FDI and the Competitiveness challenge Martin Cronin CEO Forfas Labour Relations Commission Symposium...
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Transcript of FDI and the Competitiveness challenge Martin Cronin CEO Forfas Labour Relations Commission Symposium...
FDI and the Competitiveness challenge
Martin CroninCEO Forfas
Labour Relations Commission Symposium
11 Nov 2004
11 Nov 2004Labour Relations Commission Symposium 2
A tale of two countries………..
11 Nov 2004Labour Relations Commission Symposium 3
Country 1: THE BOOMTOWN
It was the best of times……
• High income
• Near full employment
• Strong base of modern
industry
11 Nov 2004Labour Relations Commission Symposium 4
Benchmarking the Boomtown
• Levels of corporation tax 1/16
• FDI net inflows 1/16
• Labour productivity per person employed/hour 2/16• GDP per capita 2/16
• Unemployment rate 3/16
• Government debt as % GDP 3/16
• Entrepreneurial activity 4/16
11 Nov 2004Labour Relations Commission Symposium 5
• Employment in internationally
trading sector falling
• Rate of pay/price increases
(and their absolute level?)
unsustainable
• Inadequate infrastructure
Country 2: THE BASKET CASE
It was the worst of times……
11 Nov 2004Labour Relations Commission Symposium 6
Benchmarking the Basket Case
• Cluster Development 8/16• US Patent applications 10/12• Value Chain presence 11/16• Business expenditure on R&D 11/16• Cost of broadband 12/13• Intensity of local competition 13/16 • Broadband access 13/16• Overall infrastructure quality 15/16• Efficiency of distribution infrastructure 15/16• Growth in nominal compensation per employee 15/16
11 Nov 2004Labour Relations Commission Symposium 7
Are there any certainties out there?
11 Nov 2004Labour Relations Commission Symposium 8
CERTAINTY #1
Economic Development will be
increasingly Technology Driven
Iron Age
Bronze Age
Information Age
Bioengineering Age
Stone Age
???
11 Nov 2004Labour Relations Commission Symposium 9
US internet bandwidth demand growth (%pa)
30 33 3542
50
6270
7990
40
55
0102030405060708090100
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06
11 Nov 2004Labour Relations Commission Symposium 10
Economic Development will be increasingly Technology Driven
11 Nov 2004Labour Relations Commission Symposium 11
CERTAINTY #2Globalisation will continue
U.S Singapore
ThailandChina
11 Nov 2004Labour Relations Commission Symposium 12
Emulating Ireland/Singapore
Moving the goal posts
JORDAN ESTONIA
CHINA INDIA
11 Nov 2004Labour Relations Commission Symposium 13
Parts of Asia + Central Europe winning much
of “our” high tech & services FDI business.
- National Instruments
- P + G
- G.E., Dell, Ford
- China/semiconductors
- Singapore/pharma
11 Nov 2004Labour Relations Commission Symposium 14
We are still in the FDI business
Life Sciences : Centocor / Merit Medical / Guident
Web Services : Google / Overture / Amazon
Software : McAfee / Business Objects
Financial Services : Harford Financial Services
11 Nov 2004Labour Relations Commission Symposium 15
How should we respond to sustain Competitiveness and Growth?
11 Nov 2004Labour Relations Commission Symposium
16
Future Global Scenarios
•Faster, faster
•Rough neighbours
•Comparative Advantage
11 Nov 2004Labour Relations Commission Symposium 17
‘Ahead of the Curve’- Enterprise Strategy Group
Competitiveness
Comparative Advantage
11 Nov 2004Labour Relations Commission Symposium 18
1 Build Comparative Advantage
• Tax
• Flexible Regulatory and
Business Environment
• Relevant skills
11 Nov 2004Labour Relations Commission Symposium 19
Tax rates
11 Nov 2004Labour Relations Commission Symposium 20
Tax Rates
Effective Marginal Tax Rate (EMTR) of European Competitor Countries
Country Corporation Tax rate % EMTR %
Austria 34 20.9
Denmark 32 21.9
Finland 28 19.9
Ireland 10 11.7
Luxembourg 37.45 20.7
Netherlands 35 22.6
Spain 35 22.8
Sweden 28 14.3
UK 30 24.7
11 Nov 2004Labour Relations Commission Symposium 21
Tax RatesCorporation Tax Rates, in Competitor Countries
Country Standard Rate
Preferential Rate
Qualification
Czech Republic 28% 5% Profits from investment funds
Hungary 16% To be supplied
Poland 19% none -
Switzerland 24.1% 0% Tax holidays of up to 10 years
China 33% 15-24% For foreign investment in the Special Economic
Zone
Puerto Rico 20% 0%-7% Manufacturing products new to the island
Singapore 24% 0%-5% For ‘pioneer industries’ and those engaging in new high-value added
projectsSource: KPMG Corporate Tax Rate Survey 2004, PwC Corporate Taxes 2003-2004
11 Nov 2004Labour Relations Commission Symposium 22
Labour Market Regulation
Labour Market Regulation (10=flexible)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
US
Den
mark
Hu
ng
ary
Irela
nd
UK
Fin
lan
d
New
Zeala
nd
Jap
an
Neth
erla
nd
s
Sp
ain
Italy
Sw
ed
en
Po
lan
d
Ko
rea
Fra
nce
Germ
an
y
Source: IMD World Competitiveness Yearbook 2003
11 Nov 2004Labour Relations Commission Symposium 23
Extent of Labour Market Regulation (2003)(Source: IMD World Competitiveness Yearbook 2004)
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
11 Nov 2004Labour Relations Commission Symposium 24
Burden of Regulation
Burden of Regulation (7=low)
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Fin
lan
d
Irela
nd
UK
US
Hu
ng
ary
Sp
ain
New
Zeala
nd
Den
mark
Ko
rea
Sw
ed
en
Neth
erla
nd
s
Po
lan
d
Fra
nce
Germ
an
y
Jap
an
Italy
Source: World Economic Forum
11 Nov 2004Labour Relations Commission Symposium 25
Burden of Regulation (2003)(Source: WEF Global Competitiveness Report 2003-2004)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
11 Nov 2004Labour Relations Commission Symposium
26
A FEW EXAMPLES
Financial Services
Management of IP
Medical Devices Functional foods
E-Learning
Biotech/pharmaManufacturing
‘Spheres of business’ where Ireland is or could become an internationally significant location
Established
Communications Management
Software
‘Locally Delivered’ Internationally Traded
Services
Emerging/Future possibilities
11 Nov 2004Labour Relations Commission Symposium
27
Some Characteristics
Specialised Skills
Knowledge Intensive
Niche Markets Low Labour Content High Skills
High Margin
‘Spheres of business’ where Ireland is or could become an internationally significant location
Service Intensive
Customised Products/Services
11 Nov 2004Labour Relations Commission Symposium
28
Comparative advantages
Indepth Market Knowledge
Responsive Regulation
SpecialisedInfrastructure
RelevantSkills and Training
Specialised Services
Relevant Researchand Development
Strengths
‘Spheres of business’ where Ireland is or could become an internationally significant location
11 Nov 2004Labour Relations Commission Symposium
29
High Value Manufacturing - Examples of sectors and activities that offer significant opportunities
11 Nov 2004Labour Relations Commission Symposium
30
Services - Examples of sectors and activities that offer significant opportunities
11 Nov 2004Labour Relations Commission Symposium 31
2 Boost productivity
• Infrastructure
• Research
• Innovation
• Competition
• Education and skills
11 Nov 2004Labour Relations Commission Symposium 32
The “National System of Innovation”
Public R&D
Training &Education
Firms system
Large, small, MNCs, NTBFs, …
VentureCapital
Intermediaries
Incubators,Mentoring…
Businesssupport
MARKETS
Humancapital
Rules &Regulations
Framework conditions
Innovationpolicy
11 Nov 2004Labour Relations Commission Symposium 33
3 Maintain an attractive cost environment
• Fiscal policy
• Public Sector
efficiency
and responsiveness
• Pro competitive
regulatory policies
11 Nov 2004Labour Relations Commission Symposium 34
Consumer Price Inflation (HICP) December 1999-December 2003
0.02.04.06.08.0
10.012.014.016.018.020.0
Ireland
Portugal
Greece
Spain
Netherlands
Italy
Luxembourg
Denm
ark
Finland
Sweden
Belgium
France
Austria
Germ
any
UK
National HICP EU15 HICP
11 Nov 2004Labour Relations Commission Symposium 35
Index of Consumer Good and Services Eurozone, 2003 (Ireland = 100)
62
67
69
79
81
83
83
84
85
85
100
101
50 60 70 80 90 100 110
Portugal
Greece
Spain
Italy
Belgium
Luxembourg
France
Austria
Germany
Netherlands
Ireland
Finland
11 Nov 2004Labour Relations Commission Symposium 36
5 Compete for FDI
• Tax and other Comparative
Advantages
• Costs
• Infrastructure (sites, services)
• Flexibility, agility, speed
• “Selling” (Development
Agencies)
11 Nov 2004Labour Relations Commission Symposium 37
Conclusion
We must apply both economy wide and sector specific
strategies to build competitive advantage……….
……………………in activities for which this country is
or can become an internationally significant location
11 Nov 2004Labour Relations Commission Symposium 38
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Fax: +353 (0) 1 6073030
www.forfas.ie
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