New Zealand can match Celtic Tiger says Bruton

By PETER GRIFFIN

A low corporate tax rate and a decent education system are needed to secure sizeable foreign investment, says the man who led Ireland into an economic boom.

John Bruton, the Prime Minister from 1994 to 1997, is best remembered for promoting peace in Northern Ireland and chopping the corporate tax rate - a move that contributed greatly to Ireland's growth spurt of the past decade.

Bruton, a guest lecturer at the University of Auckland, is examining whether New Zealand can mirror the so-called Celtic Tiger's success.

He believes the new economy can supply New Zealand with similar advantages that Ireland won from its tech sector.

"Knowledge can be encapsulated in a little chip the size of a fingernail. Distance and weight are no longer obstacles to economic growth," he said.

But New Zealand has yet to slash corporate taxes, and foreign investment in the technology sector is a fraction of Ireland's.

"Ireland is a country transformed in the last 10 years. It has taken shape during my political life," Bruton told compatriots at the Auckland Irish Society on Sunday night, which celebrated the former Taoiseach's visit with traditional music, Irish dancing and a pint or two of Guinness.

Many of the mainly elderly crowd on hand to meet Bruton had fled Ireland in the 1950s and 1960s seeking a better life.

And some of them have done well. Donegal-born Hugh Green's fortune was listed by the NBR rich list this month at $42 million.

Bruton, a single-term Prime Minister, oversaw an economic transformation in Ireland, underpinned by healthy levels of foreign investment, much of it from the United States.

"It was a mix of good decisions, good luck and stopping the stupid things we'd been doing," he said.

History would show that among the good things was the decision to slash the corporate tax rate from 40 per cent to 10 per cent for manufacturers and exporters during the 1980s.

Last year, it was cut to 12.5 per cent across the board.

"I'd rather get 12.5 per cent of €1000 than 33 per cent of €100. If you offer multinationals a well-qualified workforce and a guaranteed low corporate tax rate, they'll come," he said.

"You concentrate in tax policy on attacking factors of production that are mobile. Companies are very mobile."

Ireland suffered so badly in the tech-wreck that it appeared the Celtic Tiger was heading for extinction, but the country is still doing well in the sector.

Just last month, computer chip-maker Intel opened a new semiconductor plant. A few weeks before, online auction operator eBay set up shop promising to employ 800 people. But Bruton said Irish employees who had built up expertise working for the tech giants were now working in their own IT start-ups and software houses.

Last month, Dublin firm Curam Software picked up a contract to supply software to the New Zealand Ministry of Social Development.

Funding from the EU, which the Irish Government directed into a number of strategic areas, including education, helped in the early years of the economic renaissance.

"EU funds enabled us to invest in education, in regional colleges," said Bruton.

"It was good use of EU money and access to the biggest market in the world."

Still, he is wary of overstating the role EU funding had in Ireland's transformation.

"In the 1990s, the Irish economy was growing at 9 per cent a year. The most we got from Europe was 3 per cent of GDP," he said.

"But there's a risk of exaggerating Ireland's success."

While Irish gross domestic product is 120 per cent of the EU average, much of that money is siphoned by multinationals sending profits back to their head offices.

Gross national product - which includes the contribution of Irish nationals overseas - is 100 per cent of the EU average.

And there has been a downside to Ireland's success. Inflation is high, as is the cost of living. Companies who came to Ireland seeking a lower cost structure are complaining about the rising costs of doing business there.

Bruton said the Irish example showed that maintaining local ownership of companies was not essential.

"Money is selfish. It doesn't matter if it's New Zealand money, it will go somewhere else if there's a better return to be made."

Bruton, who at 22 in 1969 was the youngest person to be elected to the Irish Parliament, said the quest for foreign investment had transcended party lines.

"Every Irish Government since the '50s has been building on the success of its predecessors, even if they're bitter opponents."