Ireland Future Issue and Suggestions

Ireland Future Issue and Suggestions

Foreign Direct Investment

Ireland is known for having drawn numerous advantages from Foreign Direct Investments. These advantages were seen especially in the areas of manufacturing and exports in the sense that they had a positive impact upon the employment rates. In order to attract foreign investment however, the country invested in a series of local reforms regarding taxes and grants. It has been suggested that too much attention has been given to this approach to the country's development. It has been suggested that the investments should concentrate more upon the local development and that the government should focus on aiding the local enterprises. The truth is that the global financial crisis which started from the United States is affecting a large number of economies around the globe. One of the consequences is the intensification of the competition to obtain more favourable FDI. Ireland was one of the few countries in which the government decided to support the banks when they ran out of liquidities. As a result people continued to maintain their trust in the banks and also ask for loans. Should Ireland decide to invest in order to obtain further FDI, it should probably concentrate upon the big European economies, such as France and Germany, in order to make sure it will get a positive response back. Furthermore, taking into consideration the fact that the international crisis is a financial one, the investments should not focus on financial operations, but on areas which have a potential to grow regardless of the further development of the crisis (such as the protection of the environment for example). Ireland being a small country also represents an advantage under the circumstances of the crisis. The young workforce, with medium to superior education, together with the tax regime represent strategic elements which will contribute to attracting FDI.

Issue II: Unemployment

Another issue that Ireland will surely have to deal with in the following years is represented by unemployment. Since the country's economy is sustained by the multinationals which provide working positions, many of them coming from the U.S.A., it is safe to assume that the financial crisis affecting these entities will lead to an increase in unemployment. The ones who feel the consequences of this fact are the young people who don't have work experience. "Young men under 25 are twice as likely to experience joblessness than the female force over next year" (CIPD 2008). The more unemployed young people, the harder the work that the already employed will have to perform in order to support the others. This will have the country threatened with a lower life standard which will surely affect its competitiveness level. Under these circumstances the government will no longer be able to invest in innovation, technology and science, but be constrained to invest in order to support the unemployed and the retired. These are huge costs for the economy and could better be avoided now through the investment in training and in local economy branches which are most likely to generate working places. As far as immigration is concerned, on the one hand, workers coming from other countries might represent a competition for the locals. On the other hand, they might be the ones most affected by unemployment under the circumstances in which a superior education becomes a fundamental criterion.

Issue III: Monetary Issues

The fact that Ireland is part of the European Union may have its advantages, but it has challenging implications as well. For example, the European Commission is concerned about the possibility of Ireland's deficit going out of control and surpassing the 3% limit that the European Monetary System imposes. In fact, the Department of Finance estimates the deficit will reach 13,3 billion euro, that is 7% of GDP. (Keenan 2008) the introduction of the European Monetary union caused financial shocks in Ireland, affecting especially the nominal interest rates which fell. This had a consequence upon the capacity of the labour market to "absorb immigration" and it will continue to affect employment performance through the diminishment of competitiveness. (Honohan 2005). This, together with the international financial crisis will diminish the country's capacity to attract FDI. As the prices go up, the state is forced to intervene in order to support categories such as the young, the poor, etc. This means a reorganization of the budget with a more socially-oriented perspective. This social programmes ought to be created in a manner which will not create further debts.