Showing posts with label Irish economic competitiveness. Show all posts
Showing posts with label Irish economic competitiveness. Show all posts

Thursday, September 5, 2013

5/9/2013: WEF on Ireland's Competitiveness - detailed analysis

World Economic Forum Global Competitiveness Report 2013-2014 puts Ireland's competitiveness in 28th place, one position worse in global rankings than in 2012-2013 report. Here are summary stats.

First, top 30 countries (2013-2014 ranks) and their recent performance history:


Several points of note:
  • Compared to two years ago, there is only one new addition to top 10 performers group: Hong Kong. Denmark - ranked 8th in 2011-2012 report is now ranked 15th.
  • Switzerland and Singapore are unchallenged ranked 1 and 2.
    Despite a recession, Finland ranks ahead of Germany and in venerable 3rd place. Sweden, meanwhile, lost 3 places over the last two years.
  • Ireland's competitiveness 'neighbourhood' now includes Brunei and Malaysia, with such 'stars' of global competitiveness as Saudi Arabia, UAE and Qatar outperforming Ireland significantly.
  • China and Puerto Rico are snapping on our heels. Iceland, Estonia, Oman, and Chile are nearby as well.
  • We ranked 9th in EU18 euro area.

Ireland's relatively poor performance is highlighted in the following table, showing our overall decline from 22nd position worldwide in 2008-2009 to 28th in 2013-2014 reports. Blue colour codes improvements on 2008-2009 ranks and red codes deterioration in rankings.


The table above shows that Irish rankings are severely depressed by the Macroeconomic Stability (134th), Financial Markets Sophistication (85th) and Market Size (57th). We can't do much about the latter one, of course. We rank below where we should be in terms of Infrastructure (26th) and in terms of Institutions (16th), Higher Education and Training (18th), Labour Market Efficiency (16th), as well as across both sub-components of Innovation factors.

Full report is available here: http://www.weforum.org/content/pages/competitiveness-library and on page 222 there is a handy summary for Ireland's scores. Here's a chart mapping Ireland relative to its peers average:
There is very little in the above chart that distinguishes Ireland to the better side of the average Innovation-driven economy. The largest gaps in our favour are found in Goods Market efficiency (largely thanks to the EU common trade area, plus our severe dependency on imports, normal for a small open economy), and Institutions (ditto for the EU, plus common law etc). Best way to describe us, using the above chart - abstracting away from Macroeconomic and Banking crises - is average for our group.

In case you think otherwise, our own assessments confirm the above conclusion:
Notice that - again aside from the financial crisis - our top 5 drags on performance are: Inefficient government bureaucracy; Inadequate supply of infrastructure; Insufficient capacity to innovate and Tax rates. All are of our own making.

Should you care to see more: here are the details. Reading the below, keep in mind, we really should be aiming to be in top 12-15 in the world, if not better. We certainly market ourselves as if we are in top 10 at the very least...


Thursday, May 20, 2010

Economics 20/05/2010: No comment needed

This is in just now from Ryanair:

Starts

IRELAND LOSES RYANAIR HANGAR AND UP TO 200 JOBS TO GERMANY AND FRANKFURT HAHN AIRPORT

(Thursday, 20th May 2010) ...At a press conference in Mainz today, hosted by Ryanair’s Michael O’Leary and Minister for Economics and Transport, Hendrik Hering, Ryanair announced that it would invest €25m in building a new two bay aircraft maintenance hangar including two aircraft simulators and a 16 room cabin crew training centre, in a move which will create up to 200 new Ryanair jobs at Frankfurt Hahn Airport.

...This new facility and jobs will replace those previously offered to the Irish Government earlier this year in the empty Hangar 6 at Dublin Airport. Ryanair regrets that even today, many months later, Hangar 6 remains unused for base maintenance, while up to 900 SRT Engineers remain unemployed, drawing the dole. Many of these people could have found skilled, well paid work, with Ryanair, had the Irish Government accepted the airline’s offer to buy or lease Hangar 6 and divert a significant proportion of Ryanair’s base maintenance to Dublin Airport.

Speaking today in Germany, Ryanair’s Michael O’Leary said:

“While we are pleased to announce this new investment in Germany and Frankfurt Hahn Airport, I regret that the Irish Government stood idly by and did nothing to win these new jobs for Ireland. The Irish Government talks a lot about competitiveness, but is short on action.

“At a time when traffic and tourism is collapsing in Ireland, the Irish Government prefers to impose tourist taxes, and order big increases in Dublin Airport’s fees, rather than work with the world’s largest airline to lower access costs, win investment in maintenance or create hundreds of well paid engineering jobs at Dublin Airport.

“Sadly in Ireland, we are stuck with a Government which likes talking about the “smart economy” but prefers implementing “dumb policy”. The sooner they reverse these tourist taxes and slash high costs at the Government owned DAA airports, then the sooner Irish airports and tourism can return to low cost access and traffic growth”.

Ends. Thursday, 20th May 2010

Saturday, April 10, 2010

Economcis 10/04/2010: Ireland's Competitiveness - not improving

Often overlooked today (in the usual media focus on credit flows), Ireland's Harmonized Competitiveness Indicators, published by the Central Bank are painting a really troubling picture.

The latest data, released this week in the CB's quarterly update shows that despite all the talk about wages, our competitiveness has not been improving at any significant rate during the current crisis.

Charts below illustrate:
First, the monthly figures above. It is clear that consumer price deflation acts as the only force that is inducing gains in competitiveness in Ireland. Even by this measure, improvements are not dramatic - over the course of the crisis so far, Ireland Inc has managed to improve its competitiveness only to the levels of August 2007! In other words - if 2007 was the year this economy was running on a toxic mixture of drugs and steroids, according to the CB figures, we are still reliant on the same toxic potion of uncompetitive prices and costs, except we are no longer capable of running at all.

Adjusted by unit labour costs, our competitiveness performance is even worse. We are, factoring out the seasonal effects, still in the economy geared to the boom.

The second chart shows quarterly changes:
This is really self-explanatory. Ireland Inc is absolutely out of touch, in economic terms, with its previous, competitive self. Having endured 4 years of unsustainable bubble (2004-2007), we are now lingering at close to the bottom of our historical competitiveness position.

Tuesday, December 29, 2009

Economics 30/12/2009: Competitiveness - it's a long term thingy

We hear often about the loss of competitiveness in Ireland over time. Can we illustrate it? And if so, what can we learn from it?

Here are the charts. Do keep in mind - higher values reflect lower competitiveness.
In terms of unit labour costs, Ireland has not been competitive relative to its peers within the EU15 since Q2 2004 when we crossed over the Netherlands. I ignore Luxembourg here as it is a statistical aberration. We've managed to lose all competitiveness gains incurred since Q1 1999 by Q1 2003. Majority of our peers have done so only 5 years later. while our competitiveness has deteriorated by a massive 22% since 1999 (and this is reflective of the significant gains in competitiveness over the course of 2008-2009), the average for peer countries was 6.2% and absent Ireland and Lux from the sample the rise was just 3%.

Oh, and by the way - there is no evidence that we were competitive in 1995-1999 either...

Chart above also shows that we have not posted a stellar performance against the latest additions to the Euro area. While Slovakia beats us hands down in terms of decline in competitiveness, remember - these are normalised series, so having started from a much lower cost basis than Ireland in 1999, they have been gaining significantly faster in terms of unit labour costs. Of course, notice that before 1999, Ireland was starting from a higher cost point in 1995 than Slovakia.

Is the cost of labour all there is to competitiveness? Well, no.
Consumer prices draw another comparative. But strangely enough, the picture is virtually identical. Except, here pre-1999, more specifically in 1993-1995 - we were performing really pretty well. Having gone off the rails slightly during the mad days of the IT bubble - end of 1996- end of 1998, we then again performed rather well in terms of CPI until things gone out of control for us in the end of 2002.

And just for completeness - a chart on the new entries into the Euro zone:
So what can we really learn from these four charts?
  1. Ireland's loss of competitiveness is dramatic and at this stage, seemingly irreversible;
  2. Ireland's loss of competitiveness is concentrated in the labour costs/productivity area where deterioration in competitiveness was much more pronounced compared to the Euro area average than in the CPI component;
  3. Ireland's loss of competitiveness is not a new phenomena - it has been accelerating since around 2002 and it was firmly in sight of our policymakers at the time;
  4. Ireland's loss of competitiveness is a long-term problem and requires long-term solutions - not a one-off cut in wages.


On a different train of thought: an interesting idea that can be explored in 2010. Can we use the proceeds from our carbon tax to supply a long-term economic stimulus to the private sector economy? Here is a thought going in the right direction.

Carbon tax in theory should be behavior-altering, so as consumers and producers reduce their emissions, the tax revenue should decline. To incentivise such behavior, carbon tax induces higher costs on energy use from non-renewable resources. But the revenue raised from the tax can be used to further enhance the incentives - if it is rebated back on the basis of lower emissions. This can also be done within a Cap-and-Trade system.

In the case of Ireland, such a system would involve the following:
  • Using revenue from carbon tax to provide direct income tax credits to households proportional to their annual per-capita heating, electricity and gas bills shortfall on the average. Having put into place a system for capturing data on such transactions, a rebate allowance can be estimated for each household at the end the year and this can be credited against the annual income tax.
  • The system will provide net subsidy to those who use less CO2 emitting resources.
The main advantage of the system is that it will allow to offset some of the regressive effects of the carbon tax:
  • Younger households with children can obtain a rebate that is reflective of the larger size of the household;
  • One-off housing and remotely located households will benefit from all and any renewable energy production they can generate on their properties;
  • Urban households - who actually do have an option of altering their behavior significantly - will be rewarded for doing so - incentivising more growth in the higher value-adding urban economies;
  • Businesses will also be allowed to obtain a rebate, implying lower cost for doing business and investing in new technologies precisely for companies in the more productive services exports and modern manufacturing sectors.
Best of all - the Exchequer will not get to treat carbon tax as just another regressive tax revenue raising measures that will simply increase the cost of living and working in Ireland. Of course, those not in the tax net should also receive the deductions, implying that some of them will become net earners from the tax system. As long as they are not enjoying lower cost of overall energy-related expenditure courtesy of state subsidies.