November 2010


Last week NIRSA/NCG launched the All-Island Research Observatory website – http://www.airo.ie

The website is a free resource  for the public sector and civil society organisations and includes a number of different mapping and data modules designed to improve evidence-based decision making.

AIRO makes available a set of multi-scalar (local, county, regional, all-island, European) spatial datasets and a suite of specialist tools to aid their analysis.  These include:

1.  Browse by Theme

Data on 14 key themes including agriculture, demographics, economy, education, health, housing, regional development, transport

  • An inventory of a few hundred pre-prepared maps
  • Direct access to a series of key statistics and datasets
  • Detailed inventory of key publications and organisations

2.  Mapping Modules

  • A set of 95 interactive census mapping modules (one for each partnership areas, local authorities, regions) that allow users to produce thematic maps
  • A set of specialist mapping modules including: housing, Live Register, community, regional economy, social deprivation, unfinished estates
  • Interactive time series data and statistical information

3.  Geographical Profiling

  • Create on-the-fly detailed census profiles of any user defined area on the island of Ireland
  • Create user defined catchments and specific buffer distances; includes the locations of key geo-referenced places such as schools and GPs

4.  News and Events

  • Keep up to date with the latest news and events in relation to spatial data and evidence informed analysis in Ireland

Go to the site to register.  There will be a short delay in being able to use the mapping modules as we’ll need to approve your registration.  We’re looking into access for private industry – the issue is data licenses as these are restricted to non-commercial activity.

Justin Gleeson and Rob Kitchin

Ireland’s recently adopted four-year recovery plan promotes an export-led strategy. The idea is to introduce measures to assist the export sector. These measures will assist export recovery through enhanced competitiveness and sector specific initiatives. Export growth will in turn deliver high value employment and act to stimulate the domestically trading sectors of the economy. These developments will in turn boost consumption, reduce unemployment and increase tax revenue. Confidence in this strategy is supported by the recent performance of the internationally traded sector. The government estimates exports have grown by over six percent in 2010.

Given the importance of the pharmaceutical industry to Ireland’s economy and its large share in Ireland’s exports, it is useful to take a closer look at the developments of this sector and their implications for the recovery plan.

The Irish pharmaceutical industry is performing strongly throughout the economic crisis. CSO external trade data show that exports in the combined chemicals and pharmaceuticals sector (which is dominated by the pharmaceutical sub-sectors) grew from €44.2bn in 2008 to €49.4bn in 2009 (+12%). The most recent CSO release shows further export growth by 4% in the first eight months of 2010 (compared to the first eight month in 2009). This compares with falling exports in other important manufacturing sub-sectors, notably the office machines sector (computer hardware), which experienced a drop of 32% in exports. As a result the combined chemicals and pharmaceuticals sector now accounts for 60% of Ireland’s manufacturing exports.

Now let’s take a look at the employment figures of the CSO. Between Q4 2007 and Q4 2009 employment in basic pharmaceutical products and pharmaceutical preparations (NACE 21) dropped by 9%, from 30,800 to 27,900.  How can we explain this apparent paradox?

Part of the job losses are related to corporate merger activity and the concomitant reorganisation of global manufacturing capacity. Other job losses are related to pharmaceutical companies losing markets when some of their products reach the end of their patent life. I discussed the implications of this “patent cliff” issue for Ireland in a previous IAN post. These processes were responsible for the recent high profile job-losses and plant closures at Pfizer and GSK in Cork. But one would expect these processes to translate in a drop in pharmaceutical exports, not an increase.

After talking to some pharmaceutical company managers, I believe the answer to the puzzle lies in a parallel development which may be termed “fat pharma going lean”. Traditionally, because of obscenely high pharmaceutical prices, pharma companies’ main concern was to have a sufficient supply of product. Pharma companies paid little attention to production efficiencies. However, product prices have come under serious pressure due to increasingly stringent price controls in many markets, as well as increased competition. In addition, changes in the regulatory environment have significantly increased the cost of bringing a drug to the market. In response, following the example of the electronics industry, most pharmaceutical companies are now introducing more efficient processes. As a result, Irish plants are starting to produce significantly more output, while at the same time reducing their head count. In some Irish plants, staff numbers have been reduced by over 10 per cent, completely under the radar of the media.

One might argue that this development will make the plants more efficient and put them in a better position to attract future investments by the parent company. However, efficiencies are implemented globally, not only in Ireland.

The recent growth in Irish pharmaceutical exports has not been job-less, it has been job-shedding. At least in the context of the pharmaceutical industry, the Government’s export-led recovery strategy may be problematic. In this sector, in the short term, increased exports are unlikely to lead to significant number of new jobs. Without new jobs, there will be no boost to consumption, no boost to the domestic sector, and no boost to income tax. Pharma is, of course, a specific case. The increasingly important internationally traded services sector may lend itself better to the export-led recovery plan.

Chris van Egeraat

On Wednesday a single lot of 47 nearly complete apartments in Ballybofey, Donegal, went under the hammer.  The reserve price was €550,000.  The main build is complete and the apartments need to be fitted out.  The developer has gone bust and Ulster Bank called in the receivers to recoup whatever it could from the development.  The units, ranging from 63 sqm to 108 sqm were due to be sold at €200,000+ per unit.  At the sale of price of €11,700 per unit, the complex seems like a bargain.  And yet there was no bidder and the starting price was dropped to €300,000 (€6,300 an apartment).  The auctioneer is now seeking a private sale.

Ballybofey Apartments

Donegal has the sixth highest number of unfinished estates (133) in the country, and the lowest level of completed units occupied on those estates (47.5%), but prime reason as to why there was no bidder was due to a protest by c.100 workers from 20 subcontractors who claim to be owed c.€900,000 for their work on the site (and who also have equipment locked on the site which they can’t recover).  Quite rightly, they expect to be paid for their labour and expenses and to reclaim their equipment.  The bank simply want to salvage whatever money it can and pass on the finish-off and future of the estate to a third party.

The collapse in the construction sector is already making it difficult for many sub-contractors to stay afloat.  Not being paid only adds to the pressure.  And as businesses go to the wall, workers are being added to the Live Register, and family life suddenly changes as household income drops.  Income is taken out of the local economy and other businesses start to suffer.   14% of Donegal workers (8,124) were in the construction industry in 2006 (the national average was 11%).  The Live Register rate for the county has grown from 8,498 in Apr 2006 to 20,994 in Oct 2010 (147% increase) – in the Ballybofey Office it has risen from 705 to 2,580 (265% increase) – much of the growth taken up by out of work construction workers.

This story has been replicated across the country over the past couple of years, most recently with the collapse of Pierse and McNamara construction groups which has seen sub-contractors locked off of numerous sites, including those commissioned by the state.  Yesterday, more than 190 sub-contractors held a meeting to discuss the issue, calling for a change in the law concerning the arrangements and obligations between sub-contractors and those who they are working for.

One thing is clear, whilst the apartments in Ballybofey appear to be a bargain, whoever buys it will potentially be gaining enormously at the benefit of those sub-contractors owed money for their work (assuming that they will be able to sell them on to new owners).  Giving apartments away, however, has costs and consequences that’ll reverberate through the local community for some time to come.

Rob Kitchin and Justin Gleeson

The CSO has just published its Survey of Income and Living Conditions (SILC) for 2009, and it makes for sobering reading. Gross household income dropped by 6.7% between 2008 and 2009, and is now close to 2006 levels. The deprivation rate (2+ items) increased from 13.8% in 2008 to 17.3% in 2009 – this measures the extent to which individuals experienced enforced deprivation, measured by a range of indicators including being unable to afford heating, being unable to afford a warm waterproof coat, or being unable to afford a roast once a week. In terms of indebtedness, almost a quarter of households had been in arrears at least once during 2009 (on either rent/mortgage, utility bills, hire purchase/loan or other bills), compared to just over 10% in 2008. Almost half of households said they would have to borrow to meet an expense of €1,085. People living in the Midland region are the most at risk of poverty, but the biggest increase in the at risk of poverty rate was recorded in the Mid-east (from 10% in 2008 to 14.6% in 2009). Read more in the press release or the full report, which cover the period up to January 2010, and thus do not include public sector pay cuts. If the measures announced yesterday are implemented, particularly in relation to taxation and social welfare cuts, expect significant increases in indebtedness, deprivation and the at risk of poverty rate for 2010.

Mary Gilmartin

When asked about yesterday’s savage budgetary cuts affecting some of the most vulnerable in society along with stinging cuts in the public sector, Brian Cowen suggested that “Those who can pay the most will pay most, but no group can be sheltered” from the cutbacks.  But yet there is no mention of pay cuts for elected representatives.  It seems it still doesn’t rain in Dáil Eireann!  This indicates that even now nothing has changed in the political system.  If there is to be any sense of social justice even hinted at, the first thing that needs to happen is for politicians of all parties to demand, accept, and implement their own pay cuts.  Step up now if you want to join the human race!

Mural in south Dublin

 

Cian O’ Callaghan

The four year, National Recovery Plan 2011-14 was published this afternoon.  For those looking for a copy it can be found here.  A summary is here.  Interesting, but not pleasant reading.

Of the deluge of alarming analyses and media commentary on the Irish/European debt crisis that have emerged over the last 24 hours, surely the most unnerving proposition is that the financial markets have already moved on from Ireland and all attention is now focused on Portugal.  The “worst-case scenario” consequences feared from such a development are the spread of the financial contagion from Portugal to Spain (which, given the size of the Spanish economy would be difficult for the EU and IMF coffers to contain), and ultimately an existential crisis for the euro currency. Whether or not this worst-case scenario comes to pass remains to be seen, though recent increases in Portuguese and Spanish bond yields are far from reassuring. With this risk of financial contagion in mind, one wonders just how exposed are European member states to one another’s debts? The chart (below) from a recent Bank of International Settlements quarterly report illustrates just how interwoven the EU member states are in terms of the financial exposure to one another.

A number of features BIS quarterly report have surfaced in recent analyses but perhaps have not been succinctly stated:

  • As has been recently reported elsewhere, total exposure of British based banks to Ireland is in the region of $230 billion. Exposure of German banks is not far behind at $175 billion.
  • The chart above distinguishes between foreign claims on the public sector, the banking sector, and the non-bank private sector. In both the Irish and Spanish cases, the share of British, French, and German bank exposure to the non-bank private sector appears to be very high. One wonders what exactly will be the consequences of this. Does this mean that even when Irish banks are bailed out, there are still substantial non-banking sector debts that have to be tackled? Do these debts relate entirely to the legacy of Irish property development mania or is this exposure spread more broadly across the Irish economy?
  • Government debt accounts for a relatively smaller part of euro zone bank exposure to Ireland than in the cases of Greece, Portugal, and Spain.
  • It’s also apparent from the chart above that whatever Greece’s woes may have been, they didn’t stem from a bank crises on the scale of the shocking fiasco Irish banks have become embroiled in. Or, as the Greek finance minister succinctly put it, “Greece is not Ireland”.
  • That said, it’s clear that German and French banks were very exposed to Greek debt and are also very vulnerable to Irish, Portuguese, and (in particular) Spanish debts.
  • As one would expect, Spain does indeed face the largest exposure to Portuguese debt (coming in at over $100 billion). However, this is by no means the largest exposure of an EU member state to a peripheral neighbour, as indicated by the British banks’ exposure to Irish debts.
  • As of 31 December 2009, banks headquartered in the euro zone accounted for 62% of all internationally active banks’ exposure to Greece, Ireland, Portugal and Spain. However, that’s not to say that the other 38% is of no consequence! US banks, in particular, appear to have a significant exposure to both Ireland and Spain.

All in all, one would be forgiven for thinking that  the kindness of strangers is driven by the desperation of worried bankers.

Declan Curran

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