Embassy of Ireland Helsinki Contents 1 Introduction Ireland

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 of 35. 6 years • Rapid increase in Immigration 1987: net migration -44, 000 2006: 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

What Changed the Irish Economy ? The Celtic Tiger MAY 1997 1988 –”Poorest of the Rich” Europe’s shining light 1997 – “Europe’s shining light” 6 2006 –”The luck 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. 1 m in 1990) • GDP per capita € 40, 275 • National Debt € 37, 559 million euro • The average annual rate of increase in Irish GDP has been 5. 4% over the 6 year period 2000 – 2006 Source: Central Statistics Office

A Decade of Growth Economic Performance Indicators Unemployment % 1995 12. 2% 2007 4. 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- 119% (EU-15) Irish GNP/Capita as a % of EU GDP/Capita 70% (EU-15) UN’s Human Development Index ranked 101% (EU-15) Ireland 5 th in 2007 Sources: CSO and Eurostat

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, highproductivity, trade-based FDI; ► Agility, creativity, flexibility and ‘can do’.

Economic Growth Average Annual % Real GDP Growth 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 1960 s), ►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)

Ireland Campus FAB 24 -2 IR 4 FAB 14 IR 2 FAB 24 IR 6 FAB 10 IR 5 IR 1 5, 000 Staff; $5 bn+ invested – Over 3, 000 employed

Competitive - but not at the cost of Irish Workers – Second Highest Minimum Wage Source: Eurostat / Federation of European Employers

Industrial Disputes and Social Partnership Source Forfas:

Education, Skills and Research ‘LEADERS OF TOMORROW’

Investment in Education and Skills • 1960 s 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) Source: Higher Education Authority

% Population aged 25 -34 having at least Third Level Education Source: OECD Education at a Glance

Breakdown of Higher Education Graduates Source: HEA

Human capital development objectives…

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 Potential Programme €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 onestep-up the qualifications ladder by 2020 ► Full integration of migrants into education and training system

Positive signs for the future … ►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.

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 Netherlands United Kingdom China Belgium France Germany USA Japan 12. 50% 25. 50% 30. 00% 33. 99% 34. 43% 38. 60% 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% • € 150 m investment in energy research • Review of regulatory framework proposed

e. Communications ► 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 e. Government and Knowledge Society agendas

Composition of Ireland’s Exports 2000 2005 Source: CSO

Composition and Destination of Irish Service Exports - 2005 Source: CSO

Geographic breakdown of Ireland’s Service Imports 2005

Destination of Irish Outward Direct Investment – 2005 /06

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 Ph. D 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

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Thank You

Resource Slides