Exports our best bet to cut debt ratio and grow
Home-grown entrepreneurs and the Irish diaspora are being targeted in an ambitious new strategy at the state agency. By Brendan Keenan
THEY were cheering in the aisles for Frank Ryan, chief executive of Enterprise Ireland, at last week's Institute for Taxation dinner.
The reason was not hard to find. "I don't do gloom," Ryan said, and went on to burnish any shiny bit left in the Irish economy.
There are quite a few, according to Ryan. Quoting the last world competitiveness report, he noted that Ireland is first for helpful corporate taxes, fourth in the globe for a culture that is open to new ideas; still fourth for the availability of skilled labour, and sixth for labour productivity.
This is the kind of thing people like to hear amid the encircling gloom. Still, the fact remains that the companies supported by Enterprise Ireland (EI), which are meant to be the best locally-owned firms, had a torrid time in the downturn.
Last year saw a fall of almost 4pc in full-time jobs in those companies, while total employment, including part-time, dropped by 2.3pc, showing a switch to part-time working.
That still leaves 160,000 people employed in those firms and, according to Ryan, the worst is over.
"2009 was a very difficult time," he says. "Nothing affects a company faster than a drop in domestic demand and, of course, the drop was huge. It is more damaging even than rapid currency movements."
Domestic demand has levelled off, but there are enormous obstacles to any sustained recovery. It is all about exports now, as the most feasible way to grow output and reduce debt ratios, and perhaps feed back into improved consumer confidence and spending.
Much of that may have to come from indigenous exports, with the possibility that the giant chemical and pharmaceutical sector may have peaked.
Yesterday, the Irish Exporters' Association (IEA) suggested that an annual increase of just over 7pc is a reasonable target, especially if global trade continues to grow at a double digit pace.
Last year was a good one for indigenous exports, with some traditional sectors growing sales by around 7pc. But there is much ground to make up.
Ryan again accentuates the positive. "Some 70pc of exports lost after the crash have been regained. It depends on what happens in our main trading partners, Britain the US and Germany.
"If they're in recession, we cannot come out of one, but they have all been recovering well (although recent figures from the UK have been more disappointing).
"Last year was a good one for the world economy, with growth of 4pc. Irish companies have increased their exports in each of the last 20 months in a row and there is the potential to grow them further this year. We expect indigenous exports to pass the 2007 peak during 2011."
What goes around, comes around. Lack of exports used to be a dominant theme of Irish policy discussions, until the 1990s boom in foreign investment, and the release of untapped national savings moved exports off centre stage.
Ireland would still not qualify as an exporting powerhouse, measured by the performance of local firms. According to the IEA, only 3pc of the 120,000 services companies have sales abroad.
But Frank Ryan is right when he says the calibre of the best Irish companies is far superior to 20 years ago. We did not have anything like the competence that we have now in management and technology in the 1980s. More Irish companies are exporting than at any time in the history of the State.
"More are engaged in R&D than ever and there are just more good Irish businessmen and women."
Enterprise has a novel idea for making use of the best of those men and women -- the ones with a proven record of setting up successful companies.
"Serial entrepreneurs," Ryan calls them. One of the perennial problems is that good, new companies are bought by bigger, usually foreign, rivals before they themselves can get seriously big.
"Companies are often acquired too early, so that the outside purchaser gets the bulk of the gains from their growth," Ryan says. The serial entrepreneur is someone who has founded and sold a company twice -- or even three or more times.
"We will do research in areas which people like, that they are interested in and if we find something interesting, we will work towards starting a new company with the entrepreneur."
And if foreigners are going to buy our start-ups, why not get them to come here and start up themselves?
"We are starting to look at bringing foreign entrepreneurs to Ireland to start up companies. We think we can persuade a significant number to try their luck here."
It is not the only role he sees for foreigners in the development of Irish industry. There has been much talk of making more use of the Irish diaspora of successful business people, but Ryan believes it is possible to create a new diaspora.
"These are the overseas students who have studied here. We can make use of their connections with this country if we do it right. There are many senior people who have those connections -- the chief executive of Telefonica studied English here."
If Ryan has his way, this potential diaspora will grow. Enterprise Ireland has been given responsibility for marketing education in Ireland -- an area shamefully neglected and even damaged by inadequate government regulation.
"There are 26,000 foreign students at third-level institutions. We have agreed with the Departments of Education and Justice that they will support our plan to increase that number by half."
"We can also make use of those who studied here in places where Irish business traditionally does not go. Its focus tends to be on the countries of the old diaspora."
If one cannot make bricks without straw, it seems one cannot be a successful exporter now without BRICs -- the emerging powers of Brazil, Russia, India and China.
But since Irish companies have shown limited ability to penetrate even European markets, outside Britain, what chance have they in these places?
"There are 200 companies exporting regularly to China, over 100 to Russia and 70 to Brazil," Ryan says.
"There are different challenges in each market. We have been good at getting into China but the question there is whether you can make a profit.
"In Russia, it is a question of whether you will get paid. For Brazil, you really have to go into it via Spanish or Portuguese companies. India has also proved challenging but we have only been there two years. The UK links are a help there.
EI, which has 30 offices and a total staff of 840, will be expanding its efforts in the emerging markets.
But last month, one of the "serial entrepreneurs", Kerry-based Jerry Kennelly launched a scathing attack on the development agencies, accusing them of "inefficiency" and "needless bureaucracy".
He repeated the calls for a "one-stop shop" for companies seeking support -- something which was attempted nearly two decades ago, but did not quite come off.
"There's a mish-mash of different government agencies out there creating a lot of waste and they desperately need to be consolidated," Kennelly said.
In fact, the relationship between the big two, EI and IDA, has become more complex than the simple foreign/domestic split back then. EI is targeting foreign investors, as distinct from foreign investment, and touting for sales abroad, while IDA touts for businesses.
But EI is also now responsible for foreign direct investment from food companies, on the grounds that this should tie in as much as possible with local food producers. The Danone baby formula plant, due to be established in Macroom, Co Cork, was a big feather in its FDI cap.
Ryan rejects claims of inefficiency, saying its €93m of operating costs in 2009 represented just 20pc of its total financial transactions -- not the 30pc which is often alleged.
He defends the existence of two major agencies, saying their clients are very different. On the face of it, they look very similar, with those clients each employing around 130,000 people and spending €20bn a year in the economy.
"Our companies spend three times as much on Irish materials as IDA ones do," Ryan says. "Despite projects like Danone, the bulk of our business is with established small and medium enterprises and the food industry is our top exporter. That is quite a different business that we look after."