All-island economic marketing agency is way ahead

The key to all-island economic growth is all-island economic marketing, argues prominent Northern Ireland businessman Dr Alan…

The key to all-island economic growth is all-island economic marketing, argues prominent Northern Ireland businessman Dr Alan Gillespie, who suggests amalgamating the IDA and its Northern counterpart, Invest NI, into a new, single agency for the whole of Ireland, North and South

Northern Ireland stands poised at the beginning of a new era with restored devolution, an Executive hard at work and high expectations of a stronger economic future. After almost 40 years when dark clouds hung over Northern Ireland, there is a hope of greater economic wellbeing and more prosperous years ahead. Such aspiration breeds intense debate and economic analysis, as policy-makers seek to define the way forward. Our community is looking for this debate to be translated into delivery.

The case for lowering corporation tax to 12.5 per cent has been positioned as the single most important measure in delivering a step change in economic growth. That case has been well put and sits with Sir David Varney, permanent secretary at the UK treasury, who was asked by the prime minister to review the matter . . . and we await the response.

I fully support this campaign and at Ulster Bank we have made a strong submission to Sir David. I hope that the result for Northern Ireland will be a lower corporate tax regime, improving our competitiveness and making Northern Ireland attractive to mobile multinationals.

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What has made the Republic of Ireland economy so successful? Seven years ago when I was a member of the Strategy 2010 Task Force we invited Lochlann Quinn [ formerly of Glen Dimplex and former chairman of Allied Irish Banks] to come to Belfast so that we could quiz him about the secret of the Republic's economic success?

"We don't really know," he answered, "and if we did we wouldn't want to tell you!"

Amid his dry wit he went on to say that ROI economic growth had been stimulated by several factors, with investment in education a driving force.

More recently Craig Barrett, chairman of Intel Corporation (Business & Finance, August 2007) described why Intel has such confidence in Ireland.

He noted three things make a country's economy competitive - a good education system; investment in new technologies and R&D ; and a regulatory and tax regime which is conducive to doing business.

Both Quinn and Barrett talk about education. Barrett also cites technology and innovation, and, importantly, tax - a bundle of factors that can influence industrial location decision-making. While tax is important, it is not the only driver of locational choice.

We await the treasury response based on the Varney review. Broadly, three outcomes are possible. Under one scenario the treasury says yes and we move into high gear to use this new competitiveness to win foreign direct investment (FDI).

We will compete with Ireland and the IDA with the same tax regime. We will have a strong pitch to attract FDI. There is international goodwill towards Northern Ireland; we have peace, democracy, devolved government and Ministers serious about making a difference.

Under a second scenario, the treasury could say no. In this case "what is plan B?" For a few days we will blame the treasury, the prime minister, Varney et al for not delivering a significant package. After that we will quickly need to get back to work promoting Northern Ireland without a dramatic change in corporate tax.

The third outcome, and possibly the most likely, involves marginal adjustments to corporate tax, some allowances and incentives.

Possibly Inland Revenue permission to establish a financial services centre-type implant in Belfast docks? So we need a plan B, and possibly a plan C, and we will need to be nimble if we are serious about moving from debate to delivery. An investment conference in the US in spring 2008 creeps up on us.

Attracting FDI is critical. These globally distributed, high value-added companies bring investment, employment, management skills, best practice, value added exports and income growth. We should remember, though, that FDI is very demanding and requires a broad competitiveness package, not just tax.

Against this background let me make five recommendations on how to deliver the future of the Northern Ireland economy.

First we must acknowledge that a mature economy is not just based on FDI.

We recall from the 1970s that FDI is very mobile and can move out of a region just as quickly as it moves in. Northern Ireland enjoyed a period when it was the man-made fibre centre of Europe with DuPont, Courtaulds, Enkalon, Chemstrand, ICI and others creating a significant cluster of FDI, bringing employment and stimulating exports.

Today these companies are almost all gone.

So alongside the foreign multinationals we hope to attract, we should also encourage local businesses to establish and grow. "Start-ups" are critically important, whether based on the knowledge economy coming as spin-outs of the universities, or whether they are simpler, lower-tech local enterprises. Start-ups are the feedstock of the economy.

We also need to grow our existing businesses. There is something special and precious about small and medium enterprises but we need to encourage small enterprises to grow into medium-size enterprises which in turn grow into large enterprises. We must nurture a balanced, diversified economy where there is a place for large- and small-scale enterprises, for companies of both local and foreign origin.

Secondly, we must work on developing all aspects of our competitiveness package. There are at least six features to competitiveness, in addition to tax:

1) Skills in the workforce, supported by an effective education system;

2) Modern infrastructure of roads, ports, airports and telecoms giving access and connectivity;

3) Efficient, cost-effective energy supplies;

4) Innovation and R&D anchored in university research;

5) Adequate availability of capital, both debt and equity;

6) Culture, housing, schools, recreation.

These are the features of a community which make it attractive to live in, and which are a key aspect of competitiveness. The Rediscover Northern Ireland programme in Washington DC this summer made an important statement of the strength of our culture and our attractiveness in social and cultural as well as economic terms.

Third, building on improved competitiveness we should pursue the most effective international marketing of Northern Ireland.

When Andrew Kahn, the head of UK Trade & Investment, visited the Republic of Ireland last year, he said: "the IDA was without question a world leader among government agencies responsible for attracting foreign direct investment."

I believe that to market Northern Ireland effectively we should align the inward investment marketing activities of Invest NI (INI) with the Republic of Ireland's IDA. We should promote an all-island economy through a single, joined-up effective agency with the IDA and INI no longer competitors, but merged and fully collaborative.

The IDA is best in class; INI still has some catching up to do. Surely sensible people in Belfast and Dublin could work out a mutually beneficial operating protocol to bring real benefit to the whole island? Tourism Ireland is already an operating example to follow.

Would this be a big concession by the Republic of Ireland? I don't think so, as it would stimulate all-island economic growth, enhancing the Republic of Ireland as well as Northern Ireland.

Would this be a big give-up for unionists in Northern Ireland? Such an international marketing arrangement would not compromise sovereignty.

Would it work? Such an approach would offer the most effective reach to decision-makers at the top of the world's multinationals. We could offer choices of location, jurisdiction, currency and culture.

This is not a homogeneous island and even with differential tax rates between North and South, it is worth offering FDI a well articulated case that each part of the island has its relative attractiveness. A joined-up INI/IDA should be a win/win for both parts of the island.

Fourth, we urgently need to develop a strong entrepreneurial culture where risk and enterprise are nurtured. This requires Northern Ireland to be radical, imaginative and flexible. We need to be bold, ambitious and agile with sluggishness consigned to the past. Rigid institutional rules need to be softened. This is a change that government (both elected Assembly representatives and the Civil Service) is capable of bringing about.

Sean Dorgan, chief executive of IDA, observes three things a government needs to get right to ensure the viability of the economy: continued investment in skills and expertise; continued investment in all aspects of infrastructure; and speaking of the Republic of Ireland "we need to retain our speed, agility and flexibility . . . because they have won us an enormous amount of investment over the past 20 years".

Today we do not have an operating environment characterised by speed, agility and flexibility. That is why the visitors' centre at the Giant's Causeway, our No 1 iconic tourist destination (and Unesco World Heritage Site), has not yet been rebuilt seven years after it was destroyed by fire.

In half this time the Cliffs of Moher visitors' centre in Co Clare has been designed, approved, built and opened to receive tens of thousands of visitors! Here in Co Antrim we have an effective deadlock between Moyle Council, DETI, DRD, the National Trust and other local interests. We are seriously stuck and yet place the development of "tourist product" and "visitor experience" high on the agenda for the economy!

Fifth, Northern Ireland must reform its public sector which commentators agree is too big, too procedural and too powerful. Almost one-third of all employed in Northern Ireland work for the government in one way or another.

This cries out for a sweeping renewal. At a sub-regional level the reform of local government is now a priority so that 26 councils should be redefined in fewer, more efficient governance and delivery units.

Public sector reform also involves a new approach to procurement, outsourcing and privatisation, using the public sector chequebook to stimulate private sector delivery.

Importantly there is a compelling argument for the creation of a new single department of government with responsibility for economic strategy and policy delivery. New Ministers have inherited a situation where nine out of 11 departments of government carry some responsibility for the economy.

Economic policy is developed in the Office of the First Minister and Deputy First Minister. Finance is responsible for regional economic strategy and budget. Enterprise is responsible for strategic economic development, energy, business regulation, inward investment, tourism. Employment is responsible for workforce skills, Agriculture for agribusiness and Culture for the creative industries. Planning sits within Environment, urban economic regeneration within Social Development and Regional Development provides the physical infrastructure. Such a lack of coherence hinders economic development and delivery.

Public sector reform needs commitment from the top of the Executive to restructure and remove red tape and bureaucratic blockages.

Finally the public sector will only flourish if it openly embraces and empowers private sector leadership. Public-private partnership is very powerful. At some point the government needs to encourage business people to get on with it, within an environment of appropriate control and regulation.

Titanic Quarter is an outstanding example where the private sector leadership of Harcourt is getting things done at a speed not previously seen in Belfast, with significant backing from government.

Across all these aspects of our public sector, reform and renewal with flair and imagination is requisite. With such a shake-up (or slim-down) of the public sector we can create a "make it happen" environment, and the private sector-driven economy will thrive.

Before long the public sector will not be the dominant employer in Northern Ireland. From debate to delivery requires a bold step change across this broad agenda.

• Dr Alan Gillespie is chairman of Ulster Bank Group