Embassy of Ireland, Helsinki

Contents 1.Introduction – Ireland in Summary 2.Changes in the Irish Economy 3.The Drivers of Ireland’s Success 4.The New Challenges for Ireland 5.Resource Slides

1. Introduction – Ireland in Summary

Ireland - A Changing Country Total population: 4.2 million Highest birth-rates in EU at 15.3 births per 1000 population Relatively young population with an average age of 35.6 years Rapid increase in Immigration 1987: net migration -44, : net migration +70,000

Economic History ► 1922 – 1958 a basic agricultural economy self-sufficiency and protectionism strategy ► 1958 – 1973 opening up and joining Europe (EEC) ► 1973 – 1987 some success, adjustments, but crises also ► 1987 to date exceptional development and growth

6 The Celtic Tiger Europe’s shining light MAY –”Poorest of the Rich” 1997 – “Europe’s shining light” What Changed the Irish Economy ? 2006 –”The luck of the Irish”

An Economic Snapshot of Ireland, 2007 GDP€174.7 bn Exports €138 bn (2006) Imports €120 bn (2006) Trade Surplus€18 bn- 10.6% of GDP Total at work 2+ million (was 1.1m in 1990) GDP per capita €40,275 National Debt €37,559 million euro The average annual rate of increase in Irish GDP has been 5.4% over the 6 year period 2000 – 2006 Source: Central Statistics Office

A Decade of Growth Economic Performance Indicators Unemployment % % % Gross Government Debt as a % of GNP 82%21.7% Personal Tax (Lower/Higher Rate)27/4820/41 Irish GDP/Capita as a % of EU GDP/Capita 79% (EU-15) 119% (EU-15) Irish GNP/Capita as a % of EU GDP/Capita 70% (EU-15) 101% (EU-15) Sources: CSO and Eurostat UN’s Human Development Index ranked Ireland 5th in 2007

Business-friendly policies ► Young, vibrant and highly-skilled workforce; ► Consistent public policies, including low tax; ► Strong developmental focus nationally, with strong, informal network links; ► Rapid responses e.g. skills development; ► Successful development of high-technology, high- productivity, trade-based FDI; ► Agility, creativity, flexibility and ‘can do’.

Economic Growth Average Annual % Real GDP Growth Source: OECD Economic Outlook

The Basis for Success ► Results from development decisions of earlier decades and from EU membership ► European Single Market and Eurozone ► Social partnership and economic stability ► Demographic gains and education ► Low corporate tax – now 12.5% on profits ► Foreign Direct Investment (FDI) ► Performance of Irish management and Industry ► Export focus and global orientation

Social Partnership ► a ‘time for reform’ rising unemployment (17%) and emigration public finance deficits and debt (120% of GNP) loss of jobs and of national confidence ► National Social Partnership Agreement employers, trade unions, farmers & government moderate wage increases and tax cuts consensus on development priorities shared efforts to achieve national goals

Trade relationship with the Global Economy

Destination of Irish Exports in 2006 Source: CSO /Forfas

Geographic distribution of Irelands Imported Goods in 2006 Source: CSO/ Forfas

Strategies in place by economic agencies to increase Irish exports ► Asia Strategy – focused on increasing exports to the growing economies of the Region ► Targeting existing Markets in Europe and North America for continued growth ► Targeting the potential of new markets in Mexico, Brazil, the Gulf, Russia and South Africa

The Drivers of Ireland’s Success

Ireland’s Economic Success – Key Factors ► Ireland opens for business to the world in the 1960s reduces trade barriers and seeks FDI ► Tax Reform ► Investment in Education / Skills and R&D ► Development of a national pay agreement framework in the 1980s ► Irish Industrial Policy – Focused on competitiveness and productivity

Irelands Open Economy Key Milestones: ► Industrial Development Authority (1952) ► Dismantling of import tariffs/quotas (early 1960s), ► Ireland joins the GATT (now WTO) (1967) ► Ireland joins the EEC (now EU) (1973) ► Creation of Single European Market (1993) ► Introduction of Euro in physical form (2002)

IR1 FAB14 FAB24 IR6 IR4 IR5 IR2 FAB10 Ireland Campus 5,000 Staff; $5bn+ invested – Over 3,000 employed FAB24-2

Competitive - but not at the cost of Irish Workers – Second Highest Minimum Wage Source: Eurostat / Federation of European Employers

Industrial Disputes and Social Partnership Source Forfas:

Education, Skills and Research ‘LEADERS OF TOMORROW ’

Investment in Education and Skills 1960s heavy investment in primary and secondary education begins; 1967 free secondary education introduced; 7 Universities, 3 in Dublin, 1 in Cork, Galway, Limerick and Maynooth; 14 Institutes of Technology located regionally; Increased third level participation over the three decades.

Post-Leaving Cert/High School Structure of Irish Education ‘Ladder - Up’ approach to Advanced Learning

Education and Skills ► 57% of graduates are in science, engineering, computer or business studies ► Government initiatives to meet future needs: Expert Group on Future Skills Educational Technology Investment Fund Focussed technology courses

Full-time Third level students /76 to 2004/06 in thousands (000) Source: Higher Education Authority

% Population aged having at least Third Level Education Source: OECD Education at a Glance

Breakdown of Higher Education Graduates Source:HEA

Human capital development objectives…

Research & Development ‘LEADERS OF TOMORROW’

R&D in Ireland ► Strategy for Science, Technology and Innovation ► Strong Government commitment and funding, to double both enterprise R&D and doctoral output by 2013 ► Science Foundation Ireland (on NSF model) is attracting world-class researchers to universities ► Strong industry - academic links ► Notable developments with Bell Labs, GSK, IBM, Intel, HP, Wyeth, Bristol-Myers Squibb and many other companies ► 50% of overseas medical technology companies have an R&D responsibility

Irish R&D – who finances it? GERD = Gross Domestic Expenditure on R&D

R&D Tax Credit ► 20% Tax Credit for “Qualifying Expenditure” on “Research and Development” ► Research and Development, includes Basic research Applied research Experimental development (including process development) ► Applies to both Revenue and Capital ► No requirement to retain ownership of resulting IP in Ireland

Business Sector R&D

Researchers in Higher Education Source: National Competitiveness Council, 2007

3. The New Challenges for Ireland

The future will be different ► Globalisation, technology and digitisation ► New Markets / New Competitors ► Changes in economic conditions ► New business models and virtual companies – new patterns of investment ► New aspirations and expectations in society ► Higher value activities and higher skills ► More sophisticated and complex jobs ► Premium on flexibility and responsiveness

Vision and Strategy ► Higher value, skills and knowledge based economy ► Innovation placing Ireland at global leading edge in clusters or niches, using enabling technologies ► Ireland will differentiate on the basis of: performance based on sophistication and quality of operating environment, our expertise and research, and flexibility, speed and agility.

Enhancing Productivity Growth Source: National Competitiveness Council, 2007

Addressing Productivity Growth and International Competitiveness ► Enhancing Human Capital through development of education and life-long learning ► Increasing infrastructure efficiencies ► Review and reform of the Public Sector ► Focus on moving up the value chain – private sector ► Productivity Improvement Fund ► National Competitiveness Council ► Expert Group on Future Skills

Bridging the Infrastructure Gap

National Development Plan, Raising the Economy’s Productivity Growth Potential Programme€billion Annual % of Current GDP Economic Infrastructure€ % Enterprise, Science & Innovation € % Human Capital€ % Social Infrastructure€ % Social inclusion€ % Total€ %

Human Capital Development

► National Skills Strategy, January 2007 ► Increase upper secondary completion to 90% ► Increase progression to third level to 72% ► Prepare for occupational changes ► Move 500,000 people in workforce one- step-up the qualifications ladder by 2020 ► Full integration of migrants into education and training system

► GDP growth has been consistently higher than the OECD average over the last decade. ► GNP per capita levels are now in line with the OECD average. ► Ireland maintains an open and attractive environment for overseas investment. ► Entrepreneurship rates are relatively high and the Labour Force is very strong. ► Long standing advantages in our tax system continue to be of benefit. Positive signs for the future …

Corporate Tax Rate Stable Corporate Tax Rate of 12.5% There is full domestic political support for the low tax rate European Commission has indicated that 12.5% does not constitute harmful competition Ireland has selected the “high road” of “full and fair competition” and is “setting the example” (Jeffrey Owens – OECD March 2003)

Comparison of Corporate Tax Rates Ireland 12.50% Netherlands 25.50% United Kingdom 30.00% China 33.00% Belgium 33.99% France 34.43% Germany 38.60% USA 39.50% Japan 39.54% Source - Deloitte & Touche, 2007

Tax Reform Wide base, low rates Corporate profit taxes Capital gains taxes Income taxes Employer social security taxes Consumption taxes Property taxes Self-assessment system

The Top Pharma Companies are in Ireland

Energy 2007 Energy White Paper Objectives: Security of Supply, Environmental Sustainability & Economic Competitiveness Creation of all-island energy market % of electricity from renewables by 2020 – (currently 93% of energy from fossil fuels) Electricity inter-connection to UK & Europe Building additional generation capacity All-island gas storage by 2008 Retain State ownership of transmission networks Reduce ESB all-island market share to 40% €150m investment in energy research Review of regulatory framework proposed

eCommunications ► Strong Progress High capacity and competitive international connectivity Strong private sector market participation in fixed, mobile, wireless and services State investment in metropolitan area networks Strong rates of broadband take-up ► Government supported regional broadband programme ► Priorities Rapid development of Next Generation Networks Pro-competitive regulation Reinvigorating eGovernment and Knowledge Society agendas

Composition of Ireland’s Exports Source: CSO

Composition and Destination of Irish Service Exports Source:CSO

Geographic breakdown of Ireland’s Service Imports 2005

Destination of Irish Outward Direct Investment – 2005 /06

Human Capital Development ► National Skills Strategy, January 2007 ► Increase upper secondary completion to 90% ► Increase progression to third level to 72% ► Prepare for occupational changes ► Move 500,000 people in workforce one-step-up the qualifications ladder by 2020 ► Full integration of migrants into education and training system

Social Partnership Agreements 1996 fourth pillar introduced – social/community pillar Current agreement Towards 2016 Social Partnership grown far wider than wage negotiations 10 year framework to address ‘key social challenges’ Social partnership is regarded as having benefited all pillars and as a major contributor to Ireland’s success over last 20 years

Enterprise Development ► Indigenous enterprise Scaling growth oriented companies, internationally focused and innovation-led Promoting innovation based start-ups and entrepreneurship Driving productivity growth, management skills, technology use and marketing capability in existing enterprises Improving access to equity and finance ► Foreign Direct Investment High value inward investment in advanced manufacturing, sophisticated business services and research and innovation Gateway approach to regional economic development ► Enhancing our tourism product and developing a market-oriented seafood sector ► Enterprise networks ► Higher education and enterprise collaboration ► Open competitive markets and regulatory reform

Strategy for Science, Technology & Innovation, ► Objectives: Step-change in enterprise R&D Double PhD output to 1,312 by 2013 ► World Class Research Funding excellence in frontier research Investing in core infrastructure, postgraduate training and early stage researchers and research collaboration ► Enterprise Research & Innovation Holistic in-company R&D support scheme Competence centres and higher education collaboration Innovation Vouchers ► Commercialisation and technology transfer reform ► Orienting sectoral research around policy priorities

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Thank You

Resource Slides