Inside the world of business
Upbeat view of State recovery from global economic forum
THE GOOD news is the Ireland is getting more competitive – at least in the eyes of the World Economic Forum’s annual Global Competitiveness Report. After a downward slide since 2005, Ireland climbed a couple of spots this year to 27th (out of 144 states).
It’s still a far cry from the lofty fifth position the State held back in 2000 as the Celtic Tiger took hold, but it gives some encouragement that recent measures to restore competitiveness to the economy are having some effect.
Our traditionally strong showing in areas like the State’s health and primary education system continues although our ranking did slip two spots to 12th overall. Similarly, the quality of maths and science education at second and third level – where we rank 31st – shows some slippage over recent years in an area that is deemed critical to our future economic and employment prospects.
Three years ago, Ireland was in the top 15 globally in this area.
All this pales though next to the perception of our macroeconomic environment and financial market development.
Measuring the soundness of the Irish banking system, the forum states we are ranked last of the 144 countries surveyed – a group that includes the likes of Haiti, isolated Nepal, war-torn Libya and even our friends in Greece. This despite the crippling bailout of our financial institutions. We fare only slightly better for the macroeconomic environment, languishing in 131st spot.
Still, our troubles in these areas are well known – but other details surprise. Despite the focus on entrepreneurship, Ireland is ranked a lowly 88th for ease of access to venture capital, sandwiched between Trinidad Tobago in 87th and Armenia in 89th, and trailing such innovation powerhouses as Romania, Rwanda and Mauritius.
Clearly, there is some work yet to do.
Little cheer for troubled mortgage holders with debt advisory service
THE DEBT advisory service being launched today by Minister for Social Protection Joan Burton with the accountancy bodies seems to be a poor compromise to protect consumers against raw mortgage deals from the banks.
Under the service, any mortgage holders offered long-term deals by the banks to tackle unsustainable home loans can speak to a practising accountant free of charge before deciding to sign the deal.
The banks have agreed to pay for the €250 cost (plus VAT) of one, and possibly two consultations.
However the small print says the accountants cannot advise a consumer on whether they should accept or reject a proposal from the bank or suggest other options.
This is far from ideal for consumers who are under intense financial pressure and will require important independent financial advice on what they should and, indeed, should not do.
The Professional Insurance Brokers Association (Piba), which represents financial advisers, expressed concern yesterday that their Central Bank-regulated members had been excluded in favour of accountants who are self-regulated.
Rachel Doyle, chief operations officer of Piba, wrote to Burton seeking an urgent meeting. She told us that the service was “baffling” as it put lenders “in the lead position over the borrower” when financial advisers were already offering this kind of advisory work.
The association is obviously serving the interests of its members here but it does have a point.
It seems odd that independently regulated financial advisers who are already doing this work day-to-day on a much more involved scale should be excluded.
In light of this, there is a case to be made for the new personal insolvency service being set up to approve deals between lenders and borrowers under the personal insolvency legislation to be extended to regulate long- term mortgage forbearance deals being offered by the banks to customers.
Proposals to turn the Money Advice and Budgeting Service (Mabs) into a personal debt management agency may be shelved by the Minister, however the new advisory service seems like an inadequate halfway house arrangement.
Energy market's odd contradiction
THE PUBLIC service obligation (PSO) is one of those “moving parts” that help to complicate the energy market.
The logic behind it is simple: certain groups of electricity generators, wind farms, peat-fired plants and Tynagh Energy and Aughinish Alumina are paid guaranteed prices for supplying electricity to the national grid.
If the prices paid in the wholesale electricity market match or exceed the guaranteed tariffs, then there is no need for the PSO. If they fall below it, then it electricity consumers contribute to paying the difference.
For the 12 months from October, the PSO will rise to €131.2 million from €92 million during the previous 12 months. Industries and big consumers will pay €60 million of this.
Of the total collected, €47.45 million will go to wind farms, two State-owned peat-fired plants – Lough Ree and West Offaly – will share more than €58 million and two private sector operators, Tynagh Energy and Aughinish Alumina, will receive more than €25 million between them.
The payment to Tynagh and Aughinish dates back to a deal done with both in 2005 when growing demand for energy meant there were fears over security of electricity supplies.
It is not clear why the State persists with this. Demand for energy has been slowing since the recession began, two new power plants have come on stream and at the end of this month, an interconnector with Britain will bring in additional supplies. The PSO is also contradictory: on the one hand, consumers are paying to support wind farms, which are supposed to reduce carbon emissions, while on the other they must also support peat-fired plants, which emit greenhouse gas.
To be fair, the PSO is a small element of the energy price increases this winter. It is something the Coalition inherited, but there is surely an argument for revisiting it now.
Quote of the day
Nokia has made some good progress but investors were looking for quantum leaps. We didn’t get that. - RBC analyst Mark Sue on the launch of the new Lumia smartphone
Today
All eyes will be on the ECB governing council meeting in Frankfurt where an interest rate cut and the highly anticipated “Draghi plan”will be hotly debated
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