[VIEWPOINT]Ireland, a Tiger We Can Learn FromLast week, in Dublin, Ireland, a forum on industrial economy was held. Some 450 scholars from around the world attended the conference. Although it was a gathering of economists studying the world's industrial economic issues, much of the meeting centered on the factors that contributed to the economic success of the host country. This was natural, considering that Ireland, which used to be one of the poorest countries in the European Union, has emerged as one of the most prosperous over the last several years.
During the last six years, Ireland's annual growth rate averaged 9.5 percent, and its per capita income surged to $25,000 from a mere $8,700 in 1987.
Until the late 1980's, Ireland's economy was on a rocky road. Located at a disadvantage geographically, its industries were among the least developed in Western Europe. In 1987, the Irish government even considered seeking a bailout from the International Monetary Fund, being on the brink of bankruptcy. With an unemployment rate reaching 17 percent and national debts amounting to 120 percent of gross domestic product, Ireland was in no position to expect economic self-revival. But Ireland's economy went through a drastic change. Its unemployment rate fell to 3.6 percent, national debt was reduced to 40 percent of GDP, and its per capita annual income surpassed that of the United Kingdom, which ruled Ireland for several hundred years. What on earth has brought such tremendous success to Ireland?
Many experts boil down Ireland's success to three factors. First, successful attraction of foreign investment by improving the business environment. Second, consistent economic policies. Third, social stability through contracts among labor, management and the government. The factors are called the 3Cs, using the first letters of investors' "Confidence," labor and management's "Cooperation," and "Consistency" in policies.
In fact, Ireland is a heaven for investors. You cannot even think about imposing regulations on investment. Ireland offers the best tax breaks, subsidies and one-stop services among members of the European Union. Wages are stabilized as a result of an agreement between labor and management, and labor disputes rarely occur. Ireland invested heavily in education and provides a large pool of quality workers, which attract foreign investors. As a result, Ireland has been transformed into a production base for world-class information and telecommunications companies, including Microsoft, Intel and IBM. Investments in high-added value industries, such as finance and pharmaceuticals, are also actively taking place. Foreign investments are responsible for 50 percent of production in the manufacturing industry and 40 percent of employment in Ireland.
Economic policies that have been pursued consistently throughout several changes in political power are another success factor. Incomes are preserved through tax exemptions, but increases in wages are restrained. In other words, an agreement for national prosperity that was signed in 1987 is playing an important role in supporting the stable labor relations. The agreement has been revised every three years by different administrations, but the principle to gain trust from investors was fortified.We can consider Ireland's success as only a temporary boost. We can belittle its prosperity as an exceptional phenomenon, which can appear only in a small island country. But is it really just that?
The changes are not confined to Dublin. Small open economies such as Finland, New Zealand and Netherlands, as well as such giant economies like China are changing. If a country lets anyone make investments without fetters on the background of consistent policies and stable industrial relations, an economy could blossom, even in wilderness.
Where does the Korean economy stand? Government regulations are increasing in the midst of political instability and conflicting labor and management. How can we expect to attract foreign investments and experience economic recovery in this situation? We should change from inside before we blame outside conditions. From the perspective of outsiders, Korea's situation may look regrettable.
The writer is a professor of economics at Yonsei University.
by Jeong Kap-young