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Independent.ie

Friday 28 April 2017

Analysis: This plan to make rural Ireland great again faces multiple obstacles

The Government’s €60m action plan, entitled ‘Realising our Rural Potential’,
will be launched by Minister for Rural Affairs Heather Humphreys. Photo: Kyran OBrien
The Government’s €60m action plan, entitled ‘Realising our Rural Potential’, will be launched by Minister for Rural Affairs Heather Humphreys. Photo: Kyran OBrien
IDA chief Martin Shanahan. Photo: Mark Condren

Thia Hennessy

Taoiseach Enda Kenny, launched 'Realising Our Rural Potential: Action Plan on Rural Development' last week. The €50m investment aims to create 135,000 new jobs in rural communities by 2020. So how realistic is the ambition to make rural Ireland great again?

When it comes to economic prosperity, the statistics on the rural-urban divide have been well aired and the ongoing demise of rural Ireland has been widely documented, perhaps prematurely some might argue.

 But one may ask what can this plan deliver and what can drive economic growth in rural Ireland?

The Action Plan centres around three main engines of growth, foreign direct investment (FDI), tourism and the agricultural sector.

First looking at FDI, the plan presents the specific target of increasing FDI in rural areas by 40pc by 2020.

Yet Martin Shanahan (CEO of the IDA) has publicly acknowledged that it is "extremely challenging" to attract foreign companies to rural areas and that there is a "global trend towards favouring large urban centres".

Indeed parliamentary questions last autumn revealed that 94pc of all unoccupied IDA properties were located outside of Dublin.

Notwithstanding the difficulties of attracting foreign investment to rural areas, there are major unknowns on the horizon ahead that are likely to affect FDI in Ireland in general, namely Brexit and Donald Trump's US presidency.

Trump's proposal to reduce corporation tax from 35 to 15pc and to introduce punitive border taxes on the re-importation of goods produced by American companies abroad is worrying, especially when one considers that 70pc of IDA-supported jobs are in US companies.

Trump has singled out the pharma sector in this regard, which he says are "getting away with murder". More than 50,000 people are employed by pharma companies in Ireland.

Brexit, on the other hand, may be an opportunity for FDI companies seeking access to the large single European market who may favour Ireland over the UK.

A number of sectors have been cited as seeking to relocate their European headquarters to Ireland. Most have been in the professional services sector such as financial and legal services. It is most likely however, that such companies would be more at home in Ballsbridge than Ballinrobe.

So if FDI is challenging, then can agriculture be the driving force that is needed to make rural Ireland great again? The plan for agriculture is, for the most part, a rehash of the Food Wise 2025 report with little to no new initiatives.

Unlike FDI, primary agriculture is an indigenous sector which is already well dispersed geographically. While it may only contribute less than 3pc to gross domestic product nationally, its contribution to the rural economy is wide reaching.

The value of output generated by the agricultural sector is about €6bn and each year farmers spend almost €4bn in inputs, which include animal feeds, fertilisers, vet services, agricultural contractors and so forth.

Typically the inputs consumed by farmers are purchased locally and have a lower import content than inputs used in FDI sectors such as pharma or IT, for example.

Furthermore, the €2.5bn operating surplus (profit) earned by farmers is kept in the country, spent in the local community and used to keep rural businesses alive.

Contrast this with the repatriation of profits of foreign-owned companies and it is clear that the importance of agriculture to rural Ireland should not be underestimated.

There is little mention of the future Common Agricultural Policy reform in the Action Plan for Rural Development. The national collection of direct payments coming from Brussels, amounting to over €1.3bn per year, is hugely important and although directed to farmers, the payments support many businesses in the wider rural community.

A study by UCD concluded that each €1 of support in the form of direct payments underpins €4.28 of aggregate output in the economy and €2.37 of GDP.

Clearly, it is in the best interests of the wider rural economy to protect the value of these payments when entering the new round of CAP reform especially in the context of a declining EU budget following the departure of the net contributing UK.

The importance of FDI to the future of Ireland's economy is unquestionable but the contribution of agriculture and the direct support for agriculture to the vibrancy of rural areas is also critical.

Many have criticised the Action Plan as a repackaging exercise with many of the initiatives presented already contained in the Programme for Government.

Nevertheless, the focus on rural regeneration is to be welcomed and it is good to see the Government embracing a "spread the recovery" agenda rather than the controversial "keep the recovery going" slogan.

Thia Hennessy is Professor and Head of Food Business and Development at University College Cork

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