Lessons for the UAE from sleeping tiger's hidden capabilities

While Ireland's Celtic tiger may have stopped roaring the nation still offers valuable lessons for the UAE and it vision for 2030.

A man holds a sales board promoting the services of an 'Irish Fortune Teller', in the O'Connell Street shopping district as pedestrians walk past retail stores in Dublin, Ireland, on November 25, 2011Show more

In its quest for economic diversification, social capital and wealth preservation, Abu Dhabi Economic Vision 2030 planners looked to Norway, New Zealand and Ireland for lessons on development for the emirate.

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The global economic crisis may have dented confidence in Ireland in particular, even though Angela Merkel, the German chancellor, recently praised it as an "outstanding example" of a country that has fulfilled the terms of its IMF and EU bailout.

But the Celtic Tiger is still reeling from the sharpest economic contraction of any developed economy since the Great Depression. Unemployment and home loan arrears in Ireland are at critical levels. The struggle to reduce spending, increase revenue and rebalance public finances is far from over.

But while the tiger may have stopped roaring, the adaptability of UAE policymaking allows it to continuously incorporate new insights into its strategy. And Ireland still offers valuable lessons for the country as it considers how to move to its next phase of development.

The first lesson, one vitally important for the Gulf region, is it is never too early to undertake the reforms needed to create a more efficient, competitive and cost effective public sector. This is a politically sensitive issue and Ireland failed to do this during its boom years when its public sector workers were among the highest paid in Europe and spending on social welfare and pension provisions was out of control. Now it is paying the price. In preparation for the upcoming budget in early December that is expected to include €2.2 billion (Dh10.77bn) in cuts and €1.6bn in tax increases, representing nearly 3 per cent of GDP, the government has just introduced 200 cost-saving targets across the public sector. This includes reducing the number of government employees by 12 per cent from its 2008 level to generate savings of more than €2.5bn (15 per cent) on its pay bill since 2008.

The second lesson Ireland offers the UAE is there is no substitute for developing an educated workforce that can operate in a relatively low corporate tax environment (12.5 per cent in the Irish case), where flexible business practices and a competitive enterprise philosophy are encouraged. Last year, in the midst of the meltdown of its banking sector, the devastation caused by a property bubble of historic proportions and an international media frenzy that pronounced the Irish economy dead and buried, Ireland came in second after Singapore as the most popular destination for foreign direct investment (FDI) on a per capita basis. In terms of attracting much-prized research and development projects, Ireland came in fifth behind Finland, Taiwan, Israel and Puerto Rico. Even more impressive were the findings of IBM's recently released Global Location Trends 2011 report. It ranked Ireland number one globally as a location for attracting high-level investment and ranked its capital Dublin as the top European city for investment. Similarly Dubai, even after the property crash and at a time of political turmoil in other regional states, continues to attract FDI. Companies and investors continue to relocate to the UAE because of a versatile infrastructure that is difficult to match.

Directly related to this is the third lesson the UAE would be well advised to take from the Irish attempt to rebuild its economy - the importance of developing a vibrant export sector that can compensate for economic downturns at home.

Last year, total exports of goods and services earned €161bn, the highest ever recorded. This represented a growth of 6.7 per cent on the previous year. The Irish Exporters Association forecast total exports for this year to set another record at €172.6bn.

The UAE has been building the infrastructure to become a global export hub. The Irish experience, with a vibrant export sector helping the local economy withstand global financial pressures, provides valuable examples for the Emirates.

A Professor Rory Miller is director of Middle East and Mediterranean studies at Kings College, London. Ghanem Nuseibeh is founder of Cornerstone Global Associates.

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