Growth strategy 'Ireland Connected' needs to ensure it joins the dots
This week the Government launched a strategy - called ‘Ireland Connected’ - for growing Ireland’s exports, foreign direct investment, tourism and international education in the period out to 2020.
While some of us may be cynical about such launches, on the basis that they really just represent a re-hash of previously announced policies, they do fulfil a valuable role in policy making.
By setting specific targets and outlining, in broad terms, how these targets will be achieved, the Government does generate a certain level of accountability for itself.
We will now have a series of targets in important parts of the economy that will allow us track and monitor progress and mark the Government’s scorecard.
The targets contained in the latest strategy are hard to argue with.
Specifically, the Government is targeting growth of 26% in indigenous exports, which would see them:
- growing from just under €21bn in 2015 to €26bn by 2020
- to generate 30,000 more jobs in tourism by 2020 and €5bn in overseas tourism revenues by 2025
- to secure 900 new foreign direct investments between 2015 and 2019
- to intensify and diversify 80% of indigenous export growth in the period to 2020 outside of the UK market
- to maintain exports of at least €7.5bn to the UK
- to increase international student numbers by 27% by 2020
If all of these targets were to be achieved, that would represent a very positive outcome as all of these targets are being set against a background of intense uncertainty.
They relate to Brexit; the corporation tax policies of Donald Trump and the UK post-Brexit; the Apple tax ruling; the pressure from the European Commission to push for CCCTB (Common Consolidated Corporate Tax Base), which would imply a single set of rules that companies operating within the EU use to calculate their taxable profits; and the moves at an OECD level to push the BEPS (Base Erosion and Profit Shifting) agenda, which is an attempt to stop corporations reducing taxable income and shifting profits from one jurisdiction to another.
All of these are significant challenges for Ireland’s FDI strategy.
In relation to the indigenous export growth agenda, the challenges are also very obvious. Around 40% of indigenous exports go to the UK at the moment, and this will undoubtedly be pressurised in the event of continued sterling weakness or certain Brexit outcomes that would see the erection of barriers to trade between the UK and the EU.
At the moment, EU countries account for 51% of Ireland’s merchandise exports. The US accounts for more than half of the remainder.
The strong trade relationship with the EU is due both to geography and EU membership, while the strong relationship with the US is due to the inordinate contribution that US multinationals make to Ireland’s FDI model.
The key conclusion is that diversification outside of the EU and the US is extremely difficult for a country like Ireland, particularly for our main indigenous export sector, food.
The UK will remain a very important export market regardless of the Brexit outcome, but the erection of barriers to trade would make it a more challenging market. The only real question is how much more challenging? Indigenous exporters will need a lot of assistance to achieve the targets set out in the latest strategy.
In relation to the focus on international students, I cannot help but be somewhat apprehensive, bordering on cynical. In my experience, foreign students are seen as a way of subsiding the rest of the under-funded third-level education system. Ireland in the aftermath of Brexit is likely to become a more attractive destination for overseas students as we will be the only English speaking country in the EU.
However, we need to make sure that the quality of the product is enhanced, which is difficult to achieve in an environment of underfunding. To make Ireland Connected work, policymakers will need to ensure that all of the dots are connected.
