Ireland on Web Points Way for Global Business

One country in the world created a higher percentage of new jobs than the United States in the last decade. One European country had a higher percentage of economic growth than the U.S., the rest of Europe and many countries of Asia during the last decade.

That country is Ireland, which has become prosperous on the strength of good education for its young people, European Union investments in its roads and telephone systems, and business investments by U.S. high-tech companies.

Yet Ireland’s triumph in reducing unemployment to less than 6% in a Europe where larger countries suffer double-digit jobless rates is getting to be a familiar tale.

So what’s next?

Ireland is moving on to the Internet, setting itself a goal of becoming the electronic commerce hub of Europe. To that end, its government has deregulated Ireland’s telecommunications markets, privatized Telecomm Eireann, the state-owned telephone company, and invested more than $80 million in e-commerce projects such as one with Global Crossing Ltd., the Beverly Hills-based international network company, to provide Ireland with broadband Internet connectivity to nine major European cities plus New York by next summer.

Having built its economy over almost 30 years by offering a European base for U.S. and Japanese computer and pharmaceutical companies, Ireland saw that the Internet, which leaps all distances and boundaries, “could be a threat as well as an opportunity,” says Ciaran Morris, a recruiter of U.S. investment for the Irish Industrial Development Authority.

It is determined to make it an opportunity, offering Web site management, electronic sales and customer service for global companies and giving employment to Ireland’s work force, which now includes immigrants from England and Romania.

That historically poor Ireland, known for sending emigrants out to the world for the last 150 years, should now be a magnet for immigrants is a hopeful indicator for poor countries and regions everywhere of the global economy’s possibilities.

Ireland is a small economy--$77 billion in annual output of goods and services, which is less than Orange County’s gross annual product. But as with other small economies--such as Israel, Singapore and Taiwan--with few resources beyond their people, Ireland is worth studying for clues to what’s ahead for world business and for lessons in economic development.

First, the modern economy begins with education. In the 1960s, Ireland woke up to the fact that a poor European country could not compete for low-wage factory jobs with even poorer developing countries.

So it reformed its education system, making secondary schools free to all. It founded 11 technical colleges to teach two-year courses in engineering, science and business to students emerging from secondary school.

Ireland also upgraded its telephone system and recruited foreign investments from high-tech companies. In 1971 it voted to enter the Common Market--now the European Union--qualifying for infrastructure aid and broadening its appeal to U.S. companies.

Ireland sought to be the “back office” to international banks and insurance companies, offering computing and accounting services. Telemarketing centers were set up, providing jobs for Irish workers who had been taught languages in school.

The hope was that high-tech firms would be attracted by Ireland’s educated workers and pay them good wages in return. Also it was hoped that exposure to the new technologies would foster a growth of entrepreneurial local firms that could supply support and services to the likes of Microsoft, IBM, Intel and Dell Computer.

Today those hopes for full employment and even a surge of entrepreneurs have been realized. But a lesson for development-minded countries, in Latin America or in states and regions in the U.S., is that victories take time. Ireland in the 1970s and ‘80s expanded government budgets to soften the pain of older companies’ being forced out by global competition. The country almost went bankrupt.

For years Ireland couldn’t create enough new jobs for the many young people coming into the labor force, and emigration continued, this time of talented people whom Irish taxpayers had paid to educate.

But after government fiscal reform, things have come together in the ‘90s. About 100 software firms start up every year in Ireland, international financial and business services create more than 7,000 jobs a year, and government and private backing have set up 16 venture capital funds.

“The entrepreneurial businesses mean that Ireland is moving into a new phase of wealth creation,” says Regis McKenna, the Silicon Valley marketing guru who first advised the Irish government 25 years ago. The country already features computer millionaires buying expensive houses.

Now new opportunities--and demand for investment--are opening up in Internet services.

Dell Computer has set up 23 Web sites in Ireland to sell its computers in Europe. EMC Corp., the Hopkinton, Mass.-based enterprise software firm, has established a base of powerful server computers in Cork, Ireland, for international companies to use for electronic commerce.

Viking Office Products of Torrance, a subsidiary of Office Depot, has set up its European e-commerce headquarters in Ireland.

Growth of e-commerce will demand investment in regional airports, warehousing and swift delivery services. The need for educated employees will require Ireland to invest further in higher education.

But that is just what Ireland and other poor countries want. Demands for those kinds of investments set up multiplier effects that are healthy for any economy.

The challenge of the global economy has brought other benefits too. It has made Ireland, which for all the romantic haze surrounding it was long a class-ridden country, with high school education only for those who could pay, a more egalitarian society. The need to raise the skill levels of all its people “opened up the university system to many” who would not otherwise have gained such education, states “Understanding Ireland’s Economic Growth” (St. Martin’s Press), a new book edited by Frank Barry, an economics professor at University College, Dublin. The post-World War II GI Bill of Rights rendered a similar service to America.

The indications are encouraging. In Ireland, the global economy has reversed 150 years of history in a poor country. Look for its effects elsewhere in the world to be equally profound.

James Flanigan can be reached by e-mail at jim.flanigan@latimes.com.