FDI and IRELAND’S TIGER ECONOMY

• MANOJ KUMAR

• SHASHANK SHARMA

• SHASHANK S TIWARI

• SHASHANK TYAGI

• SHASHWAT SHEKHAR

• SUKANT CHATURVEDI

• TARUN K GOYAL

EARLY PROSPECTS

• Underdeveloped infrastructure, basic facilities lacking

• High unemployment and emigration

• Non existent manufacturing sector

• Agriculture based economy, largely dependent on trade from UK

• Education sector in bad condition

Fifties and Sixties

• The Finance Act of1956 introduced EPTR

• Joined IMF and World Bank and relaxed restrictions on Control of

Manufacturers Act

• Unilaterally lowered tariffs to encourage foreign investments

• Ango-Irish Free trade Agreement was concluded

• Ireland joined GATT

Role of Industrial Development Authority

• Formed to attract new investments, in accordance with the favourable export focused industrial strategy

• Targeted Irish-Americans. ( Phizer-John Mulchay)

• Over 10 years 450 companies negotiated

• Selection Criteria -

• Basic and Social economic criteria

• Best chances of commercial and economic stability

• High dependence on scarce human resources

• Take advantage of natural resources to conserve other resources

Seventies

• Growing foreign investment

• Oil Crisis Oct 1973

• High unemployment

• New government continued the trend of deficit spending

• Native industry not growing

80’S

• Deficit 12% of GDP in early 80s

• Unemployment over 17%

• Macroeconomic crisis discouraged firms like AT&T & Black and Decker

• 22mn Irish Pounds debt

• Curbing public sector expenditure was the government’s main agenda

• PNR introduced in 87

UNLEASHING THE TIGER

• GDP growth rate reached 8.5%

• Propelled by American IT boom in the early nineties

• Export sector became more competitive by joining EMS

• IDA was able to lure target companies (INTEL)

Advantages of FDI in Ireland

• Played a vital role in facilitating Ireland’s transition from primarily a protectionist economy in the 1950s

• Leading exporter in sectors including, technology, pharmaceuticals

• Expenditure on Irish goods and services.

• Introduction of EPTR sent a strong message to IMF and World bank.

• By 1970 companies like Gillette- Braun, Digital, Cross Pens were established

• American IT boom in 1990s

Advantages of FDI in Ireland

• IDA through PNR brought labor intensive industries to decrease

unemployment.

• FDI resulted in low debt to GDP ratio and curbed deficits.

• Integration of European market in 1992.

• Employment opportunities offered by Intel

• Presence of HP, Dell, Gateway.

Disadvantages of FDI in Ireland

• In spite of growth rate of 4%, Unemployment, poverty were plague.

• High dropout rate was prevalent

• Throughout export focused.

• Foreign firms accounted for 1/3rd of industrial employment.

• High borrowing to increase welfare spending.

• EEC combined with tariff reduction resulted into high competition.

• Unemployment surged to 17% in 1982.

Disadvantages of FDI in Ireland

• During 1990s unemployment was still at 16%

• Huge gap between GDP and GNP

• Economic crises hit Ireland hard.

• Celtic Tiger because of US Economy?

• Transfer Pricing

Conclusions

• Ireland should continue to be a part of European Union.

• Ireland’s economy may be trapped in stagflation.

• Should look to boost investment in Education.

• Foreign Companies should aid in development of infrastructure.

• Diversified companies should be invited for FDI.

• THANK-YOU