Saturday, June 30, 2007

Apple's iPod: Capturing Value in a Global Innovation System

Trade statistics can mislead as much as inform - For every $300 iPod sold in the US, the politically volatile US trade deficit with China increased by about $150 (the factory cost). Yet, the value added to the product through assembly in China is probably a few dollars at most.

US company Apple created the iPod music player and outsources the entire manufacture of the device to a number of Asian companies.

In a fascinating study published this month, researchers at the University of California, Irvine - Greg Linden, Kenneth L. Kraemer and Jason Dedrick - present a framework for analysis and use that framework to look at one member of Apple’s iPod family, part of a thriving ecosystem that has upended business models across the consumer electronics, computer, and entertainment industries.

The researchers say that the iPod is a perfect example of a globally innovated product, combining technologies from the US, Japan and a number of Asian countries.

Using a report from Portelligent Inc. that provided a breakdown of all the 451 parts that go into the 30-gigabyte video iPod, which retails in the US for $299, the Irvine researchers costed the components and the final assembly at plants in China.

The most expensive item was the hard drive, which was manufactured by Toshiba and costs about $73. The next most costly components were the display module (about $20), the video/multimedia processor chip ($8) and the controller chip ($5). They estimated that the final assembly cost only about $4 a unit.

Tracing the supply chain geography by attributing the cost of each component to the country of origin of its maker was viewed as presenting a partial picture because Toshiba makes its hard drives in the Philippines and China. The Broadcom chips are made by an American company but most of them are manufactured in Taiwan.

To distribute the costs of the iPod components across the countries where they are manufactured, the researchers looked at the production process as a sequence of steps, each possibly performed by a different company operating in a different country.

At each step, inputs like computer chips and a bare circuit board are converted into outputs like an assembled circuit board. The difference between the cost of the inputs and the value of the outputs is the “value added” at that step, which can then be attributed to the country where that value was added.

The researchers estimated that the $73 Toshiba hard drive in the iPod contains about $54 in parts and labour, meaning that the additional value that Toshiba added to the hard drive was $19 plus its own direct labour costs. This $19 is attributed to Japan since Toshiba is a Japanese company.

An estimated $163 of the iPod’s $299 retail value in the United States was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Japan contributed about $26 to the value added (mainly via the Toshiba disk drive), while Korea contributed less than $1.

The unaccounted-for parts and labour costs involved in making the iPod came to about $110. The authors hope to assign those costs to the appropriate countries, but that’s not so easy to do.

Conclusion

The researchers set out the following conclusions from their initial analysis:

First, the biggest winner is Apple, an American company, with predominantly American employees and stockholders who reap the benefits. If the iPod had been made by Sony or Samsung, the value to the US would be considerably less.

Second, the producers of high value, critical components capture a large share of the value. For the 30GB Video iPod, the highest value components are the hard drive and the display, both supplied by Japanese companies. US suppliers provide the two most valuable microchips.

Third, trade statistics can mislead as much as inform. For every $300 iPod sold in the US, the politically volatile US trade deficit with China increased by about $150 (the factory cost). Yet, the value added to the product through assembly in China is probably a few dollars at most.

While Apple’s share of value capture is high for the industry, the iPod’s overall pattern of value capture is fairly representative.

Today, no single country is the source of all innovation and therefore US companies need to work with international partners to bring new products to market. These companies will capture profits commensurate with the extra value they bring to the table.

This is simply a fact of business in the 21st century, and the good news is that many American companies are winning this game and continuing to bring significant benefits to the US economy.

The researchers conclude that as long as the US market remains dynamic, with innovative firms and risk-taking entrepreneurs, global innovation should continue to create value for American investors and well-paid jobs for knowledge workers.

But if those companies get complacent or lose focus, there are plenty of foreign competitors ready to take their places. If this happens, the benefits from the global innovation system could quickly shift away from the US.

100 Million iPods Sold

Apple announced in April 2007 that the 100 millionth iPod has been sold, making the iPod the fastest selling music player in history. The first iPod was sold five and a half years ago, in November 2001, and since then Apple has introduced more than 10 new iPod models, including five generations of iPod, two generations of iPod mini, two generations of iPod nano and two generations of iPod shuffle. Along with iTunes and the iTunes online music store, the iPod has transformed how tens of millions of music lovers acquire, manage and listen to their music.

Apple launches the iPhone - Report and Video

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.

Tuesday, June 26, 2007

Irish Public Sector pay for Clerical Employees trumps counterparts in top Multinationals in Ireland

The ESB plant at Lough Ree, County Longford.

According to the CSO*, the pay levels of Clerical, Managerial and Industrial staff in the "Electricity, gas, steam and hot water supply" category which includes Bord Gais and the ESB, are substantially above other categories of workers.

The average pay of clerical employees (non-managerial) in Dec 2006 was €49,370 compared with €40,350 in "Manufacture of chemicals, chemical products and man-made fibres," which is dominated by multinationals such as Pfizer, Eli Lilly, Glaxo, Merck and others - a 22% pay gap.

The comparison between these two sectors is largely on payroll costs as large private sector companies generally provide pension coverage but the benefits would not compare with the public sector.

In other sectors, the disparity in benefits is much wider where there is no pension coverage.

So, arguments that ESB pay is high only because of the skills slant of the workforce, are not sustainable.

*Links to current release dated 29032007

JUNE 2006: Electricity prices for Irish industry are third highest in EU and sixth highest for consumers; Irish household prices are 46% higher than UK

Sunday, June 24, 2007

Minister Martin's delusional "Asia Strategy"

Micheál Martin TD, Minister for Enterprise, Trade & Employment

Minister for Enterprise, Trade and Employment, Michéal Martin on Tuesday last expressed satisfaction with the latest trade statistics.

Martin said that he was particularly pleased to note the strong export performance in a number of our markets in the first quarter of 2007 compared to the same period last year. Exports to China and Hong Kong were up by 37% and to the Philippines by 88%.

The Minister said "this strong performance in this region reflects our ongoing efforts to promote and grow our markets through our Asia Strategy."

He did not refer to the fall in exports to Malaysia by 31%. Besides, exports to India increased by €3.9 million to €37 million in the quarter- not a great gaisce in respect of the region's second economic powerhouse.

Then again, it's no big deal because the so-called Asia Strategy is either a manifestation of Minister Martin's delusions or an artful example of spin that even IBEC, the main Irish business representative organisation, has fallen for.

Earlier in June, Martin said in an address to a conference on China, at University College Cork, provided a vivid example of the conflation of the performance of multinationals in Ireland with the small indigenous sector.

Martin said: "Ireland’s knowledge –based economy, built on innovation and technology, is substantially shaped by the emergence of strong technology-led and export-focused Irish companies. Companies, which have become world leaders in their respective industries."

The danger in the yarn that the Minister is spinning is that rather than face reality, some people may well buy this "Asia Strategy."

The export performance that he is bragging about relates to decisions that are made by the likes of Intel, Microsoft and Pfizer - supply decisions that generally are not made in Ireland.

There is no reference to the small number of Irish-owned firms that are exporting to Asia and for that matter to all regions outside of the UK.

So with the "Asia Strategy" going well, maybe we need similar strategies elsewhere. Wwhy did exports to Italy fall by 15% and to France by 7%.

We should be careful what we wish for, because perish the thought, the Minister might add a line to the blank job specs of one of his junior ministers and hey presto, we will get a "Europe Strategy."

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

Thursday, June 21, 2007

Ryanair's Michael O'Leary seeking to boost business amidst market slowdown but gets puck in eye on customer service

Ryanair Chief Executive Michael O'Leary said on Tuesday that the low-cost airlines average ticket prices will be lower this year and predicted a ``big downturn'' for the industry.

Ryanair cut prices on 3 million seats at a cost of as much as £45 million pounds over three months, O'Leary said today at a press conference in London.

``We expect a big downturn in the next 12 months, we just don't know what's going to cause it,'' O'Leary said, noting the cyclical nature of the industry. ``We must be due one.''

Ryanair wants to take market share from EasyJet Plc and meet targets for passenger growth by forcing prices lower. It is targeting to boost customer numbers by 22 percent this year even as it pays more for fuel. The company confirmed that profit will climb about 5 percent in its 2008 financial year as it slashes prices.

However, Michael O'Leary ran into flak on customer service from a recent customer, who happened to be a former editor of the Financial Times.

The following letters were recently published in the FT.

Albania's airport terminal is run more efficiently

by Michael O'Leary

Published: June 15 2007 03:00 Last updated: June 15 2007 03:00

From Mr Michael O'Leary.

Sir, Philip Stephens ("Put an end to the Heathrow misery", June 12) correctly describes the passenger experience at Heathrow as a nightmare. Sadly it is no better at the other BAA monopoly airports at Gatwick and Stansted.

These appalling and badly run facilities are further depressing proof of the abject failure of the Civil Avation Authority's regulatory regime in the UK. Any system that rewards a monopoly by setting its income as a fixed percentage of its capital expenditure is bound to incentivise that monopoly to waste not millions, but billions, on capital expenditure in order to inflate its future income.

Mr Stephens also correctly identifies the solution. Competition. The only way the London airports can be improved is for the Competition Commission to force the break-up of BAA's London airport monopoly. Spin out Heathrow, Gatwick and Stansted into three separately owned companies and force them to compete vigorously against each other. Competition will deliver more efficient investment, passenger-friendly terminal facilities, lower costs and improved services. Put an end to the regulatory scandal that allows the BAA monopoly at Stansted to contemplate wasting £4bn on a second runway and terminal, when these facilities can and should be built for less than a quarter of that sum.

The BAA airport monopoly has not delivered for passengers. Albania provides more efficient terminal facilities than the BAA monopoly. Ryanair welcomes Mr Stephens' support for our campaign to break up this overspending, overcharging airport monopoly.

Michael O'Leary,
Chief Executive,
Ryanair

O'Leary's protest is not without irony
By Andrew Gowers

Published: June 18 2007 03:00 Last updated: June 18 2007 03:00

From Mr Andrew Gowers.

Sir, While endorsing Michael O'Leary's sentiments about the horrors of BAA's "monopoly airports" (Letters, June 15), am I alone in finding such criticism somewhat hypocritical coming from the head of an airline with as cavalier an attitude to its own customers as Ryanair frequently displays?

A recent encounter by my family with Mr O'Leary's "On-time airline" casts an ironic light on his protests against the poor passenger experience at Heathrow, Gatwick and Stansted. Ryanair was supposed to fly us to Treviso for Venice, but our plane was diverted by a storm and we landed at Trieste.

Then the fun started. The airport was closed and bleary-eyed police and customs officers had to be summoned from their homes to deal with us. Contrary to pre-landing assurances from the crew, there was no transport, accommodation or refreshments for the arriving refugees. More entertainingly still, once we were ensconced out of sight in the airport building, the Ryanair crew simply disappeared, never to be seen again. Thus 184 passengers including elderly, infirm and infants, were left to fend for themselves in the middle of nowhere through the small hours of the morning.

According to the Air Transport Users Council, airlines have a contractual duty to get passengers to the destination they paid for at no extra cost. Can anybody explain why an airline that so flagrantly and insouciantly violates its obligations to customers should continue to have a licence to fly?

Andrew Gowers,
London SE21

Tuesday, June 19, 2007

Ireland needs 3 more Government Ministers than France

President Nicolas Sarkozy at the commemoration on Monday, June 18, 2007 of the war-time call by General Charles De Gaulle from London for the French to resist the Nazi occupation.

French President Sarkozy reshuffled his slimmed down cabinet of 15 today and added 17 junior ministers (including a woman of Senegalese origin and the outspoken head of a group that advocates for Muslim women).

Ireland with a population of 4.2 million compared with France's 61 million, is going to have 3 additional junior ministers according to Taoiseach Bertie Ahern, bringing the total to 20.

Most of them will be non-entities outside of their constituencies. A government with an interest in reform would surely start at the top like Sarkozy.

Staying in France, the Paris-based government think-tank, the OECD, that has 30 member countries, is working on proposals for reform of the Irish public service, which has increased by 77,000 people since 1997.

There is little chance of any of the proposals being implemented.

Sunday, June 17, 2007

The Greens drinking the soup

Trevor Sargent

Under pressure in 1973 from the White House Press Corps, including CBS News' Dan Rather, as the Watergate scandal engulfed the Nixon Administration, Press Secretary Ron Ziegler retracted previous statements that were proved to be false by saying: "This is the operative statement. The others are inoperative."

It's not news that politicians would like to have past statements declared inoperative.

Green Party leader Trevor Sargent said to Taoiseach Bertie Ahern in the Dáil in October 2006: "You have lost moral authority... Do the decent thing and resign."

Eight months later with more unanswered questions having arisen about Ahern's byzantine financial arrangements in respect of the renting and subsequent purchase of his house in the 1990's, it was Sargent who resigned and then seconded the nomination of Ahern as Taoiseach in the new Dáil.

The late Ron Ziegler had said on the tangled web of Watergate: "If my answers sound confusing, I think they are confusing because the questions are confusing and the situation is confusing."

Confusing is the word indeed.

During the General Election campaign, there were only two parties that directly raised the issue of Ahern's explanations about his finances - the Green Party and the Progressive Democrats. They are both now in Government even though the issue of a possible lodgement of $45,000 that was made at the Mahon Tribunal on May 28th - 4 days after the General Election, remains to be clarified.

Sargent resigned as leader of the Greens because he had said that he would not go into a government with Fianna Fáil but he will be a Junior Minister in the new Fianna Fáil-led administration!

Taoiseach Bertie Ahern has also disclosed that he plans to increase the number of Junior Ministers to 20, to facilitate the addition of Trevor Sargent while allowing Ahern himself greater leeway with political patronage.

At best, there is a case for 5-6 Junior Ministers but adding 3 to the 17 that were mainly occupied by non-entities in the last Dáil, is at least consistent in the unreformed public sector.

Section 11 of the Green Party Manifesto:

"[The Green Party] will reduce the number of Government Ministers from 15 to 12 and reduce proportionally the Ministers of State."

Labour Party leader Pat Rabbitte said in the Dáil this week that the word ‘review’ appeared in the programme for government 56 times, the word ‘examine’ appeared 23 times and the term ‘consider’ made 14 appearances.

The Irish Government has spent up to €400 million on management consultants since 1997. So there's more scope for the industry in the years ahead.

Bertie Ahern operates more as chairman than CEO and other than the Northern Ireland peace process, does not take an active role in pushing issues like for example the way Tony Blair operates.

The Green Party should look at the very limited impact that the Progressive Democrats (PDs) had in government over a decade.

When the PDs were proposing that Dublin Port be relocated to North County Dublin, agreement could not be reached for years on providing a modern airport service in Dublin.

When Trevor Sargent referred to the 1973 Kenny Report on development land as one of the key issues for the Green Party, he was being more an optimist than realist.

Time will surely show how much.

Tuesday, June 12, 2007

Golden Fleece: Ballsbridge, Property Shakedowns, Nimbies, Developers and Selfless Politicians

The decision of members of Dublin County Council to reject a local area plan for Ballsbridge, Dublin 4, that provided for the building of high-rise buildings of up to 20 storeys, has been presented as a success against a developer-dictated plan that was drawn up by the executive of the Council.

Much of the power of councillors was taken away from them almost a century ago to reduce corruption. The main power that was left was in respect of rezoning land.

In recent decades, because of the big jump in the value of development land compared with its agricultural value, land has become the crack cocaine addiction for Irish politicians.

It's not that land is scarce in Ireland, it's just that there is an artificial scarcity created and what property obsessed Irishman would want to contemplate living in a sinkhole like Switzerland, where the real cost of residential property, hasn't increased since 1970!

The Celts came from the area of modern Switzerland and contrary to what we would like to believe, they never bothered to visit or invade Ireland.

We can't blame the Celts for our contemporary obsession with property, but attributing it to the English landlord system of feudalism that operated in Ireland until the 1880's, is also off the mark. When farmers near Irish towns become multimillionaires through making bonanzas from development, they have no qualms about becoming landlords.

A planning corruption tribunal has been sitting since late 1997 and it has effectively been operating in a parallel universe. After almost a decade of revelations of politicians for hire, ZERO has been done to change the existing system.

Taoiseach Bertie Ahern has said that any changes in the existing system may conflict with the Constitution.

It's absolute rubbish and as with the story that up to €4.6bn of the €18.5bn of taxpayers' money that will be spent on new main roads over the next decade will go into the pockets of landowners, nothing is done about it.

Fred Barry, chief executive of the National Roads Authority is reported as saying that the increases in the cost of land for major roads projects as "disturbing". Land acquisition accounts for 23% of the cost of roads projects in Ireland, but just 12% in England, 10% in Denmark, 9.4% in Greece and 1% in Iceland. A further 2% of the €18.5bn provided in the Government's Transport 21 for road building over the next decade will go to archaeologists.

Six years ago, Taoiseach Bertie Ahern asked the Committee on the Constitution to examine the issue of the pricing of development land. In 2004, it concluded that Mr Justice Kenny's recommendation in 1973 that development land should be priced with a 25% mark-up on agricultural land prices, could be introduced by legislation, and without amending the Constitution.

So, after almost ten years of stories of endemic corruption and what changes have been made in the system that spawned it? ABSOLUTELY NOTHING!

The cost of the tribunal is an issue but as usual with politicians who lack the appetite to challenge vested interests, the most pertinent issue is conveniently ignored.Are there journalists who can connect the dots rather than be led up the garden path?

Stamp duty is an easier topic to sell to the masses rather than the Golden Fleece from land.

...and we've had a system of free education since 1968!

Our planning system has moved on from brown envelopes but anyone who believes that corruption has ended, is a fool.

Besides inducements for politicians, there are the shakedowns that are involved in so many developments.

There is seldom any Irish development without a shakedown and it is often a residents' association that is seeking some payoff - maybe a wall to be built or some other amenity - that the local authority hasn't bothered providing.

There are Nimbies (Not in My Back Yard) everywhere, whether it is in Mayo in respect of the Corrib gas field or in Dublin's most expensive thoroughfare - Shrewsbury Road, Dublin 4.

The default impression that developers had, that hotels, pubs or other amenities could be knocked and the sites rezoned, was overdue a slapdown.

However, the reaction of councillors to the local area plan for Ballsbridge, more likely relates to the power of wealthy Nimbies than a new dawn for Irish planning.

Developer Sean Dunne's Mountbrook Homes which paid €379 million for the Jurys, Jurys Tower and Berkeley Court hotel sites, is one of a number of developers who have been seeking zoning changes. Another developer, Ray Grehan of Glenkerrin Homes, paid €171.5m for the former UCD Veterinary College site, which is adjacent to the Berkeley Hotel site. Other developers with holdings in the area include Bernard McNamara, who owns Carrisbrook House on the corner of Northumberland Road.

After pre-planning discussions with the developers, the council decided to recommend the inclusion of mixed-use local centre buildings with a height of up to 12 storeys and district centre buildings with a height of up to 20 storeys. Retail elements would have been restricted to 10,000 sq m.

Assistant city manager Michael Stubbs is reported to have said that it could be a year before the matter is revisited, as the council's next priority was to advance area plans for Phibsboro and then Rathmines.

Both Sean Dunne and Ray Grehan purchased their Ballsbridge sites in 2005 when the European Central Bank's key interest rate was 2% by the time a compromise is reached in 2008, never mind planning approval granted, the ECB rate may well be 5%.

Dublin has become an urban sprawl because of an over-reaction to the experience of a high-rise multi-block public housing that was built in Ballymun in North Dublin in the 1960's.

What is very interesting about the Ballsbridge development that it is not only about a developer seeking to change zoning classification for his hotel sites, which are currently solely residential, but Dunne is also one of the prominent Nimbies in Ballsbridge!

Earlier this year, a High Court judge was reported to have accused millionaire developer Sean Dunne of making a ‘‘spurious’’ complaint about a proposed development near his Dublin 4 home.

Dunne and solicitor Stephen MacKenzie were seeking a judicial review of An Bord Pleanala’s decision to grant planning permission for a three-storey block of seven apartments and underground car park, in Shrewsbury Road.

The development by O’Malley Construction involved demolishing the buildings on the site of the former Chester Beatty Library. The two men complained that An Bord Pleanala had failed to give reasons for its decision, particularly considering the unique character of Shrewsbury Road, which had been designated a residential conservation area.

An Bord Pleanala’s documentation on the issue, refers to Dunne as "Third Third Party Sean Dunne":

Previous decision: The appellant refers to An Bord Pleanala’s recent refusal of permission for development on the site. He states that there has been no change in policy in the meanwhile which would warrant a different decision on the current application which it is contended differs in minor respect only.

This appeal raises similar issues to the Mc Evaddy and Mc Kenzie appeals in relation to zoning, density, height, bulk, scale, precedent and procedure (defective public notice).

Traffic, parking, and traffic hazard issues are also raised.

So the Irish planning system is a minefield of Nimbies and politicians seeking shakedowns and developers who can be both innocent and guilty parties in the ramshackle system.

RELATED

Whitaker's Ireland and the planned destruction of two of Dublin's premier hotels

Ballsbridge Nimbies Hit the Jackpot from Lansdowne Stadium Development

Sunday, June 10, 2007

Waning of China Effect will result in Higher Inflation and Interest Rates

In October 2006, the world's biggest container ship, the Emma Maersk, owned by A.P. Moeller Maersk of Denamrk, docked for the first time in the UK port of Felixtowe loaded with nearly 45,000 tons of Chinese-made goods including MP3 players, computers, Christmas trees and crackers.

The Emma Maersk, which is 400 metres long (1,300 ft), 56 metres wide and 60 metres tall, and dubbed the SS Santa, unloaded more than 3,000 containers for supermarkets and stores before heading to mainland Europe.


While migrants have kept labour costs down, in recent years, the falling price of goods that are imported from Asia, led by China, have contributed to the fall of inflation in the Developed World.

The fall in goods prices and impact in inflation in the Developed World, is known as the China Effect.

Prices of clothing and footwear sold in Ireland have fallen by 36% since 1996. Household appliances are down by about 25%; toys are 30% cheaper, and of course, in the audio-visual category, products are on average now 56% cheaper than they were in 1996.

The latest report on Irish consumer price inflation shows that in May, service inflation rose by 9.15 while the price of goods fell by 0.3%.

A 2005 study by Dresdner Kleinwort Wasserstein reckons that China has knocked almost a full percentage-point off America's inflation rate in recent years. The recent 2% revaluation of the yuan will probably be absorbed by Chinese manufacturers trimming their profit margins and so will not be passed on into export prices. But Americans calling for a 25-30% revaluation may come to regret it: the result would almost certainly be faster inflation.

China's reduction of inflationary pressures has allowed central banks to hold interest rates lower than they otherwise would be. Three and a half years into its recovery, America's real short-term interest rates were only 0.7%, almost two percentage-points below their average at the equivalent stage in previous recoveries since 1960.

The question now is how long will the China Effect last and keep interest rates in Europe and the US lower than they would be if goods inflation was higher?

An article in the New York Times on Friday, June 8th, says that the recent rise in China’s pork prices signals an end to cheap output.

The NYT says that business executives say that with wages rising 10% or more a year in many Chinese cities, the country’s days are numbered as the world’s lowest-cost producer of many cheap labor-intensive products, like toys and shoes.

Last autumn, Governor of the Bank of England Mervyn King said in a speech:

Over the past decade the integration of China, India and other emerging markets in Asia into the world trading system has lowered the prices of clothes, electrical goods and other items that we import from them. The terms on which we trade with the rest of the world improved. That provided a boost to real disposable incomes and so to consumer spending. But the rapid growth of China and India also meant sharp increases in the prices of many commodities, such as copper, aluminium, iron ore and, particularly important, oil.

In that sense the rises in oil prices over the past two years are very different from the oil price “shocks” of the 1970s. They reflect rapid growth in the demand for oil – faster than the growth of capacity – rather than an OPEC-inspired contraction of supply. What we have seen is not so much an “oil shock” but a consequence of the rise of China.

The lower prices for many consumer goods and the higher cost of oil are both the result of globalisation. Having benefited from the former we are now experiencing the latter. As a result, our import prices are no longer falling as rapidly as they were, and, indeed, over the past year even the prices of non-oil imports have risen. With the additional impact of higher oil prices, real disposable incomes are rising more slowly, and the long awaited rebalancing of the economy away from consumer spending to business investment and net exports is underway.

“People tend to underestimate the deflationary impact over the last 10 years” from Chinese exports, said Michael R. P. Smith, the chief executive of HSBC’s Asian operations told the New York Times. “It has got to the limit: you’ve had wage inflation, you’ve got rising natural resource prices. There’s just no more give.”

The message is that interest rates may have to be increased to a higher rate for a more sustained period, if the positive impact of falling prices of imports from Asia wanes.

Wednesday, June 06, 2007

Irish Corporate Tax Regime and Synthetic Indignation

Peer Steinbrück, Germany's Finance Minister

Luxembourg vetoed attempts on Tuesday to end its position as a low-tax haven for web retailers, blocking VAT reforms that were proposed by the German presidency of the European Union and supported by all other member states.

Jean-Claude Juncker, Luxembourg's Prime Minister and Finance Minister who is known as Mr. Euro because of his longtime chairmanship of the Eurogroup of Eurozone Finance Ministers, refused to give up a tax regime that has attracted companies including Skype, AOL, Apple and Ebay to the Grand Duchy, providing his government up to €300m ($406m, £204m) a year in revenues.

Luxembourg's 15 per cent VAT rate is the lowest in the EU

"I can't agree here today," Juncker said despite criticism from other EU member states, which are losing jobs and tax revenues because of the shift offshore of the booming e-commerce sector.
Peer Steinbrück, Germany's Finance Minister, secured agreement on other aspects of a package of VAT reforms and believes Juncker will lift his veto by the end of the year.

At Tuesday's meeting Peer Steinbrück accused Ireland of subsidising its public services with EU funding while engaging in unfair tax competition.

In a strong public attack on Irish corporate tax policy, Steinbrück said States such as Ireland risked jeopardising the EU idea if they continued in this manner. "It is unfair to reduce tax rates and get money from the EU to finance public spending.

"Ireland is offering tax rates [ that are] very advantageous and organising this tax competition,"
Steinbrück said at the meeting of EU finance ministers. "Some countries are concerned about using certain techniques to fund their public finance requirement in the hope that if they do not have sufficient income it will be compensated by EU funds," he said

The German criticism followed a discussion on a proposal to harmonise the EU corporate tax base ( as distinct from tax rates).

The Irish Government fears that harmonising the base will inevitably lead to a harmonisation of the corporate tax rate.

Jamie Smyth of the Irish Times says that Steinbrück cited the tax reliefs available in the "Dublin Docklands" - commonly known as the International Financial Services Centre - as an example of using low tax rates to attract industry and engage in tax dumping. He also cited tax relief schemes in the Netherlands as examples of unfair tax competition that were undermining co-operation in the EU.

"There is a clear interest in Europe in certain countries to make their tax attractive to influence where they [ multinationals] locate and it is not a diplomatic disgrace to say it," added Steinbrück, who also said that young people in Germany were asking him to ask these questions of other EU states.

Steinbrück also said Ireland had nothing to fear from the corporate tax base harmonisation proposal.

Ireland's corporation tax rate is 12.5%. Rates are above 20% in most EU countries.

Irish business employers' group IBEC strongly criticised Steinbrück's comments, calling them "disgraceful, and unbecoming of a president in office of the Ecofin council".

Unbecoming indeed!

This could surely be termed synthetic indignation.

We have been very lucky that the funding members of the European Union, principally Germany gave us about €36 billion in aid with few strings attached.

We were simply lucky that they were stupid.

The IBEC gun-for-hire would surely be as indignant if the boot was on the other foot!

Company Taxation/Common Consolidated Corporate Tax Base: European Commission presents progress report before finalising its proposal due in 2008