VZCZCXYZ0014
PP RUEHWEB

DE RUEHDL #0817/01 2981524
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P 251524Z OCT 07
FM AMEMBASSY DUBLIN
TO SECSTATE WASHDC PRIORITY 8687

UNCLAS DUBLIN 000817 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN EAID ECON EINV EI
SUBJECT: EEB A/S SULLIVAN'S VISIT TO IRELAND 
 
¶1. (SBU) Summary: On October 5, Daniel Sullivan, Assistant 
Secretary for Economic, Energy, and Business Affairs met with 
 
SIPDIS 
Irish government officials, members of the NGO community, and 
the AmCham to discuss the making of the Celtic Tiger, the 
economic path forward for Ireland, and assistance issues. 
Sean Dorgan, head of the Industrial Development Agency (IDA), 
and David Doyle, Secretary General at the Department of 
Finance, both explained that it was a unique mix of good 
policy decisions and a very close relationship between the 
key players (business, government, and labor) that led to the 
Irish boom.  Joanne Richardson, head of the AmCham, 
highlighted the significant role that U.S. foreign direct 
investment (FDI) played in building the economy.  Finally, at 
a roundtable dedicated to assistance issues, the participants 
explained how Ireland's official assistance agency, Irish 
Aid, has ramped up its overseas aid -- with a focus on Africa 
-- and how the NGO community here is contributing to this 
effort.  End Summary. 
 
"ORGANIC GROWTH" 
---------------- 
 
¶2. (U) Dorgan gave a snapshot economic history of Ireland, 
explaining that the government laid the groundwork for the 
"economic miracle" as far back as the 1950s with the opening 
up of the economy.  This was followed by a strong focus on 
education starting in the 1960s when high school was made 
free and later when university tuition was abolished.  As a 
result of bad policy decisions, during the 1980s Ireland 
experienced high unemployment, interest rates, and inflation. 
 At that point, Ireland's union, government, and business 
leadership cut a deal that ensured manageable wage growth, an 
elimination of industrial action, and a lowering of tax 
rates.  This new-found stability, in turn, attracted FDI, 
mainly from the U.S., and the economy began to grow. 
 
¶3. (U) When asked whether the Irish model was transportable 
to other countries, Dorgan highlighted three keys to this 
growth: an investment in people, low corporate tax rates, and 
"soft" infrastructure.  The latter concept is an ineffable, 
highly-resistant-to-replication way of doing business in 
Ireland.  Dorgan called it "intuitive marketing" of Ireland, 
which he described as the unspoken sense among policymakers 
of the "right" thing to do to move Ireland forward and an 
ability of these same officials to "pull in the same 
direction."  He said this arose because of the tight-knit 
policy community here and their many formal and informal 
contacts and conversations. 
 
"AT A TURNING POINT" 
-------------------- 
 
¶4. (SBU) The Finance Department's David Doyle re-iterated 
many of the themes mentioned by Dorgan, especially the 
investment in education.  When the conversation turned to 
whether Ireland can sustain the growth it has experienced 
over the past two decades, Doyle said that the government is 
committed to "persistently invest" in education and to 
upgrade the outdated physical infrastructure.  While Ireland 
has caught and, in some cases surpassed, its EU brethren on 
social and economic indicators, the Republic is still well 
behind on the quality of, for example, its transportation 
infrastructure (roads, airports, ports, and rail). 
Fortunately, Ireland's demographic trends -- it is a very 
young country -- give it about a decade before it must begin 
worrying about growing pension obligations.  In the meantime, 
the government is committed to increased public spending on 
human and physical capital even if the economy (and tax 
receipts) slows. 
 
¶5. (SBU) Doyle said that the Irish economy is at "a 
particular turning point" as the Republic's relative 
competitiveness has slipped.  He said that part of the reason 
is the success of the economy and that the Irish have 
acquired an "enthusiasm for borrowing."  The borrowing and 
the consequent bump up in consumer spending has been the main 
driver behind the increase in the cost of living.  There is 
no better evidence of this than in the housing market which 
is now beginning to cool with "housing prices going into what 
(we hope) is a moderate decline."  Doyle complained that, 
during the boom years, fiscal policy was expansionary rather 
than being used as a tool for managing the growth of the 
economy and now the government will need to get a grip on its 
spending.  Regarding efforts to possibly harmonize tax rates 
across the EU, Doyle quipped that Ireland supports such 
efforts as "we would like everybody else to join us" in 
offering low tax rates.  More seriously, he did not believe 
that harmonization would take place as it runs counter to the 
principle of each nation's sovereignty on fiscal matters. 
 
"TAX AND TALENT" 
---------------- 
¶6. (SBU) As if taking a cue from Doyle's comments, AmCham's 
Richardson ran through a presentation extolling the benefits 
and preponderance of U.S. business activity in Ireland (about 
$83 billion in U.S. FDI stock) but pointed out that recent 
"divestments" (Amgen, Pfizer, and Motorola) have provided a 
"reality check" for policymakers here.  While all is 
certainly not doom and gloom, her members keep telling her 
that the focus should be on "taxes and talent" -- keep the 
corporate tax low and create an environment that is 
attractive to top, globally-mobile professionals.  Richardson 
said that to maintain strong economic growth rates the 
government will need to keep taxes low, effectively manage 
the flow of regulatory directives from Brussels, and maintain 
strong intellectual property protection.  Both Richardson and 
Dorgan characterized the latter as one of Ireland's 
competitive advantages against competitors from Eastern 
Europe, China, and India. 
 
ENGAGING ON DEVELOPMENT 
----------------------- 
 
¶7. (SBU) The Institute of European Affairs (IEA) hosted a 
roundtable lunch to discuss Ireland's and the U.S.'s 
assistance efforts.  In addition to A/S Sullivan, the guest 
list for the event included: 
 
-- Jill Donaghue, Research Director, IEA 
-- Ronan Murphy, Director General of Irish Aid, the 
government of Ireland's assistance agency 
-- Mike Williams, Head of International Dept., Trocaire (NGO) 
-- Helen Keogh, Executive Director, World Vision Ireland (NGO) 
-- Brian Hanratty, CEO, Gorta (NGO) 
-- Patrick Honohan, Professor at Trinity College Dublin 
-- Tom Arnold, CEO, Concern (NGO) 
 
¶8. (SBU) A/S Sullivan explained the structure and the role of 
the Millennium Challenge Corporation (MCC) in the overall 
U.S. assistance program.  Hanratty and Arnold said that the 
U.S. certainly does not get the credit it deserves outside of 
development circles for the resources it contributes to help 
developing countries around the world.  Murphy explained that 
Irish assistance is mainly focused on Africa -- alleviating 
hunger and dealing with infectious diseases -- and that there 
is a growing commitment from the government to help beyond 
Ireland's borders.  As testimony to this commitment, he noted 
that the Irish Aid budget now stands at Euro 813 million, a 
significant ramp up over the past decade.  Murphy also noted 
that there is a general consensus in Irish assistance circles 
that the private sector is needed as a partner in addressing 
some of these problems.  Williams said that this was a 
concept that would have been unthinkable even ten years ago. 
Murphy also expressed concern about new OFAC regulations that 
relate to vetting development assistance NGOs. He said that 
the draft regulations could significantly inhibit effective 
aid assistance. 
 
¶9. (U) A/S Sullivan cleared on this message. 
FOLEY