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