PAUL KAVANAGH was born in Dublin in 1956 and educated at Synge Street Schools and University College Dublin from which he graduated in 1977 with an Honours Degree in Modern History and French.
Mr. Kavanagh has been Ambassador to France and to Monaco since September 2009. In line with the Government's strong priorities, he has maintained a firm focus in the Embassy's work on the promotion of Ireland's economic, investment and commercial links with both France and Monaco, while also fostering cultural and other connections.
Ambassador and Mrs. Rosemary Kavanagh accompanied His Serene Highness Prince Albert II of Monaco and the then Ms Charlene Wittstock on the successful State Visit that His Highness made to Ireland in April 2011.
Previously, Mr. Kavanagh was Ambassador to the United Nations in New York (2007-2009); Ambassador to the UN and the World Trade Organisation in Geneva (2006-2007); and Ambassador at the EU in Brussels/Political and Security Committee (2004- 2006). Mr. Kavanagh was Deputy Political Director at Ireland's Department of Foreign Affairs in 2003-2004 and Coordinator of Ireland's delegation on the UN Security Council in New York in 2001 and 2002.
Earlier in his career, he spent nine years from 1983 to 1992 on secondment to the Cabinet of the United Nations Secretary General, dealing mostly with conflict situations, including the Iran-Iraq war (participating in the UN negotiation team that brought that conflict to an end), Cambodia and Namibia. In 1991/92, he acted as Special Assistant to Cyrus R. Vance in regard to Yugoslavia. From 1992 to 1996, he was Political Adviser to the UN Force in Cyprus and, from 1996 to 1998, Director of the United Nations Office in Japan.
His first overseas posting was in Beijing, China, where, from 1979 to 1982, he participated in establishing Ireland's Embassy. Prior to that, he worked on Ireland's accession to the European Monetary System at the Department of Foreign Affairs, before which he was Executive Officer at Ireland's Department of Defence (Army HQ) in Dublin.
Lecture by H.E. Paul Kavanagh - Ambassador of Ireland to Monaco
Friday 23 September 2011
In the Presence of His Serene Highness Prince Albert II of Monaco
Your Serene Highness, Fellow Trustees, Distinguished Guests, Ladies and Gentlemen,
It is a privilege for me to address you this evening.
I am extremely gratified, Your Highness, that you have found this time in your busy programme.
You presence is an honour to the Library to which you are so committed and of which I am most pleased to serve as Honorary Trustee at your kind invitation. Equally, your interest in this evening's topic is an honour to the country of your maternal forebears.
Your Highness,
My topic this evening is “Ireland: Open for Business”.
Allow me to address it by bringing to you an update of where we are, concerning Ireland's economy.
First, 2011 will see Ireland return to positive economic growth, following two consecutive years of serious economic contraction, and one of stabilisation.
During the years 2008 to 2010, the economy shrank by a cumulative 12.5%.
For some time now, renewed growth this year has been the broad consensus forecast of economists, national and international. The Government's projection for growth in GDP in 2011 has been 0.8% of GDP, about mid-way between the more optimistic and pessimistic forecasts of informed observers.
Yesterday the latest independent figures were issued by the Central Statistics Office. They have given us a powerful shot in the arm. They show that Ireland's GDP rose by 1.9% - almost 2%! - in the first quarter of 2011 alone. Moreover, the figures also show that further growth of 1.6% occurred in the second quarter. To be sure, the international environment has tightened since the summer, and yesterday was an especially difficult session on world markets – showing the scale of the challenges facing the global economy.
This will naturally affect an export-driven economy such as Ireland's. There is therefore some downside risk. Nonetheless, Ireland is doing many of the right things, and growth has returned to our economy.
Second, this renewed growth is being driven right now by Ireland's exports of goods and services.
Ireland's total exports grew by more than 6% in 2010 and may yet grow by as much as 7% this year.
This is important, because Ireland exports close to 100% of the value of its GDP.
Put another way, Ireland exports goods and services to the value of about € 160 billion per year,
whereas 11 million Greeks export c. € 46 billion and 10 million Portuguese export c. € 44 billion.
In 2010, for the first time since 1999, Ireland posted a surplus in her overall balance of payments.
In 2011, our surplus will be sizable. This means that the country as a whole is paying for itself.
Ireland's foreign trade balance once again this year will be between € 45 and 50 billion in the black.
Contrast this to, for example, your large neighbour, whose foreign trade balance this year will be touching € 75 billion in the red.
Our export performance is broad-based.
Sectors doing particularly well include:
- pharmaceuticals,
- software, financial services,
- business services, and not least
- food & drink
Ireland's two-way trade with France (whose statistics cover the Principality), breaks down two-to-one in Ireland's favour.
According to the Irish Exporters' Association, in the first half of 2011, total Irish exports to France grew by approx. 20%. In the first five months of 2011, Irish food & drink exports to the world grew by some 18%: to France in the same period our food & drink exports grew by 26%.
Overall, exports will continue to drive Ireland's recovery into the medium term. Our key objective is to facilitate a filtering down into domestic demand, paving the way for a more broad-based recovery.
Third, if Ireland's renewed economic growth is export-driven, our exports have been boosted by significant improvements in our competitiveness.
Ireland and her people are walking the hard walk of re-building damaged competitiveness, and we are reaping the initial fruits.
The European Commission, taking account of current trends, has forecast that Ireland's Unit Labour Costs will have improved relative to the Euro area as a whole by some 14% over the period 2009 through 2012. Public sector wage levels have already fallen by an average of 14.5%. This has been accepted by the membership of Ireland's public sector Trade Unions by a two-to-one majority, as part of a wider accord with the Government.
IBEC, the Irish equivalent of MEDEF, reports that costs of recruiting new staff in the private sector have fallen by some 25% since 2008. Rents on commercial property in Ireland have tumbled by some 40 % since the global crisis broke.
The World Cost of Living Index in 2009 named Dublin as the 25th most expensive location.
- In 2010, Dublin was the 42nd most expensive location – and falling.
- Tender prices on large contracts have fallen by 29% in Ireland since 2007.
- The price of electricity to industrial installations has fallen in Ireland by 24% since 2008
- The price of gas has fallen by 26% in the same period.
Ireland's economy, and in particular its export sector, is clawing its way back – by steadily improving its competitiveness – in other words: “the old fashioned way”.
A l'heure de difficulté, les irlandais s'accrochent. C'est dans leur nature!
Fourth, the state of Ireland's public finances is improving steadily as a result of the continuing major adjustments underway. Over the period 2008 through 2015, the total, cumulative scale of Ireland's adjustment – mostly comprising reductions in expenditure and to a lesser extent, increases in some taxes – will have amounted to some € 30 billion, or approx. 20% of GDP.
About two-thirds of this multi-year adjustment programme (€ 20 billion) has already been budgeted and will have been realised by the end of 2011.
The Government is committed, and absolutely determined to reduce the public deficit from c. 10% of GDP this year - to 8.6% in 2012 and so on, until it falls below 3.0% in 2015.
Next month, the Government will not only publish the draft budget of Ireland for 2012, it will publish also the multi-year framework of detailed adjustments (on both the revenue and spending sides) to cover each year through 2015. As a percentage of GDP, Ireland's public debt will peak in the region of 118% in 2013.
Politically speaking, so serious and far-reaching a programme poses many challenges. However, the recently elected coalition (Centre-Right and Centre-Left) Government enjoys the largest and most secure Parliamentary majority in the history of the Irish State, is cohesive in its ranks and is determined to carry through fully with the Adjustment Programme that has been agreed with the IMF and the European Union.
Fifth, restructuring and re-capitalisation of the Banking Sector is progressing apace. While very expensive to the public exchequer, it is much less in net terms than anticipated early this year.
Moreover, it is being implemented, stage by stage, ahead of schedule.
To go back in time slightly, you will recall that in the ten years or so starting in the early to mid-nineties, Ireland enjoyed strong economic growth and dramatic increases in standard of living.
This was based on solid, sound and far-sighted policies, which had been pursued by successive Governments over several decades.
Where we went wrong – and this materialised in the early years of this decade – was in allowing a property bubble to develop, fuelled by among other things, a banking and financial sector, the regulatory oversight of which was inadequately executed to say the least. Our Government of the day – faced with the prospect of banking collapse – guaranteed the deposits and most of the bonds of Irish banks. The cost to the Irish tax-payer of this guarantee helped to drive Ireland's public deficit to a once-off high of 32% of GDP in 2010. This year it will fall to some 10%.
Since entering office this past March, the Government has acted with resolve to re-structure and re-capitalise the Irish banking sector, within the framework of the IMF/ EU Programme of Support for the Irish economy. The sector has been down-sized to two core banks centred on Bank of Ireland and Allied Irish Banks, so that the sector – now right-sized – can better focus on its core function, that of financing investment and growth in the real economy. Other banks have been merged and are being wound-up.
As you know, the IMF/ EU Support Programme for Ireland amounts to € 67.5 billion, which is reinforced by € 17.5 billion from Ireland's own, cash reserves. Of the total of € 85 billion in the Programme, € 35 billion was earmarked for bank re-capitalisation.
In the event, and on the basis of severe stress tests this past Spring – which in Ireland's case were uniquely severe in the contingency scenarios they posited – the cost of this re-capitalisation is coming in at some € 24 billion. In other words, a right-sized Irish banking sector is being re-capitalised in 2011 at a cost that falls well within the financial envelope that had been set aside for the purpose.
During the Summer, moreover, Bank of Ireland attracted € 1.7 billion in foreign equity investment.
Your Highness,
I am sure that you have seen or read of the successive quarterly reports of the IMF and the EU commending Ireland for implementing in full and on time all of the commitments contained in the IMF/ EU Programme. These entirely positive report cards – one after the other – are highlighting the fortitude and resolve of the Irish Government and people and our determination to work ourselves out of the difficulty, and they are restoring, increasingly rapidly, our economic and financial credibility and reputation.
Indeed, financial market sentiment towards Ireland has improved markedly of late, as evidenced by the sharp decline in yields on Irish Government paper. In July, yields on ten-year Irish Government bonds were in excess of 13%, whereas today these yields have fallen to 8.5%.
The 21 July agreement at the Eurozone Summit to lower the interest rate on loans to Ireland - and to extend the maturities of these loans - is good news. The resulting improvement in our debt sustainability will assist us to regain capital market access.
The Eurozone needs a success story – and Ireland is working extremely hard to be that story.
Ireland – the country that came back!
Let me cite Wilbur Ross, whose US corporation put some € 1.1 billion into Bank of Ireland this Summer : They really are fixing the economy, unlike some other countries which are not reforming anything.
Let me quote to you from a Financial Times editorial of 2 September:
By honouring the promise to the European Union and International Monetary Fund …
Ireland is regaining the confidence of global investors.
Now, Your Highness, Ladies and Gentlemen,
I do not wish to pretend that everything is rosy in the Irish economy. Clearly this is not the case.
Too many people are impacted by unemployment, falls in income, increased debt burdens, etc.
Our public debt remains very high and it will constitute a severe burden for years to come.
Unemployment, although stabilised at 14.5%, remains high.
The booming export sector is proving to be slow in transforming growth into job-creation – a dilemma that the Government is addressing through a job-creation programme. And most of all, domestic demand has stubbornly refused to respond and grow. It will rebound in due course, but such a trend has not taken hold, although yesterday's CSO statistics were positive here too, showing how that for the first quarter since 2007, the second quarter of 2011 has seen growth in GDP, in GNP and in domestic demand (+0.8%).
With Irish private savings rates at all-time highs, there has clearly been serious reticence to spend on the part of the public at large. Flows of commercial financing from the banks to business enterprises remain impaired.
Nonetheless, an historical perspective is required.
In my lifetime, the Irish economy has multiplied in size by a factor of six, an increase of 600%.
Even now, there are 1.8 million people employed in Ireland, whereas in 1992 the number was 1.2 million. In three years, the economy has contracted by a cumulative total of some 12.5% - whilst this year it will begin again to grow and to claw back the losses of the recession.
Our public debt is high and servicing it will by mid-decade eat up a fifth of all income tax receipts.
In the 1980s, fully one-third of all income tax went to servicing our debt. In other words, whilst the burden is heavy now, it is not as heavy as it was back then. And we came out of that!
The Irish have been in dire straits in the past. But they have emerged from these, despite having far fewer assets and advantages than we have today.
Your Highness, Ladies and Gentlemen,
All of the underlying strengths of the basic model of Ireland's modern economic development remain in place – and indeed these are being refined and developed further.
They include:
- A highly educated work-force with a great variety of skills. In 1995, 33% of US adults had obtained a 4-year degree, whilst the figure for Ireland was 30%. In 2008, the US was at 37%, but Ireland had risen to 46%;
- Favourable demographics – with the strongest growth in western Europe;
- A very open and flexible economy with a high-tech support base;
- A strong pro-enterprise environment. Ireland is the top-ranked European country in the World Bank's “Ease of Doing Business Index”;
- Ireland is a highly entrepreneurial society. In broad opinion polls, about 10% of Irish people describe themselves as “entrepreneurs”. In the US, the figure is 8%, in Germany 4%.
- Ireland's Corporation Tax is among the lowest in the world at 12.5%, it is clear, transparent and predictable. It will not be rising.
As a consequence, Ireland continues to attract inward Foreign Direct Investment. There is more American investment in Ireland than there is in China.
- Almost 1,000 companies – including household names such as Google, eBay, Facebook, have chosen Ireland as the hub of their European networks;
- Eight of the top ten pharmaceutical companies worldwide have operations in Ireland;
- Eight of the world's top ten Medical Tchnology companies are in Ireland;
In 2010, Companies investing in Ireland for the first time grew in number by 20% and included the likes of Telefonica, Warner Chilcott, Linkedin, EA, Riot Games, Genband, Aspect and FC Stone. The year 2010 saw a total of 126 foreign investment projects coming into Ireland.
Investment in Research, Development and especially in Innovation came to some € 500 million. There is an exceptional level of collaboration between industry, academe, Government agencies and regulatory authorities. Almost 50% of all enterprises in Ireland are engaged in innovative activity. The EU average is 39%.
Ireland's infrastructure has improved dramatically in recent years on foot of major public and private investments. Those who know Ireland have seen it for themselves.
Ireland is and will remain a very attractive place to do business. In World Competitiveness Rankings, Ireland is:
- 1st for corporate tax
- 4th for the availability of skilled labour
- 4th for being open to new ideas
- 6th for labour productivity
- 7th for the availability of financial skills
- 7th for the flexibility and adaptability of her people.
Your Highness, Ladies and Gentlemen,
Before concluding, let me say a word or two about business links between Monaco and Ireland.
These received a strong boost this past April through your own State Visit to Ireland, during which you were accompanied by a significant business and investment mission, led by the President of the Monaco Council for Economic Development, Mr. Michel Dotta. On that occasion, the Venture Capital Associations of the two countries signed a Cooperation Agreement and this is being followed up in a very practical ways, with support and encouragement from Enterprise Ireland.
Similarly, the Irish National Marine Institute and the Oceanographic Institute here in Monaco (each of which ranks in the top twenty in the world) signed a Cooperation Agreement and this too holds good potential for making practical progress.
Amongst the private companies which accompanied Your Highness to Ireland, those engaged in the ocean energy, and in particular tital energy field are actively following up. These new perspectives go beyond other recently developed good business, including in the Tax Free/ Point of Sale technology and Ecological Cement, with which Your Highness will be familiar.
In conclusion I hope very much, Your Highness, Ladies and Gentlemen, that you will agree with the Irish Government, with our Deputy Prime Minister Mr. Eamon Gilmore, who delivering the message is in Wall St. today, and with me that Ireland is open for business, for good business, for profitable business!
Thank you.