Under the Microscope Prof William RevilleOver the past 25 years Ireland has transformed itself from one of the poorest countries in Europe to one of the richest in the world. This is largely because we attracted the world's largest and most sophisticated corporations, with the most advanced technologies, to set up business here.
We have been capable enough to learn quickly and to efficiently turn other peoples' ideas into high-quality products. The other side of the coin is that we have become incredibly dependent on these multinational (mostly US) corporations. They came here because we were an attractive location, but they could also pull out if it suited them. It is critically important for Ireland to firmly bed down these corporations here, but we must also develop our capacity for creating and developing our own ideas and processing them through newly created indigenous industries.
The multinationals located here for several reasons - we offered attractive tax incentives, we were a friendly English-speaking gateway to the EU, and we offered a well-educated modestly paid workforce. These advantages are no longer unique. For example, we are now a high-wage economy and already some of our labour-intensive multinational operations are relocating to new EU states where labour costs are a fraction of ours. We must counter this by developing native talent and infrastructure to carry out the most sophisticated work here, work in which labour cost is not a critical factor. Multinationals account for 87 per cent of the value of our annual exports. Clearly, if these firms now pulled out we would plunge to the bottom of the EU charts.
There are more than 600 US firms in Ireland directly employing 100,000 people. Indirect employment accounts for a further 225,000 people. Overall, US firms now account for 17 per cent of employment (excluding the construction industry and the public sector). Six per cent of worldwide manufacturing investment made by US firms comes to Ireland. The Irish economy benefits from $13.5 billion (€10.2billion) annual spend by US firms in local payroll, goods and services and US firms contribute $2.7 billion (€2 billion) in corporate tax to the Irish exchequer. In view of this, it is amazing that anti-American sentiment is so commonly bandied about here.
The American Chamber of Commerce of Ireland made a submission last May to Government on Ireland's National Development Plan (2007-2013). This submission makes the sobering point that in a recent survey of US firms in Ireland, 43 per cent indicated that Ireland is no longer a preferred location for further investment while 41 per cent indicated that Ireland is no longer as attractive a location for investment as it was when the companies first set up here. Twenty five percent of US firms said that further investment in Ireland has been lost as a result of either the cost or availability of labour. The report pointedly adds: "These survey results need to be considered most carefully by policy-makers and the Irish Government."
The submission sets out priorities to be addressed by the Government if the competitive position of US companies is to be maintained and if Ireland is to remain a preferred location for US foreign direct investment. It is critical of science and engineering graduates, pointing to poor standards in mathematics, poor qualifications of science teachers and an inflexible education system. "Major structural reforms in our education system are necessary if Ireland is to have any prospect of driving the economy up the value chain."
The submission calls for the use of tax credits to help up to 30,000 people to secure third-level qualifications as part of a national programme on life-long learning. The number of PhDs we graduate will need to double. The submission is critical of roads, traffic congestion and general congestion in the Dublin region. It calls for two-hour access by road to international airports by 2010. Ireland is currently ranked 25th out of 32 states in Europe for access to broadband. It calls for full access to broadband by 2008 at the latest.
The message is clear. Either we continue to improve standards or foreign direct investment will dry up, leaving us in big trouble. We are on a high-tech road and there is no turning back. We must deeply embed our multinational sector here in Ireland by servicing it at the highest level of sophistication with world-class science and engineering. And we must grow indigenous industries. Indigenous enterprises have grown very little in the past 10 years. There have been a few good new indigenous companies, particularly in the food area, but these have been the exception. Looking to the medium term we must build a base of internationally trading indigenous enterprise strong enough to protect our future wellbeing.
To be fair, we have coped well to-date with our new high-tech economy. We now spend billions regularly on growing our research and development capabilities both within the academic and the enterprise communities. Our commitment to scientific research is evident in the creation of Science Foundation Ireland, in the Higher Education Authority's major research investments, and in the Cabinet Committee on Science and Technology chaired by the Taoiseach. We are clearly determined to establish Ireland as an attractive European location for corporate research and innovation. But there must be no let up in our dedication to this task. William Reville is associate professor of biochemistry and public awareness of science officer at UCC - http://understandingscience.ucc.ie