Development Should New Brunswick continue to eye Irish Miracle as a model as that economy grinds to a halt?

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QUENTIN CASEY
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FREDERICTON - It was to be the tallest building in Ireland, a 120-metre triangular tower, complete with an egg-shaped pod at the top housing Irish supergroup U2's new recording studios.

The projected ‚¬200 million (C$305.5 million) project, with its roof-top wind-generating electrical turbines and solar panelling, would have dominated the low-rise skyline of the Irish capital, Dublin.

Just a year ago, with Irish investors still pouring money into luxury apartments and townhouses, it seemed highly plausible that the U2 Tower's 180 apartments would be gobbled up - even at more than ‚¬1 million (C$1.9 million) each.

It all seems far-fetched now.

After six years of planning, it is doubtful the tower with its lavish design will ever get beyond the drafting board, thanks to a collapsing property market and a recent slide into recession.

Though an ocean away, Ireland's economic woes could influence whether - or to what extent - New Brunswick follows the Irish lead to economic improvement.

It seems a risky venture at the moment.

The Emerald Isle's long-booming economy has gone swiftly into reverse during the past year. Its recession is forecast to deepen in 2009 and its unemployment rate is expected to rise to 10 per cent or more.

The past months have brought one bad piece of financial news after another, each one surprising economists and deepening the Irish government's struggle to contain its budget deficit.

Ireland was the first member of the 15-nation euro zone to fall into recession and a decade-old boom in property prices quickly reversed, bringing sales activity to a standstill. An estimated 20,000 newly built residences lie unsold in the country of 4.2 million people. Late in December, it was announced that the government will invest billions in three Irish banks.

Long gone is talk of the so-called "Celtic Tiger" economic boom.

Now the government is trying to slash its costs and reverse more than a decade of boom-fuelled excess.

Profligate spending, a hallmark of Irish governments throughout the boom of 1994-2007, is hitting a raw nerve now that the economy has done a brutal U-turn.

The result is the first cut to government staffing since the late 1980s.

The jobs of civil servants, teachers, nurses, doctors, soldiers and police are all on the chopping block.

Such economic doom and gloom raises the question: Should New Brunswick's government still emulate Ireland when trying to overhaul its economy and attract new investment?

The province's finance minister, Victor Boudreau, has long said New Brunswick should copy the Irish blueprint to create a similar economic renaissance.

Former Liberal premier Frank McKenna, now deputy chairman of the TD Bank Financial Group in Toronto, has echoed that sentiment, calling on the province to reduce taxes to become more attractive to outside investment.

In a visit to Fredericton in 2007, Brendan Walsh, an emeritus professor of economics at Ireland's University College in Dublin, stressed the role favourable corporate tax rates had in his country's ability to attract foreign investment, particularly in the lucrative financial services sector.

In each case the argument was the same: Such measures, if implemented in New Brunswick, could help duplicate Ireland's growth rate of 8.4 per cent a year between 1993 and 2001, three times that of the rest of the European Union.

And despite Ireland's recent troubles, the current Liberal government appears convinced the Irish roadmap is still worth following.

For example, Premier Shawn Graham says his government will take the corporate income tax rate down from 13 per cent to as low as eight per cent, a figure he said would be half that of neighbouring Nova Scotia.

Alan McQuaid, chief economist with Ireland's Bloxham Stockbrokers, says a low corporate tax rate remains the ticket to prosperity - regardless of current circumstances.

Ireland's corporate tax regime helped lure overseas investment during the boom, and even today is helping to shield the country from the full brunt of the global economic slowdown, he said.

In fact, while Ireland's domestic economy is contracting, the foreign investment sector is actually growing. It's the country's one economic saving grace at the moment, McQuaid said.

"The domestic economy is really weak, but the multinational side is still prospering," he said from his Dublin office. And those initial seeds will continue to bloom, he said - it's just a matter of weathering the current economic mess.

But that's not to say there are not lessons to be learned from the Irish experience.

"We put too many of our eggs in one basket," he said, noting the country's over-emphasis on the construction and building sector.

The worldwide decline in property prices has left the country's economy hurting, he said.

"It is having a huge impact on us now."

The key - in addition to having a young, educated workforce - is to attract firms from a variety of sectors, so the economy is not hurt if one founders, McQuaid said.

"Even with a lower corporate tax rate, no matter how attractive it is, if things go wrong in that single industry you're heavily exposed."

Victor Boudreau, the Shediac area MLA, agrees and contends New Brunswick should still strive for its own version of the Irish Miracle.

"Most economists and historians would tell you that the Irish example is one that worked. It succeeded," he said, noting the need for investments to post-secondary education, as well as corporate tax cuts.

"(It's ridiculous) to look at anybody's economy these days and say, 'Jeez, I wonder what caused that to go wrong?'

"Everyone is being affected by what's going on globally.

"What's going on in Ireland is the same as what's going on elsewhere in the world."