1. ‘From Rags to Riches’: the EU and Ireland’s ‘Celtic Tiger’ Economy
Andrew McDowell, Chief Economist, Forfás

2. 1988
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3. The Celtic Tiger 1988 1997 Europe’s shining light MAY 1997 24-Feb-19
The Economist
1988
1997
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4. The Luck of the Irish?
2004
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5. The “Celtic Tiger” – Annual GDP Growth
Over the last decade, Ireland has been the fastest growing industrialised economy is the world, with growth faster even than that of the Asian “tiger” economies
For this reason, Ireland has been dubbed by the international media as the “Celtic Tiger”
Growth forecast of 5-6% per annum
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6. The “Celtic Tiger”
Fast growth has lifted average living standards to above average European levels – still a “wealth deficit” compared with the richer European countries
If you know Ireland’s history, you’ll understand that in then late 1990s there was a great sense of achievement when GDP per capita in Ireland overtook that of the UK – “revenge is sweet”
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8. Migration trends have reversed
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10. Presentation Outline EU Impacts on Ireland’s Transformation
An Outward Oriented Industrial Strategy
Improvements in Human Capital and Physical Infrastructure
Macro Economic Stabilisation
Competition, Market Liberalisation and Regulatory Reform
Improvements in Governance
Lisbon Agenda
Conclusion
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11. Outward Oriented Industrial Strategy
Low corporate taxes and other fiscal incentives (grant aid for FDI etc.)
Improved transport access in and out of Ireland for goods and people
A light touch regulatory system
The provision of a skilled and flexible labour force
A pro-active industrial development policy, spearheaded by independent, professional and well resourced state agencies
EU membership
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13. FDI Inward Stock (% GDP) 2003
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14. Despite the reservations of many when the 10 per cent rate of corporation tax was introduced for the manufacturing sector and related services in the early 1980’s it is now seen to have been, perhaps, close to a revenue maximising rate of tax for the Irish Exchequer. It has had a major influence on the attraction of internationally mobile investment to Ireland or the retention of such investment here - including that of Irish origin. The single 12½% rate of corporation tax for trading income in all sectors of the economy, which was phased in over the period to 2003, provides a further major incentive for the development of the enterprise sector in Ireland.
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15. Investment in Human Capital and Infrastructure
Structural Funds
European Regional Development Fund
European Social Fund
Guidance Section of the European Agricultural Guidance and Guarantee Fund (FEOGA)
Cohesion Fund
European Investment Bank
R&D Framework Programmes
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16. Investment in Human Capital and Infrastructure
Played an important, but not decisive role in Ireland’s economic transformation
Followed fiscal retrenchment – ‘additionality’
Productive investment vs. subsidies/income supports
Physical infrastructure vs. education
Institutes of Technology, university, secondary school completion, science infrastructure
Commercial vs. ‘Public Good’ infrastructure
Private sector aids
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19. Rate of Retention to End of Senior (Secondary) Cycle
Note:
The rate of retention at second level corresponds to the estimated
percentage of entrants to Junior Cycle in a given year who complete
second level in a publicly aided school with a Leaving Certificate
(including Leaving Certificate Applied).
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20. Rate of Transfer to Third Level
Note:
The rate of transfer is estimated by taking the total annual intake
to all full-time third-level colleges as a percentage of the estimated
population at age 17. Some persons entering third level may have
previously entered. Mature entrants and entrants from outside
the State are also included.
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22. Macro Economic Stability
Macro economic destabilisation in 1970s/80s
Exchange Rate Mechanism
Maastricht criteria and EMU membership – applicability to transition economies?
Optimal currency area?
‘One Size Fits All” monetary policy
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23. Competition and Regulatory Reform
‘Behind the Border’ regulatory restructuring
Competition legislation
Telecoms, energy
Aviation
Banking and financial services
Professional services, postal services, logistics
Market-based regulatory models – appropriate for smaller countries?
Relationship with industrial and social policy
Services Directive
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24. Improvements in Governance
Operation of Structural and Cohesion Funds
Ex ante cost-benefit analysis
Multi-annual budgeting – National Development Plans
Ex post evaluation
Open Method of Co-Ordination
International Influence and Self-Confidence
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25. Lisbon Agenda Too broad?
Lack of national political ownership – but problems occur at national, rather than EU, level
Challenges to services liberalisation
Revival of ‘economic patriotism’
Decline of “Europeanism”?
Inappropriateness of U.S. model of competitiveness?
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26. Conclusions EU membership alone will not drive convergence
Capacity of the state for strategic action?
Consistent strategy to exploit EU membership?
Unique selling point?
Potential small country advantages in globalisation
Lack of bureaucracy
Proximity of main economic actors
Policy innovation and radicalism
‘First mover advantages’
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