to a train (I like working when I travel) I stayed in nearby Thurles. The contrast between the two cities is shocking.
It’s fair to say that not only did Thurles not recover from the pandemic, but it also never recovered from the global financial crisis.
This is not just a visitor impression, but is supported by hard data from the Central Statistics Office (CSO). Thanks to multinational success, our latest GDP numbers show strong annual growth of 6.3 percent (let’s call this the ‘Cashel Palace Hotel Industry’). But retail sales – driven by the domestic economy – fell 6.6 percent (let’s call that the Thurles Town Center economy).
After eight successful years as CEO of IDA, Martin Shanahan – a man from Kerry – has done much to attract foreign direct investment to rural and regional Ireland. But as I wrote in my book, An economic response to Covid-19much remains to be done.
To see how successful the IDA has been overall, consider that in the last year before Covid-19, 2019, a staggering €163.2 billion in foreign investment flowed into the Irish economy.
That was 5 per cent of total investment in the EU, or five times more than Ireland’s share of the EU population warranted. The fact that the CSO also reported a staggering 2.5 million jobs last week shows the overall benefit of this.
But nominal incomes are shared and inflation pushes more indigenous workers into poverty and unable to afford housing. Our “Thurles” economy is getting bigger.
Between 2015 and 2019 it was my pleasure to play a small part in the success of IDA as Director of Financial Services Ireland and then Head of International Business Development at Ibec.
I’ve worked with Martin Shanahan, Mary Buckley and Kieran Donoghue – all three from outside Dublin – to promote not only Ireland but also rural and disadvantaged inner-city Ireland. This refers to places like Limerick, Cork and Dublin city centre.
We have achieved this through joint events with major job creators such as Citi and Northern Trust and achievable but ambitious job goals (which are now being met). We have even created an apprenticeship scheme to give more people in rural Ireland the skills to work in the FDI industry.
But there is still much more to do. This work needs to be continued at a much higher level. As the tax revenue figures show, we are too dependent on multinational corporate taxes.
This is because FDI does not seep through to the domestic economy sufficiently. As a result, our debt-to-GDP ratio – which is tolerable on paper – overestimates our ability to service our debt. By closing the gap between our GDP and Gross National Income (modified) on the Cashel and Thurles sides of our economy, we will improve regional income equity and make our debt more financially sustainable.
There is also a key political need for such a strategy. When Martin Shanahan became CEO of IDA, Ireland needed to present a new, more globalized face to the global business community. Along with passing the marriage equality referendum, Martin communicated this brilliantly.
But with that mission accomplished, the growing economic divide forces the IDA to focus on the home front. That being said, a number of developments – the Katherine Zappone saga, public concerns about global “vulture funds” and big data centers – all create a feeling that economic and business policy is too dominated by global elites to the detriment of “common people”. is of Ireland”.
SMEs are also increasingly complaining that they are being priced out by the labor/property/professional services markets and marginalized by policy makers by a richer and more influential multinational sector.
For this reason it is important that the next IDA boss is not perceived as a corporate lobbyist. And it is no longer acceptable that the official language of the state (Irish) now has equal rights in the EU Commission, but the IDA website is not even available in Irish.
As someone who has worked with the IDA to promote multilingual events where Mandarin, Italian and German were spoken – and as a native Irish speaker – I remain devastated that the IDA does not respect our mother tongue while I speak of the Irish people expect them to respect other languages and cultures.
And as the 2020 general election demonstrated, our political system is dangerously fragmented between the perceived power elite in business and the public sector and the masses of people in Ireland.
It doesn’t matter whether the next IDA CEO is a woman, a man or someone else. What matters is that a poisoned feeling that economic success is leaving large parts of the country behind must not grow. Otherwise, the alienation of young people could be repeated in the 2020 federal election, this time with over a third of a million SME owners.
Marc Coleman is the founder of Octavian Economics www.octavian.ie and a former Senior Manager at Ibec, Economics Editor at The Irish Times and Economist at the European Central Bank. He has authored five books.
https://www.independent.ie/business/irish/why-the-next-boss-of-the-ida-could-make-or-break-our-economic-cohesion-41943302.html Why the next head of the IDA could make or break our economic cohesion