Thursday, Mar. 26, 2009


For a few hundred workers at the Irish operations of the U.S. computer maker Dell, the next few weeks look grim. The company announced in January that it planned to shift 1,900 manufacturing jobs from Ireland to cheaper countries like Poland; the first batch of laid-off staff is expected to walk in April. "This is a difficult decision," Sean Corkery, vice president of Dell's European, African and Middle Eastern business, said when the cuts were announced, "but the right one for Dell to become even more competitive."

Ireland's economic boom, which began in the mid-1990s, once earned it the moniker Celtic Tiger. The good times owed much to the arrival of foreign-owned companies like Dell — such firms account for almost 90% of Irish exports and more than two-thirds of the country's business R&D — so the scaling down of a flagship investor is a real blow. (See pictures of new hope for Belfast.)

It's not the only one. After more than a decade of rampant growth, Ireland now looks anemic. A burst property bubble has landed the country in a deep recession. The economy could shrink as much as 6.5% this year, with unemployment set to reach 12%. Irish banks — massively exposed to property — look wobbly, and as tax receipts dwindle, public finances are in a mess. (Read "As Ireland Melts Down, Voter Anger Rises.")

Ill-timed as it was, Dell's switch hardly came out of the blue. The company is only the latest in a string of multinational tech firms to shift lower-end manufacturing out of Ireland — Apple and Intel made similar moves — since the late '90s. Ireland can no longer compete with low-cost Eastern Europe and Asia. Labor in Lodz, the Polish city where much of Dell's assembly of PCs and laptops will now take place, is roughly two-thirds cheaper than it is in Ireland.

Dell's decision underlines Ireland's need to nurture higher-skilled, higher-value jobs. The computer maker — Ireland's biggest exporter in recent years — will continue to direct its regional manufacturing, logistics and supply-chain operations out of Ireland and retain its sales, marketing and support services in the country. "These are better-paid, higher-end jobs," says Frank Barry, a professor of international business and development at Trinity College Dublin. "That's the positive side of the coin." And other firms are still buying into Ireland. Intel has said it will sink a further $68 million into R&D in the country; Facebook has plans to build its international headquarters in Dublin. "New Economy service firms" like these, says Rossa White, chief economist at Davy, a Dublin brokerage, are "the kind of area we need to target." (Read: "25 Things I Didn't Want to Know About You on Facebook")

Still, with capital in such short supply, foreign investment will slow this year. In the meantime, Ireland is looking for new business. Abundant supplies of wind and waves make renewable energy an "obvious sector for Irish firms to look at," says White. "We could become a real niche player globally." The Celtic Denmark?

See pictures of the global financial crisis.