Collaborate to Compete: The Growing Importance of the Island Econom

Liam Nellis, Chief Executive Officer, InterTradeIreland, October 2006.

InterTradeIreland has a vision – it's a vision of a globally competitive island in which the two jurisdictions on this island collaborate to make the best use of economic resources that exist on the island to mutual advantage.

The island of Ireland, North and South, faces common external challenges from globalisation. These include the need:

• to respond to globalisation and maintain competitiveness;
• to continue to grow employment and employment rates;
• to increase productivity;
• to innovate and develop greater R&D capability;
• to enable people to acquire and maintain the skills needed for a modern, dynamic knowledge economy and to adapt to changes over their working lives;
• to promote enterprise and entrepreneurship;
• to provide a positive climate for business, including through more efficient regulation;
• to remove barriers to physical, labour and academic mobility as part of the completion of the European single market;
• to build world-class infrastructure;
• to achieve equality and good relations;
• to promote the highest standards of environmental protection.

Faced with a common set of challenges, it makes sense that we work together, sharing resources when it is economically sensible that we should do so in pursuit of common objectives. It's time to move beyond the archaic mental barriers that resulted, in what Conor Brady described as the "cold denying silence" that descended on this island for too long in the past century and resulted in a process of "friction and frisson" across a broad sphere of public and private, economic and social activity.

Now, this fractured island economy is being replaced with a myriad of connections across all spheres of public life, in public services, in voluntary organisations, academia and particularly in business.

The signs are encouraging; the days when the Dublin business communities' knuckles went white when they passed Balbriggan are gone. Demand from companies from North and South to participate, on our own programmes, which offer the opportunities for collaboration across a wide spread of business activities from sales and marketing to high end research and development is pleasingly high and is generating real added value. For example, first quarter results from our ACUMEN Cross Border Sales Programme show that the 48 participating SMEs have generated additional sales of over £7.5m. Some of the island's leading edge indigenous companies in the biotechnology and software sectors are participating in our collaborative Research and Development Programme – INNOVA –on projects that have the potential to open new global markets.

Recent statements by senior ministers from the North and South are calling for more economic collaboration, in areas where it makes economic sense, and to build on the success of collaborative initiatives in energy, tourism, and indeed infrastructure, such as the recent development of the City of Derry Airport, which has shown that collaboration can be WIN-WIN.

More and more people are beginning to wake up to the opportunities presented on the island, and through collaboration, to the opportunities that can be opened, off the island. A recent article in the Sunday Business Post entitled "It's the North, Stupid!" summed it up nicely, and you could just as easily substitute North or South.

Challenges and the Lisbon Action Plans

The British and Irish Governments are developing a shared belief in the merits of enhanced co-operation to improve competitiveness on the island of Ireland. For example, they have made a common contribution to their Lisbon Action Plans in which it is acknowledged that many of the challenges faced, North and South, are similar.

In response to shared global threats the two governments recognise that all-island co-operation can be a source of competitive advantage for both jurisdictions. There is now an imperative for greater economic co-operation across a broader range of economic priorities.

A commonality of approach can be seen in the current competitiveness policy frameworks in the two jurisdictions on the island.

The National Competitiveness Council (NCC) in Ireland defines competitiveness in terms of its impact:

(Competitiveness is) "Success in markets that delivers a better standard of living for all. Success at the level of the individual enterprises means more employment, higher incomes, a wider choice of goods, services and more rewarding work and leisure. More income also allows for more public services to be provided that also improve the standard of living and the quality of life".

In the Economic Vision for Northern Ireland, the Department of Enterprise Trade and Investment (DETI) describes competitiveness as the ability to achieve success in markets (near and far) leading to better standards of living for all.

The two jurisdictional approaches are built on a similar set of 'drivers' or 'policy inputs' and point to a potential platform for an all-island framework for collaborative action.

The InterTradeIreland view on all-island competitiveness is a pragmatic one that emphasises the optimal utilisation of the island's resources, to drive success in global markets. Through co-operation in strategically chosen areas of clear mutual advantage, lower costs, higher levels of innovation, productivity and wealth creation can be achieved across the island.

The main economic resources at our disposal are people and the institutional and physical infrastructure. It is our ability to invest in and utilise these resources and attract and retain resources from other regions that will condition the ability of the island, North and South, to grow and achieve sustainable and equitable development over the next 20 years. InterTradeIreland believes that by adopting a more collaborative approach to the use attraction, and retention of resources, both jurisdictions can avoid wasteful policy duplication, leverage better investment outcomes and reduce costs.

Each jurisdiction faces a common set of challenges, unbounded by geography. While each has developed a separate but largely similar response to these challenges, the current imperative is to develop a functional complementarity that enhances the competitiveness of the island, to the benefit of North and South.

Building on the similar approach adopted by each jurisdiction, the key functional areas offering the most scope for collaborative action are:

• Fiscal and Regulatory;
• Infrastructure;
• Skills, Education and Training;
• Joint Promotional Activity;
• Enterprise and Innovation.

A possible framework for collaboration, which I will now outline, broadly identifies those with lead and supporting responsibility for action. Some will be at the national government, departmental and agency level. InterTradeIrealnd's role could vary from advisory to facilitatory and implementation.

Island competitiveness is defined and bounded by the nature of the actions that can be undertaken at the public and private levels to enhance the current situation, rather than by an attempt to adopt either a 'national' or 'regional' approach for a two-jurisdictional entity. The inclusion of an all-island body, to varying degrees at all stages, ensures we move from a bilateral approach characterised by intermittent engagement to an all-island approach where there is permanent mechanism to ensure continued structured co-operation from the early stage of strategy formulation through to implementation.

The five key functional areas can be broken down into sub-areas in which we believe there is most scope for collaborative actions that will mutually enhance all-island competitiveness. The sub-areas are positioned along a spectrum of stakeholders in accordance to where responsibility for action lies. Let us look quickly at the potential for collaboration within these sub-areas.

Fiscal and Regulatory

This relates to areas that lie within the retained powers of the national governments. Co-operation on an East, West basis can lead to tangible benefits.

• Taxation: The nature and levels of personal and company taxation. In particular, the variance in corporation tax rates has been consistently identified as a key concern for Northern Irish business.
• Currency: There is a cost to business associated with the use of two currencies on the island. InterTradeIreland research indicates that this disproportionately inhibits SMEs in engaging in cross-border economic activity.
• Social Welfare: This includes elements such as pay-related social insurance, the levels of pensions and their portability.
• Regulatory Regime: Legal/operating standards and guidelines act as the framework for business activity. The burden of regulatory compliance on enterprise is considerable and could be eased by more structured co-operation in sectors like financial services, telecoms and the environment.
• Public Procurement: The opportunities raised by the planned infrastructural investment of €100 billion on the island of Ireland over the next 10 years are now a major focus of North-South planning and cooperation. There are clear benefits of scale to be achieved through all island procurement as has been seen in the health sector.

Infrastructure

This relates to areas that lie within the remit of government departments, North and South. It is of core importance to the functioning of an all-island economy.

• Environment/Waste Management: Preservation and maintenance of environmental quality on the island in addition to devising and implementing optimum systems of waste prevention and disposal. This is the subject of a number of recent initiatives including the bringing together of a Working Group on North/South Waste Management and a feasibility study on an All-Island waste paper mill. There is also the potential to extend the current proposal for an environmental model for the South to cover the entire island.
• Energy: Energy supply at competitive costs (electricity, oil, gas, etc.) and provision of high quality electricity supply with consistently stable voltage (recognised as being key to attraction of high tech investment, particularly to less developed areas). This is perhaps the field of greatest co-operation on the island to date.
• Spatial Planning: Achievement of equitable, balanced and sustainable growth across the island. Specifically, attention must be paid to regional planning and development issues such as the disadvantaged border areas with persistent long-term unemployment, for example in the North West. InterTradeIreland is currently engaged in facilitating joined up approaches across both jurisdictions.
• Transport: North-South road, rail and air connections, including access to ports. Neither the recently published 'Transport 21' for the South nor 'Shaping Our Future' in the North takes explicit account of the needs of the other jurisdiction.
• ICT/Telecoms: Availability of high capacity, high speed IT/telecoms networks with competitive charges, and providing a basis or effective global e-commerce activities. This needs to be addressed through a renewed Digital Island initiative. There is good progress already in tariff and roaming charges.
• R&D Infrastructure: Both jurisdictions are making significant investments in research and the accompanying infrastructure. To maximise the benefits of these investments for the entire island and to avoid potential duplication, an audit should be undertaken to assess the current capacity and deficits to inform a foresight exercise on future funding requirements.
• Health Infrastructure: The provision of healthcare facilities and services that support catchment areas that straddle the border offer opportunities to reduce costs and raise living standards.

Skills and Education

This relates to areas that are the joint responsibility of relevant government departments and agencies, North and South. The adequate provision of a skilled workforce is a central tenet of a globally competitive economy. This can be achieved through a mix of policy measures.

• Skills forecasting and availability: To enhance productivity and wealth creation, it is necessary to fully utilise the human resources on the island. An accurate understanding of the current labour force and future skills needs is vital for sustaining economic growth and prosperity. Work is already underway.
• Labour mobility: The barriers to labour force mobility across the island have been extensively explored by the North South Ministerial Council. It is timely to place a renewed focus on the recommendations contained therein.
• Lifelong learning: The continual up-skilling of the labour force, the re-training of workers displaced by pressures of global competition, and increasing participation rates will help ensure an adequate labour force supply.
• Migration: There is a demonstrated need, in both jurisdictions, for additional people and skills to fuel a successful all-island economy. A joined-up policy approach to areas such as work visas could be considered as an area for collaboration.

Joint Promotion

Joint promotional activity covers the full spectrum from Government Departments to companies. The costs of overseas marketing are onerous. As a small island in an increasingly competitive global economic environment, joint promotion offers clarity to potential investors, visitors and customers while minimising costs.

• Trade Promotion: Sharing of overseas marketing facilities, joint trade promotional missions, and all island promotion of specified sectors such as food, should be considered.
• FDI/Inward Investment Promotion: Whilst recognising the competitiveness aspects, a joint prospectus on FDI to market the island of Ireland as a location for high value investment projects that can tap into the complementary resources available to both jurisdictions could be considered.
• Tourism Promotion: Tourism Ireland has demonstrated the benefits of a joint approach to marketing the island internationally.
• Technology Promotion: Marketing the technological capacity and capabilities of the island internationally.

Enterprise & Innovation

This area is largely the responsibility of agencies and companies themselves. It is also an area where most progress has been made through the establishment of InterTradeIreland. We are already running a range of successful programmes in the following areas. While much has been achieved, there remains the potential to increase the scale of activity.

• Science Technology and Innovation: This is the most critical area for future competitiveness of both jurisdictions and the island economy. InterTradeIreland is running a number of collaborative technology transfer and R&D programmes. Greater co-ordination at the departmental level could increase the gains from the substantial and rapidly growing investment that both jurisdictions are making in this field.
• Sales and Marketing: Successive studies North and South have identified the lack of sales and marketing ability to allow SMEs to successfully internationalise. Joint development of this capability should be explored through the Institutes of Management Consultants, the Sales Institute of Ireland and other Marketing and Management entities throughout the island.
• Business and Management Capability: Assimilating new technology and innovation-related management practices and processes needs further focus. Logistics and supply chain management represent key strategies in dealing with the challenges of outsourcing in an increasingly integrated global economy. The absorption capacity of SMEs in particular must be enhanced if the indigenous sector is to compete successfully on the world stage.
• Networks and Clusters: Networks and clusters help firms to achieve critical mass, economies of scale, and ability to compete in larger markets than they could if they were to continue to act alone. By concentrating on core competencies and creating a network of specialised suppliers and partners, firms can develop their unique assets, while remaining flexible and adaptable. InterTradeIreland is already working in several areas including Bio/Life Sciences, IT, Food and Drink, and Polymers and Plastics.
• Capital Availability and Utilisation: Provision of angel, venture, equity and loan capital, particularly at early stage development for SMEs. This is the focus of InterTradeIreland's EquityNetwork.

I am pleased to be able to say that my own organisation, InterTradeIreland, is a key conduit through which businesses can make value-enhancing cross-border connections. We were established under the Belfast Agreement six years ago as the Trade and Business Development Body, with a remit to exchange information on trade, business development and related matters. Today our portfolio of projects covers Science, Technology and Innovation, Sales and Marketing, Business Capability Improvement, Business Networks, and Business and Economic Research. Specific projects include those on sector-specific all-island networks (such as BioMedIreland and the All Island Software Network), on exploiting equity funding to fuel company growth (EquityNetwork), on technology transfer by linking companies in one jurisdiction with leading research institutions in the other (Fusion), on all-island buyer-supplier platforms (Network & Getwork), on targeted sales and marketing consultancy (Acumen), on collaborative applied research and development between companies (Innova), on an all-island support network for micro-enterprises (MicroTrade) and on customised training for companies breaking into the public procurement market (Go Tender). In addition, we have worked with our partners in the other economic development agencies to create facilities such as the Go-Source Public Procurement Directory (www.go-source.com) and with the universities on the island to create the ExpertiseIreland research portal (www.expertiseireland.com) which offers businesses a route to finding the research expertise which can be used to drive innovation and competitive performance. Our programmes are successful, and we have the figures to show it - thirty-seven companies who participated in the InterTradeIreland Go Tender programme in 2005 have captured a total of £7.7m/c€11.3m in new business, and twenty-eight companies who recently completed their InterTradeIreland Acumen projects have reported £6.2m/c€9.1m in additional sales and have recruited a total of forty-seven permanent staff to service their new markets. These are just a few examples. Clearly North-South collaboration is good for business.