The Hindu Business Line : Can Kerala do an Ireland?

Around three years ago, a Malayalee caled Kutty Nair toured Kerala's industrial destinations and was especially impressed by Technopark, the State's first information technology (IT) park at Thiruvananthapuram. Mr Nair had not come as an ordinary non-resident Keralite - he was Chairman of the Dublin-based Ireland-India Business and Economic Association. And he had come to seek opportunities for Irish companies to set up collaborative ventures in Kerala.

Three years may not appear a long time, but this period has been remarkable for Ireland, and reveals some truths that ought to open Kerala's eyes. In that period, Ireland was able to wipe out the negative image it had been saddled with for generations - that of the "sick man" of Europe. As other European countries reaped the benefits of the Industrial Revolution, Ireland was mired in a soporific mix of - in the words of New York Times' foreign affairs columnist Thomas Friedman - "migration, tragic poets, famines, civil wars and leprechauns."

But all that has changed fundamentally. Today, as Friedman pointed out in his column last fortnight, titled `The End of the Rainbow', Ireland is the richest country in the European Union after Luxembourg. How the small nation of Ireland went from being the sick man of Europe to the rich man in less than a generation is an amazing story, notes Friedman. And it is a lesson that Kerala could well study.

In a quite unusual development, writes Friedman, the Irish government, the country's main trade unions, farmers and industrialists came together and agreed on a programme of fiscal austerity, slashing corporate taxes to 12.5 per cent, far below the rest of Europe, moderating wages and prices, and aggressively courting foreign investment. In 1996, Ireland made college education basically free, creating an even more educated work force.

Friedman distills Ireland's advice into some very simple prescriptions: Make high school and college education free; make your corporate taxes low, simple and transparent; actively seek out global companies; open your economy to competition; speak English; keep your fiscal house in order; and build a consensus around the whole package with labour and management.

Kerala should also listen to Seamus Gallen of the National Informatics Directorate in Enterprise Ireland, the country's official industrial development agency. He stresses these key reasons for the Irish turnaround: the fact that English is the spoken language, the quality of life in Ireland and the flexibility of the Irish in adapting to changes in the workplace.

Gallen also compares Ireland to India and Israel to draw some useful lessons. India, Israel and Ireland are often labelled the three `I's by analysts looking for parallels in their technological success stories. While there are undoubtedly some common factors, notes Gallen, each story is different.

The contrast between Ireland and India is particularly striking. India has built its reputation on the ability of its software engineers to build systems to order, mainly on sub-contract from US and European corporations, often by placing the engineers on site in the clients' offices.

Ireland, by contrast, produces and sells packaged products, and does not compete with India (or anyone else) for bespoke work. Israel is closer to the Irish model than the Indian, but has not become involved in localisation.

All that is not enough. As Friedman advises, having done all that, you have to then hang in there, because there will be bumps in the road - and you, too, can become one of the richest countries in Europe. Change that to "one of the richest in India" to fit Kerala's bill - at least, in a rosy future.

The writer can be contacted at kgkumar@gmail.com

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