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Wednesday, June 27, 2007

The baddies "talking-down" the Irish economy

Export Performance and Competitiveness of the Irish Economy Central Bank of Ireland Quarterly Bulletin 3 2005 - - - It is foreign-owned firms that are driving Irish exports and most of them don't have or need a marketing function in Ireland. The trend of exports from Irish-owned firms is represented by the line at the bottom of the chart and is almost flatlining.

Should this concern us at all?

It's becoming common to lambaste referred to "commentators" for "talking-down" the Irish economy even though the legitimate issues that are being highlighted are seldom contested.

There is often a confusion between the short-term and the medium to longer-term. The European Central Bank is for example not raising interest rates to impact inflation in 2007 but its focus is on medium term price stability in particular.

Trends in economic development generally take long gestation periods and cannot be easily reversed. The very significant 1989 decision of chip giant Intel to locate a major manufacturing facility in Ireland, followed by Dell Computer in 1990 and Hewlett-Packard in 1995, happened because of the successful evolution of the US presence over a number of decades and the development of a network of local suppliers.

The State's inward direct investment promotion agency IDA Ireland says in its Annual Report for 2006 today that it is confident in our ability to win important new investments this year and beyond.

Others highlight the strong Irish economy that is the "envy" of the world but the focus is on the here and now.

I have highlighted in recent times, issues that should concern us now in relation to outcomes, in ten or more years' time.

Economic development does not neatly fit into an election cycle. Do issues such as the miniscule investment that goes into Irish business compared with overseas commercial property matter? Post the residential and construction boom, if we project employment in the sector at 180,000 down from 282,000 today and 126,100 in early 1998, should it concern us? Are we fooling ourselves by claiming multinational exports to China as an Irish success?

In the export sector, should we be doing much better in what the Bank of International Settlements termed, a Golden Age of growth?

Some of these and other issues are covered here:

Irish Economy: No crash in sight nor credible strategy to maintain export-led growth in long term; Overseas commercial property to remain investment of choice

Greencore's Irish operations become property play at time when Irish food industry is faltering

IBEC says new Government must address Ireland’s economic challenges; Goods exports grew over 250% in 1995-2001 - Expanded only 6% in 2002-2006

IBEC, the principal Irish business representative body is guilty of high treason by focusing on some inconvenient truths!

Just consider the Ministry of Information type scenario if all economic commentary was the preserve of estate agents and bank economists!

We've had two examples from critcs in business, in recent days.

In the 12 months that SSIAs accounts matured with a value of about €16 billion, it should not be a great surprise that a survey of 1,000 people that was taken in the weeks after the highest level of maturities this year, found that 62% said that they are financially secure.

Michael Leahy, chief executive of Standard Life Ireland, said on Monday: "The relatively high score in the new Standard Life Financial Confidence index of 62 may well surprise those who have been talking down the Irish economy over the last number of months. There is a strong underlying confidence out there that would appear more robust than certain commentators are giving credit for."

In the Sunday Business Post, PR man Paul Allen wrote that nothing makes news like bad news, and the Irish media is full of it at present.

Let’s look at the facts. We have a growing population, full employment, strong job creation, rising household income, a high savings ratio, together with strong retail sales and industrial production.

Ok, we are not achieving the jaw-dropping growth levels of previous years, but in international terms, Ireland is still in an economically envied position.

But turn on RTE, read the papers, tune into radio broadcasts and you’d swear we were heading straight for recession.

One of the country’s leading economists, Dan McLaughlin of Bank of Ireland, rightly slammed negative reports of our current economic situation.

He has suggested that certain elements in the media are trying to talk us into a recession and do not give a true picture of how the economy is performing. He suggested misleading headlines were taking things out of context.

It is the media’s obsession with spinning negative news that potentially will have a more negative longer-term impact on our fortunes.

We owe a great deal to our international neighbours for our economic success. Direct foreign investment was – and continues to be – a vital element in our growth.

But as our neighbours look in from afar at our performance, the question is – are they being misled by our media? As we constantly question our own economic future, so do they.

Any assumptions about our impending future should be based on sound fact, rather than a vociferous media pack intent on spinning headlines of doom and gloom.

It is time the media got back on track and started acting like an independent observer and reporter on our current fortunes, rather than spinning the stories to suit its own bad news agenda.

So Michael Leahy refers to strong underlying confidence while Paul Allen wants some cheerleading for our current fortunes.

The people they criticise generally have longer term horizons.