China promises rich rewards but stiff competition

WTO accession opens investment opportunities in the world's second biggest economy. Ireland is making sure not to be left behind in the rush to tap this market. Miriam Donohoe, Asia Correspondent, reports

Two Irishmen sat together in a downtown hotel in Beijing recently planning an assault on the great untapped market that is China.

One of the men was Offaly native, Michael Garvey, the new Asia Pacific Director of Enterprise Ireland. The other was new kid on the eastern block, 35-year-old Dubliner, Alan Hobbs, who fills Garvey's shoes as China Director of Enterprise Ireland based in Beijing.

The two first crossed paths when they worked for the IDA in Taiwan more than a decade ago. But they have come together again through Enterprise Ireland to help Irish companies fulfil some eastern promise and harvest riches from this vast country of 1.2 billion consumers.

Three times larger than the United States, WTO accession has led to renewed hype about abundant opportunities and potential profits for foreign investors in China. And multi-national construction, service and IT companies are also looking hungrily for a slice of the action with Beijing set to spend US$20 billion (€23 billion) in the next six years in preparation for the 2008 Olympic Games.

Only three years ago a Great Wall of ignorance existed in China about Ireland, and vice versa. But this all changed dramatically after a visit by the Taoiseach, Mr Ahern, to the world's most populous nation in September 1998. Recognising that Ireland was not engaged enough with Asia, Mr Ahern appointed a committee to draw up a plan to develop foreign earnings in the Asia-Pacific region. The Asia Strategy was born.

Part of the strategy involved enhancing diplomatic and promotional representation in the region. A new embassy was established in Singapore, while new consulates were set up in Shanghai and Sydney. Enterprise Ireland was given the task of putting the Asia strategy into action.

Michael Garvey, with 15 years experience in Japan, Hong Kong, and Taiwan with the IDA and Forbairt, became the Enterprise Ireland China director in July 1999. After 2½ years he now finds himself in the hot seat as the Enterprise Ireland Asia Pacific director, with plans to launch a refocused initiative to bring the message of Ireland to the East.

One of his first tasks is to move the Enterprise Ireland Asia headquarters from Singapore to Hong Kong in order to keep the emphasis on China and North Asia.

Enterprise Ireland has a total of eight offices throughout the region, and three new team members. Apart from Alan Hobbs, Nick Marmion is setting up a new office in Dubai, concentrating on the Middle East and India, while Terry McParland takes over in Kuala Lumpur in Malaysia.

"We have a strong new team and the new focus will be on our clients," said Mr Garvey. "In Ireland, Enterprise Ireland has 3000 clients fully engaged in development plans. We are concentrating very much on those."

In terms of China, the emphasis will stay on IT and the education sector. But for the first time, this year Enterprise Ireland is bringing a construction services and project management group and a health care and pharmaceuticals group on trade missions to China. These are two sectors in which Enterprise Ireland plans to become more active.

Exports from Asia plummeted in the wake of the global dotcom downturn and the events of September 11th. "But as the western economies are recovering the exports are starting to grow again" said Mr Garvey. "The economies that were affected badly were the big export economies such as Hong Kong, Singapore and Taiwan. They really suffered as their exports dropped drastically and their growth in the economies generally did drop." The Chinese economy escaped virtually unscathed with 7.2 per cent growth recorded last year. Projected growth for this year is 7.4 per cent.

WTO accession will bring a lot more foreign direct investment into the country, he says. "Consumer spending is picking up so the economy internally is fine and growing away and exports will recover next year."

Irish exports to Asia are increasing every year. CSO figures show that exports to China for the year up to September last increased by 56 per cent on the previous 12 months. Exports to China and Hong Kong combined increased by 29 per cent for that period.

Alan Hobbs is from Artane in Dublin and is a graduate of the college of Marketing and Design and Trinity College. He spent one month with the IDA in Dublin after graduation before being assigned to Taiwan where he worked with Michael Garvey in 1990.

After four years he was appointed director of the IDA office in Singapore, a post he held for three years. He has been with the IDA office in its Silicon Valley office in San Jose for the last 4½ years where the main focus was software and new business companies. He had planned to move back to IDA headquarters in Ireland this year, but the China director job for Enterprise Ireland arose and he applied.

Hobbs is very excited about his new position and sees it as a big challenge. One of his first tasks will be to oversee the opening of an incubator unit in Beijing which will provide support services for Irish companies eyeing up China. The unit will be able to cater for six Irish companies at a time.

"China is one of the most powerful countries in the world and going forward it is going to be an economic powerhouse. Today it is the second largest economy in the world with a GDP of only 3,500 per capita and that is going to surpass the US in a short time," he said

"For me the future is in China. I am very keen to build on my experience in Silicon Valley with the software industry. I think there are lots of opportunities here where more sophisticated development work is being done on a joint venture basis. This is one area of opportunity for Irish companies I am keen to investigate."

Hobbs sees the 2008 Games as the cornerstone of his strategy here in the next few years, with $20 billion of contracts to be awarded by the Chinese government. The Olympics, he says, will offer untold potential to the right kind of companies.

"But we have an awful lot of work to do to try to identify good Irish companies who can actually provide services here." WTO accession will open up more markets and will level the playing pitch.

"But that will mean a level playing pitch for companies all over the world so we are going to have to be even stronger and stronger. Irish companies will have to get up to speed and be economically and physically fit and able to do business out here." Despite the success of the Asia strategy, there is still ignorance among Irish companies of the potential of China.

"Companies tend to go the path of least resistance and look very much towards the UK and then into the US and Europe. We have very few companies who have outgrown those markets. There are areas where smaller companies can make the lead straight into the Far East with products that suit this market."

According to Mr Garvey, China is a difficult market, one reason why Enterprise Ireland is trying to encourage partnerships. "Most Irish companies are not big enough or strong enough to set up individual operations here." Among those companies who have successfully gone out on their own here are Eurologic, Iona Technologies and SES.

The education sector is a hugely important area and one which Mr Hobbs will continue to promote.

Encouraging Chinese students to go to study in Ireland will result in more business interactions and links between the two countries in the years ahead. "These students will become the business connectors of the future. They will form links with universities and encourage branding of Irish universities out here. These people are entrepreneurial by nature, they are the Bill Gates of the future.

"We never had to go looking for overseas students until now but the demographics have changed and we now have university places to fill at home. Having international students also drives up the standards."

Recentlyrepresentatives of almost all Irish third-level institutions and colleges attended education fairs in China promoting the Irish third-level sector. Earnings from foreign students into Ireland this year are expected to reach €135 million.

When Mr Hobbs checked into a Chinese hotel on arrival in Beijing to take up his new job, the receptionist was very interested to see he was Irish. It turned out she had studied hotel management for two years in Griffith College in Dublin.

"She has returned to China to work and is an example of someone who can spread the word about Ireland," said Hobbs. And that's a job he intends doing with gusto over the next five years.