21 October 2006
Over the past decade, Ireland's economic transformation from one of the poorest and least-developed countries in Europe into the fabled "Celtic Tiger" has been held up in Lebanon, as it has across the globe, as something to be envied and, where possible, emulated.
In a keynote address to the "Toward e-Lebanon" conference in Beirut in June 2003, Nasser Saidi, then first vice governor of the Lebanese Central Bank, expressed his vision that "Lebanon should become the Ireland of the Middle East," a view reiterated often in the pages of The Daily Star, which last year argued that Ireland provides "a path for Lebanon's economic rebirth."
All this is true, but only up to a point.
The first positive lesson Lebanon can take from the Irish experience is that it is vital to reduce red tape and bureaucracy across the economy. Ireland has excelled in establishing flexible business practices, and the government, with the support of trade unions and employers, has made the promotion of a competitive enterprise environment a key priority of its economic strategy.
Ireland's success in modernizing its tax system - both its decision to offer low corporate taxes to inward investors and its use of tax revenues to fund development - is also something Lebanon can learn form. Indeed, a few years back a five-man international committee appointed by the Lebanese Finance Ministry to advise on tax cited Ireland as a case of good practice in this area.
More than anything else, the Irish economic "miracle" has shown just how important both flexible business practices and a competitive tax system are to attracting foreign direct investment (FDI).
A June 2004 report by the European Equity and Venture Capital Association rated Ireland as one of the three most attractive EU economies for investment precisely because of its success in these areas. But even this glowing report fails to draw attention to just how successful Ireland has been in attracting investment from abroad.
By 2000, 40 percent of all US "green-field" investment into Europe went to Ireland. By 2003, US investment in Ireland was more than two-and-a-half times greater than investment in China. Indeed, over 40 percent of all US overseas software investment has gone to Ireland, while over 300 US entities have been licensed to trade in the Irish Financial Services Center in Dublin.
Given such impressive statistics, it is hardly surprisingly that Ireland was one of the countries studied at the May 2006 conference on technology development in Lebanon, held at the Massachusetts Institute of Technology (MIT) in the United States. Among the speakers at this event was John Cullinane, an American hi-tech pioneer who has extensive knowledge of the Irish economy and has promoted peace through jobs and economic development both in Northern Ireland and in the Middle East.
Cullinane urged the audience to follow the Irish model of offering a sophisticated and low-cost communications infrastructure - built around call centers and back-office support - which will in turn attract multi-nationals looking to invest abroad.
The FDI that has poured into Ireland on the back of the strategy underlined by Cullinane has undoubtedly played a key role in ending the chronic unemployment that plagued the country for centuries. It has also provided a base for broader growth across the economy. But it also leaves you very vulnerable to the whims of foreign multi-nationals which could abandon the country at any time for cheaper locations.
Moreover, the Irish success in attracting companies like Intel, Microsoft, Google and Dell has done little to encourage the establishment of indigenous world-beating innovative companies. Domestic expenditure on research and development remains low, and Ireland has one of the worst records among developed countries in terms of Internet use and registering patents.
Even in those areas where it leads the way in Europe, the common perceptions are misleading. For example, Ireland may be the second-richest country in the EU on the basis of per capita GDP, (all output produced in Ireland), but on the basis of GNP (output produced by the Irish) its wealth is merely average.
In considering the relevance of the Irish experience to Lebanon, one must also remember that the Irish success in attracting FDI has been predicated on the political stability brought about by the Northern Irish peace process that started in 1998. As one leading Irish economist recently put it there would have been "no growth without peace." This summer's conflict highlights just how far Lebanon is from achieving a similar level of political stability.
While Ireland has also had the advantage of over three decades of EU membership, which has not only made it increasingly attractive to investors wanting a base in Europe, but has provided the country with billions in aid that was funnelled into developing the nation's infrastructure and facilitating economic growth.
It is also true, however, that a number of other EU member states have received similar levels of EU funding to Ireland over the last few decades yet have failed to match its economic success. Where the Irish have differed is their deep understanding of the benefits that globalization can offer a small, peripheral country tapped into the knowledge economy. Hence the fact that between 2001 and 2005, Ireland has come first three times, second once, and third once in the A.T Kearney/Foreign Policy Institute Globalization Index, which ranks political, economic, personal and technological globalization in 62 countries.
Despite its weaknesses, the economic model adopted by Ireland has been a success and as such offers hope to Lebanon over what a small country with few natural resources and almost no industrial base achieve. Though there is, of course, one ingredient that of can never be replicated and that's the luck of the Irish.
Rory Miller is senior lecturer in Mediterranean Studies at King's College, London and editor of 'Ireland and the Middle East: The Politics of Trade, Diplomacy and Peace,' to be published by Irish Academic Press in 2007. He wrote this commentary for THE DAILY STAR.
