The FDI era is over, says Craig Barrett

Ireland will need to move beyond an average education system, average investment in R&D, poor support for entrepreneurs and below average broadband infrastructure if it is to thrive in the post-recession world economic order, Barrett told the country’s political and academic elite last night

At a crowded Round Room of the Mansion House in Dublin, Barrett echoed his sentiment that Ireland, like many western economies, is in a battle to sustain the standards of living they had become used to.

“Education was one of the many reasons Intel chose Ireland more than 20 years ago to locate its multi-billion-dollar investment.” He said that Ireland’s competitiveness that predated the boom and subsequent crisis was another reason.

But while Ireland experienced its economic boom and the whole world went property-crazy amidst a flood of easy credit and questionable banking crisis, another revolution was unfolding. With the collapse of the Soviet Union and the abandonment of socialist principles in nations like India, for example, an estimated 3 billion additional people entered the free world economic system.

“And guess what, they also want good jobs and have a rich educational heritage. You have 3 billion new customers, you also have 3 billion new competitors.”

Ireland's blueprint for success
Barrett said that Ireland had a ‘blueprint for success’ that led to an influx of foreign direct investment (FDI). But that blueprint is no longer relevant and a new one needs to be drawn up.

He said the problem for Ireland now is that the FDI-focused blueprint is no longer practical in a world of 3 billion new capitalists and it needs to do something new. “You need to figure out what you want to be a worldwide leader in.”

He said 90pc of countries around the world envision themselves as potential leaders in the knowledge economy and it is no secret that technologies such as nanotechnology are key. He said that Ireland until now led its growth from external investment but now will need to focus on growth from within and that means supporting entrepreneurs and start-ups.

“The FDI era is over. Real economic investment will be indigenous and growth will come from investment in new ideas.”

He cited the example of a well known start-up – Microsoft – whose R&D investment every year is US$8 billion, greater than that of most countries. “But the challenges that a powerful company like Microsoft faces are actually coming out of universities,” Barrett added, pointing to the arrival of the internet browser, the internet director and eventually the internet search engine. “Google came out of Stanford and proved that the value of an idea can challenge any company.”

Universities as wealth-creation centres
Barrett said that the model proven by Berkley and Stanford as well as the Massachusetts Institute of Technology (MIT) is that universities need to be valued by countries as wealth-creation centres.

He said that for countries to succeed in the 21st century, a smart environment where smart people and smart ideas can thrive is essential. “Ireland needs to ask itself how hard is it to start a company? How entrepreneurial is your economy?”

Barrett hit out at Ireland’s punishing regime for entrepreneurs where if a business fails or if bankruptcy is declared individuals are prevented from starting up again. “In Silicon Valley, half the people who make presentations to me have failed two or three times,” he said, adding Ireland really needs to examine the societal aspects of risk-taking.

On the vital subject of education, Barrett warned that Ireland needs to be more than just average in terms of STEM subjects like maths and science.

He said that while two of Ireland’s universities are among the Top 100 in the world, neither are functioning as wealth creators in the same tradition as Stanford or Berkley in California or indeed universities in Israel. “The economics of Stanford, Berkley, MIT and Israel, this is what your future has to entail.”

Looking at Ireland’s aspirations and its original blueprint, Barrett revealed that the difference between Intel investing in Ireland and the US was US$1 billion. “Ireland modelled its IDA on that of Singapore and today every country in the world has an organisation modelled on the IDA. In terms of wage rates, you are priced out of the market and can’t target anything that is not value-add.”

Ireland's broadband infrastructure (or lack of it)
Barrett hit out at Ireland’s broadband infrastructure and lack of a national policy. “The Finns have enshrined broadband as a citizen’s right. The Finns are serious, the Irish need to be serious.

“Israel has more start-ups than all of Europe. What is Ireland doing about this?”

He said the reality is Ireland is now over-reliant on FDI and needs to come up with a new blueprint for the economy of the next 20 years.

Barrett outlined a 10-point plan that might see Ireland achieve its aspirations of remaining a first world economy:

1.       Basic education - “You need to state your goal to be the No 1 in the PISA rankings for maths.”

2.       Teachers – “Every education system is only as good as its teachers. (Some) 35pc of Irish teachers don’t have maths competency. Teaching is one of the last professions to pay on the basis of performance. You need to look at paying teachers on the basis of their performance.”

3.       21st-century teaching skills – “You teach by rote and don’t take advantage of interdisciplinary skills, like critical thinking. Also, many countries are now in a position to adopt one-to-one computer-based training.”

4.       More maths and science majors at third level – “The CAO is flawed. Your future relies on a critical mass of maths and science skills. Fix it.”

5.       Universities – “They need to become wealth generators, make them look like Stanford.”

6.       Stick to Lisbon – Ireland has only achieved 1.5pc of GDP investment in R&D where under Lisbon it should be now at 3pc. “Why bail out the banks but not fix innovation? The political will needs to be there.”

7.       Ireland needs to be more entrepreneurial – “Ireland struggles with this. Risk is a societal issue. You need to teach people to be entrepreneurs.”

8.       Focus – “Don’t try to be everything for everybody.”

9.       Infrastructure – “In terms of broadband and technology in schools, Ireland is only average. You need to be excellent.”

10.   Remember who you are competing with and the 3 billion new capitalists – “Decide to be the best in the world.”

Barrett concluded: “The best advice I received professionally was you can’t win unless you choose to compete in the first place and you are willing to win.

“It’s very simple. We all got so tied up on short-term issues that we forgot about the 3 billion new competitors.

“Ireland’s blueprint needs to change. You need the political will to do this. Twenty years ago, Ireland had a blueprint. It needs a new blueprint.

“Remember, smart people doing smart things in the right environment. You can only win if you choose to compete.”

Photo: Former Intel CEO Craig Barrett

This article first appeared on www.digital21.ie