East Europe poses growing threat to Ireland

12 Jun 2003

Ireland’s economic prowess of the past few years in terms of inward investment is under threat from Eastern European countries wanting “to have a go at us”, said former Tanaiste and foreign affairs minister Dick Spring yesterday.

Speaking at a conference in Dublin organised by Lionbridge Technologies and First Tuesday Group, entitled “World in Motion: generating revenue through the language barrier”, the assistant chairman of Fexco told an audience of business people that “Ireland is no longer a cost-competitive economy. We are also no longer a low wage economy. What do the IDA mean about going up the value chain if there is a €15bn infrastructure deficit? We have failed to deliver on the fruits of the so-called Celtic tiger”.

“In fact,” Spring remarked, “we never had a Celtic tiger, that was a term invented by an economist on paper. What we had was an American Tiger on holiday in Ireland.”

Spring said that with a number of Eastern European countries about to enter the European Union “determined to emulate Ireland’s success of recent years”, they can take the competitive lead in terms of low cost jobs and superior infrastructures. “In the 1970s and 1980s, Irish companies used to visit countries that at the time had full employment such as France and Germany and try to encourage them to establish factories in Ireland. At the time those countries had no comprehension of Ireland’s unemployment problems.

“Today France and Germany are suffering large-scale unemployment while Ireland has achieved relatively high employment. Today, a similar scenario is being played out in the shape of Eastern European companies visiting Ireland and trying to encourage Irish companies to establish factories and offices in their countries.

“I am certain that Ireland is facing enormous competition from Eastern Europe. Those countries are overcoming the language barriers and are ripe for US investment. There are danger signs ahead for this country and by failing to invest in the country’s infrastructure when we had a chance, we are wide open to that threat. Why does Charlie McCreevy give out about throwing money at roads and health? All he needs to do is to ensure that those investments deliver a return,” Spring said.

“We have also been overselling our ICT prowess. Most of the hotels in the country don’t allow businesspeople to access broadband and we don’t have a minister solely responsible for ICT. Mary Hanafin, who was given an add-on role as minister in charge of ICT, is also the chief whip of a coalition government and is a junior minister in charge of defence, in reality she could probably donate more than 10pc of her time to ICT issues and we need someone in place to drive the right strategies.”

Spring lauded the establishment of Science Foundation Ireland (SFI) with its €750m ring-fenced for investment in recruiting scientists and creating infrastructure for research and development. “We have to invest harder and faster. Investment in SFI is a major step in the right direction. We had a great decade but the next 10 years are going to be more challenging than anyone can believe.

“This country does not yet fully understand just how bad the US economy is at the present time,” Spring warned.

To underpin his words, it was revealed earlier this week that employment numbers in IDA Ireland fell for a second year in a row. Job losses amounted to 14,945 in the past year. So far, 4,000 jobs have been created this year, two-thirds of which went to graduates. Job creation was driven by the healthcare and pharmaceutical sector.

Employment in IT businesses held up despite the ongoing tech downturn. Intel, Dell, HP, Microsoft and IBM continue to employ around 18,000 people between them – roughly the same level the five companies employed at the height of the technology boom. According to IDA chief executive Sean Dorgan, lack of infrastructure continued to prevent projects locating in the regions, with investors expressing a preference for city locations.

Figures released during the week showed that out of €116m worth of grant payments in the past year some €54m, or 46.5pc of grants, went a single company, Intel in Leixlip.

By John Kennedy