Fran O'Sullivan: Lessons in catching the Celtic Tiger

It is painfully obvious that New Zealand still lags well behind the Celtic Tiger - with all its imperfections - when it comes to charting a course and pursuing it.

Back in 2001, not long after a visit to Ireland, I wrote that Ireland's rising wages and salaries, sky-high property prices and under-investment in infrastructure, such as transport and telecommunications, had got to the point where nations such as New Zealand were far better placed to compete for investment.

Those words were written at the time of the Catching the Knowledge Wave conference, a joint-venture between the Government, University of Auckland and the private sector which was supposed to set an agenda to transform the New Zealand economy.

Comparing notes again in Ireland this week, it is clear that the New Zealand transformation agenda, which was kick-started in 2001, has simply been too cautious and too incremental (so far) to achieve a substantial economic shift.

Lessons from Ireland (and tips on avoiding growing pains):

* Seduce direct foreign investment

Irish rock star Bono has been singled out as the international face for Ireland's new push to boost US investment. Bono is a national icon in Ireland.

But it's his celebrity reputation worldwide, particularly with Americans, that led Irish investment supremo Sean Dorgan to persuade the 46-year-old Dubliner to front a campaign to woo US companies to invest in Ireland.

Said Dorgan: "He's Irish, he's well-recognised, he's a great name. The U2 leader has taken to the job with alacrity."

Bono has no trouble in presenting the creative and flexible character of the Irish people which is the marketing emphasis that Dorgan, the chief executive of the Industrial Development Agency, now uses to promote Ireland.

The IDA has an independent board of directors and well-paid managers attracted from the private sector.

New Zealand's so-called investment agency Invest New Zealand is simply an arm of NZ Trade & Enterprise. It is virtually invisible.

It does not hire rock stars to promote New Zealand's case.

In Ireland, Dorgan has had to manage a switch away from the over-reliance on round one investment policies such as low taxes, which Ireland initially used to persuade multinationals to re-site their operations within the its borders, to placing more emphasis on the development of regional economies.

The Irish baited many companies, including American multinationals, by offering them a 10 per cent tax rate.

Ireland's corporate rate is now 12.5 per cent for foreign and domestic companies alike. It still offers the lowest tax rate in the European Union.

In New Zealand there are no substantial carrots for greenfields investors. The corporate rate still sits at 33 per cent, one of the highest in the region.

Ireland, in essence, bought jobs. It negotiated deals by which unions accept wage restraints in return for overall tax cuts and social spending. The trouble is that pressure is now coming on for a substantial minimum wage which critics argue penalises less well-off companies. At the top end, the market will simply decide as corporates pay what it takes to get skilled staff.

Some argue it is an absurdity for social partners that do not cover the entire population to make deals for the many.

* Get a sugar daddy

Ireland bumped itself up the wealth stakes by joining the European Union. This gave Irish exporters access to a huge consumer market, vast EU structural funds, and subsidies.

Ireland is no longer the poor relation at the EU table; countries such as Poland occupy that space now.

New Zealand cannot, at this stage, simply latch on to a big next-door neighbour. But we can make greater use of the single market programme with Australia, and, the Asean free trade negotiations to improve our market access in the region.

Ireland also made greater use of its Irish diaspora than New Zealand has so far achieved using KEA networks. New Zealand has much to learn about connectedness, Irish style.

* Let the private sector just do it

The Irish lesson is for politicians to get out of the way of the private sector and stop pretending their job is to run the country.

Instead, politicians should get the investment environment right, make sure the right financial infrastructure is in place, and foster a national ambition so that the private sector will take up the challenge to invest and expand new businesses.

That thinking enabled Ireland to transform itself from an economic basket-case to tiger status.

Ireland's population has become more ethnically diverse since it joined the EU. Its Government expects the population could be as high as 4.2 million (the last time the population exceeded 4 million was in 1871 when it reached 4.1 million).

Unemployment has stayed low despite the inflow of other European nationals to Ireland for jobs.

Technology firms are still among the leading investors in Ireland. More than 70 new business projects were negotiated with new and existing clients last year, involving a total investment of €760 million. Half of the projects are outside Dublin.

* Surf the Wave

Let's face it, there are still some startling deficiencies with the Irish infrastructure.

From New Zealand we tend to think about Ireland as a country that has now transformed itself into a leading digital economy.

Major hi-tech companies like Microsoft, Intel and others might have used Ireland as a European production and distribution hub.

But internet penetration outside the major industry sectors is quite low.

Eighteen months ago broadband had reached more than 50 per cent of internet users in Britain; in March of this year the figure for Ireland was just 31 per cent.

And broadband connections outside Dublin, as I can painfully attest, are not very reliable.

The cause seems very similar.

Most of the blame for the feeble performance has been laid at the doors of the telecom regulator Comreg, and of Eircom, which competitors claim made it difficult to access its local loop.

* Build roads

Ireland is building some stunning new motorway corridors with the help of European regional development funds.

This helps to top up the Irish Government's Transport 21 roading plan which has a budget of €16 billion ($32 billion).

Ireland deliberately concentrated its first round of foreign direct investment near Dublin, leaving the need to upgrade its poor roading system until the economic boom was established.

But the push for greater regional development means new highways are needed for the industrial corridors that have spread to southern Ireland, particularly around Cork where many technology companies are springing up.

Again there are lessons for Auckland, which will not be able to push more major industries outside the city limits until the new highways are built.

The two need to go together.