CROSS-BORDER ECONOMIC RENEWAL Rethinking Regional Policy in Ireland
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Antrim Derry Donegal Tyrone Down Fermanagh Armagh Sligo Monaghan Leitrim The Centre for Cross Border Studies Cavan 39 Abbey Street, Armagh BT61 7EB Louth Northern Ireland Tel: +44 (0)28 3751 1550 Fax: +44 (0)28 3751 1721 (048 from the Republic of Ireland) Website: www.crossborder.ie CROSS-BORDER ECONOMIC RENEWAL Rethinking Regional Policy in Ireland John Bradley and Michael Best March 2012 This research project has received financial support from the EU INTERREG IVA Programme, managed by the Special EU Programmes Body CROSS-BORDER ECONOMIC RENEWAL Rethinking Regional Policy in Ireland John Bradley and Michael Best March 2012 1 Table of Acronyms NIEC Northern Ireland Economic Council NIERC Northern Ireland Economic Research Centre ABT An Bord Trachtala (Irish Trade Board) NUTS Nomenclature of Territorial Units for BAA British Airports Authority Statistics (EU) BDZ Border Development Zone OECD Organisation for Economic Co-operation CAD/CAM Computer Aided Design/Manufacturing and Development CBI Confederation of British Industry ONS Office for National Statistics (UK) CCBS Centre for Cross Border Studies OP/ROP Operational Programme/Regional CEE Central and Eastern Europe Operational Programme (EU) CIP Census of Industrial Production OPEC Organization of the Petroleum Exporting CNC Computer Numerical Controlled (tool) Countries CSO Central Statistics Office (Ireland) PLC Product Life Cycle DETI Department of Enterprise, Trade and R&D Research and Development Investment (Northern Ireland) RCA Regional Competitiveness Agenda ECB European Central Bank (published by Forfas, Ireland) EEC European Economic Community REP Regional Employment Premium EMU Economic and Monetary Union RFID Radio Frequency Identification ESRI The Economic and Social Research SIC Standard Industrial Classification Institute (Ireland) SITC Standard International Trade EU European Union Classification FAME Financial Analysis Made Easy (database) SME Small and Medium-sized Enterprise FDA Food and Drug Administration (USA) SWOT Strengths-Weaknesses- FDI Foreign Direct Investment Opportunities-Threats GDP Gross Domestic Product TQM Total Quality Management GNP Gross National Product UU University of Ulster GVA Gross Value Added VAT Value-Added Tax HSCNI Health and Social Care (Northern WARR Wrocławska Agencja Rozwoju Ireland) Regionalnego (Poland) IBEC Irish Business and Employers WCM World Class Manufacturing Confederation ICLRD International Centre for Local and Regional Development IDA Industrial Development Authority/ Agency (Ireland) IDB Industrial Development Board (Northern Ireland) ILO International Labour Organisation INI Invest Northern Ireland INTERREG EU-funded programme that helps Europe’s regions form partnerships IT Information Technology LFS Labour Force Survey MNE Multi-national Enterprise NACE European Classification of Economic Activities NDP National Development Plan NESC National Economic and Social Council (Ireland) NGO Non-Governmental Organisation NI Northern Ireland 2 Preface and Acknowledgements In particular, we acknowledge the assistance of Dr Eoin Magennis of InterTrade Ireland and Philip The present work is based on a recently completed McDonagh for generously sharing their knowledge research project carried out for the Centre for Cross and expertise with us. Border Studies and generously supported by the Special EU Programmes Body under the INTERREG One of the most difficult tasks during the IVA programme. It had been conceptualised during a research was to set up the series of individual slightly earlier, more prosperous era and the original visits to enterprises in the border region. Aidan project title - Normal Business Restored: reviving the Gough, Dr. Eoin Magennis and Bronagh Morgan border region economy in a new era of peace and of InterTrade Ireland used their good offices to devolved government - took on new, challenging persuade businesses to meet us. Without their meanings when the true horror of the post-2008 active assistance we would have had little chance economic crash, North and South, became clear. of visiting so many firms and of being received so warmly. During the execution of the work we were assisted by many kind people. First and foremost we thank The enterprise visits were the real highlight of the CCBS Director, Andy Pollak, who supported us our work, and the generous individuals who took throughout the entire project and put up with our precious time out to meet us and talk openly about idiosyncratic and contrarian views with patience their business experiences and challenges are and a tolerance that was saintly. The staff of the individually mentioned in Chapter 10, where we CCBS provided excellent support in organising our document our findings. Their conversations with us, project cross-border conference in November, 2011, and their guided tours through their plants, taught in particular Eimear Donnelly whose professionalism us much about the real work of entrepreneurship made the entire event very enjoyable and a great and served to generate many valuable insights into success. Mairéad Hughes kept our finances in good the world of business in the border region. We are order and took on many onerous administrative eternally grateful to them. burdens. We also thank the people who took an active As part of the project that studied the Irish border role in our project conference, held in Cavan on region we collaborated with the Wroclaw Regional November 17-18, 2011. The chairs – Aidan Gough, Development Agency (WARR) who examined the Andy Pollak, Michael D’Arcy, Reg McCabe and Liam Polish-German border with respect to cross-border Connellan – made important contributions to the shopping, productive structures in the border conference discussions, as well as ensuring that region and Polish-German tourism flows across the crowded conference agenda ran smoothly. The their common border. Only a small fraction of that invited participants - Gerhard Untiedt, John Watt, research found its way into this report, since one of Walter Watson, Pat McAdam, Paul Shortt, Paddy the WARR findings was that there are only limited Tobin, Vincent Reynolds, Catriona Regan and Padraic similarities between the Irish border situation and White – took time out from their busy schedules to the Polish-German border. However, it is hoped that prepare presentations that greatly extended and future research will deepen these findings and serve enhanced our own research efforts. The discussants to illuminate the Irish situation and place it more for each conference session – Michael D’Arcy, Edgar firmly in a wider comprative European perspective. Morgenroth, Eoin Magennis and Philip McDonagh We gratefully acknowledge the work of WARR, – illuminated and enhanced the presentations and and the fruitful collaboration with Professor Janusz provoked active and enjoyable open discussions. Zaleski and his team in Wroclaw. Finally, we thank Councillor Sean McKiernan, the Chair of Cavan County Council, for opening the We were lucky to have the services of a great conference and Mr John Perry, TD, Minister of State Steering Committee* during the two years of the for Small Business, who entertained and informed us research. They gave generously of their time and with his address at the conference dinner. of their expertise, and we learned much from them. * Celine McHugh (Forfas), Damian McAuley (Invest NI), Graeme Hutchison (DETI), Edgar Morgenroth (ESRI), Colin Stutt (Colin Stutt Consulting), Aidan Gough and Eoin Magennis (InterTradeIreland), Michael Smyth (University of Ulster), Andy Pollak (CCBS). 3 In preparing this study we took the opportunity of drawing on some earlier historical research that we had carried out for the Forum for Peace and Reconciliation. We thank the Forum Secretary, Wally Kirwan, for permission to use this work in order to set the historical context of the cross-border economy research. Finally, we stress that all the opinions, views and judgements expressed in this study are our own responsibility. 4 Table of Contents Preface and Acknowledgements 3 Chapter 1: A divided and divisive island 9 1.1 History and economics 9 1.2 The logic of our analysis 13 Part I 15 The Past 15 Chapter 2: The origins of Ireland’s two economies: 1750-1960 16 2.1 Introduction 16 2.2 Key events 16 2.2.1 The Act of Union 16 2.2.2 The Great Famine 17 2.2.3 Partition 18 2.3 Key economic issues 19 2.3.1 Demographics, emigration and decline 19 2.3.2 Economic geography and the North-South divide 20 2.3.3 Relations with the rest of the world 21 2.4 Legacy: the two economies in the 1960s 23 Chapter 3: Economic consequences of the ‘Troubles’: 1968-1994 25 3.1 Introduction 25 3.2 The private sector 27 3.2.1 Manufacturing 27 3.2.2 Market services 30 3.2.3 Agriculture 31 3.3 The public sector 32 3.4 Labour market failure 34 3.5 Paying the bills: public expenditure, taxation and deficits 37 3.6 Regional expenditure, competitiveness and the trade balance 40 3.7 Costing the ‘troubles’ 43 Part II 49 The Present 49 Chapter 4: The Belfast Agreement and the island economy 50 4.1 Introduction 50 4.2 Island economic governance issues: Strands 1and 2 51 4.2.1 Internal Northern governance: Strand 1 51 4.2.2 North-South co-operation and the Belfast Agreement: Strand 2 52 4.3 The new regional context for the island 53 4.4 The cross-border research challenge 55 Chapter 5: Development strategy frameworks: what do they tell us? 58 5.1 Introduction 58 5.2 Macro-regional policy frameworks 59 5.3 Vernon’s product life cycle framework 62 5.4 Porter’s diamond of competitiveness