Page 1

Sustaining Ireland’s recovery for all page 1

Why skills matter, page 2

A solid recovery page 3

From bricks to brains page 4

Issue No 305: Offprint January 2016

Still riding the globalisation wave page 6

Innovating Ireland page 8

OECD Observer Roundtable: What policies for innovation? pages 10-13

Ireland’s economy

At the cutting edge

Banking on Silicon docks page 14

Maritime: Casting off for a blue future page 16

From Goias to Galway page 17

Overcoming the scars and social costs page 18

Migration’s two way ticket page 20

Ireland’s global workforce page 21

The capacity conundrum

©George Karbusa

page 24

For an offprint of this OECD Observer Spotlight, contact

Founded in 1592 Ranked 1st in Ireland Over 400 industry partners Top 1% worldwide in 18 fields

Ranked in World’s Top 100 Universities

17,000 students from 122 countries 1st in Europe for producing entrepreneurs Network of over 100,000 alumni in 130 countries worldwide

find out why

Sustaining Ireland’s recovery for all Angel Gurría, Secretary-General of the OECD

technological innovation from the foreign sector to domestic SMEs. Financial support for innovation should be rebalanced away from tax incentives–which often suit multinationals better–to direct funding, which is more accessible to smaller firms. Steps should be taken to ensure all firms can access the global talent pool. To draw all these strands together, productivity needs a crossgovernment policy champion. But boosting productivity and growing the economy shouldn’t be an end in itself. Sustainably

Ireland is once again among the leading lights of the OECD’s economies improving citizens’ living standards must be the over-arching goal. Ireland has experienced seven tough years to get its economy on the right track and its public finances under control.


Better-off households contributed progressively more, while core welfare payments to the retired and the unemployed have been largely protected. Remarkably, Ireland’s tax and transfer system still does more to reduce inequality than any other in the OECD.

When I launched the OECD’s 2011 Economic Survey of Ireland, the Irish economy was in the depths of a deep recession. Two years ago, the clouds were beginning to clear. Today, I am delighted to see how far and how quickly the country has bounced back. The economy is powering ahead and is the fastest-growing in the OECD. Strong growth is making a big difference in people’s lives, allowing the social scars of the crisis to slowly heal. Having peaked at over 15%, unemployment has fallen below 10%, while the economy is creating more than 1 000 jobs a week, most of them full time, and average earnings are picking up. Net emigration has fallen to a third of its 2012 peak as the labour market improves. These successes owe much to the government’s steadfast commitment to reform. The banking system has been restructured and recapitalised, the fiscal deficit significantly reduced, government debt put on a declining path, public administration efficiency increased, and public employment services revamped. Ireland is on the right path! Now is the time to secure the recovery, to ensure that restored prosperity is shared by all and to build resilience for the challenges ahead. Foreign investment has long been the cornerstone of Ireland’s dynamic IT, medical devices, pharmaceuticals and financial services sectors. Dublin’s cuttingedge IT cluster, the so-called “Silicon Docks”, houses the European headquarters of the biggest names in the global digital economy. In contrast, Irish-owned small and medium-sized enterprises (SMEs) continue to lag behind, dragging aggregate productivity growth down to only 0.5% per annum–about a quarter the level in 2000. To give productivity a shot in the arm, government policy needs to better support the diffusion of knowledge and

One area where huge strides have been made is in labour activation. The government has been trying to transform a largely passive welfare system into one where a person’s first day on welfare marks the first step on their path back to work. But challenges remain. There are still around 120 000 people who have been unemployed for over a year. Many of these people lack the necessary skills to participate in the recovery. Efforts to redesign the apprenticeship system are therefore welcome. More can be done also to end unemployment and poverty traps. Sometimes, as with housing and family income supplements, financial assistance is withdrawn too quickly as you earn more. At the same time, child care costs are 40% of the average wage, the highest in the OECD. Much more needs to be done to make child care affordable, particularly for low-income families. In Ireland’s case, ensuring an inclusive recovery also means further reducing emigration, welcoming home those who left in recent years, and better integrating those who have arrived since the turn of the century, and continue to arrive in relatively large numbers. One striking feature of the migrant population, both into and out of Ireland, is that they are highly educated. More than half have post-secondary qualifications. Ireland needs to do better at attracting back its emigrants once they have benefitted from international experience, as well as integrating highly qualified immigrants into the domestic labour market. Ireland is once again among the leading lights of the OECD’s economies. In the months and years ahead, the challenge is to make sure the recovery is sustainable and inclusive. The OECD stands ready to work with Ireland every step of the way to design, develop and deliver better policies for better lives. Extract adapted from a speech delivered for the launch of the OECD Economic Surveys: Ireland in Dublin, 15 September 2015. Data may have evolved since time of delivery. Read the full speech here: See also

OECD Observer Spotlight January 2016



Labour market reform: Why skills matter Joan Burton, Tánaiste (Deputy Prime Minister) and Minister for Social Protection, Government of Ireland, and Chair of the OECD Meeting of Employment and Labour Ministers 2016*

©Rights reserved/

Ireland’s job market has improved markedly, thanks in no small part to strong policies for new skills to meet evolving demands and engagement with people out of work. Ireland’s policies for recovery since 2011 have targeted employment creation through measures to promote enterprise and competitiveness. These have been set out in successive annual statements of our Action Plan for Jobs. The growth in employment of 140 000 since early 2012 suggests these policies have met with a great deal of success. At the same time, Ireland has been implementing a series of labour market reforms under an overall strategy framework called Pathways to Work. These reforms broadly aim to ensure that the supply side of the labour market is supportive of employment growth. In particular, the focus has been on ensuring that as many as possible of the jobs created during the recovery are taken up by unemployed welfare recipients–particularly those people who were displaced in the employment collapse of 2008-09 and subsequently faced long periods out of work. A major plank of the Pathways to Work strategy has been to reform our working-age benefits system and the way it interacts with the delivery of employment services. This has involved the creation of rebranded and revamped Intreo public service offices, which bring together the employment service with the payment system for jobseekers’ welfare payments and the community welfare service that delivers basic safety-net payments. The objective has been to ensure that newly unemployed people are engaged as quickly as possible with employment-service support. Within the overall Pathways to Work approach, and in response to the EU Recommendation on a Youth Guarantee, our engagement with the young unemployed happens on a faster schedule than the targets for older jobseekers. In designing our approach to youth labour market issues, we had the benefit of a study issued by the OECD in 2014. Having concentrated initially on reforming procedures for engaging early in the unemployment spell, we moved on in 2015 to a major programme for people who are already long-term unemployed. This is being achieved through the deployment of third-party resources in employment-service delivery, specifically for people who have been receiving jobseekers’ welfare payments for a year or more.


Skills development Pathways to Work is focused primarily on assistance in reentering employment. However, for people who fail to find employment in reasonable time, a range of opportunities is available to increase their employability. The importance we attach to skills development is shown by the types of opportunities offered. For the young unemployed, for example, almost three-quarters of the programme opportunities are in further education and training. (Others are in work experience and temporary employment programmes). Vocational education and training provision for the unemployed form only a small part of Ireland’s overall effort to ensure that our people have the skills and qualifications required in a modern economy, now and into the future. Ireland has been undertaking a steady process of reform and improvement to the education system in recent years–with a particular focus on vocational provision. Major recent milestones in this process include the establishment of SOLAS, a new authority for further education and training, and an apprenticeship review that is leading to the establishment of 25 new apprenticeships in areas such as information technology, financial services, transport, tourism and hospitality. Good job The scale of Ireland’s ambition in relation to upskilling is indicated by the strategic targets for education that we established as part of the EU 2020 process. We set out to reduce the proportion of young people classified as early school leavers from 11.4% in 2010 to 8% in 2020; by 2014 this figure had already fallen to 6.9%. We also set out to increase the share of 30-34 year-olds who have completed tertiary or equivalent education to at least 60% by 2020; this figure stood at over 52% in 2014, well above the EU average of 38%. There is evidence that the strategy followed under Pathways to Work since 2011 has supported a flexible labour market that allows the unemployed to share in the economic recovery. This is suggested, for example, by the fact that employment growth of 140 000 since early 2012 has been accompanied by a decrease of almost 120 000 in unemployment. In addition, long-term unemployment has fallen even more rapidly than overall unemployment, down from a peak of 9.5% in early 2012 to 5.0% by the middle of 2015. The impact of employment growth on both overall and long-term unemployment has thus been relatively strong compared with past recoveries. Our work will continue on the refinement and development of policy to address the changing needs of a modern economy and society, and we will be launching updates of both Pathways to Work and the National Skills Strategy in early 2016. * “Building More Resilient and Inclusive Labour Markets” is the title of the ministerial meeting held at the OECD Conference Centre on 15 January. A policy forum on the Future of Work precedes the meeting on 14 January. For more information on these events, see

OECD (2015), Economic Survey: Ireland, OECD Publishing OECD (2014), “Options for an Irish Youth Guarantee”, OECD Youth Action Plan, available at



Ireland’s economy: A solid recovery Michael Noonan, Minister for Finance, Ireland

approach, which has focused on both the supply and demand sides of the market, is based on reactivating the unemployed through education, training and mentoring, and creating the right conditions for the private sector to create employment. Putting the public finances on a sound and sustainable footing has been another key priority of the Irish government. Put simply, stable public finances are a pre-requisite for economic growth. To that end, the government set out a series of fiscal targets to bring

An inclusive recovery where the economic benefits are widely spread is a key objective

©AFP ImageForum

down the deficit on a phased basis, which I am pleased to say we overachieved each and every year. The underlying deficit fell from 8.6% of GDP in 2011 to an estimated 1.5% of GDP in 2015, with Ireland set to exit the Excessive Deficit Procedure as a result.

The recovery in the Irish economy is well under way. Determined policy responses to the fiscal, economic and financial sector challenges Ireland faced are now bearing fruit, with Ireland expected to be among the fastest-growing economies in the OECD this year and next. The recovery has gained momentum over the last two years, with GDP expanding by over 5% in 2014, and by 7% in the first three quarters of 2015. GDP per capita is now above the pre-crisis peak recorded in 2007. The expansion in economic activity, initially led by the exporting sectors, has become more sustained, with domestic demand now making a strong positive contribution to growth. Companies are once again investing in the real economy, and household consumption is expanding thanks to growing employment and rising household incomes. I have always regarded the labour market as the best barometer of trends in the Irish economy and am particularly pleased that the latest figures show broad-based employment growth across the Irish economy, with increases recorded throughout the country and in virtually all economic sectors. The latest figures show that 140 000 net jobs have been created since the low point of the crisis, representing an 8% increase in the level of employment. As a result, the unemployment rate fell to 8.8% by December, representing a decline of over 6 percentage points from its peak in 2012. This however is not the end point; policy efforts will continue to focus on further reducing the unemployment rate.

We were careful to ensure that consolidation measures were strategically implemented in a manner that was least damaging to economic growth. In line with OECD research and recommendations, we have broadened the tax base through curtailment and elimination of tax expenditures, and reduced revenue volatility by focusing on more sustainable tax bases. This is but one example of the great assistance the OECD’s expertise and independent advice has been to Irish policy makers throughout the crisis. More recently, I would like to thank the OECD for its work on the 2015 Economic Survey of Ireland, which provides a prescient analysis of the challenges now facing Ireland. The survey, along with previous OECD research, has highlighted the need to improve the tax and welfare system to remove potential disincentives to work. The government has sought to address these problems by lowering marginal tax rates faced by middle earners, a group that, as the OECD has shown, faces high marginal rates. I also welcome the OECD’s focus on the theme of inclusive growth in the survey. The economic recovery has not yet filtered through to all; ensuring an inclusive recovery where the economic benefits are widely spread is a key objective for us, and the best way to achieve that is to ensure a return to full employment. Ireland is moving further along the road to recovery. We have regained our competitiveness and stabilised our public finances, and are making significant progress in bringing the economy back to full employment. We have laid the foundations for a solid and sustained recovery. The task now is to build upon the gains we have made in recent years and to keep the recovery going. Visit Noonan, Michael (2011), “Ireland: Confident of a return to force” in OECD Observer, No 284, Q1, OECD Publishing, see OECD (2015), OECD Economic Surveys: Ireland, Paris

These are significant achievements and are testament to the continued success of the whole-of-government approach we have taken in addressing the challenges in the labour market. Our

OECD Observer Spotlight January 2016



Ireland’s economy and the OECD From bricks to brains Michael Forbes, Ambassador and Permanent Representative of Ireland to the OECD

©Michael Dean/OECD

Nothing has demonstrated Ireland’s shift to modern economic policies more concretely than our decision to become a founder member of the OECD in 1961. Since then the OECD has been a trusted partner in our economic and social policy evolution. The year 2016 marks the 50th anniversary of an OECD report entitled Investment in Education, issued in 1966 (see ad below). It was the first major sectoral report by the OECD on Ireland, and set in train a new approach to education in our country and showed us how we could address economic and social development through education. To meet the challenges and opportunities of engagement in the world economy, Ireland would from then on use education to help propel our development–in other words, our economic policy and work focus would move from bricks to brains. Free secondary education, which was introduced in 1967/68, was a first step in a process that was to set off a profound and positive social transformation. Since taking up my post as ambassador to the OECD in 2012, I have personally witnessed the importance of Ireland’s engagement with the OECD as we grappled with the consequences of the international financial crisis and worked our way back to economic health. I have seen how the organisation’s advice has

helped our government in charting a reliable course out of those troubled economic waters to where we are now–the fastestgrowing country in the OECD–and how working with the OECD helps bring about positive, transformative change. In February 2014 a government team led by the Taoiseach (prime minister) and the Tánaiste (deputy prime minister) visited the OECD in Paris for a day of policy discussion. The visit, which came

The OECD remains key to our economic and social progress at the invitation of OECD Secretary-General Angel Gurría as part of the OECD’s Leaders’ Forum programme, allowed us to assess the progress of our economic recovery and to exchange ideas on how the OECD could contribute further to improve domestic policy in Ireland. As with all member countries, the OECD’s in-depth peer reviews on areas such as the labour market and job activation have informed this progress. The biennial Economic Surveys of Ireland have been of particular value to our government; the most recent edition was launched in Dublin by the OECD Secretary-General in September 2015, and it provided a further opportunity for meetings with the Taoiseach, finance minister, foreign affairs and trade minister, and leaders from trade unions and business. Ireland will continue to draw upon the analysis and support of the OECD in our search for better public policies across government. We will forget neither the role the OECD played in the emergence of our modern economy and society in the 1960s nor its assistance more recently in our recovery from the 2008 economic crisis. The OECD remains key to our economic and social progress. OECD (1966), Investment in Education: Ireland, Educational Investment and Planning series, OECD Publishing.

Progress reports Order the OECD Economic Survey of Ireland now! The 1966 Investment in Education report is available as a scan at OECD Library & Archives. Contact to request your pdf.




The Centre Culturel Irlandais Paris is Ireland’s cultural foothold in Europe, a crossroads where Ireland can meet the rest of the world, with a rich and varied arts programme of visual arts and music, dance and theatre, debates and rencontres. Housed in the historic Irish College on the rue des Irlandais on the Left Bank of Paris, the Centre Culturel Irlandais is just minutes from the Pantheon and Notre Dame cathedral. Centre Cultural Irlandais 5 rue des Irlandais, 75005 Paris Follow us on Facebook and Twitter @cc_irlandais


Ireland’s economy: Still riding the globalisation wave David Haugh, OECD Economics Department

media, like Google, Facebook, Twitter, Airbnb and LinkedIn.

©George Karbus Photography/AFP

But Ireland’s success riding the globalisation wave goes far beyond the new economy. Three other key sectors– pharmaceuticals, medical devices and financial services–have also enjoyed a tide of investment: eight of the top 10 global pharmaceutical companies have a significant presence in Ireland centred on Cork, while half of the world’s top 50 banks and top 20 insurance companies operate out of the International Financial Services Centre in Dublin.

The recession in Ireland was long and deep, but has been followed by a marked recovery. Why is the expansion in Ireland so strong? At the Cliffs of Moher, on the west coast of Ireland, surfers test their limits in an emerald barrel, Aileens, one of the world’s great surfing waves. Like those surfers, Ireland is back up after a banking and fiscal wipeout and riding the globalisation wave again, and in style. Ireland has come a long way since the dark days at the end of 2010, when–with a broken banking system and locked out of sovereign debt markets–it entered a three-year EU-IMF programme. In 2016 the economy should expand by over 4%; while that is slower than the more-than-6% real growth notched up in 2015, it would maintain Ireland’s place as the fastest-growing OECD economy for the third year running. The public deficit has fallen steadily to 2% of GDP, public debt has declined from a peak of 120.3% to around 100% of GDP, and the banking system is back on its feet. Jobs growth is robust, with the unemployment rate sliding down from a peak of 15.1% to 9.3%.


Recessions caused by banking crises are notoriously long and recoveries muted, as several other EU countries have found out. The recession in Ireland was indeed deep and protracted, so why has the expansion in Ireland been so strong? In two words: foreign investment. Between 2009 and 2013, an extraordinary €125 billion (61% of GDP) of foreign direct investment (FDI) flowed into Ireland. Even in the midst of the banking and fiscal crisis and emigration surge, quietly,

It’s either move up in the innovation system or move out almost under the radar, foreign capital and brains continued to flow into Ireland. The most visible evidence of this lies in so-called “Silicon Docks”, situated in the rejuvenated docklands of Dublin port. This is the heart of Ireland’s information technology (IT) cluster. Long-standing investors in Ireland, such as IBM and Microsoft, have now been joined by the European, Middle Eastern and African headquarters of the biggest new names in software, online services and social

These investments did not happen overnight: Ireland’s policy makers have laid the ground to attract capital over decades, at least going back to the 1960s when, thanks partly to OECD advice, a major effort was made to boost education and promote Ireland as a European enterprise destination. By the 1990s, Ireland had developed high-value attributes for innovative global business that the latest financial crisis did not remove. However, like riding the Aileens barrel, the globalisation wave requires a constant adjustment and flow of new ideas–witness the transformation of Ireland’s IT sector from hardware in the early 1980s to software in the 1990s and 2000s, and pharmaceuticals from basic chemicals to active ingredients. Moreover, for all its progress, Ireland’s innovation system still lags behind other small advanced countries, such as Austria, Denmark, Finland, Sweden and Switzerland, where business investment as a percentage of GDP is at least twice as high as in Ireland. Boosting this innovation dimension is the key to Ireland’s long-running goal to unlock greater spillovers from the huge pool of foreign investment to Irish-owned firms. Dublin’s Silicon Docks, Cork’s marine technology and Galway’s medical devices sector show what can be done as clusters of foreign and local firms, supported by fine universities and research centres. But more is needed.

Bluntly speaking, it’s either move up in the innovation system or move out. There is nothing automatic about linkages between the foreign and local firms–multinationals source worldwide along complex value chains. If locally owned firms succeed in these clusters, it is because they have developed smart products and services to sell and give their multinational clients an advantage over competitors. These spin-offs remain too limited, and spreading such successes requires tuning up the innovation system to better serve the needs of small dynamic firms, which are the harbingers of new, value-enhancing business in most cutting-edge economies. Research organisations that focus on shorter-term product- and processrelated research are required–Enterprise Ireland’s new Technology Centres have promising potential in this regard. Ireland has expanded its tax credit for research and development (R&D), and it has many features of international best practice. This is a clever step, since R&D tax credits don’t lead to the old trap of picking winners. However, tax credits assume a certain cash flow, which small startups might not have. Instead, direct R&D funding would suit smaller firms more, and some rebalancing of policy in this way would help them innovate. Building small firm capacity to absorb new ideas is also important; expanding industrial doctorate and master’s programmes that link enterprise to research institutions would generate a new cohort of entrepreneurs. Finally, generating spillovers from FDI requires patience, a lot of it–local firms only started to join the medical devices cluster a decade after the first core foreign investors arrived in Ireland. Even if Ireland gets all this right, it still faces the challenge of getting more people on board for the ride. Despite Ireland’s return to strong growth, a large group of people remains stranded on the beach, unable to reap the benefits. Long-term unemployment is all too high and the employment ratio is low at around 62%, compared with over 70% in

Move up in the innovation system or move out Investment in Ireland’s Knowledge-based capital, slowdown in annual average growth



the highest marginal income tax rate on around the average wage, compared to just over five times the average wage for the OECD as a whole. Clearly, their tax would be better served developing the potential talent and perspectives of everyone, including those out of work, rather than funding welfare to such an extent that it keeps far too many people inactive in what risks becoming a two-speed Ireland. The solution is to get

% 8

The social consensus that has long underpinned policy making is not beyond risk




0 1995-2000



Source: OECD (2015), OECD Economic Surveys: Ireland 2015, OECD Publishing

Scandinavia and the UK. In Ireland there are high rewards for being educated– teachers’ salaries are among the highest in the OECD area, for instance–but stiff penalties for the less skilled. This gap, partly a consequence of Ireland’s globalised economy, contributes to the highest rate of inequality at market income in the OECD. The fact that there is not more discontent and a more destabilising social divide owes something to Ireland’s generous tax and welfare system, which brings inequality down to around the OECD average. However, the social consensus that has long underpinned policy making is not beyond risk. For a start, welfare is expensive, requiring high taxation rates, even on relatively modest incomes. Strikingly, workers start paying almost

a wider cross-section of people back into activity. The government has started to advance this approach by adopting more active labour market policies. Improving training for the unemployed and reducing high marginal effective tax rates at low incomes (some families face a marginal effective tax rate of 60-70% on incomes between €16 000 and €32 000 per annum!) that penalise going out to work should now be priorities. It is said that a crisis is an opportunity, and Ireland can emerge stronger and more innovative than before. If Ireland can create a world-class innovation system to bridge its foreign and domestic firms, while opening up the jobs ladder for everyone, it’ll handle the twists and rolls of the next the globalisation wave with aplomb. References Kennedy, Seán et al. (2015), “Taxes, income and economic mobility in Ireland: New evidence from tax records data”, OECD Economics Department Working Papers, No. 1269, OECD Publishing, O’Connor, Brendan et al. (2015), “Searching for the inclusive growth tax grail: The distributional impact of growth enhancing tax reform in Ireland”, OECD Economics Department Working Papers, No. 1270, OECD Publishing, OECD (2015), Economic Survey: Ireland, OECD Publishing OECD (2015), OECD Economic Outlook, OECD Publishing

OECD Observer Spotlight January 2016


Innovating Ireland Ireland has well-known firms such as Guinness for beer and beverages, Ryanair for air travel, and Smurfit Kappa for paper and packaging, not to mention dairies, beef and fish. However, for a small country that has turned itself into a thriving pharmaceutical and IT hub, Ireland is not awash with global brands in these sectors. Compare with, say, Finland which has Nokia, or Sweden which has Ericsson. True, there is Airtricity, but that innovative wind energy firm now belongs to an overseas company.

R&D policy Direct government funding and tax incentives for business R&D in 2013, as a % of GDP, selected countries Indirect government support through R&D tax incentives

Direct government funding of BERD USA

And according to a post on LinkedIn’s Pulse by Christopher Jimeson, a business consultant, Ireland is building a reputation in precision engineering in the aviation industry, such as Eirecomposites, Schivo Group (originally Waterford Tool Company) and DPF Engineering. But in general, the Irish R&D and innovation system, while not a complete laggard (see chart), should be further up the field. Encouraging more spill-overs into the Irish economy would likely improve productivity, create more and better jobs, and support broad socioeconomic development across Ireland (see article by David Haugh).


As with many OECD countries, productivity growth in Ireland has been falling for some time. Although Ireland’s multinational sector thrived through the crisis, the domestic small- and medium-sized enteprises (SME) sector has seen relatively low levels of competitiveness, productivity and R&D spending. Strengthening the performance of domestic firms will help rebalance the Irish economy, generate new sources of growth and jobs, and further enhance the country’s attractiveness for foreign direct investment (FDI). This means focusing on the business environment for young, innovative firms, ensuring that innovation programmes have sufficient scale to be efficient and improving the balance between indirect support for business innovation–through R&D tax incentives–and direct support, which is better suited to these firms. The government could help strengthen Ireland’s domestic sector by shifting the balance away from tax credits and towards more direct support for innovation. R&D tax credits accounted for some 70% of all government supports in 2013. Though well designed and efficient in supporting business R&D in general, cash-strapped smaller firms derive little benefit from them. Direct support– contracts, grants and awards for mission-oriented R&D, etc–can complement existing tax incentives and can direct public funding to areas of high social and economic returns. It can also help address specific barriers in the Irish innovation system, such as boosting science-industry co-operation. Moreover, Ireland has relatively few young patenting firms and young firms do not scale very well in many OECD countries, limiting their contribution to innovation, growth and jobs. Policy makers should therefore carefully assess whether any policies inadvertently constrain the growth of such firms. These may include reducing barriers to entrepreneurship as well as access to public procurement. Support for business accelerators and incubators, and better access to research and technology are







Source: OECD, R&D Tax Incentive Indicators, and Main Science and Technology Indicators,, June 2015.

particularly valuable for young firms and SMEs, and Enterprise Ireland’s new Technology Centres can help in this regard. Policies that strengthen the digital economy also help, and the National Digital Strategy rightly emphasises the importance of digital technologies for Ireland. Improving uptake of fixed broadband connections, which is below the OECD average, and for mobile broadband, which is slightly above it, would act as a boon for small innovative businesses as they reach out to global firms at home as well as to markets in the euro area and beyond. For more on innovation, contact Jimeson, Christopher (2015), “Irish aerospace industry at the Salon du Bourget, Hall 4 A4”, LinkedIn Pulse, May OECD (2015), “Improving SMEs’ access to finance to boost growth and job creation in Ireland”, Ireland Policy Brief, OECD Better Policies Series, OECD Publishing, September OECD (2015) “Better innovation policies for better lives”, Ireland Policy Brief, OECD Better Policies Series, OECD Publishing, September OECD (2015), OECD Digital Economy Outlook 2015, OECD Publishing OECD (2015), The Innovation Imperative: Contributing to Productivity, Growth and Well-Being, OECD Publishing

Business brief

Trinity lights the way forward GBHI puts particular focus on translating research. How is Trinity positioned for this?

©Rights reserved

Interview with Dr Patrick Prendergast Provost and President, Trinity College Dublin, the University of Dublin

We’re strong on frontier research and on applied research and we don’t differentiate too much: all applied research started out as frontier, and all researchers want to see their discoveries applied. Since 2008 we’ve averaged seven spin-out companies a year, many of them very successful. Innovation is essential for an ageing population; the World Health Organization estimates that by 2050 there will be more than two billion people aged over 60, most of them in the developed world. Countries will need to draw on expert research to put in place policies, products and services to deal with this demographic change. Trinity will play a leading role. How does Trinity encourage innovation?

Trinity has produced more entrepreneurs than any other university in Europe Tell us about your university. Trinity is located in a stunning historic campus in the heart of Dublin’s city centre–it’s Ireland’s highest ranked university and one of the world’s top 100, and also one of the world’s oldest universities, founded in 1592. We’re multidisciplinary and this is reflected in the rich, diverse achievements of our alumni who include three Nobel Laureates: Samuel Beckett in literature, Ernest Walton in physics and William C Campbell in medicine, as well as the political thinker Edmund Burke and the former President of Ireland and UN High Commissioner for Refugees Mary Robinson. You’ve just received a major donation from Atlantic Philanthropies. How did this come about? Yes, the Global Brain Health Institute (GBHI) is one of Atlantic Philanthropies’ five legacy projects before the foundation closes down activities. It’s a 15-year programme between Trinity and the University of California. GBHI will train global leaders in brain health by the rapid translation of research into policy. Trinity has been awarded about US$72 million, one of the most generous grants for a single project anywhere in the world. This benefaction came about through the vision of Atlantic Philanthropies’ single benefactor, Charles F Feeney, whose philosophy of “Giving while Living” has inspired Bill Gates and Warren Buffet. Atlantic Philanthropies chose Trinity because we are world leaders in neuroscience and research into ageing. Trinity leads the Irish Longitudinal Study on Ageing (TILDA), which allows researchers from numerous disciplines–including epidemiology, neuroscience, social policy, psychology, economics, nursing–to collate research to develop a full understanding of ageing in all its aspects.

We’ve focused strongly on this over the past decade, with the aim of incorporating innovation, entrepreneurship and creativity into the way we research and educate. We’ve proactively enabled technology transfer, corporate partnership and knowledge exchange; and through our business incubator, LaunchBox, we provide students with seed funding and mentoring to grow their business ideas. We’re also using our pivotal location in the heart of Dublin city to catalyse the arts; we’ve launched an open competition, the Trinity Creative Challenge, inviting artists to propose interdisciplinary projects with a Trinity focus. The five winning projects will be shown in college in April 2016; they include performance, visual art, music, film, design, animation, and gaming. Our college initiatives are having effect. The private equity research firm, PitchBook, has published the results of its independent survey. Over the past five years, Trinity has produced more entrepreneurs than any other university in Europe. Our combination of interdisciplinary research capability with innovation, entrepreneurship and creativity is potent and justifies Atlantic Philanthropies’ faith in us. I’m excited about the products, policies and services that will emerge from Trinity over the next few years, and about educating the next generation in the skills that Ireland, and the world, needs most.

Sponsored by OECD Observer Spotlight January 2016



OECD Observer Roundtable

Ireland’s innovation challenge NERI A 10-point plan

Ireland has bounced back from the crisis to become one of the OECD’s most dynamic economies. A key help has been the continued inflow of capital investment from abroad, allowing the country to bolster its position as a European hub for the likes of IT, finance, pharmaceuticals, engineering, and more. Ireland has been an attractive destination for global high-value investments for decades, yet its own innovation system lags that of other similar-sized OECD countries. Closing the gap would strengthen the country’s long-term outlook, but how can this be done?

Tom McDonnell, Nevin Economic Research Institute, Dublin, Ireland*

In our OECD Observer Roundtable, we put the question to a distinguished panel representing a range of perspectives:

Enterprise Ireland Towards recognising and rewarding innovators

©Rights reserved

Julie Sinnamon, CEO, Enterprise Ireland

For Enterprise Ireland (EI), “innovation means business”. There is clear evidence that innovative companies perform better, grow quicker and are more sustainable. Innovation is one of the four pillars of EI’s strategy to grow Irish industry. To harness innovation for economic impact, companies need a blended suite of interventions. This must be marketled and market-informed, and given that the majority of our clients are small and medium-sized enterprises (SMEs), it must also be impactful for all companies and at all stages of development. EI’s direct innovation-building interventions include financial assistance with in-company research and development (R&D) and business processes through to innovation management training. When dealing with an all-pervasive process, and driving it with multiple interventions, high standards and regular programme reviews are vital for ensuring the optimal


impact from taxpayers’ money. The recent European Committee for Standardization in Innovation Management will help our client companies to benchmark and manage their innovation while providing a clear framework for improvement. One important facet of innovation is the connection of companies to external sources of innovation, and this connectivity is a key indicator of innovation intensity. Ireland’s publicly funded research system has an important contribution to make as a significant source of disruptive opportunities and access to globally connected, innovative people. EI provides research commercialisation funding, commercialisation support services (to close the “investability” gap) and co-financing for market-led industrial collaboration. Such support must also be market-led, executed using commercial practices and in an environment that is as “industry-like” as possible. Given that success in innovation is dependent on people, it is imperative that researchers from the Irish publicly funded research system participating in these activities are properly recognised and rewarded, and this requires some more work. In addition there is a substantial contribution made to the research system by researchers who are not Irish citizens, with a significant proportion of those being from countries outside the European Economic Area. Given the global competition for talent, more needs to be done to ensure that those researchers, where willing, get the opportunity to contribute to economic impact in Ireland when they finish their research. Visit

©Rights reserved

What would you do to promote innovation in Ireland and what policies would you like to see introduced?

The economy’s innovative capacity is a function of education and skill levels, government policies that support research and development (R&D), and the quality of capital markets, among other things. The government has a critical role to play in this regard. Innovation and R&D are fundamental determinants of international competitiveness, productivity gains and economic growth. Ireland’s gross domestic

Establish a state investment bank to raise affordable funding for innovating enterprises expenditure on R&D was just 1.6% of GDP in 2012 compared with 2.4% for the OECD and 2.8% for the US. Combined government and higher education spending on R&D according to the OECD was less than 0.8% of GDP in 2012 compared with 1.1% for the EU and 1.2% for the US. A 10-point plan might look like this: 1. Increase government and higher

education spending on basic and applied research, targeting 1% of GDP. 2. Provide incentives (such as subsidies)

to take up science, technology, engineering and mathematics courses at undergraduate and postgraduate levels. 3. Establish a state investment bank to

raise affordable funding for innovating enterprises, including seed funding for high-potential start-ups.

penalise failure and risk-taking. 5. Address market failures in the

provision of high-speed broadband access. 6. Increase education budget for early

years learning (targeting disadvantaged households as a priority). 7. Reform the patent system to prevent

market incumbents from locking in advantages and excluding new entrants, and shorten patent protection in the IT sector. 8. Provide grants for adoption of new

technologies by small and mediumsized enterprises (SMEs). 9. Increase support for horizontal links

among the state, higher-level institutes and enterprises. 10. Protect child care, family, housing

supports and health care services at sufficient levels to avert child poverty, which has an extremely damaging effect on human capital formation. Given Ireland’s relatively low revenue/GDP ratio by EU standards, there appears to be some scope for policies to increase the revenue to pay forthese policies. Contact Tom.McDonnell@NERInstitute. *The Nevin Research Institute is supported by a number of unions affiliated to the Irish Congress of Trade Unions (ICTU); see

Amneal Pharmaceuticals Wanted: Home-grown scientists Chirag Patel and Chintu Patel, CEOs and Chairmen, Amneal Pharmaceuticals

©Rights reserved

We are in the midst of starting up our operations at our facility in Cashel, which will be dedicated to research

and development (R&D) as well as the production of meter-dosed inhalers and dry-powder inhalers. We are also going to focus on developing and producing biosimilars–approved biological products that are comparable to originator biologics

Another area of government focus should be creating and maintaining vital and reliable infrastructure, so manufacturers like us can receive incoming raw materials as well as distribute and ship our final products across Europe and the United States without disruptions.

A big part of our employee population will be skilled individuals


Microsoft Ireland Ireland could be a pioneer in cloud services

in terms of safety and effectiveness. These are all high-end specialty medications for the treatment of life-threatening diseases such as cancer, asthma and chronic obstructive pulmonary disorder (COPD), which will be distributed across Europe and the United States. Continuous innovation will stem from ongoing testing of ingredients, drug delivery components, product formulation and stability. These medicines will be produced on very sophisticated manufacturing lines equipped with a high level of automation and quality control systems. We are constantly in search of the best new technological advancements to enhance the patient experience. Ultimately, our goal is to ensure that patients around the world can reasonably afford safe and effective medicines to enable them to live healthy lives. While a favourable investment climate is essential to our success in Ireland, recruiting for scientists, engineers and R&D specialists is an important part of the equation. We expect to hire 250 to 300 employees, and a big part of our employee population will be skilled individuals capable of developing and manufacturing high-quality medicines. We plan to work with research communities and universities down the road to find the right talent for our organisation. However, the government must work on building home-grown talent, particularly in the areas of science, technology and engineering, and place greater emphasis on these courses across the education system to provide a base of skilled workers in these disciplines. A deep and diverse talent pool that we can tap into will be important to our longterm success and driving innovation in our Ireland operations.

Cathríona Hallahan, Managing Director, Microsoft Ireland

©Rights reserved

4. Reform bankruptcy laws to not overly



Microsoft celebrated 30 years in Ireland in 2015. In that time as a company we have grown and changed a lot: we’ve gone from being a software company to a devices and services company embracing a Cloud First, Mobile First world. With a team of 1 200 people working in software development, research and development, engineering, sales and marketing, and the data centre, Ireland is the only location outside our headquarters in Redmond, Washington, that has every aspect of our business located in one place. Critical to our success in furthering innovation has been the great work environment we have created. Flexible and diverse, and with an emphasis on collaboration, we have nearly 50 nationalities represented in Microsoft Ireland today, reflecting the diversity of our customers throughout Ireland and the globe. We recently announced our investment in a new campus to house our team under one roof, which will support our objective to continue to lead and innovate through

OECD Observer Spotlight January 2016



OECD Observer Roundtable

To ensure that Ireland’s next generation is its most innovative yet, Microsoft became an official European partner for the CoderDojo Foundation (www.coderdojo. com), which introduces children to technology and coding at a young age. We also work closely with the start-up community in Ireland. Through our Microsoft BizSpark programme we have supported 2 000 Irish start-up companies since the programme launched in 2008. Finally another European-wide problem we’ve been focused on finding a solution

We have supported 2 000 Irish start-up companies since 2008 to is youth unemployment. In response to both the crisis and the requirements of our ecosystem of partners, to fill job opportunities we’ve partnered with FIT* to create an initiative called Youth2Work. Through an initial €3 million investment from Microsoft, the programme is on track to reach 10 000 young people through training. We are very supportive of government efforts to drive more cloud usage. Ireland has huge potential to become known as a pioneer in the use of cloud services–in the private sector but critically also in the delivery of citizen service. We’re ambitious for Ireland and its future–and look forward to continuing our relationship with the country. Visit * Read more about FIT (Fastrack into IT) at

Stirling Behavioural Science Centre Innovation for well-being Liam Delaney, Professor of Economics and Director, Stirling Behavioural Science Centre, University of Stirling* A key potential for innovation in Ireland lies in engaging the developing literature on behavioural science. The creation of the Behavioural Insights Team in the UK and similar efforts across the world, along with


example of how this might be done.

©Rights reserved

reinventing productivity and business processes, building the intelligent cloud platform, and creating more personal computing for our customers.

Liam Delaney a sustained focus on practical applications of behavioural science, offers an important source for innovation. Public policies in Ireland should be driven increasingly by ideas from a wide range of disciplines, such as psychology and behavioural economics, tested more

Public policies in Ireland should be driven increasingly by ideas from a wide range of disciplines

For such measures to provide a key impetus for innovation in Ireland, they must be fed into the democratic process and become accepted as measures by which governments can be held to account by their electorate. This will require widespread consultation across society. By combining a focus on behaviourally designed, ethically driven and smartly evaluated public policies with a greater focus on wider measures of well-being, Ireland could innovate across a wide range of public policies that are crucial to people’s welfare. * See Prof Delaney is formerly of University College Dublin. Visit

The Stone Twins Education, but not any education Garech Stone, The Stone Twins Brand Consultancy, The Netherlands

cleverly and adapted more rapidly. This should be driven by more nimble crossdepartmental teams with capacities to develop and evaluate policies with a solid foundation in the literature and in international experience. This would facilitate the development of a wide range of innovative agendas, from financial regulations that are grounded in how people actually make financial decisions to the development of health services that reduce waste caused by a wide range of behavioural biases. The development of a core group of civil servants working in collaboration with academics, practitioners and other stakeholders to develop such policies would be a key step. As well as grounding policy in such principles, a related innovation is to rethink what is the ultimate goal of public policy. GDP, while extremely useful, is not a good measure of overall societal well-being. Developing metrics based on a wider set of criteria is crucial: the OECD Better Life Index provides one key

Promoting innovation in Ireland does not require the establishment of another quango, the extending of tax credits or the bannering of a fluffy marketing slogan, such as “Innovation Comes Naturally”. If the Irish government is serious about promoting innovation, then it must rethink the fundamental principles of primary- and secondary-level education. Reforming education to take a more holistic approach is the only way to cultivate a true innovation agenda.


Well-being in Ireland In general, the current education model revolves around the rote learning of lists and prose, and culminates in exams and grading. It prioritises academic ability–valuing languages, sciences and mathematics at the expense of the arts

Ranking of well-being topics by users of the Better Life Index in Ireland 12%

10.05% 10.02%

Conformity kills innovation

True innovation–the one that is a powerful economic force and driver of prosperity– comes from a culture of questioning and shared knowledge. Innovation requires an open, fluid network. Here in the Netherlands, my little boy goes to a vrije–or Waldorf–school. This educational approach has its foundations in anthroposophy, a philosophy founded by Rudolf Steiner. It is a schooling fuelled by the ideal of bringing forth every child’s unique potential, while respecting the talents and merits of others. Waldorf (Steiner) education encourages creativity, and celebrates the three I’s of imagination, inspiration and intuition. Most of the students turn out to be well-rounded, intelligent and, importantly, everinquisitive. Unlike the state schools, this education appears to provide a fertile place for facilitating the fresh thinking where innovation can happen. After all, the innovators of tomorrow will be those who have learnt to think for themselves. Visit

9.66% 9.01%






8.26% 6.78%


and humanities. But within this narrowly conceived curriculum (which is geared primarily towards university entry), it produces too many clones: children who regurgitate reams of facts, yet possess no critical thinking skills. Conformity kills innovation. In addition, the education system pigeonholes children when they’re too young by forcing them to specialise, and continually encourages competition and individualistic goals. All these things stifle innovation.



4% 2% 0%


n ctio




rk-L Wo




alth He

n atio

c Edu

s Job

e nt om me iron Env



usi Ho

ety Saf

nt nity me mu age Com c eng i Civ

Irish users give greater importance to life satisfaction, work-life balance and health.

Ireland’s country ranking in the 11 well-being dimensions


Ranking out of 36 countries Housing

Civic engagement




Life satisfaction




Work-life balance

See For note on Ireland’s OECD Better Life Index, visit

OECD Observer Spotlight January 2016


Banking on Silicon Docks of the downturn, its marketing campaign to attract international tech firms into the area has succeeded in luring in companies such as, HubSpot, Dropbox and Facebook. What seems certain is that low tax is not the only draw; true, at 12.5% Ireland’s corporate tax rate is one of the lowest in Europe, though it is also true that many other jurisdictions offer low

Silicon Docks also helps to attract IT investment to the rest of Ireland

©REUTERS/Cathal McNaughton

taxation, yet do not gain the same levels of inward investment. Ireland’s highly skilled, well-educated and technologically savvy workforce has also been cited as a draw, while being an Englishspeaking country within the euro area is an obvious asset. Furthermore, the magnetic power of the Silicon Docks community is an attraction in its own right. While Silicon Docks’ original fraternity of behemoths has outgrown its original office space, with many of the global tech names expanding their presence there, it has morphed into a tech cluster, which spans central Dublin and gathers a cohort of Irish entrepreneurs, too. Even in today’s “weightless” global economy, location has solid value. After all, it is no coincidence that Silicon Docks, the nickname of Dublin’s high-tech hub, should emerge in Ireland. The culmination of a long-term vision to regenerate the capital’s dilapidated port area and a dogged determination to convince a still-budding if surging Google to set up its international headquarters in the capital in 2003, Silicon Docks, like Silicon Valley in California, is now attracting global attention. While technology companies such as Apple, Microsoft and Hewlett Packard all set up headquarters in Ireland beginning in the 1970s, it was Google’s arrival in Dublin’s docks that consolidated the country’s attractiveness with a new contemporary edge. It quickly became the pull factor for other investors, and today Silicon Docks, transformed by Dublin Docklands Authority (www. is home to some 50 international tech firms, including the world’s leading “born-on-the-internet” companies in sectors such as search, games, e-commerce, online payments, personal services and marketing. The cluster effect of the big names Google, Facebook, Amazon, Yahoo, eBay and Twitter convinced US messaging service Slack to open its European office in Dublin in 2015, while Airbnb moved its European HQ to Dublin in 2014, creating 100 new jobs. Linkedin has also added its name to the list. The Industrial Development Authority (IDA), the semi-state body charged with attracting foreign investment, estimates that the internet sector is worth over 40 000 direct jobs, €2 billion in wages and €1 billion in corporate taxation, and predicts it will create an additional 45 000 jobs by 2018. The IDA showed vision setting up an emerging business unit in 2010 under its Horizon 2020 plan to attract new investors. In spite


It also helps to attract investment to the rest of Ireland. The tech world has been embedded outside the capital for decades, with giant tech companies, such as Apple in Cork and Hewlett-Packard (HP) in Galway. Indeed, Galway’s own tech hub is now flourishing, with a solid talent pool flowing from local universities, and the presence of several major US tech companies including IBM, Cisco, HP and SmartBear Software. In 2015 HP’s new innovation centre opened, marking its 44th year in Ireland. Apple also has heightening interest in Galway with its plans to create a monster data centre. Apple’s European headquarters in Cork now employs more than 4 000 people, making it the city’s largest private-sector employer. Some of Cork’s youngest technology companies, including Xanadu, Trustev and Teamwork, are thriving, and others are bubbling up in rural towns such as Skibbereen. Efforts by these firms to reach out to the next generation show they are keen to stay. Some teach kids how to code and develop software; others are investing in partnerships with schools and universities. Can Silicon Docks keep thriving, and investment in Cork and Galway and other places too? Much depends on global trends in technology, but also on constantly improving government policy towards innovation, skills and global trade. By spurring a stronger, more dynamic, sector, including among home-spun businesses, Ireland could become Europe’s silicon coast. Claire MacDonald See more on the Industrial Development Authority at Newenham, Pamela (2015), Silicon Docks: The Rise of Dublin as a Global Tech Hub, April, Liberties Press Patnaude, Art (2015), “Tech Workers Flock to Dublin’s Silicon Docks”, in The Wall Street Journal, May

Business brief

©Shaun Murphy

Ireland: Open for investment

Shaun Murphy Managing Partner KPMG in Ireland

The start-up environment is exceptionally dynamic Ireland had the highest rate of economic growth in the EU in 2015. Strong exports, increasing employment and a highly attractive foreign direct investment (FDI) offering have helped the Irish economy stage a strong recovery writes Shaun Murphy, Managing Partner of KPMG Ireland. The economic shocks experienced by Ireland following the 2007 crash were severe. A credit squeeze, increased personal taxation and reduced exchequer spending created significant economic and business challenges. Faced with a rebuilding of its economy and international reputation, the Irish government and other stakeholders successfully set about the task of restoring our credibility. In 2016, Ireland is expected to record the strongest GDP rate of growth in the EU and an unbroken pattern of inward investment has helped Ireland reaffirm its record of long term growth and stability. Notwithstanding a number of challenging years, Ireland’s record of delivery as a first class destination for international investment was rarely if ever called into question–proof if it were needed of the underlying strengths of Ireland as a location of choice for foreign direct investment (FDI). For government, the tasks involved in maintaining Ireland’s attraction for businesses of every type and size have been significant. Firstly, in the context of a pan-European debate about how best to get economies back on track, the Irish government successfully restored the country’s reputation with international creditors. The efforts of government and the effectiveness and reputation of the tax collection function of the Revenue Commissioners were fundamental–further reaffirming our national economic credentials. Secondly, state agencies and IDA Ireland in particular continued to work to promote Ireland’s business appeal. The commercial focus of embassies and the leveraging of a well-connected diaspora have all played their part. The results have been impressive. IDA Ireland has reported a strong performance in 2015 with the creation of over 19 000 new jobs, the most ever recorded in the agency’s 67 year history. High performing sectors such as financial services, agribusinesses, pharma and technology, to name just a few, have reinforced Ireland’s position as an FDI hub. This long-term attractiveness of Ireland as a secure and stable home for inward investment is evidenced by the facts. Over 1 200 companies

from global giants to high-growth brands have chosen Ireland as their strategic European base. Intel recently marked its 25th anniversary in Ireland, with an accumulated investment in their Leixlip Campus near Dublin of US$12.5 billion. In 2015 Microsoft celebrated its 30th year in Ireland, while in 2014 Xilinx marked its 20th year here and Citi and Bristol Myers Squibb their 50th. These stories of investment success speak for themselves and help promote a cycle of investment motivated and reassured by the Irish performance of these companies. Total employment in FDI in Ireland now stands at almost 175 000 people, the highest level in the history of the IDA. In 2015 there were 213 investments, up from 197 in the previous year. According to the American Chamber of Commerce in Ireland, US companies have $204 billion in foreign direct investment in Ireland, representing 9% of all US investment in the EU and 4.5% worldwide. Inevitably, the tax environment plays an important role in helping senior decision makers choose Ireland. We have a stable tax regime with an extensive tax treaty network. The main company taxation benefits of being headquartered here include a highly competitive 12.5% corporation tax rate for active trading businesses, an attractive research & development tax credit regime, and tax depreciation for capital expenditure on intellectual property (IP). The start-up environment is also exceptionally dynamic. Forbes magazine recently listed Dublin as one of the top seven cities in the world for start-ups. Ireland has the youngest workforce in Europe with 40% of the population under 29 years old. Ireland’s education system ranks in the top ten in the world according to the IMD Competiveness Yearbook 2015, which also ranks Ireland first in the world for the availability of skills, openness to new ideas and flexibility and adaptability when faced with new challenges. Furthermore Ireland is undoubtedly an attractive destination for internationally mobile and skilled people. Quality of life indices regularly rank cities such as Dublin in the upper reaches of global league tables. The Irish government has recognised the need for tax certainty to help maintain our inward investment track record. The 12.5% rate is established and is settled policy of all of Ireland’s major political parties, both in government and opposition. The level of social cohesion and political agreement about pro-business policies is striking. In an uncertain world, Ireland also shows an emphatic commitment to the EU, providing further reassurance to investors. In conclusion, there is no complacency about Ireland’s position as a location of choice for business and stakeholders remain focused on providing the most attractive mix of reasons to choose Ireland.

Sponsored by OECD Observer Spotlight January 2016



Casting off towards a blue future Lorna Siggins, Marine and Western Correspondent, The Irish Times

sea-based economy to its full potential. It has identified five key sectors: blue energy, aquaculture, maritime coastal and cruise tourism, marine mineral resources, and marine biotechnology. Meanwhile, the European Marine Board, representing key research institutions across the community, has recently identified the need for greater focus on the deep sea environment, below 200 metres. “Earth’s inner space” of cold and dark abyssal plains and hydrothermal vent ecosystems may hold secrets to the origins of life, it says.

©2010 ERSI

Mr Coveney’s ambition is to ensure that Ireland secures a stake in what he describes as the “blue century”. A report published by the Socio-Economic Marine Research Unit of NUI Galway, a university on the west coast, during the summer of 2015 noted that Ireland’s maritime sector was performing better on average than the general economy, at a growth rate of 8-9% between 2010 and 2014.

Open any atlas, look at any globe, and Ireland appears as a small green island on Europe’s Atlantic rim. But in fact, Ireland’s territory is almost the size of Germany, and mostly blue. If you asked Vice-Admiral Mark Mellett, the current head of the Irish military what sovereign territory he is responsible for, he would point to a 1 million square kilometre horizon, equivalent to ten times the land size, with some 93% of it underwater. Mr Mellett, the first Naval Service officer to hold such a senior position in the Irish defence forces, would also wax lyrical about the economic opportunities offered by a sea area with some of the most biologically rich fishing grounds and some of the most energetic waves in the north-east Atlantic–and with potential for “trillions” of euros in hydrocarbons and renewable energy.


Over 40 years after Ireland traded access to its waters by European fleets for EU concessions for the agricultural sector, Mr Mellett’s appointment in September reflects a very different approach by the Irish state to the marine. Such was the lack of enthusiasm in opportunities beyond the coast during the 1970s that those appointed to marine affairs would joke about being responsible for “fish and ships”. No longer. Simon Coveney, current holder of that portfolio, is a keen sailor whose passion for the sea led to an integrated marine plan, Harnessing Our Ocean Wealth, published in 2012. It has a target of doubling the value of Ireland’s “blue economy” by 2030. Parallel with this is the EU’s own blue growth initiative, which recognises the need for considerable investments in science and technology to develop the

Marine-related employment rose from 17 425 to 18 480 full-time equivalents in 2012-14, with turnover of about €4.5 billion a year. Developing the marine economy is a long game. Irish scientists are already heavily involved in national and international projects, ranging from seabed mapping to locating and protecting cold water coral on the continental shelf to measuring ocean acidification caused by the rise in carbon dioxide levels in the atmosphere. Some have worked with the European Space Agency on monitoring and forecasting of jellyfish blooms that can have a negative impact on fish farms, for instance. Other projects include research into wave and tidal energy to using sail power for propelling naval ships. Organic cod farming is also under development. Research is focused at NUI Galway and at University College Cork, which is part of an Irish maritime energy research cluster

involving Cork Institute of Technology and the Naval Service. The state-run Marine Institute in Galway is designed to play an overarching role in co-ordination. Raising the funds for this research and scientific work is a challenge, whatever the long-term benefits. EU and Irish public funding geared towards applied research tends to favour valid projects

The target is to double the value of Ireland’s “blue economy” by 2030 with immediate job creation prospects and private-sector funding. Yet as the OECD argues, a truly innovative climate needs public funding for basic research. Professor Colin Brown, the director of NUI Galway’s Ryan Institute, gives an example from the domain of earth observation. He explains that high-frequency radars geared to monitor the sea surface can measure wave heights and sea surface currents. These data can then be input into hydrodynamic computer models with meteorological data, such as wind speeds, and can then be used to forecast the energy available. Such innovations for smart energy use also have the potential to predict flooding and sea surges.

shipping firms along Ireland’s coast, but decried the Irish people’s generally indifferent attitude towards the sea and their preference for land on an island where beef forms more of the national diet than fish or seafood (most of which is exported). Some blame this paradox on a deeply rooted fear among some communities of the hostile oceans that for years claimed so many lives when fishers were dependent on small canvas boats called currachs, others on the fact that fish on Fridays was seen a penance rather than a pleasure, and still others on the political influence of the Irish livestock industry.

Dublin, and the beginnings of marine tourism on an Atlantic rim that is now a magnet for surfers worldwide.

These attitudes are changing, and Dr Ireland lived just long enough to see the development of a multimillion-euro fishing industry in ports such as Killybegs in County Donegal, the founding of a maritime museum near his home in

Marine Co-ordination Group (2012), Harnessing Our Ocean Wealth: An Integrated Marine Plan for Ireland,

Though Irish proverbs like “the sea receives its own” (originally in Gaelic Irish) reflected that historical fatalism, Dr Ireland also noted more positive sayings. “The person who owns a boat will one day find their reward” was one that he particularly liked to share with political leaders. Recent progress in Ireland’s blue economy suggests that his subtle message has finally been heeded. References De Courcy Ireland, John (1992), Ireland’s Maritime Heritage, An Post, Dublin

European Marine Board (2015), “Delving Deeper: How can we achieve sustainable management of our deep sea through integrated research?”, EMB Policy Brief No 2, November

From Goias to Galway Brazilian Jobert Marinho stands in the doorway of his local gym, where he trains, in Gort, County Galway, November 2014. Irish migration is no longer just about leaving the country, but moving to it, too, and from all over the world. Migration to Galway, for instance, was strong during the Celtic Tiger years, leading Ireland’s third largest urban area to become one of Europe’s fastest growing cities. Mr Marinho moved to Gort with his family five years earlier from

the central Brazilian state of Goias, joining some 400 of his compatriots in this rural town of 2 600 people. Known locally as Little Brazil, according to reports, at one point a third of residents were Brazilian. The billboard on the left announces the visit to Gort’s boxing club of Olympic boxing champion Katie Taylor. Visit

©Paul Faith/AFP

Prof Brown believes a real breakthrough is in the offing, and though he compliments the Irish government on its investment in marine renewable energy innovation, he believes climate change should figure more strongly in their funding considerations. His vision would have found hearty support from another leading advocate of the sea, the historian John de Courcy Ireland, who died 10 years ago in April. Dr Ireland ploughed the seas as a young man, working for several merchant navies, and was later decorated by countries around the world for his services to the sea, including the likes of France, Spain and Argentina. Dr Ireland always praised the hardworking small ports and family-run



OECD Observer Spotlight January 2016



From crisis to recovery: Overcoming scars and social costs Claire Keane, OECD Directorate for Employment, Labour and Social Affairs

only one-fifth were unemployed, and close to half held full-time positions before leaving. A further 13% were in part-time jobs. Many emigrants who were employed prior to leaving Ireland reported low levels of career satisfaction. A lack of career opportunities, as well as underemployment in the case of part-timers, were likely drivers of the emigration upsurge. Migration does not have to be all bad news–returning migrants can bring back skills and experience gained abroad; indeed, emigrants returning to Ireland

©David Rooney

Close to a quarter of Irish households fall into this “jobless” category, compared with just one-tenth across Europe

The economic and financial crisis has posed a stern test of many countries, though in Ireland, which enjoyed a boom for over a decade, the challenge was particularly stark. The scars are still there, but so are opportunities. Well-targeted, sensitive social policies can yield positive results. The scale of the economic and social shock that Ireland has experienced in recent years was one of the worst in OECD countries. GDP and average household disposable income fell by 16% peak to trough, while unemployment soared from a low of 3% in 2007 to a peak of 15% in 2012. A collapse in the construction sector and a banking crisis that rippled well beyond Irish shores left the Irish government unable to borrow in international bond markets. A €67.5 billion financial assistance plan was thrown as a lifeline from the troika of the EU, the European Central Bank and the International Monetary Fund. Tough


reforms and austerity were bitter pills to swallow by an electorate that took the brunt. It has been a long journey, with Ireland finally exiting the financial assistance programme in December 2013. Economic growth has accelerated to become the highest in the OECD, unemployment has fallen towards 9%, and public finances have improved ahead of forecasts. Nevertheless, the crisis has left deep scars. Recent research by the OECD found that one in six Irish-born people live outside Ireland, the highest rate of any OECD country. Since the onset of the recession in 2008, around 650 000 people have left Ireland, or about 13% of the current Irish population, far more than the population of any city outside Dublin. Those emigrating were mainly highly skilled and, perhaps surprisingly, employed, too. A 2013 study examined emigrants’ labour force status and reasons for emigration and found that

tend to earn a wage premium of 7%. But not everyone returns. The recent wave of emigration from Ireland has consisted of higher numbers of people over 30 than in the past, including people with children. This group may be less likely to return, and represents a cost to the government that had invested in their education. Moreover, there is a less visible, but nonetheless serious, social and psychological toll of migration to take into account, particularly on families. Households in rural areas were more likely to have experienced emigration recently, which may lead to the depletion of young people from rural areas. Emigration has also been linked to a decline in mental health among the mothers of emigrants. Economies take time to adjust to the skills gap emigrants leave behind. Luckily Ireland today is a labour market destination, and though migration to Ireland fell sharply at the onset of the recession, it continued during the recession with over 450 000 migrants arriving between 2008 and 2014. The integration of migrants and their children has become a policy priority, particularly in light of the current refugee crisis faced by Europe. Some 80% of migrant children are concentrated in 23% of schools,

a concentration that risks causing “ghettoisation” and slower integration into Irish society. A better jobs market would certainly be helpful. Despite falling unemployment, long-term unemployment remains high–close to 60% of the unemployed have been out of work for at least a year (see article by David Haugh). Research shows that being out of the labour market for extended periods can result in persistently lower wages and higher rates of unemployment in the future; indeed, getting the long-term unemployed back to work becomes harder the longer they remain out of work. Ireland has a high proportion of “jobless households”, where no one works, or works low hours only. Close to a quarter of Irish households fall into this category, compared with just one-tenth across Europe. Moreover, a recent report showed that the proportion of households with children reporting difficulty in making ends meet doubled from 31% to 61% between 2008 and 2011, which is not surprising given an average drop in household income of 16%. This economic strain has affected family relationships, with parents reporting more frequent arguments and lower relationship satisfaction. Research shows that financially stressed parents become less affectionate, while the deterioration of child-parent relationships is associated with higher child anxiety, poorer conduct and worse educational performance. Young adults have also suffered, which is a wide policy challenge, for as OECD research shows, what happens in the first 10 years of young people’s working lives affects not only their careers, but their personal circumstances and happiness, too. In Ireland, youth unemployment rose from 9% in 2007 to 30% in 2012. The Irish NEET rate–this stands for young people who are “Not in Employment, Education or Training”–doubled from 11% in 2007 to 22% in 2010. Underemployment is also an issue with 41% of those over 25 and 31% of those under 25 having no choice but

to work part-time. Clearly, it is becoming necessary to focus policy on the needs of young people, through labour market schemes, education and more. As writers in this edition argue, Ireland must work hard to stay on the innovative, globalisation wave. However, innovation should not apply just to the likes of finance, pharma or fibre optics. New skills in sharing and caring also matter,

The importance of social skills has never been greater both in support of other sectors and as generators of value. Recent EU research shows that four lower-skilled positions are created for every high-skilled position, as high-skilled workers increase the demand for child care, restaurants, leisure, etc. Research in Germany has shown how workers reacted to job losses by upgrading tasks that are difficult to offshore and improving interpersonal and multitasking skills. In fact, while technology may be automating routine jobs, the importance of social skills has



never been greater. Non-cognitive skills, such as agreeableness and perseverance, can be taught and acquired, and today, initiatives such as mentoring nurture these non-cognitive skills. In fact, given Ireland’s renowned culture of hospitality, policies aimed at developing “soft” skills in contemporary services could prove key in competing for investment in today’s weightless global economy. The identification and building of skills, both cognitive and non-cognitive, and providing an ever more attractive location for high-skilled workers, including returning emigrants and immigrants, will pave the way for Ireland’s future success. References OECD (2015), Economic Surveys: Ireland, OECD Publishing OECD (2015), OECD Skills Outlook 2015: Youth, Skills and Employability, OECD Publishing, Visit the OECD Migration Database at See also and

Order this now!

OECD Observer Spotlight January 2016



Migration: A flexible return ticket 25-44 year-olds, many of them leaving jobs. Despite this trend, since 2013 migration to Ireland has started to follow a less negative trend. In the 12 months to April 2015, 80 900 people emigrated from Ireland, a slight 1.2% drop on the previous year. Of that group, 35 300 were Irish nationals, down by 13% on the previous year.

©Phil Crean /Alamy Stock Photo

The numbers arriving have risen, with immigration in 2015 increasing for the third year in a row, up 14% in the last year to 69 300. However, just 12 100 of those

Nationals from outside the EU form the largest category of immigration

Today, bolstered by steady economic growth and an emerging confidence in Ireland’s future, the government is taking a new tack by fostering a bolder engagement towards emigration and the diaspora.

2006. There was a rise in positive net migration that year too, to 104 800. However, the crisis triggered a sharp reversal in migration flows with immigration suddenly halting in 2009 and emigration increasing.

Actively encouraging Irish nationals to come home, with key strategies for connecting with the Irish worldwide, is more than a wish, but is a central part of the government’s first paper on the subject, Global Irish: Ireland’s Diaspora Policy, issued in March 2015. As Enda Kenny, the Taoiseach (prime minister), writes in the foreword of the publication, the economy is “creating opportunities for our people here and we want them to be able to come home.”

Between 2010 and 2013, emigration levels of Irish nationals jumped from 28 900 to a peak of 50 900; more than 600 000 have left since 2008.

However, figures published by Ireland’s Central Statistics Office (CSO) in April 2015 suggest that while the trend is shifting favourably, a return to positive net migration among Irish nationals may still be some way off. At the peak of the Celtic Tiger in 2007, emigration among Irish nationals dropped to 12 900, while the number of Irish people returning home rose to 30 700, up from 18 900 in


“For the first time, during the Celtic Tiger if a person was born here they expected to work here. We felt we’d turned a corner, changed history. So forced emigration was the most emotive area of the 2008 recession,” says Alan Barrett of the Economic and Social Research Institute (ESRI). For him, the government’s innovative steps to mobilise its overseas workforce is a response to the changing nature and profile of the migrants who are flowing in and out of Ireland today. Until the 1990s, emigration was largely composed of the indigent and unskilled. Today college graduates and young professionals leave, while the average age has risen, too: rather than the 15-24-yearold group of yore, the new wave is led by

were Irish. In fact, nationals from outside the EU form the largest category, reaching 30 400 following a rise of nearly 20% on a year earlier. Indeed, as the economy continues to rally, it is largely thanks to strong net inflows of non-EU nationals that net negative migration has fallen so sharply in the last three years. The profile of foreign nationals coming to Ireland is also shifting towards more highly qualified people. When Microsoft’s Bill Gates chose Dublin in 1986 as the hub to localise his firm’s software for Europe, it attracted one of the first waves of foreign technology graduates to Ireland. Today, about a third of the company’s 1 100 staff in Dublin is non-Irish. However, this inflow of skills has not yet generated a sufficient “brain gain” to close some stubborn skills gaps, particularly in engineering, information technology, finance and health care. Also, a moratorium on recruitment to the public health sector during the crisis resulted in many qualified health and education professionals leaving. The construction industry has also been affected, with 17% of Irish emigrants having worked in the industry, including the likes of civil engineers,



Ireland’s global workforce While courses aimed at existing workers, such as through Springboard Courses, can plug some of this skills gap, a return of more Irish skills from abroad would be welcomed, too. “We will not achieve our target if we do not attract at least 100 000 people back home to take up jobs,” said Damien English, minister for skills, research and innovation, in a parliamentary discussion in May 2015 (see Recruitment drives have been launched, while firms like Grafton Recruitment and the Social House in Dublin hope to entice workers home with positive statistics, including an improving job market and rising salaries among returnees. Meanwhile, the government also has its work cut out to ensure Ireland provides new opportunities for people who have not left the country, in some cases deliberately standing their ground, as witness the “We’re Not Leaving” campaign in 2013. As articles in this edition show, policies are starting to pay off. By adopting the kind of policies recommended by the OECD to enhance innovation and promote more spillovers from Ireland’s cutting-edge sectors, emigration should once again become just another choice. Claire MacDonald References Barrett, Alan and Jean Goggin (2010), “Returning to the question of a wage premium for returning migrants”, National Institute Economic Review, Economic and Social Research Institute, Dublin Government of Ireland (2015), “Global Irish: Ireland’s Diaspora Policy”, Department of Foreign Affairs, March; see Glynn, Irial, Tomas Kelly and Piaras MacEinri (2013), Irish Emigration in an Age of Austerity, University College Cork, Cork Irish Abroad Unit, Department of Foreign Affairs and Trade, and UCD Clinton Institute (2015), Global Irish Civic Forum Report, UCD Clinton Institute, Dublin OECD (2015), OECD Economic Survey of Ireland, OECD Publishing Visit the Central Statistics Office’s website at

Argentines perform Irish dancing for Saint Patrick’s Day in Buenos Aires The writer James Joyce was unique in many ways, but when he left Ireland in 1904, he was joining a tradition of expatriate Irish writers. Difficulty publishing at home in what was then a conservative country was one reason for his departure: in his 1912 poem, “Gas from a burner”, he referred to Ireland as “This lovely land that always sent Her writers and artists to banishment.” But Joyce also declared that after his death “Dublin” would be found inscribed on his heart. Today the word “Joyce” is in turn inscribed in Ireland’s own heritage. Ireland’s diaspora, whether artistic or economic, is now seen as an asset to be harnessed, and today the government is actively engaging with the Irish abroad. As Ireland’s Taoiseach Enda Kenny once said, “The 5 million voices of this small nation are hugely amplified by the 70 million around the globe.” Ireland has the highest share of nationals living abroad among OECD countries, with around 17% of Irish-born persons aged 15 and over living overseas. The diaspora is a diverse body with no set profile. They work across a wide range of sectors, have different reasons for living outside Ireland, and are a mix of young and old. What they have in common is culture and identity, as expressed today through writing, dance and music, as well as business. The diaspora transcends borders, as the by now global celebration of Saint Patrick’s Day on 17 March demonstrates. Diaspora with historical ties and influence can be found emerging in countries as far-flung as Australia, where more than 2 million people claim Irish descent, to Argentina, where the navy was founded by Admiral William Brown from County Mayo in

©Daniel Garcia/AFP

architects and quantity surveyors.

the west of Ireland. The largest–and arguably most celebrated community–is in North America, with 35 million in the US claiming some Irish heritage and 4.5 million in Canada, about 14% of the total population, though only 150 000 or so are Irish-born in the US. Meanwhile, there is an enormous Irish-born population in the UK of over 600 000, and a quarter claiming Irish heritage. A small yet strong Irish community also took hold in France when Catholic landowners and merchants fled with their wealth and titles from the clutches of Oliver Cromwell in the 17th century. Even if emigrants stay abroad, connecting with this vast diaspora makes sense in today’s networked world, and Ireland now has a minister of state for diaspora affairs, Jimmy Deenihan. Ireland’s first official diaspora policy, Global Irish: Ireland’s Diaspora Policy, published in 2015, forms part of the evolving government drive to reach out, notably to graduates, with an alumni fund that aims to provide seed funding for collaborative initiatives. In November 2015 the fourth Global Irish Economic Forum in Dublin brought together this global Irish network, made up of over 350 of the most influential and innovative Irish business people based in 40 countries. Such gatherings have become more numerous in recent years, for just as Ireland’s crisis had global causes, it would have global solutions. Claire MacDonald Visit Government of Ireland (2015), “Global Irish: Ireland’s Diaspora Policy”, Department of Foreign Affairs, March; see

OECD Observer Spotlight January 2016


How do you measure

a Better Life? For nearly a decade, the OECD has been working to identify societal progress – ways that move us beyond GDP to examine the issues that impact people’s lives. The OECD’s Better Life Index is an interactive tool that invites the public to share their thoughts on what factors contribute to a better life and to compare well-being across different countries on a range of topics such as clean air, education, income and health. Over five million visitors from around the world have used the Better Life Index and more than 90 000 people have created and shared their personal Better Life Index with the OECD. This feedback has allowed us to identify life satisfaction, education and health as top well-being priorities. What is most important to you?

Create and share your Better Life Index with us at:

The OECD Better Life Index enables you to rate countries according to the importance you give 11 topics. Each petal of the flower represents one topic and the size of the petal the country’s rating for that topic.

Find out more about how life compares in OECD countries by ordering the book How’s Life? Measuring Well-Being. Available now on the OECD Online Bookshop:


The capacity conundrum attracted some business interest but stirred up protest too, with groups like Save Our Seafront pushing the issue into the political arena. As OECD reports have pointed out, cruise ships can bring revenue but major economic and environmental costs, too. Meanwhile, Ireland’s expanding multinational workforce has put pressure on office space and housing supply. As the giant tech companies expand, start-ups are finding it harder to pay the soaring rents for a spot in Silicon Docks. Rents are 12% higher than in 2007, making it one of the most expensive neighbourhoods in

New development must be balanced with environmental concerns

©David Rooney

the capital. Some are turning to appropriately innovative solutions, like young entrepreneur Graham Barker, who has started his own co-working space on a barge in the docks, right next to the giant tech firms; membership of offices costs from as little as €50 a month, and in some cases free for non-profit technology start-ups.

A growing economy means increased need for office space, housing and infrastructure. Can Ireland meet that demand? The Ireland of 2016 is much transformed in infrastructure terms compared with the Ireland of the 1990s. However, much of that transformation, in areas such as transport and telecommunications, was achieved before the crisis and with the economy growing again, bottlenecks are affecting some public services. These are not unusual during an economic recovery, but with public investment set to remain constrained, relieving the pressure will be a challenge. Take the semi-state operator Dublin Bus, whose fleet and budget were cut to match the falling numbers of passengers under austerity measures. Now demand is rising again, but the bus services simply cannot grow quickly enough to meet it. Passenger capacity is also an issue for Dublin Airport. Because Ireland is an island, its airports play a critical role in the economy, with the routes to London being among Europe’s busiest. Google cites the proximity of Dublin Airport to the city and the efficiency of the site as essential to its headquarters, for instance. According to a 2015 Dublin Airport Economic Impact Study, a second runway at Dublin Airport would enhance the connectivity of Ireland, and generate 31 200 jobs and €2.2 billion in gross value added by 2043. Keeping the costs down will be a concern for tax payers as well as airlines like Ryanair using the airport. Moreover, as local residents point out, airport development must be balanced with environmental concerns, such as land use, biodiversity, and air and noise pollution. Similar worries surround plans to boost capacity at seaports to accommodate cruise-ship tourism, a sector that the eastern area of Ireland is eyeing with interest. In Dun Laoghaire harbour near Dublin, which used to be a passenger terminal for ferries to the UK, a project to build new capacity berth for cruise ships has


Policies to take the heat out of high rents could help, and in May 2014, Dublin City Council gave the go-ahead for a major development of the docklands area that will include new office space and more than 2 500 homes. Nevertheless, the Industrial Development Authority (IDA), which promotes inward investment, reiterated its warning that a lack of suitable office space could detract foreign multinationals from investing in Dublin, losing out on thousands of jobs. Multinational company PayPal has no problem attracting people to Ireland, but has problems housing them. Its vice president of global operations, Louise Phelan, is asking staff to rent out rooms to new employees. She also points to other capacity issues, such as school places, healthcare and transport needs. “If we can’t deliver the aftercare, we can’t bring the jobs here,” she argues. Ms Phelan also believes that losing investment is a risk. The founders of Web Summit, which for several years has gathered the world’s leading IT geeks in Dublin, point to capacity constraints in their decision to relocate to Portugal in 2016. Clearly, today’s knowledge-based businesses are footloose, as are its workers, and constantly kitting up in terms of communications, hospitality, convention centres, accommodation and other support services is essential. Policy makers must lay the ground for this to happen lest Ireland become a victim of its own success. Claire MacDonald Visit, and Clarke, Rory (2005), “Cruising ahead”, in OECD Observer No 250, July, see Flanagan, Peter (2015), “PayPal asking its staff for spare rooms in rental crisis”,, 2 October, InterVISTAS Consulting Ltd. (2015), Dublin Airport “Economic Impact Study”, April, Patnaude, Art (2015), “Tech workers flock to Dublin’s Silicon Docks”, The Wall Street Journal, 28 May

At the heart of business in Ireland

The KPMG name and logo are registered trademarks or trademarks of KPMG International

The OECD Forum, held alongside the main, annual Ministerial Meeting provides a key opportunity to debate global policy issues with heads of government and international organisations, ministers, CEOs, academia, media and civil society leaders. Some of the policy challenges to be discussed in 2016 will be: • Inclusive Growth : migration, youth employment, gender equality and active ageing • Innovation: investment in people, productivity, knowledge and skills • Sustainability : follow up to COP21 and the new Sustainable Development Goals

Join us at OECD Forum 2016 and collaborate in the debates aimed to shape and improve the economic and social well-being of people around the world

OECD Observer Spotlight on Ireland January 2016  
OECD Observer Spotlight on Ireland January 2016