Ireland has taken a beating since the global financial crisis erupted, but despite the scary headlines on bank rescues and ratings downgradings, the country points the way for how Abu Dhabi can diversify its oil-dominant economy.
Agriculture is no longer the driving force in the small European island after the efforts by Dublin to attract a raft of foreign financial, technology and pharmaceutical companies. The essence of the country's development story and perhaps the secret to its success is that it has leveraged what resources it has to the maximum extent possible. Asa Fitch writes
Ireland suffered a series of unprecedented setbacks during the financial crisis, forcing it to seek aid from the EU and IMF to contend with a crippling banking crisis and property market slump. This summer its credit ratings were downgraded to junk status by Moody's Investors Service.Beyond the scary headlines of ratings downgrades and bank rescues, however, lies a vibrant economy supported by a well-educated workforce and built upon foreign investment, innovation and small business growth.
Despite Ireland's troubles, its development model, preened carefully over many decades with government support, is one Abu Dhabi and other places in the Gulf are examining closely as they try to diversify and grow their own economies.Indeed, in some sense, Ireland in the 1950s and 1960s faced challenges that parallel Abu Dhabi's today. Its economy was almost wholly agrarian, just as Abu Dhabi's is oil-dominated, and it was highly dependent on exports to the UK.While agriculture was a profitable business, the country's leaders knew a more diverse economy was needed. "They realised that [an agrarian economy] wasn't sustainable in the long term if you wanted to develop the economy and create sufficient employment opportunities for a greater proportion of the population and to increase incomes," says Kieran Donoghue, the head of financial services at Ireland's main foreign investment promotion body, the Industrial Development Agency (IDA).Ireland is small - it has a population of about 4.5 million and a workforce of about 2 million - and policymakers understood early on that the country would never be an economic titan to rival the UK, France or Germany. It would have to carve out a niche to thrive in while attracting foreign investment and growing non-agricultural exports. It would be a small country with a strong punch.What happened in the decades that followed was nothing short of a metamorphosis.
Despite Ireland's size, it is home to European bases for a slew of technology and pharmaceutical companies from Intel and Google to Pfizer and Novartis. Foreign companies in Ireland currently export goods to the value of about €110 billion (Dh581.7bn) a year. They employ 240,000 people and account for 65 per cent of corporate taxation paid in Ireland.
In addition to attracting foreign technology and drug companies, the country has brought in a raft of foreign financial firms following the founding of Dublin's International Financial Services Centre in 1987. In just a few years, its stock exchange has become a centre point for listings of hedge funds and asset-backed securities.
"We started the investment fund business back in 1995, and it pretty much ran in parallel with the growth of financial services in Ireland," says Gerard Scully, the director of international primary markets at the Irish Stock Exchange. "We've gone from zero to being number one in the world for alternative investment funds."
With help from government funding agencies, Ireland has also become a force in science research and innovation.Science Foundation Ireland, the main body behind the country's science funding agenda, has deployed about €1.4bn in its 10-year history, helping to start nine research centres that focus on everything from semiconductor chemistry to composite materials for aircraft. That investment has fed back into industry and small business, generating ideas for start-ups and new products for Ireland's biggest companies.
From / The National