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Thursday, 25th April 2024 |
| Ireland can become a ‘shared centre of excellence’ |
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| The IFSC must differentiate itself from its competitors. Padraig Rushe puts forward a new model that could help retain businesses and attract others. |
The most effective weapon we have against the tsunami of ‘expert’ and sometimes inaccurate opinion that has emerged recently in some of the international media is to simply rely on the facts about Ireland and our economy and hope that in time we will win out.
Recently the G20 backed the publication by OECD of an update on the countries it had surveyed in relation to implementing the internationally agreed tax standards. We are listed as one of 40 countries that have “substantially implemented” these standards. We are in good company here along with most (though not all) of our European neighbours, the US, Australia, Japan and others. The list also contains some 30 countries or jurisdictions that have not implemented the standards and are categorised as tax havens. So when we are forced to defend our position and state that we are not a tax haven this is an indisputable fact. Some other facts about Ireland that bear repeating and emphasising:
- we are a modern, vibrant democracy of over 4 million people;
- 35% of our population are under age 25 and 67% under age 45;
- we are a respected member of the European Union and the OECD;
- we have a highly skilled workforce of 2 million people;
- we have some 170,000 enrolled in undergraduate and postgraduate studies and produce an average of 35000 graduates each year;
- we have an open and transparent banking system and do not rely on archaic banking secrecy rules to develop our financial services and banking sectors;
- we have negotiated close on 60 double taxation agreements with major economies of the world and we continue to develop this treaty network to support our international trading activities;
- our IT infrastructure is highly developed as are our telecommunications and transport systems;
- we are the only fully English speaking Eurozone member;
It is undoubtedly the case that like most countries in the world today we are impacted by the severe global downturn. Here again some of the very important and relevant facts about the Irish economy have been sidestepped in favour of the more sensational headlines. So let us again look at some facts:
- our 2008 GDP amounted to €184bn
- our debt to GDP ratio in 2007 was 24.8% - the 2nd lowest in the
Euro area
- in 2008 our debt to GDP rose to 40.6% (Net debt ratio 20%)
- by 2012 our debt to GDP ratio is expected to peak at 79% as against an estimate of 76% in 2010 for the
Euro area
- Interest on our national debt amounted to some 5% of 2008 tax revenues and is estimated to rise to between 15 and 20% by 2010;
(Source: CSO and Forfas)
The foregoing demonstrates that we have some economic headroom and flexibility in terms of managing our way out of the present crisis.
Our economy has been built on a carefully developed strategy of attracting, via IDA Ireland, mobile Foreign Direct Investment (FDI) projects to Ireland. Some 1000 multinational groups have each established substantive manufacturing or international services businesses in Ireland creating some 130,000 direct jobs in this economy. Pick any of the sectors represented and you will find the world’s leading players here. Names such as Microsoft; Intel; IBM; Hewlett Packard; Amazon; Google; Pfizer; Merck; Abbott Labs; Wyeth; Kellogg’s; Siemens; GE; Google; Johnson & Johnson; Citi; Bank of America and many others can be found throughout the country, each with sizable businesses and large numbers of employees.
The announcement in March 2009 by Ingersoll Rand (a $13 billion diversified industrial company employing 60,000 worldwide) to establish its ultimate Group parent company in Ireland is a very strong vote of confidence in Ireland Inc. Their press release focused on key benefits that Ireland can deliver including ‘…in addition to its stable business, legal and regulatory environment, Ireland enjoys strong relationships as a member of the European Union. Ireland also enjoys a long history of international investment and a good network of tax treaties with the United States, the European Union and several other countries where Ingersoll Rand has major operations.’
In coming here large corporates similar to Ingersoll Rand analysed the options available to them in any number of countries but chose Ireland because of these very facts. Over the years these same companies have expanded and grown their activities here and many now have incorporated R&D centres of excellence within their Irish activities.
Is it any wonder then that international financial services has also been a success story in Ireland?
We must and do also recognise that the future of the IFSC is threatened by the current turmoil. For that reason a renewed energy is required to develop new ideas and concepts so that the IFSC can continue to grow and expand in the years ahead. We have very substantial businesses here in banking, insurance, funds, corporate treasury and other specialist areas.
The focus of industry right now is on protecting and maintaining existing jobs to the maximum extent possible. We need to do more than that though and for that reason there was a clear message from industry at the recent IFSC Clearing House Group seminar that a more co-ordinated marketing approach between the public and private sector was needed. This reflects the fact that from the outset it was this type of co-ordinated approach that helped launch the IFSC project.
In previous articles I have suggested that we needed to maintain a focus on our competitiveness and certainly the silver lining, if there is one, in the current crisis may be that at least from an overall cost perspective our competitiveness may improve. We also need to establish new ways of differentiating Ireland/IFSC from its competitors. A model that worked very successfully at the start of the IFSC was the concept of outsourcing. By this means many major banks and multinational companies established a presence in the IFSC by appointing a local service provider as their agent. As intended, many of these firms moved on from there and over time established their own physical presence here and indeed some have expanded their activities into a range of other areas.
Unfortunately many of the firms providing services in this area have exited the business over the years as they refocused on their own core business activities. We now have only a few players still active in the industry. If we could offer a new ‘model’ it may well be the differentiator that will not only help to retain these businesses here but may be the ‘magnet’ that will attract others. If we take a look at our public sector companies we will find a range of industries represented by separate legal entities all with substantial and sophisticated back office or shared services type operations. Is there an opportunity to merge some of these into a shared ‘centre of excellence’ and then outsource the available services on a commercial basis? (Indeed there may well be an argument for doing this anyway but that’s for another day!) If we had a “hub” like this in the IFSC I believe that we could in time develop a very substantial nucleus of companies here.
Other areas being explored within the Banking and Treasury Group as a follow on from the January Seminar include; intellectual property management; greentech financing; midcap company services; clearing house settlement centre; rating agency services and others. In order to generate a momentum around these initiatives we need, above all else, to have the confidence that we can and will succeed. We can start by accentuating the positives or put another way; sticking to the facts. |
Padraig Rushe is director, Bank of Ireland Corporate Banking.
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