bi | opinion
Lisbon
Yes or No?
A GLOBAL PERSPECTIVE
Ciaran Ennis says that changing business models and
increased globalisation dictate the need to refine EU
governance through the Lisbon Treaty.
MUCH HAS been made lately of the need for a Yes
vote in the forthcoming referendum on the Lisbon
Treaty if Ireland is to remain “at the heart of Europe”.
How well does this ‘heart’ stand up to scrutiny? In my
view Ireland is peripheral to Europe in many ways and
always will be. However, over the past four decades
Ireland has played a very good game of understanding
how the world has evolved and, to an extent,
exploiting this peripheral position.
Passing on the Business
For the first four decades of its history the Irish Republic was an
inward-looking and closed economy. The consequence of this
was felt most keenly in the 1950’s when economic growth fell
well behind post-war Europe, and close to 15 per cent of the
population had no option other than to pack their bags and
leave. By the end of that decade it was clear that our economic
policies had failed.
It was at this point that Ireland began its journey towards
becoming an open, progressive and forward-looking country.
Protectionist policies were abandoned and the country
developed an outward orientation and started to engage with
external bodies such the IMF and the World Bank. The IDA,
which had been in existence since 1949, was granted greater
autonomy and began to aggressively promote Ireland as a
destination for foreign direct investment with, as we all know,
some considerable success.
Accession to the EU in 1973 enabled the country to expand
its trade horizons and to develop markets outside the United
Kingdom, which had long been its most important market by
a considerable margin. It also brought with it considerable
investment from European Community which enabled the
country to begin the process of catching up with the rest
of Europe.
With the introduction of the Single European market in
1992, the country became an even more attractive location for
overseas companies seeking to establish a base in Europe and
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further investment flowed. Ireland’s Atlantic location,
English-speaking population and a legal system based on
common law made Ireland a particularly attractive location
for US-based companies.
The introduction of the euro in 2001 greatly eased the
burden of doing business in Europe and further enhanced
Ireland’s attractiveness.
As a result of all this Ireland has, over the past four decades
or so, gone from being a closed economy to the point where it
is one of the most globalised economies of the world. In fact,
throughout the first decade of the 21st century, the country
has been consistently rated in the top five most globalised
economies of the world in the annual survey carried out by AT
Kearney in conjunction with Foreign Policy magazine.
This has been a remarkable transformation by any standard.
The success of Ireland has been in no small part due to its
ability to understand how the world is evolving around it and
how to adapt to change. We now have a generation who have
developed world-class capabilities without having to leave
Ireland. Not only have they developed the capabilities, they have
developed the confidence to play in a global world.
Our future prosperity, notwithstanding the current difficult
economic situation, will depend on our ability to continue to
adapt and change.
But how is the world changing around us? I would like to offer
some observations from the perspective of one who has worked
for a large international company for the past 25 years.
A Different View of the World
Firstly, I would like to take a look at how large international
companies, of the type that have invested in Ireland over the
past couple of decades, view world markets. Up until recently
they used a fairly standard model, sometimes know as a ‘triad
model’. According to this model, companies tended to organise
themselves around three major markets: Americas; Europe,
Middle East and Africa (EMEA); and, the Asia Pacific (AP) Group.
This triad model worked very well for many decades.
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Ciaran Ennis, Head of Communications
and Corporate Affairs, IBM Ireland
However, as the 20th century drew to a close the limitations
of this model were becoming evident. Countries, which for
political, religious or cultural reasons had been closed, began
to open up.
Initially it was considered adequate to simply bolt these
countries onto the existing triad model, so Russia and Eastern
Europe became part of EMEA and China and India became
part of Asia Pacific (AP). However, it became clear that the
fundamental characteristics of the countries within a grouping
were often radically different.
A new and more logical way to view countries was to
group them by their state of economic development –
‘Mature’ or ‘Growth’.
The key to success in the future will be our ability to leverage
skills developed in Mature markets to help Growth markets
achieve their objectives. Mature markets have infrastructure that
has evolved over many centuries. Growth markets are looking to
build infrastructure that will last several centuries. They can learn
from Mature markets; how to do things but also how not to do
things. And because they are often starting from scratch the
learning can also flow in the other direction. In both markets
the question of sustainability is unavoidable.
The Rise of the Globally Integrated Enterprise
The second matter I would like to turn to is the question of
how international companies are organising themselves. In the
past, multinational companies organised production market-by-
market within the traditional boundaries of the nation states in
which they operated. In essence the company replicated itself
wherever it wanted to do business.
However in an article first published in Foreign Affairs journal
in 2006 Sam Palmisano, CEO of IBM, observed that three
important developments have taken place over the past three
decades that have impacted how international companies are
organising themselves.
Firstly, trade and investment barriers have receded; secondly,
there has been a revolution in IT; and, thirdly, standardisation
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has facilitated the interlinking of work both within and among
companies. This is giving rise to a new organisational model or
structure which is, in effect, a Globally Integrated Enterprise. In
this world the company’s supply chain can be spread across the
globe and work flows to where it can best be performed.
Europe is part of this globalised world. Business can flow into
it or from it. Its success will depend on how well it can develop
the Mature and Growth markets that lie within its boundaries,
and the extent to which it can develop business with those that
lie outside it.
We have recently seen positive economic signals coming from
France and Germany which have more to do with their success
in Growth markets than their more traditional Mature markets.
Future success will depend on the extent to which Europe can
build enterprises that are truly globally integrated.
A key consideration for the EU, however, is its governance
regime. This has evolved over many decades. In many ways
the EU is like a house, originally designed for a small number
of people and has had an extension added every time a new
person comes along. Eventually after several decades, and with
27 people living there, the house may keep the rain out but it is
unlikely to be pretty.
The Lisbon Treaty is an attempt to deal with some of the
aspects of EU governance that may hinder progress in our
globalised world. The ins and outs of the last referendum
have been relentlessly debated. If there is a benefit in the
rejection of the Treaty the last time it is that it helped surface
the genuine concerns which people had and it has enabled
these to be addressed.
It is in this context that the Lisbon Treaty deserves a ‘Yes’
vote. Ireland has benefited from its membership of the EU and
from its ability to adjust to the winds of change. We have built
considerable skills in Ireland over the last 15 years in areas such
as medical devices, pharmaceuticals, information technology
and international financial services. In a global world, work flows
to where the skills are. And this will continue to be the case.
Because Ireland has been adaptive and progressive we have
benefited from this trend.
In the longer term, the financial crisis we are facing will pass
and we will be able to refocus our attention on the forward-
looking approach that has served us so well for half a century…
… Or we can vote No. k
Ciaran Ennis is Head of Communications and
Corporate Affairs at IBM Ireland and a former
President of the American Chamber of Commerce
in Ireland. Prior to joining IBM, Ciaran spent ten
years in the Irish Civil Service. The views expressed
in this article are entirely personal.
22/09/2009 19:36:05