Maybe it is a case of rags to riches and back to rags again. How did Ireland, a poor European country, transform itself from being backward to being an economic tiger and then back to being in the economic doldrums? How could this be a lesson for T&T? These are some of the questions raised by Roger Acton, regional director, Europe and the Americas, Association of Chartered Certified Accountants (ACCA), who spoke two Tuesdays ago at a seminar entitled, The Irish Experience. The seminar, hosted by ACCA Caribbean, was held at the Courtyard by Marriott hotel, Audrey Jeffers Highway.
Drawing on the Irish experience, Acton said diversification is important if T&T is to transform its economy. "It is agreed that you do have to diversify and you can't have all your eggs in one basket. Emphasise education that leads to research and development, and this leads to investment and higher end technologies, and those technologies are the ones that bring greater value to societies." Being a small island state could have its drawbacks because there is a smaller pool of talent to choose from. "I think there is a resilience from being an island and I think there is an interdependency among the people that is always good.
But it also brings a danger because you have a shallower pool of talent to fish from, so you tend to see the same people emerging in different positions, so it's a question of the same people wearing different hats," he said. Acton said this could lead to problems with transparency. "That's not necessarily a problem. In Ireland, we didn't address the dangers that associated with that. It's where good governance comes into place. You have to ensure that you have good rules and clear and transparent rules around behaviour. Once you have that in place, those dangers become mitigated."
The Irish cycle
Acton described Ireland as being conservative, backward-looking and socially rigid for most of the 20th century. Ireland in the 1960s decided to move away from its protectionist economic policies and, by 1973, had entered the European Union (EU). By this time, Ireland had begun opening up its markets, introduced universal education and reduced the role of trade unions in the workplace, thereby reducing industrial action. Acton said Ireland's success was not only due to government initiative, but also help from the EU. In 1992, the EU agreed on a package of £6 billion to assist Ireland in its development.
"This funding was critical for investment into Ireland's infrastructure, like railroads, drainage schemes and bridge building." By the 1990s, things were moving upwards for Ireland as people were returning to Ireland instead of emigrating, and there was an emphasis on high-tech industries and financial services. "The international financial services Centre in Dublin continued to grow to a situation where there were over 430 operations approved to trade at the Ireland International Financial Service Centre (IFSC)." Despite this, there were some "storm clouds" that were beginning to grow, which, he said, could have been seen by 2007.
"Economists warned that there should be greater diversification. Over 25 per cent of economic activity was tied up in the construction centre. Our tax base was way too narrow. Congestion in our cities was a problem. The costs of doing business was too high." There was also a need for greater regulation of Ireland's banking system. "Banks were offering its customers 100 per cent loan approvals and some were interest only loans despite historically low interest rates. Nobody was paying anything back." By 2008, disaster struck. The global economic crisis made matters worse. "Irish banks were exposed to property market that had overheated. The Irish banks were heavily reliant on the international markets and, as liquidity dried up, so to did capacity to function," he said.
Lessons learnt from crisis
There are lessons to be learnt from Ireland's experiences. "I think even if we didn't have the banking crisis, Ireland would be in recession, but for a short period. We didn't widen our tax base enough so that our tax revenues were predicated upon the construction industry, either on property transactions, which is our income taxes base, or people working in the construction industry. "Once that industry went flat, the revenues went south and it did not mean that government continued spending at the high level.
If government is going to maintain and not keep a lid on its cost, it has to ensure that there is a wide enough tax base and to deliver on those costs, and they did not do that," he said. He said there is a lot of anger by the Irish people over what has happened. "I think we have to get a lot of anger out of the system. We need clarity around the restructuring loans around the European Central Bank, the EU and the International Monetary Fund (IMF)." Acton spoke of the resilience of the Irish people.
"I think we need confidence back in the economy and confidence in ourselves. We're still an educated people, we're good traders, we are innovative and creative. I believe we'll get out of it." He believes that T&T and Ireland should work together because of historical links. "This is my third trip to Trinidad in 12 months. One thing I realise is the close links on the education side. It would not be unreasonable to see how education and research could be reactivated. There is historical links between the countries on education," Acton said.