In her address to a global Internet conference here in Virginia, the Tanaiste, Ms Harney was upbeat about Ireland's economic outlook. But, in an interview afterwards, she acknowledged that the slowdown in the US was having a negative impact on the Irish economy. "There's no doubt it's having an impact," said Ms Harney, who is also Minister for Enterprise, Trade and Employment, noting the loss of confidence among US businesses and consumers. This has caused a cutback in orders for US technology firms based in Ireland, which employ 110,000 workers, or some 7 per cent of the labour market.
"In some sectors there's a slowdown. We're not getting the level of investment we got 18 months to two years ago, though in other sectors, like health care and some of the service areas, there's an increase. "Obviously a downturn in the American economy has a major impact on the world economy and clearly it would have an impact as well on the Irish economy. Investment decisions aren't being made as rapidly and companies are standing back and waiting." Overall, she said, the Government was happy with the level of investment coming to Ireland from the US.
Many US companies had also recently chosen Ireland to develop new areas of business, said Ms Harney. She pointed to decisions by Hewlett-Packard and IBM to make Ireland their place of e-business within Europe, and by American Home Products to build a new biopharmaceutical plant in Ireland. Ms Harney's remarks come against a background of delayed investment and cutbacks since December by US firms in Ireland. Many of them have seen their earnings forecasts and share values plunge in recent weeks. Some 20.4 per cent of Irish exports are dependent on the US, much of it in the software sector.
Intel, which expects global sales to fall by 15 per cent in the first quarter of 2001, has put off its $2 billion (€2.15 billion) investment in Leixlip, Co Kildare, which will employ 1,000 more workers. Nortel Networks is cutting 40 employees at Galway in a worldwide retrenchment after a sharp drop in sales forecasts, and Gateway has cut 28 jobs from its 1,600 Irish workforce.
"In many ways we could probably contain a slowdown," said Ms Harney, referring to the problem of the lack of skilled workers. "A slowdown might be no bad thing given the skills-related issues and the other problems."
However, the US slowdown could have a serious effect on Irish companies which had invested in the US. "In the past, we were very reliant on foreign companies. We are now developing our own technology sector as well. One of the worries I would have would be the fact that the US is so important for some of the new emerging Irish companies, many of which internationalise very quickly here. Certainly a downturn would affect them and that would cause very major problems for a sector that is just developing."
There are more than 100 Irish companies with US operations, including several technology companies like Baltimore Technologies, Datalex, Iona Technologies, Parthus Technologies, Riverdeep, SmartForce and Trintech. Many have seen their value sharply reduced with the fall of the Nasdaq Composite Index, which has lost more than 50 per cent of its value in the last year.
The Government was providing a light regulatory environment, maintaining low taxes and investing in education and infrastructure to attract new foreign direct investment, she said. "We can't stand still, we've got to keep working at it. It's a very competitive world. The strategy now is to go after smaller businesses rather than big ones with huge job numbers, which is different from what we did five years ago."
In software design, for example, Ireland produces as many software engineers as Germany "which is incredible given the size of the two places". Before her arrival at the International Global Summit in George Mason University, Virginia, Ms Harney visited half a dozen companies in Georgia and Pennsylvania. She was optimistic that two new projects would be approved shortly providing a couple of hundred jobs each. They represented the new type of investment Ireland wanted to attract, she said. "They were in the services area and the main focus was for regional locations.
"In our experience when a company does become a big player in a small town, they do not just get people to go to the town to work for the company, they can retain them much more readily than if they are in a large city with much more labour mobility and much more demand for the same labour. So we use that as a tool to sell regional locations to companies.
"If there are shortages from our indigenous sources, we make it clear that we will supplement that with foreign workers," she said. She pointed out that last year the Government granted 18,000 work permits. It was anticipated that a further 200,000 immigrants would be needed in the next six years - half of them Irish people returning from abroad.
"If we didn't have those workers coming to Ireland, we wouldn't be able even to implement the National Development Plan. The rate of entry to the labour force has fallen from 4.5 to 2.5 per cent and it is to fall further. Last year there were 27,000 new entrants to the labour market and I think in four years it will be down to 12,000. If we don't bring in people with skills from abroad we won't be able to sustain the growth rate."
Asked about the social consequences of such relatively large-scale immigration, Ms Harney said she would like to see the development of a Government plan which would take into account the business, human rights and legal aspects.
