Umbrella boom

ANDREW WHITTAKER

From the viewpoint of the businessman— particularly one from outside the country— it must have seemed in the past ten years that in setting up an enterprise in Ireland the last thing to worry about was money. The tax-free holidays and the capital and other grants for exporting industries are notorious by now. But this free-spending decade is at an end: in the 1970s there will have to be attention to gaps in the country's industrial infrastructure that have been circumvented, but not closed, during the past forty years.

Education, for example, both for the popu- lation at large and for skilled workers and management in particular will be needed: so will restructuring of government depart- ments themselves, if in conditions of freer trade, whether in or out of the Common Market, existing firms are to prosper and new ones be attracted to the Republic. And there will have to be immediate remedies for the cost inflation that is raging in Ireland at present as it is nowhere else in Europe.

In a country so recently undergoing a second-tier industrialisation (never having suffered the industrial revolution of the last century) and so decisively programmed by economists, civil servants and businessmen in and about government, rather than in the Private sector, the problems of business have come to be seen primarily in terms of gov- ernment action and of the economy as a whole. The problems in the next decade will continue largely to be seen this way—and %sill be more basic, more international, and so less open to ingenious financial or fiscal solutions. The immediate need for an in- comes policy, for example, can only be met m the short term if the British experience does not work contrary to Irish needs. The enterprises now being sought from Japan to Britain to Germany to California are the growth industries such as engineer- ing, electrical goods, food processing and plastics: they bring international needs and competition with them. Irish management ill have to develop techniques both inter- nationally effective and in line with the Re- public's relative lack of class divisions. The government will have to accept growing criticism from businessmen who, up to now. have tended to know little and care less about how the industrial sector of the economy

could be encouraged to grow rapidly.

The remarkable success of industrial de- velopment in the past decade, of course, has made financing new factories easier than it used to be. From the state grants angle. however, the big plants now coming in the metals and other heavy industries will eat up the available finance at an ever-rising rate. From every point of view, a continued restriction of consumer credit is likely for the next three or four years.

It was all simpler in the past. In the 1930s. in line with the international habit and the political mood of the new Free State, tariff protection became the method of assisting businessmen in the domestic market. The firms, by and large, were small, the products indifferent and the expansion of both sales and employment very limited. The higher manufacturing costs imposed by poor in- frastructure—roads, water supplies, tele- phones, even education—were not attacked by attacking the problems, but by seeking greater tariff protection.

From the early 1950s this protectionism began to be phased out and replaced by freer trade, deliberately encouraged com- petition and adaptation in industry, and dir- ect incentives to industrial investment, such as flowered fully in the 1960s. Originally the creation of academics and government officials reacting both to the international mood and the limits being reached in ex- pansion within Ireland, the new ideas were justified in the Anglo-Irish free trade agreement (1965) which was itself a delib- erate preparation for the shock of Common Market entry. The twin fuels of the new system were exemption from tax on profits made by exporting: and capital and other grants for new factories and modernised machinery.

The effects, admittedly achieved under an umbrella of healthy world trade, have been remarkable. During the 1960s industrial pro- duction rose 85 per cent and industrial ex- ports quadrupled, to become one-half of the Republic's total exports. About 44,000 new jobs were created in industry and emi- gration (largely to England) fell to an aver- age of less than 17,000 people a year. or one-third of its 1950s level and only one- quarter of the birth rate.

Over the decade the average rise in na- tional output was 3.9 per cent a year, accord- ing to OECD, a figure that compares well with the United Kingdom's 2.7 per cent but not so well with western Europe's 4.7 per cent.

The 514 new industrial enterprises founded in the 1960s with state grants of £66 million were 30 per cent Irish. 28 per cent British, 17 per cent American, and 14 per cent German. The British investment was £29 million in 150 enterprises.

Looked at more broadly, during the decade the 1960 gap between Irish and British standards of living was closed by about one

quarter. The people who have done best out of this are the middle classes, and the 1966 census showed that, in the previous five years, they increased in number by 19 per cent, by far the largest social change in that time.

In the countryside change has been much slower, both on the farms and in facilities for light industries. The new industrial em- ployment, in fact, has not quite kept pace with the drift from the land and in the past five years unemployment has risen from 4.6 per cent to 5.4 per cent of the labour force.

Wages, housing and the general standard of living certainly have not been static. The wage rounds that swept the Republic about every two years have brought, not just a first taste of the good things of the Euro- pean consumer society (take them or leave them), but the familiar world-wide problems of inflation. Cost inflation, wage spirals. strikes, credit restraint, the hunt for an in- comes policy—all this is very familiar to the English businessman. During the 'sixties Ireland managed to keep ahead of the game, and only in the last eighten months have the problems become acute. It' their amelioration is to be harsher than it would have been a year ago, this must be blamed on a gov- ernment deflected from economic manage- ment by more sensational worries both north and south of the border with Northern 1 reland.

The main worry of businessmen now. particularly in such competitive areas as tex- tiles, is the way Irish costs have shot ahead of British and European ones. Wage costs- per unit of output rose 11 per cent last year, against 4.5 per cent in Britain and 4 per cent in Germany. Of Ireland's II per cent rise in exports last year, 6 per cent was due to higher prices.

Up and down the country, from business to business, the underlying reason for such increases can only be read as an attempt to close, faster than can be afforded, the gap between Irish living standards and those at- tained at the other end of the unrestricted sea routes to England.

Given an incomes policy, or the alternative higher unemployment and emigration. there is probably no reason at all why Irish in- dustry should not continue rapidly to expand. The bad effects of cec entry have been exhaustively discussed, but after a decade of business and management revolution it can be argued persuasively that the world is moving too fast for Ireland to get off. The cat's bantamweight counterpart, the cit. would argue that there is no fundamen- tal threat in Common Market entry and that, with energetic management, it offers un- limited opportunities. In negotiating entry the gqvernment should concentrate simply on keeping its freedom, within the EEC re- gional policies, to promote more industries, rather than seeking special terms for those likely to die. In any case, no one expects Britain to cease being the major trading partner. Ireland has risen in the last five years to be Britain's best customer after the us and West Germany, and ahead of all Commonwealth countries. For a population of 2.9 million people, it is a remarkable ition On the other side, Britain takes 65 per cent of all Irish exports—a prepond- erance that the EEC would be slow to dim- inish.

At this stage of business development in Ireland, however, the disadvantages, phy- sical and human, that were circumvented by tariffs first, then by state incentives to industry, need to be tackled at source.

The education system, for instance, which now extends to free secondary schooling, is

not playing its part in turning out the skilled industrial workers who increasingly will be needed.

More than one-third of Irish industrialists have reported that labour shortages have

hindered their plans for expansion, while unskilled workers still go to England. Both an extension of existing industrial training grants, and a recasting of adult and tech- nical education at large, are needed. The related problem of apprenticeships and demarcation decisions cannot be sorted out in isolation from Britain. where so many unions and so much skilled experience, ap- plicable to Ireland. have their roots. A national manpower policy has been mooted, and indeed offices have been opened and surveys made, but during the 'seventies much will have to be done that is as yet only

dreamed of. •

Apart from the critical housing shortage in Dublin itself, and the high prices for middle-class housing. the shortage of houses for skilled workers in other towns is so bad that the various semi-government agencies have been forced to involve themselves in clearing a bottleneck that was making it hard for firms to attract workmen and managers to new development areas. This problem. being physical, may be sooner solved than many others.

While Irish roads are generally adequate. there is no national roads policy, and con- gestion develops too easily merely from the siting of one big new firm. The whole road- rail-sea freight network needs study, though so far as freight rates on the Irish Sea go. they appear reasonable and, with British Rail investing heavily in container ships. could become cut-throat.

The restructuring of government depart- ments, and of local government, comes into the picture when the physical infrastructure for industry is questioned. Delays in such essentials as water supplies have caused much irritation and some financial losses to com- panies going into new industrial areas. The telephone system, suffering from years of under-capitalisation. is still overloaded and, outside the main cities, slow and crackly. Data link quality is not yet guaranteed. though the lines to England are generally satisfactory.

A plan for reorganisation has been pro- posed by the Devlin committee but, like the Buchanan plan for regional development de- cisions, has not yet been digested by a gov- ernment distracted by the political upheaval in Northern Ireland. Decisions are beginning to be made piecemeal but, for the decade, more radical changes will be needed.

In managements themselves there is an urgent need for greater sophistication and education. Some of this can be helped on by the government, but nothing except un- familiarity with the idea prevents business- men from organising more management ed- ucation, in their own interests. Marketing is Probably the most underdeveloped area in this. The universities. technical colleges, and the Irish Management Institute, do organise Instruction, but down-the-line enthusiasm for

instruction has not reached even the level in Britain. The batteries of special short and night degree courses, month or three-month courses, and special seminars, that would be needed for a thoroughgoing management re- form, equivalent to the new-industries reform

of the last decade, have yet to develop. When they do. the government may expect to lose for good its pre-eminence in guiding busi- ness development, and accept the well-in- formed voice of the business community, as it has not been heard in Ireland so far.