Cantillon

Inside the world of business

What’s all the Kish fuss about?

Reaction to the news that Providence plans to begin exploratory drilling 6km off Dalkey Island early next year was predictable: most people don’t want it.

The company intends to carry out a seismic programme, which will allow it to assess the area’s geology, a site survey and to drill an exploration well in the Kish basin. In short, it is embarking on the sort of standard exploration programme that such companies do every day in thousands of locations around the world, with no negative side-effects for anyone. The work is being done to establish whether there are commercial quantities of oil in the area. Providence is a long way from establishing that there are. If it does, it will have to go through a further round of licence applications.

However, it’s clear from the voices clamouring to join the debate about its plans at this early stage that the issue is already politicised. Tánaiste Eamon Gilmore, a TD for nearby Dún Laoghaire, said he would expect a public inquiry to be held into any future licence applications for the area by Providence.

Does this mean he expects a similar inquiry to take place should Providence make further licence applications in respect of Barryroe off Cork, where it has found commercial quantities of oil and gas? Or is Dalkey a special case? Or are his concerns tied to the fact that he shares a constituency with a political opponent, Richard Boyd Barrett, who is also against the project?

No special cases should be made. Exploration and production licence applications should all be treated consistently and transparently. Opposition to such projects is inevitable. Sometimes it’s justifiable, at other times it is not. But the world relies heavily on oil and gas for energy. The Republic is no different: 60 per cent of electricity used here is generated by burning gas. Transport in this State, including south Dublin, depends almost entirely on petrol and diesel. We import these fuels at considerable expense. Commercial reserves of either oil or gas would allow us to export them, at considerable gain.

Not in my back yard – or on the next balcony

The statement by Nama executive Felix McKenna at an Irish Council for Social Housing seminar in Athlone yesterday that the property agency has identified about 4,000 properties for social housing will be welcomed by many, though not all. The issue of social housing is a highly charged and politically sensitive one.

While most thinking people will agree that it makes sense for Nama to align public housing needs with its own suitable available properties, it appears that a severe case of Nimby (not in my back yard) is going on.

The issue of social housing provision is a major concern for apartment owners and management companies across the country.

With most apartment owners facing a large reduction in the value of their properties, many are concerned about the prospect of unsold units being used for social housing and the effect this could have on the value of their properties. Local politicians are being lobbied extensively.

A case in point is the Beacon South Quarter complex in south Dublin. Marketed as the 21st century residential dream, the complex was left unfinished and in receivership, with Nama providing a loan of €10 million to complete it. In July 2011, housing association Clúid bought 58 apartments in the development from Nama for €10.3 million. This did not go down well with residents.

Planning permission for the development and others, however, always included provision for social and affordable housing, and any increase in such housing activity is unlikely to breach the original rules.

The tensions over the issue illustrate how damaging the property crash has been not just on the financial situation of many people, but also potentially on social cohesion in this country.

Don’t go global, stay local, say employers

The benefits of globalisation are “a myth thought up by top executives of a few multinational companies back in the 1970s and 1980s who based their decisions on a new philosophical commitment to shareholders rather than customers or employees . . .”

It may sound like an excerpt from an address to the faithful by the Socialist Workers Party or a similar grouping; in fact, the words are from Robin Chater, secretary general of the Federation of European Employers, an umbrella group that professes to be “the leading organisation for multinational companies operating in Europe”.

In an address to executives of major international companies this week, Chater urged multinationals that have their principal markets in Europe to reassess “the risks and opportunities” of outsourcing production.

Changed times indeed.

Chater, from the UK-based federation, argues that rises in fuel and labour costs mean many of the cost advantages that drove offshoring in the first place have now disappeared.

If that sounds a bit far-fetched, there is a little more substance to his position that companies must give consumers the means to purchase the goods and services on which they themselves rely to drive profits and growth – ie if people cannot find jobs because they have moved offshore, they are unlikely to have the wherewithal to purchase anything but the basics, at least not without greater welfare payments, putting added financial burden on those taxpayers still in employment.

Chater argues that the six million jobs lost in the EU since 2000 through the relocation of manufacturing operations to China will rebound on the businesses that made those decisions

It’s an attractive argument, mirroring, in part, the US emphasis on retaining jobs domestically. But the notion that companies will abandon the considerable financial allure of globalisation seems far-fetched – almost as far-fetched as an organisation representing such companies arguing for it.

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