Ireland’s High-Tech Jig

In the 1980s, Irish citizens were leaving the country in droves. The economy was in miserable shape and the country’s spirit was sagging. Isolationism and intransigence over bitterly divisive internal issues contributed to a national malaise.

In the midst of the gloom, a few forward-thinking individuals turned their imaginations toward the potential of e-commerce and the New Economy, and in the wink of an eye — or so it seems — Ireland started to become associated with the folding kind of green.

The little island country that conjures images of faeries and shillelaghs — along with potato famines and religious strife — is now developing a different sort of reputation. The “Celtic Tiger” is bursting onto the 21st Century economic scene as a high-tech magnet, attracting an influx of major corporations along with a steady stream of returning natives.

Still, despite the trumpeted advances of the last few years, Ireland faces some daunting challenges.

Catching Up with Its Success

Ireland has been extremely successful in attracting foreign investments and has achieved an impressive level of national productivity, according to the Global New Economy Index (GBEI), a recent report that ranks the technological vitality of 47 nations.

Maggie Johnson, a member of Stanford University’s computer science faculty and executive vice president of Metricnet.com, told the E-Commerce Times that Ireland is doing a lot of things right in its efforts to build a strong, tech-centered economy, but the country still has some serious technology deficiencies.

Johnson said that in spite of Ireland’s entrepreneurial spirit and openness to foreign investments, the country has a relatively poor infrastructure. “It’s surprising, given their VC strength, how low they are in computer power use, and research and development,” she said.

According to the GBEI, which was authored by Metricnet and published by the IT research firm Meta Group, Ireland still “has a ways to go in developing its capacity for technological innovation,” ranking 32nd in that category. The GBEI analysis says that Ireland also has room for improvement in computer power and use, with rankings of 38 and 39 respectively.

“Those are two big weaknesses for Ireland,” Johnson said, adding that improvement in those areas would likely push Ireland up on the index, where the country presently ranks 25th overall.

Internet Go Bragh?

The good news is that literally hundreds of high-tech corporations have flocked to Ireland — a country that is smaller in size than the state of North Carolina — including such hit players as Dell, IBM, Microsoft, Compaq, Sun Microsystems, Cisco, Gateway, Oracle, Hewlett-Packard, Novell, Informix, AOL Bertelsmann and Ericsson.

The big businesses are attracted by Ireland’s favorable corporate tax structure, broadband access to the Internet, and perhaps most importantly, the availability of a skilled workforce — essential elements driving the country’s economic growth, according to Ireland’s Industrial Development Agency (IDA).

Developing those elements has been part of a determined governmental strategy. Mary Harney, Ireland’s vice-premier and minister of trade and industry, co-founded the Progressive Democrats in 1985, promoting the gospel of free trade, tax cuts and new schools to further the goal of high-tech development.

At first, Harney’s ideas met with sour disinterest. But as Europe opened up and more countries joined the competition for investment capital, the new party’s program gained support.

Corporate Lures

In addition to establishing a 10 percent corporate tax rate, the government passed a number of technology-friendly laws, including a digital signature bill, a copyright bill that addresses intellectual property issues, a telecommunications bill that encourages sharing between operators, and a broadcasting bill that details the roll-out of digital terrestrial television.

Ireland is also the only English-speaking member of the Economic and Monetary Union (EMU), which created a single currency, the euro, to replace the national currencies of the EU Member States. The IDA says the euro offers significant advantages to companies operating in Ireland, such as the elimination of exchange rate risks and transaction costs, consistently low interest rates, and a stable economic environment.

Not Ready for E-Commerce

Ireland’s new digital signature law makes electronic signatures as legally binding as handwritten signatures, and is part of a strategy to jumpstart Irish e-commerce. Using technology similar to that used in the U.S., Irish citizens will be able to use encoded smart cards to complete transactions of all kinds online.

Ireland lags well behind many other less tech-ambitious countries in e-commerce activity. In 1999, only 10 percent of Irish Internet users made online purchases of merchandise, a figure that had not changed in a year, according to Amarach Consulting.

Amarach said the low number of Irish e-commerce shoppers is primarily due to the dearth of local e-commerce Web sites and low credit card use among Irish Web surfers. According to a report issued this Spring by Amarach, titled “Eir-Commerce 2000,” only a third of Irish Internet users have credit cards.

Workforce Treasure Trove

Analysts agree that Ireland’s greatest strength at present is the country’s ability to supply a large number of skilled employees — another advantage that is far from accidental. The government has fostered the development of an educational system that produces degreed professionals in computing, software and information technology, with programs that begin at the primary school level, PCs and Internet access in the schools, and widespread teacher training.

The incursion of technology companies into the country has meant a dramatic increase in jobs, and many of the Irish who left their homeland a few years ago in search of Silicon Valley gold are now finding their way back — an encouraging development that could boost Ireland’s efforts to move forward in research and development and technological innovation.

Positive recent political developments also bode well. Ireland’s strong trade-orientation and its history of internal strife have much to do with the country’s slowness to invest more heavily in infrastructure, according to Johnson. “Recent improvements in the relationship between Ireland and the North have contributed to the improved economy,” she said.

Other export-oriented countries that have struggled with persistent internal tumult could benefit by taking an approach similar to the Irish government’s strategy in moving toward a position of strength in the New Economy.