Sunday 17 December 2017

'We must face up to the fact that the time when the IDA could parachute a plant into every small town has gone'

Chris Van Egeraat on why a good-news week for Athenry cannot be seen as a model for struggling rural Ireland

Dr Chris van Egeraat
Dr Chris van Egeraat

'Apple's decision to establish a data centre is an undoubted boon for Athenry, a small town that, like so many other small towns and rural areas, has seen little substantial investment in recent years. Data centres employ small numbers but 100 permanent jobs will make a significant impact in a town that in 2011 had 4,000 inhabitants, 1,265 jobs and an unemployment rate of 18pc.

The development was celebrated by An Taoiseach, who sees it as another step in the right direction "as the Government works to secure recovery and see it spread to every part of the country". This comment should be understood in the context of the recently launched framework for the development of regional enterprise strategies and the IDA's stated aim of achieving a better distribution of investment across Irish regions.

But what does Apple's investment in Athenry really mean for the future of small towns and rural areas? Should it be regarded as a potential path to future economic growth for small towns and rural communities or should it instead be seen as a one-off event?

The answer is, neither. Nationally, (and globally) we are witnessing a concentration of employment in urban centres, notably the largest metropolitan centres. Edgar Morgenroth at the ESRI has calculated that in 2011 overall jobs were 11pc more spatially concentrated compared to 2006. My own research has shown that in 2012 Co Dublin accounted for 71pc of all employment in new foreign operations in Ireland (the situation has improved somewhat since).

This preference for larger urban centres has proven to be most evident amongst those knowledge-economy companies that the IDA has been so successful in attracting: the born-on-the-internet companies, digital-content developers, financial services, business services, and so forth. These companies require connectivity, both in terms of international airports and internet-ports. They look for large pools of educated labour and, therefore, like to be located near universities. Educated workers also tend to prefer to live in vibrant cities that possess a high degree of connectivity.

Apple's decision to locate in Derrydonnell near Athenry should be seen as a special case (though not a one-off event). The main attractions of Ireland for data-centre investment include favourable corporation tax, connectivity to the transatlantic internet backbone and, last but not least, its climate. Cooling is a major cost factor for data centres and companies can achieve significant cost savings by making best use of Ireland's low-temperature ambient air.

Until recently, data centre activity in Ireland was heavily concentrated in the periphery of Dublin, close to the internet backbone that connects the business parks along the M50. But, after Rackfloor's decision to locate in Limerick, Apple in Athenry is evidence of an incipient dispersion process that can also be observed abroad. For example, Google is constructing a mega data centre in Eemshaven, arguably the most peripheral spot in the Netherlands. The reason is that high bandwidth connectivity is becoming available in more locations and companies like Apple are establishing their own content networks, allowing for rural locations - where property prices are relatively low - to now become attractive sites. Data centres are able to operate in small towns because they require a relatively small number of IT service workers - I estimate 50 IT service workers of the 100 permanent jobs, with the remainder occupied with support functions and security.

There will be other date centres and other informational economy projects locating in small, or even smaller, urban centres. But there are about 100 urban centres in Ireland that are larger than Athenry, the vast majority of which did not receive any foreign investment in the last decade. And there are another 100 towns and urban settlements that are smaller than Athenry.

The point is that small urban centres in Ireland should not focus on foreign investment. Neither should IDA Ireland be asked to promote foreign investments in every town in Ireland. Clearly, the current trend in concentration of foreign investment is too strong and, as stated in its new five-year plan, the IDA is correctly, and energetically, adopting a strategy supporting greater dispersion to the regions. But this cannot, and should not, take the form of investment in every regional town. We must face up to the fact that the character of inward investment has changed and that the time when the IDA could parachute a low value-added assembly plant in every small town in Ireland has gone.

We need to reconsider the space-economy of Ireland, and the roles of urban centres of different size, in the context of the new environment. Concentration of foreign investment in a select number of sizeable regional urban centres, and in Dublin, should be encouraged. If we concentrate social and economic infrastructure we can make these centres attractive for foreign investment. These centres will enjoy cumulative processes and their growth will benefit the wider region.

The centres will function as major regional employment centres for their hinterland. That will involve commuting for some. Currently, 38pc of the population of Athenry are already commuting into Galway. Provided that we invest in high-quality public transport and infrastructure, there is nothing wrong with this.

Clearly, some areas will be outside the commuting range of the large centres. But all urban centres will potentially have an important economic and employment role. Foreign companies account for only 9pc of employment in Ireland. Smaller regional centres should focus on indigenous opportunities such as indigenous private enterprise, public-sector jobs, farming, off-farm employment and tourism. Indeed, the indigenous sector beyond Dublin is performing very well, with 70pc of net job gains of Enterprise Ireland clients over the past year occurring outside Dublin.

Dr Chris van Egeraat lectures at Maynooth University and is Chairman Regional Studies Association Ireland

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