Notes on the Front

Read through Enterprise-Ireland’s Annual Reports and you might think that everything’s all right on the native enterprise front. Exports are increasing, new companies are coming on stream while current companies are expanding. Targets are being met on a range of benchmarks – R&D, investment, innovation, etc.  Sure, it could be better, but we’re moving in the right direction. We can all go back to sleep and vote Fianna Fail.

This is one gloss. Unfortunately, there’s another read which is not so encouraging.

More and more people are jumping on the ‘we’re not producing enough’ bandwagon as the realisation hits that buying and selling houses is not a sustainable way to grow an economy, and that we’ve hocked large parts of our economic homestead to multi-national capital. Hopefully there will be more jumpers – there’s plenty of room on the wagon.

But the Forfas Annual Business Survey makes for extremely sobering, and not a little depressing, reading. For it shows not only how far we have to go to break our addiction to foreign capital but further, how in the last few years we’ve being going in the wrong direction.

We should all be familiar now with the shameful fact that our export base – both manufacturing and internationally traded services – is heavily dependent on the MNC sector. And it’s been getting worse.

Not only are indigenous exports declining relative to the foreign-owned sector, the Irish-owned export sector remains heavily dependent on one industry – food and drink – which accounts for nearly 70% of Irish-owned manufacturing exports. If we remove the multi-national sector, we are practically a single-industry economy in terms of manufacturing exports.

It’s not that Irish-owned exports have decreased, it’s just that they have not kept pace with MNC growth. And therein lies another tale.

In the last five years the Irish-owned sector put in a poor performance, much lower than even the period that preceded the Celtic Tiger years. Indeed, were it not for the internationally traded services sector (which makes up only 20% of exports), the Irish-owned sector would have declined.

One of the problems is that the numbers and tables produced by official agencies can be easily manipulated. For instance, when criticisms are raised about our export performance and, by extension, Government enterprise policy, Ministers are capable of pumping some interesting numbers. Poor performance? Why sure, didn’t exports from the international traded services sector increase by over 11%? And this is the cutting edge of the new knowledge economy.

There’s a bit of ‘devil in the details’ to all this. When hard numbers are produced it looks a lot less impressive.

Yes, service exports are rising. Since 2000, they have increased by €650 million. But what does that mean in the grand scheme of things? Percentage growth looks good because we are working from a low base. When we put numbers on growth, we can see that Irish-owned service exports growth contributed to about 3% of all export growth.

We shouldn’t blame Enterprise-Ireland for talking up the situation. That’s what they’re there for. You wouldn’t want the CEO to launch an Annual Report by throwing up his hands, rolling his head, and muttering into the microphone, ‘Game over, game over, game over.’ No, God loves triers. And Enterprise-Ireland is trying.

The problem is that they, and we, are hamstrung by two (at least) long-term chronic conditions: the historical failure to create a native enterprise class that can compete internationally, and Government policy that believes its only a matter of getting the ‘economic climate’ right (low tax, low regulations, etc.).

Until we face up to those two challenges, the ‘economic climate’ is going to look pretty dreary. When Government ministers are not mystifying us (and driving Finfacts’ Michael Hennigan to distraction) with spin and sunny prognostications, they retreat to a ‘ look at this way, it could be worse, it could be raining’.

Well, look out the window. It already is.