National Competitiveness Council Report

The National Competitiveness Council is a social partnership body set up in 1997. It “reports to the Taoiseach on key competitiveness issues facing the Irish economy and makes recommendations on policy actions to enhance Ireland’s competitive position.” As with all such bodies, the Council members are the usual smorgasbord of trade unionists, business and financial interests and civil servants, chaired by a safe pair of hands in the form of a former senior civil servant.

Today, the NCC released a report titled Getting Fit Again: The Short Term Priorities for Restoring Ireland’s Competitiveness. You can find it here.

The report makes various recommendations to the government. Some of them—like introducing a property tax, reforming the public sector and, uh, resolving the banking crisis—are generic and would be agreed with by the vast majority of economists and other bodies advising the government. A picky person like myself will find something to disagree with (such as the recommendation to prioritise capital spending) but most of it is fairly unobjectionable.

But that’s the problem. By and large, the report looks and reads like exactly what you’d expect from a body of this type. It’s a glossy and somewhat bland document that does not in any way challenge entrenched government positions (for instance, the document regularly pauses to praise the Smart Economy plan, which most informed economists that I’ve spoken with consider to be an excellent example of Emperor’s New Clothes).

There’s plenty of evidence to show that I’m not the world’s biggest fan of the Blueshirts. But on this issue, I was reminded of a passage from their Streamlining Government document. The FG document pointed out that social partnership

has given rise to the creation of new state agencies. For example, the desire of unions to show that they were using the social partnership system to assist their members who could not afford a home during the housing boom gave rise to the Affordable Housing Partnership (AHP). Unfortunately, it has not given rise to many affordable houses.

In a similar vein, business and corporate interests were given the National Competitiveness Council (NCC) so that they could tell their members that the social partnership process was being used to address Ireland’s loss of economic competitiveness. In reality, our competitiveness has continued to decline. When it comes to housing and competitiveness, we do not need more agencies, what we really need is the right policies and ministers who will to implement them.

The NCC believe the government should cut current expenditure. I reckon that eliminating their budget would be a good place to start.

13 thoughts on “National Competitiveness Council Report”

  1. @Karl
    In the absence of a minority report, we’re never going to know what individual council members have (or have not) contributed to debate.

    On less politically polarising issues the NCC have produced some fine work. Their report on education and training was as uncomfortable for teachers as it was for the Department of Education — a famously rare alignment.

    Committees are the enemy of many things — ask any camel — but leadership, originality and meaning are all potential victims. We don’t ask the Supreme Court to find consensus on all matters, so perhaps the NCC shouldn’t aspire to it either?

  2. I’m clearly biased in this area, having worked as Economist for the NCC for a while, but I think a couple of points are appropriate:

    1. The NCC’s budget is tiny. I think there are two posts, neither at a senior level, associated with it. To the best of my knowledge, everyone on the Committee is voluntary, and members don’t get expenses.

    2. If it didn’t exist, the research that is currently done for it would have to be done by Forfas or if Forfas didn’t exist someone else in the system anyway.

    3. The Council’s Annual Competitiveness Report may not be the most hard-hitting of reports, but that’s never going to happen when you bring a wide-ranging set of interests around one table. It does have something most think-tanks would kill for. Its recommendations are put to the Cabinet and a mid-year review takes place, to see where progress is on each recommendation. Nothing compulsory mind you, but still something.

    4. I’ll finish with a standard debating trick, reaching the exact opposite conclusion! Surely the fact that the NCC was ignored precisely when we needed it most (the 2003-2006 period, when something could have been done) shows that it should be given even greater powers to ensure we don’t make the same mistakes again.

  3. @Ronan

    Are you still sticking to your theory that the good performance by Irish merchandise exports in early 2009 reflects nothing more than a closing-down sale by manufacturing companies in Ireland?

    When I posted the merchandise exports figures for January and February here a couple of months ago, I pointed out that in those months they had fallen by 0.4% y-o-y in Ireland versus, typically, 20% to 25% in other EU countries.

    Your reply was, that while you hoped I was right, you believed that they simply reflected a closing-down sale or clear-out by manufacturing companies in Ireland, and that merchandise exports would soon start to fall. You were backed up in this belief by several other posters (include that eternal pessimist, Michael Hennigan). The only one taking the same view as myself was Ronnie O’Toole.

    Since then, the March and April (yesterday) merchandise exports figures have been published. Far from falling, merchandise exports from Ireland actually improved significantly on their allready-good January and February performance. In March and April combined, merchandise exports increased y-o-y by 7.2% (bringing the overall y-o-y increase in the first four months of 2009 to 3.3%), versus again, typically, 20% to 25% falls in other EU countries. In Germany they were down y-o-y by 28% in April alone, versus a 12% rise in Ireland. As far as I know, Ireland is the only EU country, possibly the only developed country, currently recording a y-o-y increase in merchandise exports in the first four months of 2009. In nearly every other developed country, they are down 20% to 25%, even 30%, y-o-y in the first four months of 2009.

    So, do you now accept that merchandise exports from Ireland actually are doing exceptionally well in the circumstances (global recession), or is the ‘closing-down sale’ theory still your preferred one? If so, when may we expect this closing-down sale to end and exports from Ireland start to show the same level of falls all other EU (and many non-EU) countries are experiencing? Do you not think that, if German exports fall 28% y-o-y in April and Ireland’s exports rise 12% y-o-y in the same month, then the theory that Ireland is very uncompetitive relative to Germany should be questioned?

  4. Hi John,

    My position is still the same but as every month goes on, I’m happily inching towards your view – such should be the response of anyone using evidence to inform their view, I would have thought.

    I would recommend vigilance rather than hubris, however, and while Ireland’s export performance has certainly been excellent in international comparison (as the NCC’s report itself pointed out), I would make two comments:

    1. Exports grew €355.5m in Q109 compared to Q108. €354.7m of this came from ‘Other’ and ‘Not classified’. What does that say?

    2. A €1.4bn increase in pharma exports was offset by a €1.2bn fall in machinery (and €0.2bn fall in food exports). It is my understanding – and I’m open to correction – that many of Ireland’s best-selling drug exports have patents that expire in the next 24 months, so again we should be vigilant about future export growth. Does anyone know whether we will also be exporting the generics?

  5. It’s probably also worth considering, as per Colm McCarthy’s post, the 12% decline in employment in Industry since Q1’07 with about half of this occurring in the past two quarters alone (Q1’09 and Q4’08)

  6. I’m sick of the focus on headline goods export figures and yesterday, one economist who should have known better termed the export performance “remarkable.”

    So it was fodder for Mary Coughlan and her sidekick Billy Kelleher who both lauded the good news in statements, while as usual conflating exports from the mainly US-owned sector and the rest.

    Two years ago, Coughlan’s predecessor claimed “Irish companies” were leading the export drive in China, when Irish-owned companies were responsible for 7% of Irish exports to China.

    A few years ago a minister was bragging about increased sales to the Philippines but they may have been transshipments via the Subic Bay freeport; should we be excited about the 20% rise in exports to Belgium in April – another big shipment hub?; second-hand aircraft also helped the figures while the drop of 37% in exports to Malaysia maybe just a timing factor in Intel’s shipments.

    We have lost jobs in for example computers but the rise in chemical exports has not resulted in any big increase in sector payroll. Batch processing could be ramped up without any corresponding rise in non-material costs.

    The NCC fell for the political spoof and referred to the importance of expanding export markets, as if we had some control of the sector, when most US companies in Ireland do not have marketing/ sales functions there.

    The challenges faced by indigenous exporters are very different to those of the multinational sector.

    It’s good that the multinational sector is doing well at present but blather from armchair “experts” on the so-called “smart economy” and the importance of the export sector, adds nothing to an understanding of the issue.

    As with the political use of announcements on as low as 10 “high calibre” jobs, when in contrast, the loss of thousands are losing jobs each week is an unremarkable event, it’s time for economists to call spin and marketing spoof what it is.

    @John

    Eternal pessimist?

    I suppose I left a secure pensionable job to pursue my pessimism!

    I have worked directly in sales and manufacturing companies and I have lived in market sectors such as the Middle East and Asia.

    All that of course doesn’t mean I have an exalted opinion of my opinions!

    John, you were likely a cheerleader of Bertie when he was wondering why people like me didn’t commit suicide!

    You’re likely not a current victim of his recklessness and that of his band of poltroons.

    Ronald Reagan used to say about Soviet disarmament: “Trust but verify.”
    I don’t trust but I do try to verify and this week, I have been trying to reconcile the claims of 2 State agencies: Science Foundation Ireland, which says it had 8 spin-outs from third level research since 2002 while Enterprise Ireland claims 100. More of that anon.

    What is a “new export order”?

    On March 16th in the US, Brian Cowen announced the winning of “new” orders of over €100m during a 2-day trade mission.

    EI subsequently told me the so-called “new” orders data dated back over the previous 6-month period.

    Maybe a sceptic rather than pessimist?

  7. @Ronan

    This argument that patents are expiring is a general industry wide one I think, and not specific to Ireland (that I am aware of). This hurts patent holders, not manufacturers (which we are). The expiration of a patent results in a massive expansion of production of that drug, so I am not sure why this is sometimes (tho not by you) presented as a negative. We do have a number of generic manufacturers based in Ireland, some Irish owned. The point is that just because they are generic, doesn’t mean they become yellow-pack operations. The FDA doesn’t care whether they are under patent or not when it comes to quality. However this debate would benefit from a real pharma expert as this is largely conjecture.

    @Michael
    Your post contains lots of stuff politicians have said. It is unfair to use these against any economist just because they believe that Ireland is a competitive economy. Your only substantive comment is that electronics job losses have bot been relaced elsewhere. What is true that we never retained the hyper dot com peak in 2001/2002, though our employment level in 2008 is still higher than this time a decade ago, and there is no evidence of a secular decline in employment levels. It is natural that as we reached full employment in 2000 and beyond, focus switched away from job numbers to job quality.

    @General:
    The one NCC document that everyone missed was on cities in April. It is classic NCC, maybe fudged a little not to offend anyone, but otherwise making a very clear, distinct and correct point that we have neglected our urban areas in the name of ‘spatial democracy’. Disclosure: I used to work in the NCC too …. hi ronan…..

  8. I don’t really buy the argument that non-chemicals exports from Ireland are doing badly in the current global downturn. There is, of course, no reason why chemicals should be excluded from the figures. Its like saying Manchester United wouldn’t have won the Premiership without Ronaldo and that his goals should be excluded when making comparisons with other teams. Other countries also have chemicals exports sectors. Just as a statistical exercise, however, I have looked at how Ireland would fare in comparison with other EU countries if chemicals were excluded from Ireland’s exports.

    The following tables shows the y-o-y changes in the VALUE of goods exports in 2009 Q1 (against 2008 Q1) for all EU countries that have so far reported. Two figures are given for Ireland: one including chemicals exports (marked INC) and one excluding chemicals exports (marked EXC). The figures for the other countries are for all exports, as I couldn’t obtain the data to do two separate sets of figures for them.

    Ireland[INC] +1.7%
    Ireland[EXC] -9.8%
    Greece -12.6%
    Austria -14.3%
    Netherlands -19.2%
    France -20.1%
    Germany -21.6%
    Slovakia -21.6%
    Italy -21.9%
    Spain -22.8%
    U. Kingdom -23.4%
    Latvia -24.2%
    Czech Republic -24.7%
    Lithuania -25.2%
    Estonia -26.6%
    Malta -26.8%
    Portugal -27.1%
    Finland -34.5%

    EU15 -21.4%
    EU27 -21.8%

    So, even if chemicals are excluded, Ireland is still doing better than any other EU country. Bear in mind that these are the figures for 2009 Q1 when the Euro was at 95p sterling. Its since dropped to 85p sterling. The overall April figures for Ireland are much better than shown in the table for the January to March period, but no sectoral breakdown is available yet. However, in the latest month for which we have a sectoral breakdown, Ireland’s chemicals exports were up +25.4% y-o-y and the y-o-y fall in non-chemicals exports was just -0.5%. The April figures should be better even than those, once the sectoral breakdown is published.

    I also don’t buy the argument that other countries’ falls can be attributed to problems in the motor industry. For some, it can. But, many do not have a motor industry, yet are still showing 25% y-o-y falls in exports in 2009 Q1. Interesting to note also that Finland is the worst performer. Its exports in 2009 Q1 were down 34.5% on 2008 Q1 (compared with Ireland’s 1.7% rise). The NCC report last autumn lauded Finland as the example Ireland should follow to be a successful exporting country.

  9. Quick one before the weekend! Is there a potential elephant in the room here? Ireland has always (well in recent years) had a merchandise surplus, driven by MNC sectors, and a services deficit, driven by royalties, licences and “inter-affiliate management charges”.

    If, as some contend, this patterns of exports and unusual services imports is being driven by transfer pricing, could Ireland’s unusual exports performance in 2009 so far be driven by MNC accounting practices? Will we have to wait for updated BoP statistics from the CSO to even have an indication?

    For the record, the 2008 figures look distinctly odd. Imports of royalties+misc. business services increased 10% from €34.8bn to €38.1bn. Other services imports rose 1.6% to €34.3bn, while merchandise imports fell 11%.

  10. Don Thornhill seems not to fit into the mould of the other mandarins. But he may get a swollen head if I continue to praise him ……

    He and the rest of the NCC will find this site most welcoming! Dish the dirt! Call yourselves Mao Ze Dong if you wish!

    @ Ronan
    There is a greater incentive now for such despicable practices, but the Revenue Commissioners are obliged by the standard DTA, to co-operate with the IRS and others, should the IRS start an investigation into transfer pricing. (I so so crease myself!)

    They need cash flow more now as lending has stopped. Some nonsense about US banks being bankrupt ……. Probably correct to think profitability has increased and will do so?

  11. Ronan:

    This is to a degree true, though I’m not so sure of envoking the tranfer pricing black box. The switch from electronics to pharma is likely to flatter the goods balance somewhat, as pharma uses less goods imports, and more services imports, so a switch to more pharam exports results in an expanded goods surplus and services deficit. The rise in pharma exports in 2009 is likely to be c€5bn, similar to the fall in electronics, so this switch of imported intermediates could be around €2bn this year (a guess). This is non-negligible, but with a goods balance of perhaps €40bn+ this year, this doesn’t change the overall picture.

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