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Wednesday, 17th April 2024
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20 years of the IFSC - a remarkable story of growth Back  
Twenty years on from the launch of the planning scheme of the IFSC in June 1987, FIONA REDDAN talks to RON BOLGER about his memories of the early days of the IFSC. Bolger, who played a pivotal role in establishing the centre both through his work with the Taoiseach's IFSC Committee and as a partner with KPMG, recalls the days of the 'committee that you could not hide on' and the 'New Orleans showboat'.
As a partner with KPMG from 1979 to 1998, and a member of the Taoiseach's IFSC Committee up until 2002, Ron Bolger played an important role in promoting the IFSC and convincing companies such as Bank of Bermuda and Citibank of the opportunities that lay before them in Dublin's docklands.

His first memory of the IFSC was the Fianna Fail manifesto for the 1987 general election. He recalls thinking that it was, 'a fascinating concept to do something with a derelict area. And, it wasn't going to be like London's docklands, which are miles away from the city. Dublin's docks are just a few blocks away from the heart of the city, so the proposals represented a major effort to bring life back into city centre area'.

The legislation to develop derelict parts of the city had been on the books since 1986, through the Urban Renewal Act 1986, but it wasn't until the financial services centre plan had been devised by Fianna Fail that the docklands area was selected as a beneficiary of this Act.

Following Haughey's assumption of power in March 1987, the new Taoiseach quickly put his plans in motion, and established a committee chaired by secretary of the Department of an Taoiseach, Padraig O'hUiginn, to put the proposals for an international financial services sector into action.

When it appeared how serious the Government was about its plans, Bolger remembers saying to the partners at KPMG, 'We have to get involved in this and we have to work with the Government to make it a reality. What will be good for the country will be good for KPMG'.

From the start he thought it would work because of the very business like approach adopted to developing the centre. 'There was no monopoly on wisdom or brain power - the best ideas were captured and harnessed to drive the centre forward,' he says.

Initially, Bolger says, people thought that the IFSC would be 'Shannon writ large' - i.e. something similar to the fledgling financial services activity which had developed in the Shannon Free Zone, particularly in aircraft leasing/asset management.

In July 1987, the Finance Act establishing the 10 per cent rate for licensed companies operating in the Custom House Docks area, was passed. It set out a list of eligible activities for which licenses would be granted, including global money management, foreign currency dealing, equity and bond dealing and insurance activities. Bolger says that from the start it was thought that Dublin could be a very good back office location - servicing firms in London and across Europe.

He adds that right from the start the Central Bank and Revenue Commissioners were very conscious of Ireland's good name, and it was determined early on that 'brass plate' operations wouldn't be eligible for the centre. Companies looking to be licensed had to have 'substance and employment', says Bolger, adding that, 'this requirement of substance proved itself time and again'.
At the time, Ireland was in a very tight and tough economic position, with soaring unemployment and national debt. 'The country needed to create economic activity and generate tax revenues to get itself out of the morass,' says Bolger.

As such, a key element of the licensing process was that companies had to commit to meet pre-agreed employment targets. 'However, there were no minimum employment targets,' says Bolger, 'it was decided on a case by case basis'.

In June 1987, the Custom House Docks Authority launched its planning scheme for the IFSC, outlining its plans for 'a city within a city, to be fully functioning within five years from now'. Bolger recalls the 'New Orleans showboat' nickname attributed to the consortium's winning model for the development of the IFSC.

On October 19th, global stock markets experienced a dramatic fall, remembered as 'Black Monday'. However, plans for the IFSC proceeded unabated. Bolger remembers that the event didn't deter people, 'they were absolutely committed to making it a success' he says.

Signs of success
An early sign that the centre was going to be a success came when Ireland's two major banks committed themselves to the centre says Bolger. 'The two major banks made those decisions early and without hesitation. Without them the international banks would have asked why they should commit to the IFSC if the domestic banks won't,' he says.

However, he maintains that the real breakthrough came when Citibank and the German and Asian banks committed to the centre.

'Prior to the launch of the IFSC, the Japanese banks had been involved with the National Treasury & Management Agency (NTMA) in lending to Ireland, so the NTMA proved to be very useful in opening the doors to the key institutions such as Daiwa, Sumitomo and Mitsubishi, which eventually all came to Dublin. Once they came, people really began to take notice of the IFSC'.

Of the Taoiseach and his IFSC committee, Bolger says that it was the 'committee that you could not hide on - if you undertook to do something you had to do it'. The committee was the first time that such a public/private sector partnership operated in Ireland, and he recalls that Haughey was 'open to all influences'. He believes it was a key success factor of the centre, as it led to speedy execution of plans.

He credits Haughey with playing a massive role in the IFSC. 'His role was pivotal, he had the gumption and foresight to see a good idea - and to be able to apply it and execute it. Lots of people have great ideas - but he did something about this one'.

Bolger also saw the role of Dermot Desmond as being pivotal to the success of the centre, describing him as a 'visionary', who, 'could see over several hills where the project was going'.
The commitment of Haughey and Desmond was matched by the wider public sector, with Bolger describing the hunger to succeed from the public sector as being 'almost palpable'. Subsequent governments also proved able to the task, says Bolger.

Key sectors take off
While the early years of the IFSC were dominated by the formation of leasing type companies, in 1988 there were signs that Dublin could become a centre for the investment funds business.
'Boston was a good example of a city developing as a funds centre, and it was reckoned at the time that Dublin could also be an important centre for back-office, middle office and front office activities. At an IFSC committee meeting, O'hUiginn asked how we could get best practice information on the global funds industry, and I put forward KPMG to do the work. A study followed over the summer months of 1988, and in conjunction with 23 other offices around the world, we came up with nine recommendations for developing the industry in Ireland - eight of which went into the Finance Act 1989,' recalls Bolger.

KPMG was not paid for its report, and it was very much a case of 'putting the shoulder to the wheel' says Bolger. 'It wasn't a fee paying assignment - it was just the right thing to do to establish Ireland as a financial centre'.

Conclusion
Overall, the IFSC has 'well surpassed' initial expectations, says Bolger, who declares that it has been a tremendous success. 'It is the most successful project that I've ever been involved with. I don't think it was about personal ambition - it wasn't egos around the table, but more a patriotic/economic desire to show Ireland as a world class player. It was a case of ensuring that when the time came for you to pass on the baton, the situation was better than when you came in'.

'And we're still in the relay race,' he adds. 'I hope that a barrier to continued growth doesn't become our success. We shouldn't blind ourselves to the challenges - there are competitors out there who will work to eat our lunch, and we need to stay hungry'.

Today, Bolger says that it is, 'timely to stand back and reflect upon what has been achieved, to mobilise resources for the next step, to avoid complacency, and to avoid pricing ourselves out of the market. We need to have a willingness and openness to look at things and say 'where to next?'.

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