BOOK REVIEW: PROF. EAMONN WALSHreviews Ireland's IFSC: A History of the First 21 YearsBy Fiona Reddan; Mercier Press; €29.99
WHILE THE topic may appear to be a potential cure for insomnia, this history of Ireland's IFSC development over the last two decades is a readable and engaging account of the contributions of key individuals and its largely accidental success.
A quarter of a century ago, Ireland as an offshore financial centre was viewed with deep suspicion. Older readers will recall that Ireland still had exchange controls. Younger readers will be surprised to learn that there were significant restrictions on the amount of currency that could be taken in and out of the country. Investment in foreign assets was restricted. Early attempts to introduce an offshore centre were dismissed as a destabilising force.
The book documents the tremendous individual efforts by a small group of senior politicians, financiers and civil servants to railroad these objections. While the IFSC was originally envisaged as a trading centre, the 1987 crash derailed these plans. The State and private business leaders did a remarkable job in ensuring that the IFSC came to fulfil previously unforeseen needs in the financial services industry.
The success of the IFSC was largely due to splendid improvisation and adaptation - not a product of a five-year strategic plan with milestones and the straitjacket of meaningless objectives and targets. If anything, the book demonstrates that our institutional and cultural ability to adapt to unfolding circumstances was a key determinant of the ascent of the IFSC - despite overwhelming competition from well-established financial centres.
Originally conceived as "acres of trading floors", by 1991 trading operations comprised only 6 per cent of activity in the IFSC. The ability of State agencies and government to engage in joined-up action rather than write reports extolling "joined-up thinking" ensured that a flexible response to unfolding circumstances was possible.
New opportunities were identified to sell Ireland as a back office location for financial services firms. These new opportunities multiplied with the development of information and communication technologies. The IFSC exceeded all expectations by virtue of being in the right place at the right time.
The final chapter of the book assesses the future for the IFSC. It makes for grim reading. Many of the competitive advantages that gave rise to the IFSC could erode just as easily. Ireland is likely to face ever intensifying competition from other jurisdictions. However, our own complacency is likely to be the greatest threat. Fiona Reddan concludes with a quote from an architect of the IFSC, Dermot Desmond: "If we can't do it, we should give up now."
The history of the IFSC should serve as an inspiration to today's leaders in Government and the private sector. A firm, shared commitment to enduring civic achievement creates conditions for public trust, the opportunity for diverse actors to improvise and the possibility for creative responses to the current mayhem in international financial markets.
Rather than participating in a global hangover, the fundamental shifts in financial markets will create new opportunities in financial services. A failure to repeat the lessons from the generation of leaders in 1987 would be unfortunate.
Reddan's book will be of interest to all those who have lived through the development of the IFSC. It is an enjoyable way of remembering how rapidly Ireland has changed.
The book should be required reading for anyone seeking to understand the Irish financial services industry. It explains many of the activities that take place in the IFSC in a clear non-technical manner and it is relatively up to date (late summer 2008). It represents a significant contribution to our understanding of modern Ireland.
• Prof Eamonn Walsh is the Pwc Professor of Accounting at the UCD Michael Smurfit Graduate Business School
