Transcript The Irish Miracle Ana Dobrosavljevik Vesna Dejanovska Mariya Mladenova

The Irish Miracle
Presenters:
Ana Dobrosavljevik
Vesna Dejanovska
Mariya Mladenova
Ireland Underperforming
(1960s-1980s)
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Problems:
high unemployment (18%)
 huge indebtedness (nearly 130% of GDP)
 stagnating GDP growth
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Causes:
government protectionist policies
 increasing government intervention
 lax fiscal policy
 increased government sector
 negative remittances from the UK
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Jan 1988
From a Laggard
to a Leader
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Economic miracles
do happen—over the
1990s Ireland outpaced
the world
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The Celtic Tiger…
or the Prudent
Government
May 1997
The Miracle Rationalized
Shift of government focus from inward to outward
solutions—promoting foreign direct investment (FDI)
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revised fiscal policy—government spending cuts
lowered corporate tax (Ireland-10%, since 2003-12.5%, other EU
countries 30-40%)
offered subsidies for recruitment, employee training, research
and development, etc.
social partnership…
joined the EU in 1973…
Joined the EMS in 1979 upon which Ireland received special aid
Social Partnership -What does it really
mean
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No exact definition – a new form of of inclusive corporatism
shifted national agreements away from the narrow matter of wage
regulation to the broader theme of social inclusion
made Irish public policy less bureaucratic and ‘opened up’ to inputs
from civil associations.
decentralized policy implementation
organized negotiation process into a four pillar structure :
a)Trade Union Pillar
b)Business and Employer Pillar
c)Farming Pillar
d) Community and Voluntary Pillar (included for first time in 2000)
Social Partnerships since 1987
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Program for National Recovery (1987-1990)
Program for Economic and Social Progress (1990 –
1993)
Program for Competitiveness and Work (1994 –1997)
Partnership 2000 (1997 –2000)
Program for Prosperity and Fairness (2000 –2003)
Sustaining progress (2003 –2006)
Towards 2016 (2006 –2016)
Program for National Recovery
(1987-1990)
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first of seven successive partnership agreements
cornerstone of the program “system of centralized pay
bargaining”
Effective agreement achieved between rigid labor
unions, employees and government.
shifted national focus to one common goal of attracting
FDI and improving the country's economic condition as
fast as it can.
Employment and unemployment levels remained
virtually unchanged - concerns that this was a form of
“jobless growth.”
“Towards 2016” - New 10 year Social
Partnership Agreement
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Currently, Ireland is dealing
with the problems with
excessive immigration
population has been growing
again to a modern high of
3,917,336 in 2002
“Towards 2016” building a
new social policy perspective,
founded on the lifecycle
approach
• .
Impact of EU’s Structural and Cohesion
Funds on Ireland’s Development
The Structural Funds help the regions to reduce the
disparities between the levels of development
 The Cohesion Fund, which was set up in 1993,
assists Member States whose per capita GDP is
below 90% of the Community average
 Since 1973 (the year of joining the EU), Ireland
gave €10 billion to the EU budget, and received €43
billion, out of which over €17 billion from Structural
and Cohesion Funds
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National Development Plans (NDP)/ Community
Support Frameworks (CSF)
1989-1993 and 1994-1999
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Ireland constituted a single
NUTS II region
Promotion of national
development
"the cumulative long-term
structural impact of the first two
CSFs was to raise Ireland's GNP
level by about two percentage
points above the level that it
would be without them"
(Economic and Social Research
Institute)
2000-2006 and 2007-2013
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two NUTS II regions
regional development
Parts of Ireland exceeded the
eligibility criteria for Objective
1 status
Declining EU Structural Aid
Structural/Cohesion Funds, As Percent of
NDP
41,2
50
40
30
20
10
29,91
6,55
1989-1993
1994-1999
2000-2006
0
Data taken from
http://www.iro.ie/EU-structural-funds.html
Cohesion Fund
Prior to the 2004
enlargement, 4 member
states benefited from it:
Spain, Portugal, Greece and
Ireland
None of the other poor countries in
the EU which have also received
subsidies have achieved anywhere
near the rate of growth the Irish
economy experienced (Portugal
averaged 2.6% GDP growth, Spain
averaged 2.5% and Greece
averaged only 2.2% growth from
1990-2000)
Cohesion Fund budget allocations
for the 2000 - 2006 period
( at 1999 prices )
In millions of €
How do the Structural Funds
contribute to Ireland’s development?
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increase the net capital
inflow into the
economy
 co-finance structural
measures for
 regional development
 infrastructure
 human resources
development
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Timing is important: increase in
Structural Fund aid in 1989 was
fortunate for Ireland because at that
period Ireland had postponed
important investments due to
budget constraints and it helped the
country better prepare for Foreign
Direct Investments
The selected investment priorities
of Structural aid have contributed to
the attractiveness for FDI, by
improving the competitiveness,
raising the productivity and
efficiency, and improving the
labor's quality
Why Structural Funds have been so
effective in Ireland?
Could other member states achieve the same
outcomes of structural aid?
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during the first two CSFs (1989-93 and 1994-99) Ireland
had quite a unique position in that the entire Republic of
Ireland was a single Objective 1 region
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Ireland was a beneficiary of Structural Funds at a time when
there was only a small number of other Objective 1
countries
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Investment priorities, in particular education and HR
Human resources investment –
a key factor for attracting FDI
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facilitated by the Structural
Funds
“Ireland is unique among
cohesion countries in this
regard, having allocated up
to 35% of its Structural
Funds to human resource
investments, compared
with an average of around
25% for other cohesion
countries”
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Education system ranked
2nd in terms of meeting the
needs of a competitive
economy
(IMD World
Competitiveness Yearbook
2005)
Ireland spends more on
education and higher
education as a percent of
total public expenditure
than the other EU states
Education – comparison with other countries
Public expenditure on
education as a % of total
public expenditure
Ireland
Portugal
UK
France
Spain
Belgium
Netherlands
Germany
Italy
Greece
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13.2%
13.1%
11.8%
11.5%
11.3%
11.0%
10.4%
9.7%
9.4%
7.0%
Source: OECD - Education at a Glance 2002 (1999 data)
Key sectors of development and FDI attractiveness
Exports as a % of GDP
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Pharmaceuticals
Software and
hardware
Telecommunication
services
80
1973
1983
1993
2004
56
60
37
40
20
0
Irish Exports 2005
Pharmaceuticals
Computer equipment
50
46
Machines/various
equipment
Misc. manufacturing
40
30
20
10
0
16
11 14
6 7
Others
Food/live animals
65 68
Ireland in the 1990s…
Government efforts + EU Policies =
..."magnet" for inward investment flows that
"underpinned a radical restructuring of the
country's industrial base and led to rapid growth
in both imports and exports."
"We are very satisfied with the working conditions
in Ireland," said Paul Logue, general manager of
Pfizer Ireland Pharmaceuticals
FDI scale
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with 1 % of EU population Ireland, attracted 25 % of all new U.S.
investment in the EU over the last decade
by 2004 Foreign-owned sector accounted for 87.6% of Irish
exports
71.6% of total exports came from two sectors
Chemicals/Pharmaceuticals and ICT/Machinery
Foreign-invested firms exceed 1,200, around 580 of them are U.S.
In 2003 U.S. investment in Ireland was 2.5 times U.S. investment
in China
U.S. companies - Microsoft, IBM, Oracle, Siebel, Dell, Accenture,
AOL, eBay, Nortel and Ericson - either operate out of Ireland or
house their European headquarters there
FDI contribution: solved Irish problems
increase in exports
 job creation (by 2002 40% of Irish workforce was
employed at foreign-related multinationals)
 promotion of management and technology transfer
 generated impressive GDP growth
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Projections
The Economist Intelligence Unit
Key indicators
2006
2007
2008
2009
2010
2011
Real GDP growth (%)
6.2
5.4
3.6
3.2
3.3
3.4
Consumer price inflation (av; %)
3.9
3.4
3.0
2.6
2.2
2.2
Consumer price inflation (av, %; EU
harmonised measure)
2.7
3.0
3.0
2.6
2.3
2.3
Budget balance (% of GDP)
2.2
1.0
0.3
-0.3
-1.1
-2.1
Current-account balance (% of GDP)
-4.1
-4.3
-3.3
-2.6
-2.1
-1.9
Short-term interest rate (av; %)
3.1
4.0
4.1
4.1
4.1
4.1
Exchange rate US$:€(av)
1.26
1.33
1.35
1.30
1.27
1.26
Exchange rate US$:€(year-end)
1.32
1.37
1.32
1.28
1.27
1.26
Exchange rate¥:€(av)
145.9
3
151.5
3
139.3
1
124.0
0
118.7
5
115.6
6
Thank You for the attention!