Economic impact of NDP in Ireland 2010

Economic Environment of Business

MO3 EFA

Economic Impact of National Development Plan in Ireland

Submitted By : Sridevi Chandrakumar Word

Count: 2003 Student ID : 2975830

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 Economic impact of NDP in Ireland 2010

Aim:

To critically explain, evaluate and suggest the Economic impact of National

Development Plan for Ireland in the view of an economist.

Introduction:

National Development Plan (NDP) for Ireland is a major Investment project

that is proposed to enhance better future prospects for Ireland in the
upcoming years; NDP involves an overall investment of €57 billion. This NDP
for Ireland includes various benefits in the areas of Child care, Education,
Roadways, Railways, Industries, Water, Recycling of waste materials and rural
area development etc.

In the view of an economist, I would emphasise the fact that resources when
managed according to the actual requirements we would find the economy a
fortunate thing for the human race. We as an economist are expected to make
logical decisions for a critical problem, which must be purely based on reasons
and time sensible with accordance to the constraints. This logical decision
should ultimately maximise the objectives of the problem.

Overview of Irish economy:

Irish economy was considered to be downturn economy in the beginning of

20th century, since the country was totally dependent on agriculture and UK
economy for its essential source of improvements. After adopting “import
substitution model” in their economic structure domestic industries began
fulfilling the intrinsic needs of the Irish people, while creating job opportunities
for the locals, thereby creating a strategic approach which eventually acted as
a barrier that prohibited the Foreign Direct Investment (FDI) and reduced the
risk of increased tariff. In the latter half of 20 th century the domestic
manufacturers began to dominate with an overall export of 66% and paved the
way for “outward looking policy” in Ireland, which reset the previous
restrictions on FDI.

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 Economic impact of NDP in Ireland 2010

Proceeding years were meant to be so crucial for Ireland, since various

important developments and accomplishments happen to occur.

 Ireland decision to join the EC played a key role in Ireland’s financial

development.

 EC membership was replaced by an incentive of 10%, which resulted in

reduction of corporate tax on profits due to manufactured exports.

 Agriculture began to decline and employment sector fell from 54 per

cent to below 16 per cent.

As per Davy Stockbrokers, The Irish economy will increase and put Ireland in
growth prospect in Q1 2010, and in the full year of 2011, GNP (Gross National
Product) is expected to increase at a rate of 4%. Davy chief economist Rossa
White also said that: "We expect average annual growth of 0.5% in real GNP in
2010, but that
conceals gradual
acceleration in
economic
activity intra-
year. It implies a
peak-to-trough
decline in GNP of
14% from Q3
2007-Q4 2009.
We look for a
broad range of
indicators to
indicate growth
by early 2010, including survey data, retail sales, tax receipts and industrial
production."

Source :< http://www.finfacts.ie/irishfinancenews/article_1018000.shtml>

“Ireland's budget deficit could rise to 24% of GDP in 2010 following Eurostat
ruling” (Finfacts Team; Apr 23, 2010)

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 Economic impact of NDP in Ireland 2010

According to Davy an economist the domestic conditions are not likely to

evade rapidly, bottom-line GNP still has impact on the growing. Household
debts are expected to fall during 2010-2011. However, the debt to disposable
income ratio will drop from 175% to 170% and not any more, due to lower
income.

Source: <http://www.finfacts.ie/irishfinancenews/article_1018000.shtml>

The Fiscal Revolution:

The Fiscal revolution aims at three major factors concerning country:

1) To focus on constant economy

2) To facilitate growth, and
3) To create an impact of income distribution within the economy.

In my opinion Irish fiscal policy contributes to the above three attributes with
slow pace on the transition path. However when compared to the high fiscal
growth rate seen during the years 1987 – 2001, the existence of conditional
convergence is reinforced by pace of the slower economic growth rate
experienced in the recent past in Ireland. This slow pace is experienced not

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 Economic impact of NDP in Ireland 2010

only in Ireland but also in most of the 265 developed countries. Convergence
has been constantly improving with quite a lot of fiscal and non-fiscal
measures within Ireland. Based on the above analysis we can clearly conclude
that the essential improvement of the fiscal policy contribute towards the
evolution of “Irish economic miracle”, or the “Celtic Tiger” phenomena.

“European Commission extends period for Ireland's fiscal adjustment by one

year to 2014” (Finfacts Team; Nov 11, 2009)

National Development Plan:

The National Development Plan is a strategic five year approach to develop the
country’s financial status while substantially developing the economic
eminence and attain an overall competitive growth. The main aim of the plan is
to develop the country by creating employment opportunities, better
economic conditions, and thus attaining strong and sustainable growth. The
first five year plan was started late in the year 1988-1933, by ministry of
finance and is aimed to be carried out every five successive year. The latest
national development plan was developed for the year 2000-2006 and was
intended to continue where the previous fiscal year’s plan was ended. The
main and foremost challenge addressed in the plan is the implementation of
public policies through increased employment rate and competitive economic
conditions, thereby attaining strong and sustainable growth.

“Ensure that Ireland will remain competitive in the global international

marketplace and that the fruits of our economic success will be shared more
equally at the regional level and throughout society.”

Source: <http://www.nra.ie/AboutUs/NationalDevelopmentPlan/>

National Development Strategy and Priorities for 2000-2006

The plan for 2000-2006 attributes the following key objective as part of the
present fiscal year to develop the economic conditions of the country.

1. Increasing employment rate and continuing sustainable economic conditions

2. Strengthening Ireland’s overall competence
3. Promoting equal regional development
4. Promoting societal inclusion

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 Economic impact of NDP in Ireland 2010

The government of Ireland has set up their goal towards the continual work on
creating macroeconomic budgetary policies in order to sustain the economic
growth. Hence, the allocation towards public sector, and other commitments
will be maintained to a level of mark which meets the basic level, as the
government if primarily focusing on the macroeconomic policies of NDP. With
regards to this policy, the key elements of NDP strategy include the following:

1) Maintaining a stable orientation of macroeconomic policies in the

upcoming years
2) Investing in higher amounts for social and economic infrastructure
3) Distribution of the investments incurred by public and private sectors to
better regional place
4) Meeting the needs of labour market by promoting them with
educational and employability opportunities in order to avoid the risk of
unemployment in the country
5) With the aim of promoting social inclusion, a comprehensive approach
towards the targeted people both in urban and rural areas

Source: National Development Plan (2000-2006)

Strengths and Weaknesses

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 Economic impact of NDP in Ireland 2010

Below shows the assessment of NDP, its strengths and weaknesses towards
the priority for next 6 years

Strengths:

1) Low chances of inflation, there is a continuous decline in debt ratio, and

macroeconomic policies seems to be constants
2) Increased chances of foreign direct investment by favouring good ease
of investment
3) Reducing the risk of unemployment and educated workforce
4) Increase in productivity and maintenance of low tax economy

Weaknesses:

1) Lack of skills in human resource and requirement for training

2) Shortage of houses, mostly in case of urban areas
3) Poor infrastructure and insufficient competition in the market
4) Insufficient facilities of transport and environmental services
5) Poor development of industrial sectors
6) Less opportunities to the people in both urban and rural areas

NDP focus and plans for 2000-2006:

In order to meet the above objectives, the NDP need to focus on 6 priority
areas which include:
1) Infrastructure which includes public transport, environmental factors
2) Providing special focus on urban and rural areas
3) Social inclusion
4) Increasing chance of employability and fundamental training in Human
resource
5) Focus on increased productivity
6) Special attention on housing and health needs

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 Economic impact of NDP in Ireland 2010

Source: National development Plan; 2000-2006

Planned expenditure for NDP:

From the above table, we can find that main focus on expenditure is on
economic and social expenditure, whereas the least expenditure goes to
regional development. The next level of expenditure was focused on
Employment and human resource for the period of 2000-2006

Programmes for NDP:

There are 6 vital programmes focused for NDP, which includes:

1) Economic and social infrastructure
2) Employment and human resource
3) Productive sector
4) Rural development plan
5) Regional operation

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 Economic impact of NDP in Ireland 2010

Source: National Development Plan 2000-2006, Page 49.

Economic and social infrastructure:

The economic and social infrastructure is focussed on expanding the capital

stock in order to sustain the present activity level and to improve the potential
of rural areas, NDP plan of 2000 - 2006 involved in maximising the
infrastructure including Roadways, Railways, Industries, Water, Recycling of
waste materials and rural area development etc.

National Roads: Ireland reasonably has quite good roadways in terms of

density of the roads, but the quality of the roads is not up to the standards of
the EU according to the plan

This plan incorporates the strategies of national road system and aimed in
improving the reliability of the road transport system

 Aimed to reduce the overall turnaround time of the journey

 Aimed in improvising the Intra road infrastructure between productive
areas and areas where competitive production lies
 Aimed in improving better access facility between harbours, airports and
thus influencing and motivating the export and Trade.

Housing strategy:

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 Economic impact of NDP in Ireland 2010

This is the first ever time that NDP has included housing plan, this facilitates
the present built up model of houses and having control over the houses to be
built in the future, so as to meet the demands of future requirements.

 This housing strategy is aimed and providing the necessary blueprint for
the house to be built and thus having control over the houses built up in
the similar fashion.
 It is also aimed in increasing social housing strategy so as to meet the
needs of future houses and geographic variations.

Human Resources:

This plan overlooks upon the overall performance of the country “Ireland” as a
whole which substitutes as a valuable asset to the country itself. It will also
direct the labour market towards success path and thus improving their skills
and discovering their potentials to the rest of the world.

Source: National Development Plan 2000-2006

 Aimed at promoting growth in employment for people seeking

employment
 Aimed at identifying the skill structure of the labours in the country
 Aimed at promoting equal opportunities
 Aimed at educating, training the labour market to trained workforce

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 Economic impact of NDP in Ireland 2010

Conclusion:

The OECD figures seem to be increasing, which shows a less optimistic nature
of the Government in the upcoming years. There would also be a rapid growth
in world economy which results in GDP to get accelerated to around 6.5%.
Ireland has shown positive traits of retaining and continuing the current
growth and aiming to spread across the countries through the plan of National
Development Plan. These improvements will protect Ireland from being
vulnerable to economic shocks and it will remain strong which will further lead
to future development.

With regards to the worldwide trade, Ireland continues to remain strong and
competitive which can be proved from the evidence shown in the export data
which has almost hit the target with 95% and were keep rising in 2008-2010.
This NDP provides a better pavement for productivity and increased chances of
FDI. Thus in a nutshell, I conclude this National Development Plan provides a
bright opportunity to enhance the strengths of Ireland, by concentrating more
on Ireland’s weaknesses. This enables Ireland to focus more on future projects
and development of the nation, which will thereby enhance the future
economic status.

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 Economic impact of NDP in Ireland 2010

Recommendations:

 Must census the data of long term unemployment and must focus on
youth unemployment
 NDP must review and focus where ever appropriate to enhance the
employability of people seeking employment
 Must focus on schooling system where young students dropout and
becomes the victim of unemployment
 The employment and taxation system must be made more flat and
friendly to organisations to offer employment
 Genderless equal opportunity approach
 Must reduce deprivation among people from rural areas in
empowerment

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 Economic impact of NDP in Ireland 2010

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Dar.A, AmirKhalkhali.S (2002) ‘Government size, factor accumulation, and economic

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