Ireland's Celtic Tiger 2005: Built to last or on a foundation of quicksand? finfacts

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bearishbull

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http://www.finfacts.com/irelandbusinessnews/publish/article_10004162.shtml


have to say im very downbeat on the prospects for the irish economy after reading the above article and other articles. who will be able to pay the current prices of houses when all the multinationals leave and the construction sector slows down and financial services sector moves.we are not investing anywhere near enough in r&d and in upskilling our workforce.millions of top graduates in asia are waiting to take the jobs from american and european workers for a fraction of the price.
 
Re: irish economy

I've just finished reading that article and it doesn't bode well for the irish economy. I'm working in one of these developing countries in a well know mulit national company..not on a fat 'expat' salary, but on a local wage. Approx 50% of my colleages have Masters degree, everyone has at least a 4 year college degree and everyone must be able to speak and write english. salaries here at about one quarter that of equlivalent jobs in Europe (US much higher again). Thats not taking into account all the benefits many compaies give in Europe - health insurace, user of gym etc. They all add up. So the nett cost to the company is much much lower.

At present there are 'hiring freezes' in europe while R&D (and production - but not only production) facilities are being expanded in India and China. Every major mulitnational has some office or research center in one of these two countries and they're increasing their head count. China especially is becoming more open, offering incentivces to companies in 'special development zone' of cities to locate there and this policy is definitely working.

Ireland has benefited from globalization in the past...but it's going to turn full circle unless ireland adapts and evolves its policies and focus. Asia used to be the sweatshop of the world - and in parts it always will be - but higher level, high tech work is being done in asia too. Why pay someone 50000 euro to do a job in ireland, when someone in china will do it for 10000 (and remember the average salary in china is less than 1000 euro a year - so 10000 euro/year gives you a very good standard of living there). In 10 years the world might look very different.
 
Re: irish economy

qingdao, interseting to get a first hand account of this phenomenon, Ive read alot about this trend. I think when ireland looks back at the last 10 years it will ask the question why with all the technology companies currently in the country did ireland not develop a significant indiginos industry. Afterall that is what the chinese and indians are at now they are developing their own indiginous capacity. That is also the big fear in the us, that they will leapfrog ahead of them and steal some of their ideas.
 
Re: irish economy

Yeah - we would have gotten away with it if it wasn't for those pesky foreigners!
joe sod said:
why with all the technology companies currently in the country did ireland not develop a significant indiginos industry. Afterall that is what the chinese and indians are at now they are developing their own indiginous capacity. That is also the big fear in the us, that they will leapfrog ahead of them and steal some of their ideas.
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According to the ICT sector contributed 11.6% to Gross Domestic Product (i.e. this excludes much of the "multinational" earnings that are counted in Gross National Product) in 2000 compared to an EU average of 5.1%. This sounds significant to me even allowing for some readjustment since the period to which this data refers.
 
Re: irish economy

qingdao said:
Why pay someone 50000 euro to do a job in ireland, when someone in china will do it for 10000 (and remember the average salary in china is less than 1000 euro a year - so 10000 euro/year gives you a very good standard of living there).
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Why indeed?

Ireland benefited from this phenomenon (the desire for business to increase profits by lowering costs) in the past with our educated yet cheap workforce. combined with generous tax breaks. Then we raised the bar with low corporate tax rates, encouraging many US and other multinationals to HQ their European (EMEA even) subsidiaries here. We don't have the cheap workers anymore, but we still have the tax incentives -- plus we speak English, which helps. Ironically, the fact that we speak ONLY English (one of the lowest scores in the EU for language capacity) will be a big problem for us in the future as we struggle to cope with a burgeoning Asia, and as we move more of our own "indigenous" operations over there.
 
Re: irish economy

NEC announcement yesterday - 350 microelectronics/semiconductior jobs going - how long will it be before others in the same industry follow suit. IBM, Intel, Analog Devices..these are all big employers who have to be facing the same problems that NEC faced. As their Asian operations get up to speed and increase capacity its only a matter of time.
 
Re: irish economy

Hmm, all good points. However, one fact I feel commentators ignore, or forget, constantly when talking about China is the fact that it is a Communist dictatorship.

I could be wrong, but I don't recall any significant Communist country in the past managing a smooth transition to a market economy. The Chinese government is straining to control the population - eventually the people will snap, just as they did in E. Germany, Soviet Union, Romania and all the other Communist countries.

It is very easy to run a low-cost economy when wages, living standards, health care, supply and demand, hell, even free speech, are set by a ruling elite answerable to no-one but themselves.
 
Re: irish economy

Sherman said:
Hmm, all good points. However, one fact I feel commentators ignore, or forget, constantly when talking about China is the fact that it is a Communist dictatorship.

I could be wrong, but I don't recall any significant Communist country in the past managing a smooth transition to a market economy. The Chinese government is straining to control the population - eventually the people will snap, just as they did in E. Germany, Soviet Union, Romania and all the other Communist countries.

It is very easy to run a low-cost economy when wages, living standards, health care, supply and demand, hell, even free speech, are set by a ruling elite answerable to no-one but themselves.
Click to expand...
yeah but even without communist china theres plenty of very cheap democracies to operate in such as india-one billion people,well educated and english speaking etc
 
I think china is a communist country in name only.If you arrived in any city on the east coast, and didnt know anything about the government you'd think you were in one of the most capitalist places on earth. I live in city of 4 million people, a place that i never even heard of before i came here. There are ferrarri, bentley , porsche dealerships, guicci, prada, armani shops...and they're all doing great business. So many chinese people are looking to try and start their own business and get rich...and the governement is encouraging it. Its a place full of contradictions...economically and socially it's an experiment, the result of which no one can predict.

The companies who already have invested in china have considered that the government is a 'communist dictatorship' and still invested billions. its a calculated risk...maybe even an advantage in many ways. things will be relatively stable, as long as there isnt a revolution, there wont be change of government and a u turn in government policys...and they know who to bribe if they have to. I'm sure when Chavez in venezuala or lula in brazil came in to power, with a real socialist agenda, companies invested there started to worry.

As for the government controlling everything, thats not really true. the market decides wages and living standard after that. if you have an IT degree you can get paid 700 euro/month after you graduate. English degree.maybe 200/month. no degree..you'd be lucky to get 60/month. companies know how much your worth to them and will pay accordingly. health care..if you have no money you wont get any...a bit like the US. China is not cuba where (i think) everyone gets the same wage regardless of your job...free healthcare, education ...i dont know much about cuba. free speech is another issue in itself and one foreign companies don't seem to be too concerned about (microsoft, yahoo, google etc.)


the biggest threat to stability in china is the widening gap between rich and poor. The 'peasants' (i don't like the word..but its what's used) will only sit back for so long and watch the other 300 million get wealthy while they're stuck living in the dark ages. Unless the chinese government seriously tackle this issue its going to explode.

Deng Xiaoping, the chinese leader most young people here would look up to much more than Mao, said 'to be rich is to be glorious'. i don't think he was quoting the communist manifesto when he said it.


sorry for length of my rant ....
 
things will be relatively stable, as long as there isnt a revolution, there wont be change of government and a u turn in government policys
Click to expand...

Famous last words...
 
qingdao said:
I think china is a communist country in name only.If you arrived in any city on the east coast, and didnt know anything about the government you'd think you were in one of the most capitalist places on earth. I live in city of 4 million people, a place that i never even heard of before i came here. There are ferrarri, bentley , porsche dealerships, guicci, prada, armani shops...and they're all doing great business. So many chinese people are looking to try and start their own business and get rich...and the governement is encouraging it. Its a place full of contradictions...economically and socially it's experiment, the result of which no one can predict.

The companies who already have invested in china have considered that the government is a 'communist dictatorship' and still invested billions. its a calculated risk...maybe even an advantage in many ways. things will be relatively stable, as long as there isnt a revolution, there wont be change of government and a u turn in government policys...and they know who to bribe if they have to. I'm sure when Chavez in venezuala or lula in brazil came in to power, with a real socialist agenda, companies invested there started to worry.

As for the government controlling everything, thats not really true. the market decides wages and living standard after that. if you have an IT degree you can get paid 700 euro/month after you graduate. English degree.maybe 200/month. no degree..you'd be lucky to get 60/month. companies know how much your worth to them and will pay accordingly. health care..if you have no money you wont get any...a bit like the US. China is not cuba where (i think) everyone gets the same wage regardless of your job...free healthcare, education ...i dont know much about cuba. free speech is another issue in itself and one foreign companies don't seem to be too concerned about (microsoft, yahoo, google etc.)


the biggest threat to stability in china is the widening gap between rich and poor. The 'peasants' (i don't like the word..but its what's used) will only sit back for so long and watch the other 300 million get wealthy while they're stuck living in the dark ages. Unless the chinese government seriously tackle this issue its going to explode.

Deng Xiaoping, the chinese leader most young people here would look up to much more than Mao, said 'to be rich is to be glorious'. i don't think he was quoting the communist manifesto when he said it.


sorry for length of my rant ....
Click to expand...
good post.
 
China can build companies in much the same way that Japan did in the 1950's. They can pump state money into private companies and cut them loose when they are big enough. If you look at the way Sony way founded it would break all sorts of laws in the EU today. In short it would never have existed if Japan in the 50's has the same set up that the EU has now. Regulation and a fair society do not lend themselves to the birth of corporate giants.
 
Purple said:
China can build companies in much the same way that Japan did in the 1950's. They can pump state money into private companies and cut them loose when they are big enough. If you look at the way Sony way founded it would break all sorts of laws in the EU today. In short it would never have existed if Japan in the 50's has the same set up that the EU has now. Regulation and a fair society do not lend themselves to the birth of corporate giants.
Click to expand...

all the american giants were born in a regulated market.
 
Re: irish economy

Sherman said:
I could be wrong, but I don't recall any significant Communist country in the past managing a smooth transition to a market economy.
Click to expand...

China already is a market economy. I think you are confusing poitics with economics here. Whether the political system holds fast during a severe slowdown is another matter.
 
If it's a market economy then it certainly is not a free market economy given the amount of regulation the Communist government still imposes. In this respect Sherman has a point.
 
Re: Ireland's Celtic Tiger 2005: Built to last or on a foundation of quicksand? finfa

ClubMan said:
If it's a market economy then it certainly is not a free market economy given the amount of regulation the Communist government still imposes. In this respect Sherman has a point.
Click to expand...

I don't really agree. A certain amount of regulation is to be expected and normal in free market economies. Granted, in the case of China, there may be a lot more regulation than say Ireland or wherever. The point is that the economy is no longer centrally planned by the communist party as before and markets are now encouraged by the state. In reality, there is no such thing as a true free market economy.
 
Yesterday in the Sunday Times Austin Hughes Economist with IIB claimed that the BIG number used by the likes of Mc Williams in the SBP and by D. Kiberd for whom he substituted is grossly misread. He said that the €260 bn Private Sector Credit mountain which scares everyone is largely comprised of corporate borrowing from IFSC based firms and that the core debt by consumers is more like €100 bn. If true I'm flabbergasted at the basic error contained in the analyses by respected economists. Who is right because the conclusions are poles apart?
 
Ric said:
Yesterday in the Sunday Times Austin Hughes Economist with IIB claimed that the BIG number used by the likes of Mc Williams in the SBP and by D. Kiberd for whom he substituted is grossly misread. He said that the €260 bn Private Sector Credit mountain which scares everyone is largely comprised of corporate borrowing from IFSC based firms and that the core debt by consumers is more like €100 bn. If true I'm flabbergasted at the basic error contained in the analyses by respected economists. Who is right because the conclusions are poles apart?
Click to expand...

Here's the link to the Central Bank article which gets to the €258bn number - it would certainly appear that McWilliams is closer to the truth in that it is very hard to say that the "other" €143bn (Personal Sector is about €115m) can be ignored as a lot of it appears to be construction related as well. At least €50m should definitely be included (real estate and construction debt).

[broken link removed]

The growth in some of these figures and the overall growth of construction-related credit (bottom of last page in link) as a share of overall debt in the economy are really quite scary.
 
Thanks Neffa, I looked at the data but it's hard to decipher. In broad brush stroke terms how much of the c.260bn is consumer credit?
 
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