The Economy
The Irish economy has achieved a truly remarkable transition. Driven by a period of extraordinary growth from 1993 to 2007 Ireland has become one of the world’s most dynamic, innovative and globalised economies, with extensive external trade and investment links.
In 2008, partly due to the open nature of its economy Ireland began to feel the effects of the global economic downturn. Pressure on the economy was accentuated by the end of a prolonged Irish property market boom and problems within the domestic banking system. This led to a period of recession in Ireland and a sharp contraction in economic output.
But Ireland is facing the economic downturn from a strong starting position. Many of the strengths that drove our recent economic boom and brought unprecedented levels of prosperity, with growth and GDP per capita among the highest in the European Union, remain in place. These strengths will position Ireland to take advantage of the global economic recovery as it emerges. Ireland’s economic success is generally attributed to its educated and flexible workforce; its social partnership model, which involves close cooperation between government, trade unions and employers; government measures to ensure macroeconomic stability and to attract foreign investment; and membership of the European Union, which now provides a market of almost 500 million people.
Ireland continues to be one of the most open economies in the OECD, although growth in total Irish exports (goods and services) has slowed during the 2004–2009 period. Ireland’s share of merchandise trade has fallen gradually, while our share of services trade grew in 2008.
Ireland has developed a strong entrepreneurial culture in terms of new businesses being established. Ireland has a strong track record in attracting investment in Information communications technology (ICT), Life sciences, Financial Services and Globally traded Business (GTB) including Digital Media, Engineering, consumer Brands and International services. Ireland’s positioning as a ‘smart economy’ continues apace combining our innovative, enterprise economy with an ever–increasing emphasis on the emerging areas of clean/Green technologies, services Innovation and convergence. Ireland is also the centre for digital media in Europe with major multinational companies locating their European headquarters and a range of business support activities here.
Ireland and the Euro
The ease with which Ireland qualified for membership of the Euro in 1999 underlined the dramatic improvement in the country’s economy and public finances. Membership of the euro was embraced by Ireland’s internationally oriented business community, which viewed it as a logical step in the further integration of European markets and as a boost to Ireland’s credibility as a location for internationally mobile investment.
Inward and Outward Investment
Inward investment has been critically important to Ireland’s economic development, providing tens of thousands of jobs, disseminating technological know-how and expertise within the wider economy, linking up with indigenous industry, boosting productivity, and underpinning export growth. Outward investment by Irish companies has increased noticeably in recent years, albeit from a very low historic base. This emerging trend is consistent with the pattern observed in other economies as they move to higher stages of economic development.
Education and Training
Education and Training is a vital component of Ireland’s knowledge-based economy, and is a priority investment under the National Development Plan. Ireland enjoys one of the best education systems in the world, with approximately 1 million people in full time education.
Innovation and R&D
R+D in Ireland has expanded dramatically in recent years reflecting the Irish government’s massive injection of funding into the sector. Leading global companies have found Ireland to be an excellent location for knowledge-based activities. The young Irish workforce has shown a particular aptitude for the efficient collection, interpretation and dissemination of research information.
Corporation Tax
Since 2003 Ireland’s corporate tax regime has been fixed at a rate of 12.5%. This applies to all Irish corporate trading profits. A rate of 25% applies to non-trading (passive) income. Existing overseas operations, which were eligible for a 10% rate, will retain entitlement to this rate until the end of the year 2010.
Economic and Social Research Institute: www.esri.ie
Central Bank of Ireland: www.centralbank.ie
Trade
Ireland’s total trade in 2009 was approximately €128bn; with a trade surplus of more than €38 billion. This consists equally of merchandise trade and services trade each of which stand at €144bn. the main merchandise goods traded include organic chemicals (mainly for the pharmaceutical sector), medical & pharmaceutical products and computers. The main services areas are computer services and trade related business services, insurance and financial services.
Ireland’s main trade partners are the United States, Great Britain, Belgium, Germany, France, Spain and the Netherlands.
Industry and Services
The Industrial sector has a highly skilled technological labour pool. Within this high technology grouping, the most active sectors currently are life sciences, medical and information technology sectors.
The service sector in Ireland accounts for over half of GDP and for 65 per cent of employment. Throughout the last decade output of services has grown strongly, largely as a result of growth in financial services, telecommunications and tourism.
Three agencies deal with industrial development in Ireland. Forfás provides overall policy advice and co-ordination for enterprise development and science, technology and innovation in Ireland. Enterprise Ireland helps develop Irish-based enterprise with the potential to trade internationally. IDA Ireland, has responsibility for securing new investment in manufacturing and internationally traded services. It also has responsibility to encourage existing Foreign Direct Investors to expand and develop their businesses in Ireland.
There are also a number of regional development agencies such as Shannon Development which was set up in 1959 to promote Shannon International Airport and Údarás na Gaeltachta, which is the regional authority responsible for the economic, social and cultural development of the Gaeltacht (Irish speaking parts of the country).
Financial Services
Dublin's International Financial Services Centre (IFSC), which was set up by the Irish Government with EU approval in 1987, is globally recognised as a leading location for a range of internationally traded financial services, including banking, asset financing, fund management, corporate treasury management, investment management, custody and administration and specialized insurance operations. More than 430 international operations are approved to trade in the IFSC, while a further 700 managed entities are approved to carry on business under the IFSC programme
Information supplied by the Embassy of Ireland, Japan
