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The two events that dwarfed all others Back  
With this issue FINANCE Magazine celebrates its 20th anniversary. To mark it we conducted an online poll on the key changes and events in the past 20 years, the issues facing the industry, and some features of how things have changed, and yet remained the same.
When FINANCE was first published we sensed there was change in the air, and indeed the magazine's intended role was to track and analyse that change, and to define its implications. That's still our aim, and although in some sectors change is not likely to be as dramatic in the next twenty years (e.g. in the Government bonds sector: see Oliver Mangan's article on page 6) it will be even greater in others - one example being private wealth management.

On both domestic and international fronts there were clear runaway winners, with over a third of respondents identifying the two chosen developments as the most significant thing to have happened over the period.

The most important international development was the adoption of the euro - which, indeed, was a core theme of the publication over the twenty years. While a third of responses identified the euro as the biggest development the full list also provides a fascinating overview of the big trends and issues (see tables 2 and 3).
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Said one reader, 'The introduction of the euro has transformed finance and investment both in Europe and globally. A rival currency block to the dollar has changed the way institutions have invested in the European zone. It has, for example, facilitated the introduction of a truly integrated credit market in Europe which has also benefited the development of the North American credit market, heralding a deep, liquid and highly professional market for credit in both cash and derivative form'.

Domestic developments in finance
Top important change on the domestic front was the founding of the IFSC, with, again, over a third of mentions as the most significant domestic event (it heavily featured in our first edition of 1987, and our second edition was largely given over to it); next most important domestic development was the introduction of the nationwide tax rate of 12.5 per cent, which was introduced because the IFSC was being disallowed by the EU, because of its specific sectoral focus. The decision to make this move, by the FG/Labour Coalition Government under John Bruton, took considerable courage, because it required at the time a judgement call that the Exchequer revenue gains from moving to a countrywide system would offset the losses in corporation tax revenues from reducing the domestic sector corporation tax rate, which stood at the time at 38 per cent.

It was visionary and courageous to do so, and the result paid off handsomely and in turn turned the Republic of Ireland into an economic mecca within the EU, whose example is still being followed. First there were the East European states, but now the trend has spread to the core of 'old europe', as evidenced by Sarkozy's successful election platform on tax, and Angela Merkel's recent moves to significantly lower corporation tax in Germany. Ireland, an economic backwater in the '70s and '80s, became an international economic trend leader. (Without wishing to beat drums too loudly, Finance was ahead of the times on this front too, arguing in advance of the move to a countrywide corporation tax rate, that it would be a sensible move, as early as 1996).

The other most significant events noted by readers are included in the table 3. Of international events, after the euro, rated most significant, was 9/11 and its various ramifications on the financial system and markets. This was followed by dot com and technology, and lower interest rates, while tax changes globally were also are rated highly, followed by the UCITS Directives. Enron, IAS and SarbanesOxley, along with the other developments listed in table 3.

Biggest success factors, and problems
When asked to describe the most important factor behind the success of the Irish financial services sector over the past 20 years, Ireland's low corporation tax rate was the run-away winner, garnering almost 70 per cent of the votes, and special mention was given to the introduction of the IFSC in 1987. As one respondent stated, 'The IFSC tax rate of 10 per cent in the early '90s attracted the interest - without that it would never have taken off'. However, when it comes to complaints, tax also heads the list, moves relating to the atractiveness of Ireland to high skill high paid overseas based workers heading the list of complaints.

Ireland's pool of skilled labour was voted as being the second most important positive factor, with one respondent highlighting, 'the drive and ambition of the people working in the industry,' and adding, 'back in 1987 we had to prove ourselves as being worthy of these jobs and people worked really hard to please promoters and fund managers. The job insecurity meant that people really focussed on their jobs which were relatively well paid and that focus paid off'. The returning diaspora of highly skilled Irish people from the world's financial service centres was also cited as being an important factor in the growth of Ireland's financial services industry.

Supportive successive Governments came in third, with one respondent pointing to, 'supportive governments that were lucky in their timing, sensible in resource allocation, allowed the private sector its head and put practicality ahead of policy purity', and another citing the 'can do attitude of leaders'.

On the complaints front, it is notable that the issues cited rate higher than other items according to respondents, indicating that the issues highlighted are, from a sector-wide point of view, the most significant. Regulatory issues remain close to the top, after tax, as well as staff shortages. It is significant too, that of the infrastructural issues, the airport has moved ahead of domestic traffic infrastructure as a bĂȘte noir, indicating some (relative) progress on this front, in the past couple of years.

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