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Ireland’s Chimerical competitiveness.

468px-Chimera
elusive Chimera

 

By Constantin Gurdgiev (November 2014).

Of the 196 appointments to state boards made by the current Coalition, only 35 resulted from open public competition. Pay increments for civil servants – for length of service not performance – remain in place. Only .75% of civil servants received less than  three out of five in the October performance reviews which ground entitlements to the automatic pay increments. Meanwhile the country is on the march over Irish water and its bonus-for-nothing culture. The Regulator has set it a target of only 8% in cost reductions over the next few years.  The percentage is paltry because it is obliged to maintain double the necessary  workforce inherited from local authority staffs until 2025 – following a deal with the unions. John FitzGerald of the ESRI has said the extra wages and other costs for the  2000 extra staff amount to around €150m a year, or an extraordinary €90 per household. In recent weeks, the Government promised to deliver comprehensive reforms of the public sector. As before, there are vague targets for transforming the sector underpinning much less vague giveaways to insiders. In exchange for reversing pay cuts imposed in the two previous agreements with the unions, the State is promising some easing in the absurdly ineffective procedures for removing incompetent employees. The former is a tangible, enforceable and easily monitored commitment: either new pay flows or it does not. The latter is completely non-transparent and unenforceable. No-one, beyond senior civil servants, will ever have any real proof as to whether or not the new regime is working. No-one in the public service has any incentive to make sure it does. As pay, promotion and performance awards remain detached from actual productivity, no fine-tuning can ever deliver measurable gains in performance.

And of course Public Sector Reform Minister Brendan Howlin failed to implement the €75m reduction in civil-servant allowances he promised some years ago, out of the total of €1.5bn in such perks.  In the end the only allowance abolished was a €218-a-night payment for civil servants who represent Ireland at meetings abroad. Of course even straightshooter Leo Varadkar  suggested it was worth retaining the allowances so as not to damage the Croke Park deal. “We have to weigh up the consequences of any action”, he said at the time. “It has been determined that allowances and increments, like core pay, are protected by the Croke Park Agreement and for €75m it wasn’t worth throwing the agreement in the bin”.
Some public-sector workers still get paid 30 minutes a week “banking time” to cash cheques, even though salaries have been paid electronically for a generation. Others are entitled to two ‘privilege’ leave days which were originally introduced back in the 1940s to allow them to make their ways back to Dublin from the country after a bank holiday weekend when the trip might have taken a day. And some civil servants benefit from a paid half-day’s leave for Christmas shopping. Employees of the Marine Institute get an allowance for going to sea, soldiers get an allowance for handling explosives. Inland Fisheries get an Eating on Site allowance and Advisory Counsel Grade II in the Attorney General’s Office get an ‘Acting Up’ allowance for doing the work of an Advisory Counsel Grade I.

Furthermore there is to be no reform of unsustainable public-sector pensions. There are no changes to the imbalances   between public and private sectors’ employees, which are a multiple of even the imbalances in PAY between the sectors. There will be no reform of the performance-rating and monitoring systems.

There is a growing public recognition in Ireland that the current Government offers little real reform of our political culture and the system of governance. This all contradicts recent surveys of global institutional and structural competitiveness that have generated a lot of ‘feelgood’ publicity for Ireland’s political leaders.

Last month, the World Bank released its Doing Business 2015 survey results. Ireland’s overall rankings improved by four places  from 17th in 2014  to 13th, the best reading since 2012.

The good news prompted a flurry of excited press releases and a chorus of minstrelling Ministers. Even our reserved Minister for Finance, Michael Noonan has lauded Ireland’s improved position. “I welcome the continued strong performance by Ireland in the Doing Business report, which is reflective of the ongoing reforms being implemented in Ireland’s business and regulatory environment as we continue to improve our competitiveness”, he drawled.

The praise, however, came with a kicker.

The sub-components of the survey reveal that Ireland’s gains came almost entirely from a massive jump in our rankings within ONE category. In the (hardly determinant) ‘Getting Electricity’ rankings we moved from 139th position in the 2014 survey to 67th this year. There has been a marked decline in the length of time required for business to obtain an electricity connection. Which is great. And the cost of compliance fell, as a share of income per capita. But it happened because our income per capita rose, not because the heavily-regulated energy sector became more efficient.

The World Bank survey largely fails to reflect the bleak reality of Irish energy. According to the Irish Academy of Engineering, since 2007 our energy-price inflation outpaced the OECD average by 45 percent. Household electricity prices in Ireland are up almost 30 percent in the last three years.

Our ranking in the ‘Starting a Business’ category placed us 19th worldwide in 2015 compared to 21st in 2014 – a fine if small improvement. The  gains here were driven by a significant drop in the number of days required for new-business registration. But the number of procedures and registration costs remained unchanged.

We gained two places from 52nd place to 50th in the ‘Registering Property’ category rankings, going. The time taken to register a property has reduced but the cost of complying stayed the same.

In other sub-categories, things were much less positive.

When it comes to dealing with construction permits, Ireland ranks slipped due to recent Government reforms. A year ago, Ireland was ranked 117th in the world for  ease of securing a construction permit. This time around we are 128th. In an economy allegedly starved of new building activity the World Bank estimates that the cost of obtaining a commercial property construction permit is around 9.5% of the total value of the property, up on 8.9% before the reforms. It takes on average around 150 days to finalise a construction permit for the surveyed type of projects, up on 132 days in the previous study. For comparison, in Germany the cost is 1.1% and a permit can be obtained on average within 96 days.
Meanwhile, in the area where the Irish Government has spent most of its attention and resources – getting credit  into the economy – our performance fell by four places. For ‘Getting Credit’ we ranked 19th in the 2014 study, falling to 23rd this year. Across all survey measures that comprise this category, Ireland simply stayed in the same place over the last 12 months. Which meant that global-credit-condition improvements have pushed us down in the world rankings. In today’s world, standing still is a loser’s game.

The Jobs Minister, Richard Bruton, has said that reforming  the regime for the enforcement of contracts through changes in the way the courts  work is one of the Government’s commitments to improving Ireland’s institutional competitiveness. Yet, in the category relating to enforcement of contracts, Ireland’s rank deteriorated from 17th in 2014 to 18th in 2015, while in the category covering resolution of insolvency there was no improvement year on year (rank 21st).

All in, our competitiveness score has declined by 2 percent between 2011 and 2015, covering the period since the current Government came into office. Ireland is now down four places from the time the Coalition won the General Election.

CHART 1

The World Bank survey was one pat on our Government’s shoulder. Another one came courtesy of the Prosperity Index 2014 published by www.prosperity.com.  Measuring country performance across eight social, economic and governance categories, the index placed Ireland twelfth in the world for socio-economic wellbeing. Which sounds brilliant, except this represents a decline in our ranking from 10th place in 2012 – the dark days of the crisis.

Although our economic performance improved from 33rd in 2013 to 29th in 2014, the latest reading is still worse than the 25th place we occupied in the world in 2012. The ‘Entrepreneurship and Opportunity’ sub-index, measuring the reforms that Minister Bruton was lauding this week, ranks us as the 16th economy in the world, which is two places behind where we were in 2012 and 2013.

Since 2012, there has been absolutely no change in our ranking for Governance. Personal Freedom ranks for Ireland have depreciated from fourth in 2012 to eighth place in 2013, and to eleventh this year. Of coures the cornerstones of the Election 2011 promises were to political, administrative, and regulatory reforms. To make Ireland the best little country in  the world in which  to do business. Based on the Prosperity Index, these reforms appear chimerical.

CHART 2

The inexorable slide back to static consensus on  the  public service gathers pace, to the detriment of vaunted new competitiveness. The surveys show it.