By Brian Gaynor

                A booming economy can create its own problems. After
                a decade of fantastic economic growth in Ireland the
                road system is totally inadequate, taxis are scarcer
                than rugby test victories, house prices are ridiculously
                high and employers are struggling to find workers.

                There is also a concern that GDP growth - which has
                averaged 9.1 per cent per annum over the past three
                years - cannot be sustained and a lower growth rate will have a major impact on a
                number of sectors, particularly property.

                Although there has been a huge increase in road construction it has lagged traffic
                growth. Dublin is one big traffic jam, particularly during the peak periods, and
                driving through many of the country's small towns can be a slow and torturous
                exercise.

                The taxi industry is tightly regulated and up to 250 people can be waiting in a taxi
                queue at Dublin Airport. Railway stations are just as bad and late at night the
                streets of Dublin are full of tourists walking to their hotels because they cannot
                find a cab.

                House prices have more than doubled since 1994 with Dublin experiencing the
                strongest growth. It is difficult to purchase a reasonable house in the inner city for
                less than NZ$1 million and last week an old three story terraced home was sold
                for Irsterling 1.8 million. As an estimated Irsterling 1 will have to be spent on its
                renovation the total cost of this residential property is in excess of NZ$7 million.

                The apartment market is even more ridiculous. Last week the proposed sale of 29
                new units in a fashionable area of inner Dublin was announced at prices ranging
                from NZ$380,000 for one bedroom to $780,000 for three bedrooms. The average
                price is in excess of $1,000 a square foot and there are only three car parks for
                the 29 apartments. The three car parks will be sold for $80,000 each, on a first
                come, first served basis.

                Last Thursday evening - six days before the apartments could be purchased -
                there were eight potential buyers queuing outside the real estate office with
                sleeping bags, radios and portable television sets. University students can earn
                up to $300 a day as stand-ins in these queues.

                Students and existing home owners may be benefiting from the buoyant housing
                market but most houses are now too expensive for first time buyers.

                Employers compete fiercely for both skilled and unskilled workers. The
                newspapers are full of glossy and creative employment ads and last Saturday
                Dell Computers was trying to attract workers by distributing leaflets through the
                streets of Limerick city. Unskilled production workers were being offered more
                than NZ$1,000 per week if they could start immediately.

                Dell's Limerick plant employs 3,400 and wants to raise this to 4,000 by
                Christmas. The company says it will import workers from Scotland if they cannot
                be found in Ireland and it is also offering a free weekly draw with television sets,
                overseas holidays and a car to attract to workers and keep its existing ones.

                EMC, a computer company employing 1,200 in Co. Cork, is offering free
                university degree courses on site in an effort to attract and maintain workers.
                Many multinationals are offering stock options to Irish workers and over 100 of
                Microsoft's employees at its Co. Dublin operation are Irish millionaires (NZ$2.6
                million) as a result of their shareholdings.

                While the shortage of skilled and unskilled workers is a problem for employers it
                has been alleviated by a flexible labour and immigration policy. Ireland now has a
                large migration inflow as both foreigners and former emigrants take advantage of
                the buoyant economic conditions.

                In a recently released book - Understanding Ireland's Economic Growth - Frank
                Barry argues that the main reason for the country's success has been the
                government's success in attracting foreign direct investment. This has been
                achieved through tax incentives and grants. Mr Barry, who is a senior lecturer in
                economics at University College Dublin, argues that agriculture economies suffer
                a long term decline in wealth and the most realistic way to industrialisation is
                through government intervention.

                He claims that the 10 per cent corporate tax rate for all manufacturers has led to
                a phenomenal growth in direct foreign investment. Overseas companies were non
                existent in the late 1950s but they now represent 65 per cent of gross
                manufacturing output and 47 per cent of the sector's employment.

                Nearly 45 per cent of this employment is in computer and computer related
                products and 14 per cent in chemicals.

                Mr Berry makes a number of observations about Ireland's direct foreign
                investment. The most interesting are;

                * Most of the investment has been in areas (computers and chemicals) where
                Ireland has no comparative advantage;

                * The overseas owned operations are larger than the Irish owned plants, are five
                times as productive and eight times more profitable;

                * Foreign companies employ more highly skilled workers and their average wage
                is 25 per cent higher than the domestic owned operations;

                * Foreign firms operating in Ireland invest large sums in research and
                development;

                * Employment in the indigenous manufacturing sector is growing again and this is
                mainly attributed to direct foreign investment. For example two-thirds of the new
                domestic owned software companies have been established by individuals who
                have worked for a foreign company in Ireland.

                Although economic growth is expected to remain relatively strong over the next
                few years - the government is expecting growth of 7.5 per cent in 1999 to be
                followed by 4.5 to 5.5 per cent in the first few years of the new millennium - there
                are concerns that the good times may not last for ever.

                Many countries are trying to duplicate Ireland's success by aggressively targeting
                multi-nationals through tax and other incentives. Ireland could be particularly
                vulnerable to low wage countries because its pay rates are now higher than many
                European countries. New graduates can expect to earn in excess of NZ$55,000
                per annum and successful managers can anticipate $160,000 plus by their mid
                30s, before taking into account stock options.

                The Irish government, through its industrial development arm, is taking a proactive
                approach towards this potential problem. It is trying to encourage foreign
                companies to upscale their facilities so that the country is less dependent on
                assembly line production. Low skilled assembly plants would be the first to close
                in an international recession.

                The effort to convince overseas companies to switch to high value production
                goes hand and hand with the government's huge commitment to higher education.

                This policy is bearing fruit. Nortel Networks, the Canadian telecommunications
                giant, had 600 employees on a low quality production line process eight years
                ago. Most of the assembly line production has been moved to the Far East and
                Nortel now employees 700 highly skilled employees in Galway who are mainly
                involved in product development.

                Earlier this week Sun announced that it would be employing an additional 100
                software experts to work on its Java system development and a large number of
                major computer companies, including Intel, Microsoft and Motorola, have
                significant research and development projects in Ireland.

                Although Ireland had many of the problems associated with an economic boom -
                including widespread shortages, escalating public sector pay demands and
                income inequality - there is widespread support for the government's emphasis on
                picking winners.

                This policy has been far more successful than the free market approach adopted
                by Irish home rule governments at the turn of the century and the protectionism
                policies of the 1930 to 1960 era. Most Irish economists and business people
                believe that a total free market approach would be naive in Ireland because the
                country's traditional expertise is in agriculture and it has had no comparative
                advantages when it comes to industrialisation.

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