Trade, multinational investment and high telephone call volumes were key factors, writes Cliff Taylor, Economics Editor
Ireland has again emerged as the most "globalised" country among 62 states included in the annual AT Kearney/Foreign Policy magazine survey. The Republic's high level of trade and multinational investment and high telephone call volumes with the rest of the world were the key factors maintaining its position at the top of the survey.
The globalisation survey aims to measure the integration of the countries surveyed into the world political and economic system. Undertaken by AT Kearney management consultants and the prestigious Foreign Policy magazine, it uses a range of measures covering political engagement, technology, personal contact and economic integration.
Ireland ranked sixth in the first survey, conducted in 1998, and was first in the 2000 survey, a position maintained in the latest research, which relates to 2001.
So why does Ireland count as the most globalised? The export- driven nature of the economy - much of it driven by multinational industry - is a central factor.
Irish trade (imports and exports combined) amount to almost 150 per cent of annual gross domestic product, a very high figure by international comparison. Ireland continues to win a disproportionate share of mobile investment capital and some 140,000 people are now directly employed in multinational firms here, with many of these companies using their Irish base to target export markets in the EU and beyond.
This ensures that Ireland ranks highest in terms of economic integration, not only due to high levels of imports and exports but also related to the massive financial flows as multinationals repatriate profits from Ireland.
Ireland's international economic integration has also been deepening in other ways. For example, the big Irish investment institutions have been diversifying steadily out of the Irish market in recent years, encouraged first by the ending of exchange controls and latterly by the advent of the euro. Recent Central Statistics Office figures show that Irish portfolio investment abroad rose from €43 billion in 1998 to €64 billion in 2001, excluding the holdings of IFSC-based companies.
This means your pension fund is now as likely to be invested in Phillips or Nokia as in a share on the Irish exchange and represents a genuine deepening of economic integration. Personal investors are also now much more likely to look overseas for investment opportunities, as shown recently by interest from Ireland in British property.
Other financial flows boosting Ireland's rating may overstate the underlying level of globalisation. For example, the CSO figures show massive financial flows into and out of the IFSC, many of which merely reflect the transfer of funds or investments between the various subsidiaries of international banks.
These would have boosted the flows into and out of Ireland measured in the survey.
IFSC companies have foreign assets of €644 billion in 2001 and huge flows of funds each year would be associated with these.
Also, the level of profit repatriation from multinationals based here will have boosted Ireland's standing in the globalisation index. In many cases, these also overstate the real level of economic activity taking place here. Interestingly, the survey indicates that in 2001, manufacturing wages here were relatively low compared with our EU partners, though wage growth over the past year may have closed the gap somewhat.
The other area where Ireland scores highly is "personal contact". This is boosted by high telephone call volumes in and out of Ireland. This partly reflects trade and business volumes and also the large number of people with relatives abroad, relating to previous periods of high emigration or more recent trends for young people to head off travelling for a prolonged period.
One caveat on the phone traffic figures is the high volume of calls relating to call centres based in the Republic. A number of large technology and financial firms have such facilities here, providing services to international markets.
Whether the calls going into and out of these centres is a true measure of globalisation"is an arguable point. Irish people are also reasonably well travelled internationally, boosting the index in this area.
In other areas the Republic scores less well. The survey measured Internet users, Internet hosts and secure servers as a measure of technological globalisation.
Here Ireland scored less highly, particularly on Internet users where it ranked 24th. Internet use has continued to grow over the past year and Ireland's international interconnectedness has improved through the major Global Crossing project. However, the high cost - and in some cases lack of availability - of high speed Internet connections is a major block to progress in this area.
The Republic is also down the league in terms of political integration, as measured by the index. This uses measures such as membership of international organisations (where we rank 15th) and the number of foreign embassies hosted here (where we rank 38th).
Obviously this measure does not fully capture our involvement at EU level or the importance of decisions made by the likes of the EU Commission and the European Central Bank to our political and economic situation, nor does it attempt to measure the impact of the increasing number of non-nationals living here.
Is Ireland's ranking likely to have altered significantly over the past year? It is unlikely that it has. The foreign direct investment sector has been less buoyant - particularly information technology where exports have fallen.
However, Ireland will not have suffered disproportionately in this area and the major pharmaceutical companies have been supporting the overall levels of exports with massive export gains.
Likewise tourism volumes have been weak over the past year, but again the Irish experience here will reflect the international trend.
Overall the key factor behind the Republic's ranking - the high level of export activity relative to the small size of the economy - illustrates how intimately our economic fortunes are tied up with the global economy.
A period of "catch-up" and rapid growth when we hugely outperformed the average during the Celtic Tiger years has now come to an end.
In future, our high level of economic integration is likely to be reflected in an economic performance more closely aligned with the international average. Outperformance from here on will be more difficult, though not impossible
In the meantime, if you want to boost Ireland's future globalisation ranking, don't forget to ring the relations in Australia.