Irish bank governor on experiences of home
Ethiopia and more generally Africa, is now looking at Ireland’s transition from a once struggling economy to that of an economical powerhouse near the top of the IMF and World Bank ranks as something to emulate within its society.
This is as the continent is at a realization that free trade and foreign investments are the basis for its transformation and reasons for the changing of its landscape that once almost heavily relied on foreign aid in an attempt to change its lasting narrative. There is no one country that has captured the essence of these than Ethiopia, now ranked as the fastest growing economy within the continent by IMF as it moves to the liberalization of some of its important public sectors in telecommunication, aviation and others.
To highlight this new reality, the Governor of the Central Bank of Ireland, Philip R. Lane (PhD) made a historic visit to the capital and gave a keynote speech inside the headquarters of the UN Economic Commission of Africa (ECA) at its 51st Session of the Conference of African Ministers of Finance, Planning and Economic Development last month.
This came into being as a result of an invitation by the Executive Director of ECA, Vera Songwe (PhD), an Economist, who has been pushing for a free trade agreement among African nations, most recently with the African Continental Free Trade Agreement.
In a room of heavyweights with more hefty words than action, idealism rather than realism, the 5th Governor of the Irish Central Bank spoke on the theme of the day – the African Continental Free Trade Area: creating fiscal space for jobs and economic diversification. He spoke from a lived experience of his nation highlighting how free trade and foreign investment has helped his nation, which at the moment has a 294 billion GDP (World Bank, 2016), low unemployment rate, a sound social safety net and an annual GDP growth of 5.2 percent (2017).
“I want to share with you some of Ireland’s experiences as a small country and member of a much larger regional single market and trading bloc – the European Union (EU). Membership of the EU has been a primary driver of our economic transformation over the last forty five years,” he reflected. “Africa is projected to see the largest increase in population of any continent in the coming thirty years: this presents both great opportunities and great challenges. In this context, an efficient, continent-wide single market can make a fundamental contribution in promoting inclusive economic growth across a more integrated continent.”
In an exclusive with The Reporter, he reflected on the experiences of home which has seen dramatic changes in the last few decades and on how trade and foreign investment via lower taxes and the lowering of trade barriers and high tariffs being the reasons for its now booming economy and instrumental in its growth.
“The unemployment rate fell from almost 17 percent in 1987 to just over four percent by the turn of the millennium; the fiscal balance moved from a deficit of over eight percent of GDP to a surplus of 2.7 percent; the debt-to GDP ratio declined from in excess of 110 percent to under 40 percent over the same period; and the current account was in surplus,” he said. “This period up to 2001 was termed the ‘Celtic Tiger’ era, by analogy to the fast-growing group of emerging Asian economies that had enjoyed rapid expansion in the 1970s and 1980s.”
In looking at the African experience, he said, while similarities can be found and shared, the African context is different than that of Ireland and that can be the basis for the formation of informing policy and help in locating the benefits of a similar free trade idea, such as the new Continental Free Trade Area.
From the experience of Ireland, entering the EU common market has allowed it to grow from a home market of 4.5 million people to 500 million people. The country is noted in the transformation of its economy in the 1970s when it was a poorer nation with a GDP per capital of only 53 percent of the EU average), highly dependent on agriculture like Ethiopia is currently and in due time leveraged all the benefits of joining the European market and is now home to the multinationals of the world, including the headquarters of Google.
“A large EU market provides a key foundation for global trading activity, both through scale effects and the assurance that EU membership provides to international customers in relation to regulatory and product standards”, the Harvard educated Economist said.