Ireland: Global financial services drove urban renewal
ONE of the most important presen-tations in Jamaica this year was on Friday by Eisenhower fellow Dan Flinter, former executive director of Irish Development Agency (IDA) Ireland (the equivalent of JAMPRO), and former
chief executive of
Mr Flinter had been invited to Jamaica to talk about "Economic Develop-ment Strategy with a focus on job creation" by Morin Seymour, the indefatigable head
of Kingston Restoration Company (KRC) Limited, himself an Eisenhower fellow, in partnership with the Francis Kennedy-led Jamaica Chamber of Commerce, who like the KRC, sees the revival of downtown Kingston as a key part of their mission.
Interestingly, the Eisenhower Fellowships, named after
US President Dwight Eisenhower, are now
chaired by retired General Colin Powell.
Flinter started by noting
that despite their current difficulties, between 1970 and 2009 Irish GDP had grown five fold, while exports had grown 30 fold. Between 1985 and 2010, employment had also increased by 70 per cent from 1.09 million to 1.86 million. Noting that the driver of growth for a small open economy had to be exports, he observed this had required radical change, including the destruction of quite a
number of industries, along with the creation of lots of
One of the key new industries created was in international financial services. Flinter outlined the tremen-dous economic impact the creation of an International Financial Services Centre (IFSC) in Dublin's Docklands had on an isolated no go area characterised by dereliction, economic deprivation and educational disadvantage.
Currently, over 35,000 people are employed in the industry (25,000 in Dublin alone) in 460 companies resulting in payroll and personal tax receipts of ¤713m per annum (approxi-mately ¤500m in Dublin). The industry now contributes 7.4 per cent of Irish GDP and over ¤2bn to the Irish Exchequer, including 36 per cent of corporation tax receipts in Ireland. In 2006, the corporation tax yield from IFSC companies alone was (euro)1,118 million.
In addition to 1,500 homes built in the area, over 40,000 jobs have been provided across a range of business sectors in the Docklands. The quality of employment in the area is considered extremely high with the average salary in the IFSC at ¤60,000. In addition, over 87 per cent of employees in the IFSC were university graduates. Between 1999 and 2006, total service exports in the IFSC grew by 167 per cent, and the IFSC accounted for 0.83 per cent of all service exports globally.
The IFSC was established by state public policy, with the prime minister stating this must happen, using an
underutilised site in public ownership. The context for the IFSC's creation was a new government in 1987 facing severe cutbacks in public expenditure, with the obvious depressing effect on the economy, and with an urgent need to create employment. This revolutionary idea was driven internationally by a Government-appointed task force in conjunction with the IDA. The first planning scheme, the Custom House Docks Planning Scheme, was prepared in 1987 to guide physical regeneration of the area. It was a partnership in which Government incentives provided the catalyst to encourage private enterprise.
The prime minister appointed a task force of three "wise men", including the former head of the Central Bank, to market a centre of "substance" and not a "brass plate" operation. The three wise men secured commitments from AIB (Allied Irish Bank), Bank of Ireland and Dermot Desmond for the first three buildings in 1989 which helped kick-start interest in the IFSC. By late 1989, commitments had been received from 39 institutions including Citibank.
The government created a "clearing house" with the authority to deal with any obstacles that came up in creating the IFSC. They established a competitive tax structure, initially 10 per cent, for the internationally traded services located within the IFSC (ring fenced to avoid leakage of existing corporate tax revenues), and identified a dedicated, target-driven team of executives to identify, approach and persuade potential clients. The approach was entirely driven by what the market place wanted, as the executives kept feeding back what the market required, with changes to the offering following quickly.
At all times, the creation of the IFSC was a coalition between the public and private sector, and there was a licensing agreement that governed the arrangements with companies, ensuring
that tax concessions were
only given to reputable organisations.
The initial years were very challenging, as for the first three years, they were selling buildings that had not yet been built, and initially companies had to do business outside of the geographical area of the centre. Not only did Dublin have no position in the international financial services market place, it also had no obvious unique selling position (USP), and faced heavy competition from the established financial centres in London and Frankfurt,
as well as significant internal resistance.
It worked because it was established as a key
cornerstone of public policy, with an initial vision that was bold but limited, with clear responsibility for delivery of targets "a civil servant's career was on line if itdidn't happen", and a speedy response to any emerging issues.
The expectations for the IFSC were met but not in the way expected. For example, they had expected a small number of large projects, but instead secured a large number of small projects. In retrospect, it was unrealistic to expect international banks to
put a large team in an unproven project. Instead, they saw
a lot of small three or four-
Initially, the key issue was not price (wages for a small team is not a deciding factor in their location), but reputation and governance, building confidence in areas such as the consistency of government policy, and developing new skill sets in legal and financial firms. Eventually, the education system also responded, and legal and financial firms relocated to the IFSC.
The key lesson was that the IFSC was not originally a concept about large-scale urban renewal, but an economic driver of job creation. The emphasis on urban renewal came later with the passing of the Urban Renewal Act of 1996.