Ireland: A model for industrial progress

By Zatni Arbi

DUBLIN, Ireland (JP): For many Indonesians, the name "Ireland" brings to mind images of bombings, snipers, bloodshed and burning wreckage.

Such a portrayal is not surprising, as most of the news that reaches us concerns the fighting in Northern Ireland between the Irish Republican Army (IRA), Protestant paramilitary groups and British forces.

The fact is, Ireland's young generation, Protestants and Catholics alike, is no longer interested in the clashes that have claimed 3,200 lives. They now want peace.

Above all, the violence takes place mostly in British-ruled Northern Ireland, not in the independent Republic of Ireland.

In reality, the Republic of Ireland is marching confidently toward the top of the European Union (EU) in terms of economic growth. According to a report in the Feb. 2, 1997 edition of The Sunday Tribune, the cheerful, Guiness-drinking people of Ireland enjoyed a national per capita income last year that, for the first time, exceeded the average for the EU.

Moreover, for the first time in the country's history, the figure was higher than that of the United Kingdom (UK). The latest reports from Brussels reveal that -- if we take the EU's 1996 average of Gross Domestic Product (GDP) as 100 points -- Ireland had a GDP of 100.7, with the UK reaching only 98.9. This certainly is a level of achievement that can be reached only by a peaceful and politically stable country.

Over the last five years, Ireland has achieved an average GDP growth of 5 percent per year. The high value-added electronics industries accounted for 12 percent of its GDP in 1994, as opposed to the norm of 2 percent to 5 percent in most developed nations. Electronics exports have grown to 6.1 billion Irish pounds (about US$10.06 billion) in 1995, accounting for 30 percent of the country's total exports.

The Irish Management Institute reported recently that last year, senior managers in Ireland enjoyed salary increases up to three times higher than the inflation rate at the time. The price of properties have also soared. A typical Georgian house now costs about 150,000 Irish pounds. Still, demand is strong and supply is short. The property market is dominated by first-time buyers.

Of the 3.6 million people living in the Republic of Ireland, 1.1 million live in the capital city, Dublin, and its suburbs. Upon entering this city, one will immediately sense the strong spirit of the Irish as they embrace the age of high technology. Despite the high price of gasoline, which currently stands at 65P (approximately $1.04) per liter, as well as the high price of cars and very high insurance rates, private cars jam the narrow streets of Dublin. The country's economy is evidently very strong.

The Industrial Development Authority registered many information technology companies from North America, Europe, Japan, South Korea, Taiwan and even Singapore in Ireland. They include such giants as Hewlett-Packard, IBM, Novell, Informix, Oracle, Intel, Microsoft, Hitachi, Apple, Matsushita Kotobuki, NEC, Motorola, AST, Dell, DEC, LG Electronics, Sun Microsystems, Lotus, Symantec, Software Spectrum, Creative Lab, Quantum and Philips.

During a tour of Malahide Castle, my tour guide proudly pointed to a vacant lot alongside the highway and explained that Gateway 2000 was going to build a large computer factory there. The headquarters for Microsoft's European Operations Center is in Dublin, which generates one-third of the company's worldwide sales. Intel has wafer fabrication facilities here as well.

But information technology companies are not the only ones that have found a haven in Ireland. Thirteen of the world 's top 15 pharmaceutical companies and 10 of the world's top 15 medical product companies have their operations in this country. In 1987, Dublin's International Financial Service Center was established, and today it is one of the world's prominent financial centers.

Ireland's industrial revolution began in the 1960s. Early on, the government realized that the country had to rely on foreign investment to turn the predominantly agricultural society into one that is based on high-tech industries. Hence, the focus on making Ireland attractive to overseas high-tech interests. Successive governments have consistently pursued the same objective, and have been very successful.

Ireland has also benefited from the aid provided by the EU, known as structural funds. Among other things, the funds have been used to improve the road systems linking Dublin and its suburbs. Today, because of its extraordinary progress, Ireland may lose its right for further aid funds from the EU when the current term expires in 1999.

In his address to the Siemens Nixdorf International Opinion Leaders press conference recently, Richard Bruton, the Irish minister of enterprise and employment, told the conference attendees that 25 percent of U.S. investment in the electronics industry in Europe had gone to Ireland. At the moment, 300 world- class electronics companies develop and manufacture their leading edge products in this country and market, as well as distribute them from here. That's no surprise, as very rarely can investors find a location with low operation costs and corporate tax rates that enable manufacturers to reap after-tax returns of up to 27 percent per year on average. On top of that, repatriation of profits is subject to no restrictions or withholding taxes.

With its fiber optic services, Ireland's telecommunications infrastructure is also one of the best in Europe. Over the last few years, $3.5 billion has been invested for installing state-of-the-art telecommunications infrastructure. Over 60 percent of customer connections are digital. The country boasts low telecommunications tariffs that are a boon to international call center operators.

Bruton further highlighted the country's other crucial competitive advantages, including its strategic location between Europe and North America. But, more important than that, he said, was the fact that the Irish people speak English and by nature are curious and very friendly. These characteristics equip them with the best tools for telemarketing and teleservice operations. Indeed, call centers are one of the booming service sectors in Ireland. Taking this into perspective, a country with 3.5 million people is serving the EU's population of 360 million, around a hundred times larger.

The greatest stimulus of all is undoubtedly the fact that government support has never changed from one administration to another. For example, the tax rate on profits derived from manufacturing and qualifying services has been a low 10 percent since 1986, and the Irish government has promised that it will stay this low until at least Dec. 31, 2010. What else would provide a stronger incentive for foreign investors?

Another important pulling factor is the availability of a vibrant workforce, which is made up of highly educated and fast- learning young people. Forty-three percent of the workforce is under 25, and the employee turnover rate in Ireland is lower than in most European countries.

However, because six out of 10 students in Ireland major in engineering, business or science subjects and an increasing number of them are becoming fluent in several foreign languages, the Irish government also realizes that it cannot rely on cheap labor to attract investors. Minister Bruton assured the audience that, when necessary, further tax adjustments would be implemented to compensate for the inevitable wage increases in the future.

Ireland's success story has long attracted the attention of a number of governments and administrations. Shanghai, for instance, has built its economic zones based on the Shannon Model of economic zones in Ireland. Chinese President Jiang Zenin, a former mayor of Shanghai, visited Ireland almost 20 years ago. He later declared that Ireland was an inspiration for the development of China's special economic zones, an effort that helped open up the economy and attracted overseas investments. The ties between Ireland and China were fortified recently when the O'Malley Irish Pub, the first in China, was opened in Shanghai.

Isn't it time that we also looked to Ireland as a model and learned from its success?