WE know that businesses detest uncertainty, and it is one of the greatest deterrents to business investment.
Given the lack of an Executive, and the unknown impact of the shift from operating under the partially implemented Northern Ireland Protocol to a fully implemented Windsor Framework, it could be argued that last month was a strange time for Northern Ireland to host an investment summit.
With a constant focus on the negative political backdrop, it is easy to forget the many benefits of investing here. Not least access to a well skilled labour market, excellent tertiary education infrastructure, and government support programmes which are amongst the best in the world.
Hosting the event itself also brings benefits. Firstly, it acts as a catalyst for investment by providing a deadline for deals that are close to agreement, so they can be announced at the conference and all sides can benefit from the publicity that generates.
Secondly, it can help provide momentum to progress potential investment deals that are in their early stages of development and finally, it provides countless opportunities for people who would not otherwise meet to get together and create new links and contacts. As a consequence, investment summits normally continue to bear fruit in terms of inward investment over the subsequent 18 to 24 months.
More broadly, inward investment is important to the development of small open economies and has been recognised as a critical component in Ireland’s economic success since the 1990s.
Typically, foreign-owned firms operate in higher value-added sectors, so wages are higher for staff, they tend to invest more in staff training raising the skills of the local labour market further, and they typically introduce more developed management techniques.
Also, if they have local supply chains, they will work with their local suppliers to help them become more efficient and adopt more advanced management practices. Together this creates a more productive business environment, by raising efficiencies and standards across the indigenous business population.
One area I expected to see more discussion about at the investment summit was the use of private sector funding for public infrastructure. The Chancellor of the Exchequer, Jeremy Hunt, has spoken about this in a UK-wide context in recent months and obviously government funding will remain very limited here in Northern Ireland at least over the next five years.
Given these circumstances, finding ways to direct private funding into public infrastructure could form part of the answer. At least two local publicly-owned companies, the House Executive and NI Water, are run outside of government in many other parts of the world.
These organisations already generate revenue which could be used to finance upfront capital investment, which is currently unaffordable for government. The introduction of domestic water charges would also open up another significant source of funding for capital investment, but that is the subject for another day.
Clearly the circumstances for the investment summit were not ideal, but business leaders make investment decisions with a multi-decade time horizon. In this context, civil servants making decisions in the absence of ministers must be viewed as a short term issue, to which a longer-term solution must be found.
The uncomfortable truth is that ‘collapse’ is a normalised political strategy deployed by both sides when circumstances become challenging for them. Then, typically, the party which collapses the institutions faces widespread criticism but very rarely does that result in the timely restoration of those institutions. In fact, political or electoral support for the party which collapses the Executive tends to hold up well.
So, whilst many people are incredibly frustrated with the start-stop nature of our government, criticism of individual parties perhaps misses the point. Maybe our criticism should be more focused on the institutions themselves, or more precisely the rules and mechanisms that allows an individual party to collapse the institutions.
The checks and balances put in place during the Belfast/ Good Friday Agreement negotiations were included for very good reasons and provided solutions at that point in time.
However, 25 years on, perhaps it is time to recognise that the solutions required in 1998 have become a problem in 2023, and longer-term stability will only be achieved when those rules are updated.
:: Gareth Hetherington id director at the Ulster University Economic Policy Centre
