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IDA ignores danger signs

ARE the multinationals on the move? Ireland Inc should issue a profit warning. Everybody else is. The signals are crystal clear. No one has spotted them. And the IDA is partying.

On Budget Day Motorola laid off 750 people in north Dublin. The IDA lamely volunteered that the number of high-tech jobs at risk was now "no higher than last year". It was the worst closure since Seagate of Clonmel in 1996.

Six days later, two Irish directors of Gateway upped sticks. Gateway said nothing. Back in the US the company recently issued a profit warning. Cutbacks are coming.

Last week Ireland lost 1,000 jobs to Hungary. A US company opted for lower labour costs in Eastern Europe. The IDA thought the business was in the bag. A taste of things to come? The IDA had been putting the armlock on the US high-tech company to locate away from Irish urban areas; its crazy new policy.

On Wednesday, Intel revealed a shock delay in its $2bn investment in Leixlip. The IDA thought it was great news, waffling on: "The focus on higher technology makes the investment more sustainable for Ireland." But in the real, non-IDA world the demand for PCs is slumping globally.

And on exactly the same day the voice of US business in Ireland sounded a warning. The US Chamber of Commerce didn't like the Budget's failure to lower the tax rate on employees' share options. The Voice of America was giving Irish business a yellow card.

Back home in the USA, a Republican president was declared elected. Republican economic policy is traditionally more insular, preferring to see profits earned and spent at home. In three days the Nasdaq fell by nearly 10 per cent. Profit warnings galore have been issued by the hi-techs, including those in Ireland such as Intel, Dell, Compaq and Motorola. They will be pulling in their horns world-wide. Is the IDA awake?

ON Thursday at 5.50pm I rang the IDA to find out what was happening. The receptionist told me their hours were 9.30am to 5.30pm. They were all at various "dos". Not a sinner was available. Such clock-watching wouldn't wash in the US. But in the battle between Boston and Berlin, the IDA is firmly in the Berlin camp. East Berlin.

Ireland will get a bad name as a home for foreign direct investment. The IDA is partly to blame. It is pushing multinationals into tiny towns around Ireland. It had no clout to reduce the tax on share options. It is ensnared in the social contract myth, a slave of the moribund Programme for Prosperity and Fairness (PPF).

US companies detest the PPF. They rarely say so, because they play a game of mutual masturbation with Irish governments. They stay mute on the wages straitjackets while the Government lets them plough their own furrow on pay.

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Last week, a spokesman in the American Chamber told me that they were "very worried. Bertie did a good job in Nice on tax ... but we are worried about social legislation." Boston is beginning to recognise Berlin.

The spokesman voiced reservations about the EU's dreaded Information and Consultation Directive. US companies are keen to defend their "voluntary structures". Decoded, they want no truck with social partnership: "Our members communicate with individual employees." In layman's language, this is known as free collective bargaining.

ICTU, the Government and IBEC are taking the road to Berlin. There are no multinationals moving to Berlin. Back in Dublin the IDA is still partying.

Eircom escape



EIRCOM shareholders have enjoyed a lucky escape. The company was almost plundered. Last weekend it emerged that Paul Coulson, a clever financial engineer and a businessman without telecoms expertise, had tried to buy KPN's 21 per cent stake in Eircom.

What would have been the consequences? Mr Coulson would have picked up 21 per cent of Eircom in a fire sale by KPN. He and a colleague would have replaced the KPN directors, ensuring that the entire board was pretty well devoid of any expertise in the business. Coulson could then have hoped to sell the 21 per cent stake at a profit to his friend Denis O'Brien, or to anyone else. An opportunist move. Good for Coulson, but bad for shareholders. KPN wisely decided to wait for Denis and Vodafone.

Paul Coulson is no Denis O'Brien. It is hard to see how his presence on the board would have helped shareholders. He has enjoyed a colourful business career, lacking in any singular success. He is an adventurer whose rollercoaster ride around CLF Yeoman, the courts and Ardagh plc has yet to propel him into the big time. Eircom could have done it. His greatest triumph was a £35m out-of-court settlement with SG Warburg, his advisers in the purchase of CLF by his own company, Yeoman, for £93m. He was a heavy investor in the ill-fated airline Cityjet, along with horse trainer John Mulhern, Eugene Murtagh of Kingspan and Standard Life.

Mr Coulson is a member of the "Saggart Partnership" which stands to gain £17m from the sale of 50 acres of land for the new Eircom Park stadium. Among his fellow investors here are lobbyist Frank Dunlop, builder Seán Mulryan, stockbroker Kyran McLaughlin and other connections of Davys.

Coulson's latest purchase, Ardagh plc, is one of the poorest performers on the Iseq. Ardagh's purchase of the UK glassware group Rockware in 1998 has not yet been a success.

Ardagh has one thing in common with Eircom they are both hopeless underperformers in the stock market. Ardagh is down over 30 per cent relative to the Iseq this year. In his favour, friends say that he is an attentive director of the troubled VHI and a useful hockey player. And in FG circles they speak highly of his tenure as a trustee of the party.

Eircom shareholders need constructive bidders. We need real entrepreneurs like Tony O'Reilly or Denis O'Brien who could offer the company an exciting future, even a capital injection who will make the company work. The last thing we need is financial engineers grabbing a short-term strategic stake. There is a place in Irish business for brave risk-takers who can pick themselves up and dust themselves down, as Coulson has done. There is no place for them in Eircom.

* The Eircom/Vodafone euro 4.7bn deal to be sealed on Tuesday. Shareholders could get euro 2.12 in Vodafone stock


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