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Maeve Dineen: Two-speed economy not ideal but Enda right to put faith in exports

IF you run a start-up business and you have any potential for exporting your produce, your luck is in at the moment. You appear to be the only person that the banks want to do business with, and you are certainly the only person government agencies want to deal with.

The Government has scrapped all 35 of the local enterprise boards in an effort to make way for a revamp of supports for small and start-up companies. Unfortunately, many start-ups complain that they get little support unless they have something to export.

Last week the Government announced plans to create an exporters' division within Enterprise Ireland (EI) that will provide support for 1,800 firms that either do not export at all or are in the early stages of moving into overseas markets.

The exporting companies will have access to financial supports worth up to €25,000 per company. If the plan catches on, that will cost as much as €45m in funding.

Out of those firms, EI will target 250 who may be further along in their export plans for what the agency described as "intensive work on export initiatives".

It's a welcome move. It means the Government is indeed focusing on export growth -- the primary driver of our recovery to date.

With austerity the only thing on the menu in many countries, the hope is that export growth can compensate for sluggish domestic demand. Of course, since our biggest export market is other EU nations, and Britain in particular, this might seem a lost cause

But we've experienced somewhat of an export boom in the last two years and have recorded current-account surpluses in three of the last five quarters.

We have made huge strides in growing our trade surplus, but domestic demand remains abysmal. There is little spending power at home: consumers are still carrying a lot of debt while struggling with shrinking wages. Public spending is practically non-existent and business investment has been sluggish. Worse still, the banks aren't lending.

An IBEC business sentiment report published today paints a picture of the economy built on pharmaceutical, food and software exports.

On the other side of the coin, retail sales are on the floor, consumer confidence at an all-time low, house prices are still heading south, new mortgage lending remains soft and domestic demand continues to shrink.

But is our two-speed economy just about to enter the slow lane?

A report published last week by Ulster Bank suggests that exports will weaken this year, with an increase of just 2pc now expected -- down from over 4.5pc in 2011. This, of course, will feed into the economy with a deceleration rather than acceleration growth in 2012.

Under the Government's ambitious jobs plan, Taoiseach Enda Kenny promised to create 100,000 jobs within the next five years.

The proposals aim to create conditions that will allow small-to-medium businesses develop, and then rely on entrepreneurs and companies to pick up the baton.

At current levels, exports suggest that the economy, at least at a deeper level, is returning to health.

Mr Kenny has put his faith in the export market and those involved in it to drive us out of this recession. But the fundamentals of this export recovery remain worrisome. A two-speed economy may not be ideal, but it is better than one-speed when that speed is reverse -- and the Taoiseach is right to throw all the resources he can at it.

Irish Independent