MG4031 Development Of Irish Business Sector PDF

MG4031 Management Principles Development of the Irish Business Sector Reading: Chapter 2 Modern Management, pages 40-68  Learning Objectives Understand the roles played by various Irish governments in determining industrial development Explain our unique pattern of indu...

MG4031 Management Principles Development of the Irish Business Sector Reading: Chapter 2 Modern Management, pages 40-68  Learning Objectives Understand the roles played by various Irish governments in determining industrial development Explain our unique pattern of industrial development Identify and discuss the major sectors of business in Ireland today and their future prospects  Key Milestones 1907 Census of Production in Ireland 1958 Free Trade and FDI 1993 The Celtic Tiger 1922 The Irish Free State 1973 EEC Membership 2008 Financial Crisis 1932 Self-Sufficiency & 1980 Recession 2013 Towards Recovery Protectionism  The Early Years Ireland - largely unaffected by Industrial Revolution (1907) – industry employed 20% of the population, Linen, ship building, brewing & distilling – Guinness, Harland & Wolfe The Irish Free State 1922 - political and economic independence but ties to the UK - currency and export market The loss of the industrialized North was a huge blow By 1920s the industrial labour force was only 100,000 or 7% of the total  The Irish Free State The focus was on agriculture “what was good for agriculture was good for all” Lack of entrepreneurial tradition within Ireland due to: Ex colonial status of the economy meant that people were given little opportunity for business positions The best and brightest opted for the safe employment of the Civil Service  Self Sufficiency & Protectionism 1932-1958 1932 - strong belief in self-sufficiency to achieve economic growth & political independence The Control of Manufacturers Act (1932) – 50% of equity in new firms must be Irish Domestic industry was protected from foreign competition by placing tariffs on imported rivals. Sometimes up to 45% of the price Self Sufficiency & Protectionism 1932-1958 ◼ 1932-37Economic War with the UK. Impact on both agriculture & industry ◼ Semistate Enterprises established to provide essential services - Aer Lingus (1936), CIE (1944), and to exploit natural resources, organisations such as Bord na Mona (1946), Industrial Credit Corporation (1933)  Self Sufficiency & Protectionism 1932-1958 ◼ Emigration - 400,000 1951-1961 ◼ Deepconservatism, strong relationship between Church & State, civil war generation politics and no right/left divide ◼ Domestic firms were small and sheltered behind tariffs, employed only 15% The Move to Free Trade & Foreign Direct Investment (FDI) By the late 1950s, 3 strategies were being pursued: 1. Protectionism was replaced by free trade & greater market access. The Anglo-Irish Free Trade Area Agreement 1965 2. IDA actively pursued FDI to aid job creation & exports. 3. Financial grants & incentives to encourage an export focused manufacturing sector – Waterford Glass & Youghal Carpets developed Dr T K Whitaker The Move to Free Trade & Foreign Direct Investment (FDI) ◼ Industry now became an important part of the economy amounting to 35.7% of GNP in 1969 ◼ In 1958 manufacturing exports amounted to 49.7% of total exports, but by 1969 it was 70% ◼ The policy pivot to Free Trade and FDI viewed as having had a key role to play in the developmental trajectory secured by Ireland  EEC Membership - 1973 Opened up opportunities for Irish companies to develop Continental markets and reduce reliance on UK EEC membership - significant selling point for the IDA in its FDI effort in the USA – Apple, Verbatim Financial Benefits – European Social Fund, Regional Development Fund and later though the Structural and Cohesion Fund  EEC Membership - 1973 Indigenous firms did badly – employment increased in FDI Firms, but did little to keep pace with overall loses in domestic firms Overall however, late 1970s – good time due to USA FDI & increased spending through external borrowing by public sector Recession & Recovery 1980-93 FDI was hampered and proved more difficult due to USA recession and competition from other Countries which were now also providing favourable packages to attract multinational companies IDA – developed new plan and new strategy to attract high output firms using best technology, who were likely to create linkages in the economy The IDA now focused on new sectors and new promotional strategy focused on the human capital base of Ireland  Recession & Recovery 1980-93 The development of the Social Partnership Model in 1987 served as an important piece of architecture for recovery. Throughout the 1980s, the IDA gradually capitalised on the beginning of recovery and new FDI emerged – Sandoz, Motorola and Intel In 1991 Industrial Policy Review Group produced the Culliton Report Gradually many of the recommendations were implemented Emergence of the Celtic Tiger (1993-2007) The Programme for Competitiveness and Work (1994): pay moderation and tax concessions Cut in Corporation Tax to 12.5 % in 1994 European Structural Funds totalling 9.52 billion Euro between 1989 and 2000 January 2002 saw the introduction of the Euro Currency Partnership 2000 in 1997: similar provisions to the earlier social partnership agreements, along with additional measures to reduce unemployment Between 1994 and 1999 Ireland had experienced 5 years of rapid economic growth at 9% per annum The Programme for Prosperity & Fairness (2000) Growth from the mid 1990s to early 2000 described as catching up growth involving Ireland converging with other successful economies Demise of the Celtic Tiger (Mid 2000s Onwards) The early 2000s saw more steady growth rates The basis for the on-going growth began to be attributed to cheap credit and increased property speculation Construction sector was disproportionate as overall share of the economy Mid 2000 onwards saw rapid shifts in Globalisation Trends Altered patterns of investment away from developed towards emerging economies (The BRIC economies and others) Financial Crisis and Post Celtic Tiger Ireland Early warning signs of the impending Financial Crisis were evident in the USA in 2007 relating to the the sub- prime market for mortgages Negative FDI flows from Ireland, along with a credit- fuelled property bubble resulted in Irish banks being exposed as a result of their excessive borrowings to fund the property bubble 2008 Banking and Financial Crisis globally and the Irish Government issued a blanket guarantee on all the deposits and debts of the six largest banks in the Country (Bank of Ireland; Allied Irish Banks; Anglo Irish Bank; Irish Nationwide; Irish Life & Permanent; and the EBS  Financial Crisis and Post Celtic Tiger Ireland The gross debt to GDP ratio, which was less that 25% in 2007 was to eventually rise to over 120% by 2013. In 2009, the Government established the National Asset Management Agency (NAMA) to take over non-performing loans amounting to 77 billion Euro By November 2010 the government could no longer borrow money on the international bond markets and was forced to seek a bailout from the International Monetary Fund (IMF) and EU totalling €85 billion to keep the country afloat and to ensure essential public services Financial Crisis and Post Celtic Tiger Ireland Crisis resulted in huge debt and tax burden severely affected Ireland’s economic growth, employment and emigration The Global Competitiveness Report 2012-13 produced by the World Economic Forum ranked Ireland 131st for its overall macroeconomic environment In its recent recovery, Ireland faced several challenges and constraints: the Construction Industry had suffered huge losses leading to an undersupply of houses; the transport infrastructure remains weak; regional disparities remain significant; lack of investment in 3rd level education sector; over-reliance on a small number of powerful MNCs The most recent significant contextual factor likely to impact Ireland’s future growth, prior to the Covid 19 Pandemic, was Brexit The Covid-19 Pandemic and the Future? The human, social and economic impact of the pandemic, as an exogenous shock, is yet to be determined From a purely Business perspective, the pandemic underscores the volatile, uncertain, complex and ambiguous (VUCA) circumstances thrown up and that have to be faced Among the developments that are currently being debated are: De-globalization Supply chain disruption Managing health & safety Flexible & remote working arrangements Shift to global virtual collaboration Thank you