Wednesday 21 November 2018

Government rallies Irish diaspora to help deliver the 'smart economy'

Many heavy hitters on guest list but big domestic financial players will not attend

John Mulligan

Next month, leaders and senior executives of some of the world's best known companies, from Siemens to British Airways and Coca-Cola will arrive in Dublin for a love-in hosted by the Government.

The aim, according to the Department of Foreign Affairs, is to foster a greater connection with the Irish diaspora involved in these companies -- Roscommon-native Irial Finan at Coca-Cola, Dubliner Willie Walsh at British Airways and others.

Aside from a jaunt to the All-Ireland football final in Croke Park, the more than 160 attendees will also engage in workshops that will ostensibly serve to answer some questions that are likely pivotal to Ireland's future economic success.

Those workshops will ask questions such as how Ireland can attract higher-value inward investment; how do we create a "European Silicon Valley" in Ireland, and what is the skills deficit for delivering the 'Smart Economy'?

It's worrying to think that the Government and its various departments could still fail to have its own answers to these questions, so let's hope they're just fishing for confirmation.

After all, enough money has been spent in pursuit of them and development policy is firmly directed towards the so-called but somewhat nebulous 'Knowledge Economy'.

"Government aims are often right, even if they sound woolly, but often things related to innovation happen in Ireland in spite of government policy, rather than because of it," believes Richard Tol, a professor with the Economic and Social Research Institute (ESRI).

Joining the heads of those foreign-based companies in Farmleigh will be plenty of bosses from leading Irish enterprises too. The usual suspects can all be found, such as Myles Lee of CRH as well as his predecessor Liam O'Mahony, who's also chairman of Smurfit Kappa.

Others who'll be nibbling on canapes include Stan McCarthy of Kerry Group, financier Dermot Desmond, and out-going BP chairman -- Ireland's former attorney general -- Peter Sutherland.

Even the reliable perennial Bob Geldof is being drafted back to his home town for the event.

The gathering will certainly produce some decent photo opportunities for the Taoiseach, but even so, there is a notable gap in the line-up.

One of the working group topics asks how the Irish financial services sector can take advantage of the finance and banking sectors of the future.

On hand to possibly discuss this will be some heavy-hitters such as Basil Geoghegan, managing director of Deutsche Bank in London, Anita Sands who's managing director of CitiGroup in New York, and Brendan McDonagh, who's head of HSBC in North America.

Failings

While Irish financial institutions aren't exactly in favour, almost none of them are represented at the shindig -- except for Margaret Sweeney, the chief executive of Postbank, the joint venture between An Post and bailed-out Belgian bank Fortis.

Despite all their many and notable failings, it seems odd that neither Bank of Ireland, AIB, nor Permanent TSB, or indeed an executive from any Irish insurance provider, will apparently be there to hear what their foreign-based contemporaries have to say about the future of the banking and financial sector from an Irish or international perspective.

Innovation is just as much about business processes as tangible products, and if ever banks needed better processes, now is the time.

"Ryanair, for example, has great business processes and Michael O'Leary is the prototype entrepreneur, but not popular in government," notes Prof Tol, who adds that an over-arching definition of innovation is by definition, uncertain, and that setting goals in a quantitative manner to ascertain the success or failure of innovation is flawed.

Recently at the Glenties summer school, Hewlett-Packard Ireland chief executive Martin Murphy, also underlined that point.

"The capacity for innovation is not restricted to the IT sector," he said.

"Innovation is a business and opportunities for enterprise arise across a broad range of disciplines and not just limited to science and technology.

"We need to widen the net for innovation investment."

So can this impending gathering really come up with solutions for Ireland's 'Smart' or 'Knowledge' economy, phrases that have been bandied around by politicians for years?

It's unlikely that it will of course, and too demanding to expect it could over a weekend, but at least it might provide some additional insight for the Government as to the competition and challenges the country faces, not least in deploying effective and strategically targeted R&D expenditure and eschewing jaded newsbites.

Back in 2004, then Enterprise, Trade and Employment Minister Mary Harney welcomed a report from an inter-departmental committee she had established the previous year and which was charged with drafting an action plan for increasing Ireland's research and development spend by 2010.

"We need to think smart, work smart, and be smart in order to build our future," noted Ms Harney when the report was delivered five years ago.

Innovation

Just a few weeks ago, in June, Taoiseach Brian Cowen launched a new innovation taskforce and noted that last December he launched 'Building Ireland's Smart Economy'. He described it as the Government's framework for sustainable economic renewal.

"We need to think smart, work smart, and be smart in order to build our future," he said.

Filched word-for-word from Ms Harney's statement half a decade before, the catchphrase mantra drafted by press office mandarins for Mr Cowen would be funny if it wasn't so unsettling. The worry is that while verbosely adept, the Government could ultimately fail to deliver on, and lose sight of, important strategic targets.

The 2004 action plan noted that business investment, rather than that from the Government, in R&D was €917m in 2001, or 0.9pc of gross national product (GNP). It envisaged that by 2010, the figure should have reached €2.5bn, or 1.7pc of GNP.

Earlier this year, Tanaiste and Enterprise Minister Mary Coughlan noted that spending on R&D performed in the business sector in Ireland rose to an estimated €1.68bn last year, up from €1.6bn in 2007.

As a percentage of GNP, the business investment in R&D stood at 0.96pc in 2005 and 1pc in 2007. The 2008 figure was reckoned to be the equivalent of 1.08pc of GNP.

With Ireland's GNP likely to fall by about 8pc this year and about 2.8pc in 2010, it could conceivably make it easier for the Government to claim by 2011, that in 2010 R&D spending targets as a percentage of GNP were met. A €2.5bn spend by businesses in R&D next year could equate to about 1.8pc of an estimated 2010 GNP of €138bn.

Prof Tol also believes the R&D figures should be taken with a pinch of salt, as companies may in some instances over-state their expenditure on R&D as they can avail of generous tax breaks in Ireland for spending resources on research. But Aidan Sweeney, who is innovation executive at business group IBEC, believes that while the definition of the knowledge economy and innovation can be more conceptual than easily definable, money has been well spent here by the Government.

"One if the key issues is whether government investment in R&D can help boost company investment in R&D, and I think the answer is that yes, it can."

The Government's Science Foundation Ireland (SFI) has been responsible for doling out over €1bn in funding to research projects, but assessing the true effectiveness of that monetary input has so far remained undetermined.

An Bord Snip Nua, the group headed by UCD economist Colm McCarthy and charged with pinpointing billions of euro worth of savings in government spending, said in its recent report that science, technology and innovation (STI) funding in Ireland fell under the remit of too many agencies and that no evidence of effectiveness had been undertaken.

"Overall, there are in excess of 90 schemes and some 60 of these involve the funding of PhDs," it said.

"This approach is resulting in some displacement of private-sector funding and deadweight costs, and the production line of PhDs is outpacing industry's absorptive capacity.

"The largest verifiable output to date appears to be the publication of articles as opposed to more concrete measures of economic returns," it added.

An Bord Snip Nua called for a "radical rationalisation" of the delivery of STI in Ireland that would result in all funding being streamed through just one agency and expenditure being prioritised on the basis of likely commercial return over a three to five year period.

Sentiment

Mr Sweeney echoes that sentiment. "It's important what it's spent on," he says. "We should be looking at commercialisation, not just science for science's sake. It doesn't and shouldn't matter who's doing the research, but just to make sure it's exploited as best as possible. We need to have a pragmatic approach."

Prof Tol agrees, saying that government money should be simply given to the people or groups with the best ideas and the best track record -- a sort of national 'Dragon's Den'.

You can bet that official speeches at next month's forum will be liberally sprinkled with mentions of the 'knowledge' and 'smart' economy, but interrogations on the nitty-gritty will be thin on the ground.

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