Chapter 11: Comparing Irish And Chinese Politics Of Regulation ~ The Irish Asia Strategy And Its China Relations

IrishAsiaIn its Asia Strategy, the Irish Government calls for closer cooperation between Europe and Asia and a higher profile of Irish business, society and politics in this core region of the global economy. While the focus in general rests on trade and investment, there is one area where Ireland as Europe’s Celtic Tiger has much to share with its distant partners: regulatory reform and innovation as a key driver for economic modernisation and competitiveness. From an academic perspective, the analysis of regulatory regimes, states and capitalisms has enjoyed years of impressive development. While some have focused on a better understanding of the evolution of regulation and their impact on political systems or the world economy, a second stream in regulation research seeks criteria for an evaluation of existing regulation and the promotion of better regulation. Case studies from different jurisdictions are frequently used to highlight practical and theoretical issues. In this paper, the experience of two states experiencing impressive rates of economic growth but exhibiting contrasting political systems are analysed to isolate areas of convergence in regulatory development. China and Ireland are of vastly different size but the Middle Kingdom dwarfs most other states. The comparison is, however, made more plausible by Ireland’s need to accommodate EU regulatory strictures and China’s adjustment to an open market economy. Further, though small, Ireland does not operate in an international political vacuum. Like other western democracies that are “open, integrated, and rule-based, with wide and deep political foundations”[i] and, as such, represents a typical liberal democracy. Nevertheless, to acknowledge the clear differences between the cases chosen, the paper concentrates on aspects of the Irish experience that might signal useful insights for China in the areas of transparency, innovation and competition.

Thirty years after the Chinese leadership initiated the policies of reform and opening up to the outside world, the People’s Republic of China (PRC) is a remarkable economic success story and an increasingly opaque puzzle for academic research. Its ‘Socialism with Chinese Chracteristics’ has seen average annual growth rates of more than 10% since 1980. By World Bank standards, China in 2006 was the fourth largest economy in the world, a major trading nation and holder of the largest foreign exchange reserves. At the same time, its ‘Socialist Market Economy’ exhibits fundamentally contradictory features: while there are comparatively free markets in some sectors of the economy that tempt observers to compare today’s China with the Manchester of the early 19th century, private property rights have only recently found their way into the constitution and are still subject to the interpretation and protection by a judiciary under direct control of the political leadership. China’s rule by law – not to confuse with the concept of rule of law – is executed by courts and bureaucracies under direct control of the Leninist apparatus of the Communist Party of China, which, according to the constitution, leads all Chinese political institutions and exerts the democratic centralism as part of the dictatorship of the people.

The interdependence of social orders that links the existence of a market order with a pluralist democratic system that guarantees rule of law points at an implicit instability of China’s political and social order. But, while doomsayers had their fair share of academic and public interest in the 1990s, the survival of CCP rule in spite of fundamental changes in the economic and social system requires further analysis. There is no consensus among China watchers on the nature of its political order. Characterisations include soft authoritarian, adaptive authoritarian and neo-consociational. Similary, opinion on the direction of its future development ranges from enhanced state capacity stabilising party rule to decreased state capacity destablising the CCP. It is obvious nevertheless that somehow China’s hybrid political and economic order is a survivor.
Part of an explanation how exactly the Chinese leadership has managed to maintain political control and economic dominance in an increasingly pluralist social and market economic environment lies in its proven track record in institutional learning and innovation. At the same time, a global trend towards the introduction of new forms of governance, particularly of quasi-independent regulatory bodies, is recalibrating the traditional relationship between governments, societies and markets in well-established OECD countries as well as in emerging markets.
While the rise of the regulatory state, the post-regulatory state and regulatory capitalism has led to an intensive debate about efficiency and legitimacy, its implications for non-democratic states with emerging market orders has been painfully neglected.[ii] The global trend to redefine the relationship between governments and markets, between state and non-state actors in the area of economic activity, however, has changed the perception of social orders and has a direct impact on the institutional and policy change of states in an interdependent world. Read more

Bookmark and Share

Chapter 12: Ireland And The ASEM Process: The Case Of The Asia-Europe Foundation ~The Irish Asia Strategy And Its China Relations

IrishAsiaIreland’s Asia Strategy is also embedded in the context of the wider relationship between the European Union and Asia. The relationship has been dramatically transformed from one of European political and economic dominance to a partnership of equals”. Dermot Ahern, Minister of Foreign Affairs, 2006.[i]

The inaugural Asia-Europe Meeting (ASEM)[ii] was convened in Bangkok, Thailand, in 1996, in a uniquely ambitious endeavour to build a multi-faceted platform where Asia and Europe could encounter each another in a modern context. This innovative model of engagement, with its emphasis on a flexible structure and informal dialogue, arose from a mutual recognition that the relationship between the two regions needed to be strengthened in light of the increasing interdependence in the economic, social and political spheres. The ASEM process as it has developed is based on an equal partnership and its activities are grouped into three pillars: political, economic and socio-cultural.

ASEM has its roots in the recognition in Asia and in Europe that the relationship between the two regions requires strengthening taking into account the growing importance of Asia and the integrating and enlarging Europe.
The three pillars of ASEM – political, economic, social/cultural/intellectual – have allowed for increasingly intensive engagement between the two regions since the outset of the process.
The process was driven largely from the Asian side with much of the initial impulse coming from Singapore. On the European side the push for improved interaction and greater co-operation came from the European Commission. Despite preoccupation with the implementation of the Maastricht Treaty provisions for the launching of the single currency programme, the European Commission responded positively and facilitated the inaugural meeting of the Heads of Government from the EU and East Asia in Bangkok. The fact of the meeting taking place was an important indicator of a readiness to engage more effectively in mutually beneficial interaction. Subsequent discussion between officials from both sides set out tentative procedures to be pursued.

In the words of Kishore Mahubani, the Singaporean diplomat charged by his Government with the task of convincing the European and Asian Governments to join in the initiative to develop ASEM, the rationale was simple. “There were three major growth centres in the world: North America, East Asia and Europe. In this triangular relationship, the connection between North America and Europe was strong, so too was the transpacific connection between North America and East Asia. The missing link was the relationship between Europe and East Asia”[iii]. Three years into the process, a review of the progress by a Vision Group of eminent persons was initiated. The report of the Vision Group makes interesting reading; the Group saw
“the gradual integration of Asia and Europe into an area of peace and shared development, a prosperous common living sphere in the 21st century, a sphere in which our knowledge, wealth, cultural heritage, democratic ideals, educational assets, intellectual aspirations are closely intertwined and exchanged without barriers or constraints. [The group] envision the active integration of our intellectual forces and a vibrant exchange of culture and the arts between Europe and Asia…[and] also visualise the progressive opening of markets with the eventual goal of free flow of goods and services by the year 2025”.[iv] Read more

Bookmark and Share

Chapter 13: Ireland’s Unique Asia Strategy – The Irish Strategy In European Comparison ~ The Irish Asia Strategy And Its China Relations

IrishAsia13.1 Introduction
Historically, Ireland’s human and cultural links with Asia have been underdeveloped[i] The Irish Asia Strategy, launched in 1999, was designed to strengthen Ireland’s ties with Asian nations. Until 2004, the fundamental aim of the strategy involved outlining a series of challenging targets and objectives, with a view to increasing Ireland’s political, trade and investment connections with Asia. Several new embassies [ii] and consulates[iii] were founded in order to achieve this end, and there was a notable increase in trade-related and high-level political visits between Ireland and the continent. Efforts were also made to heighten awareness of the Irish national brand through a state-funded campaign. The first phase of the strategy resulted in the doubling of the average value of exports to China (2003–2005), compared to the trade statistics for the previous 3 years[iv]. Two-way trade between Pakistan and Ireland also increased: By 2006, exports to Pakistan were valued at € 67.8 million, and sales by Irish companies in Pakistan more than doubled over the last three years.[v] However according to the Irish Exporters Association’s (IEA) annual report, 2005 exports to Asia fell by 1% to € 6.6 billion, with exports to Thailand and South Korea falling the most. Exports to Japan remained fairly static during this period[vi]. What about India and other Asian nations? Why only mention these nations?
The second phase of the strategy (2005-2009) has been designed to encourage Irish foreign direct investment (FDI) in Asian countries, and vice versa. “The objective at this stage of the strategy is to intensify the wider range of interaction with the priority Asian countries and to encourage indigenous Irish companies to avail of business opportunities there”[vii]. Sectors such as education, tourism and R&D have been targeted as key sectors of the Irish economy where Ireland can attract investment from Japan, China, India, South Korea, Thailand and the Philippines. Enterprise Ireland’s 2002 report indicates a stark lack of awareness of Ireland inside Asia[viii]. To counteract this trend, the Department of Arts, Sport and Tourism has established a new organization named Culture Ireland/Cultúr Éireann to promote awareness of Irish arts and artists abroad, as embedded in the second phrase of the Asia Strategy[ix]. Thus far, the success of phase two is difficult to judge. Exports to China and Hong Kong rose by 38%, while exports to the Philippines surged ahead with a 106% increase[x]. Following Japan[xi] and China, Singapore ranks as the third most important Asian market for Irish exports. The average value of Irish goods exported to Singapore per annum during the period 2003–2005 was € 792 million, up 25.9% on average annual exports in the previous three years, with the result that Singapore now accounts for 12% of total Irish exports to the Asian region[xii].

However in his 2007 article “Irish Trade Statistics: Policymakers opt for spin and delusion rather than confront challenging facts,” Michael Hennigan highlights that many of these trade statistics can be misleading. He illustrates his case regarding the aforementioned 106% rise in trade with Philippines, pointing out that “former US naval base north of Manila, at Subic Bay, is a major Asia-Pacific hub for FedEx, one of the world’s biggest airfreight companies. Therefore shipments from Irish-based multinationals to Subic likely have ultimate destinations elsewhere in the Region”[xiii]. He also points to the fact that “foreign-owned companies account for about 87% of total exports from Ireland”[xiv].
This raises some interesting questions: Who does the Irish-Asia Strategy serve? Is it designed to promote Irish companies in the Asian Market, or to retain foreign companies in Ireland by providing them with logistic and marketing support in Asia, thus allowing multi-national companies to operate in Ireland while competing in the Asian market? Should Ireland try to compete in Asia and gain market share in these emerging markets, or should Irish companies only enter these markets to benefit from low-cost labour intensive manufacturing?
In order to gain some insight into these topics and approach these questions, we will first closely examine Italy’s and Germany’s relations with arguably the most highly-profiled Asian market, China, and explore whether Ireland can learn any lessons from our European neighbours’ experiences. Both countries have enjoyed a long history of trade with China and both have dealt with China’s rise as a superpower in alternative ways; one cooperating with China in low-cost high-labour production through a lattice of industrial organisations; the other attempting to use China’s growth to increase its percentage share of the world market. China by no means represents Asia as a whole. Each country in Asia produces its own opportunities and challenges, but it would be beyond the scope of this paper to analyse Italian and German trade history with each country in Asia. China however does represent a wide range of the opportunities, as well as a variety of the challenges, which are  experienced by participating in business in Asia. And China clearly enjoys a very prominent position within the Irish Asia Strategy. Read more

Bookmark and Share

Chapter 14: Ireland, China And The EU – Foreign Policy In A Europeanised Context ~ The Irish Asia Strategy And Its China Relations

IrishAsia14.1 Introduction
The ever-expanding economic and political strength of China has garnered high levels of interest from the heads of the European capitals, including Ireland, over the past decade. Over the past deacde or so, a series of programmatic policy papers from the EU and bilateral agreements have established an increasingly institutionalised relationship. From the European perspecitve, China has provided a test of European strategy of constructive engagement, with the EU being characterised as a civilian, normative or soft power. Where, then, does Ireland fit into this framework? Since the early 1990s, Ireland has increasingly sought to engage China as part of its wider Asia strategy, which has involved meetings with heads of state, diplomatic conferences, as well as bilateral political dialogue on issues such as environmental protection, human rights and education policy. From these emerged one of the the most significant policy documents with regards China in Irish history, the Asia Strategy. This document laid out plans for business agreements, economic benefits and cultural dialogue between the two countries. It has been one of the most successful policies in relation to China and its relations between a member of the EU since 1985. In order to assess the relationship between Ireland and China, the wider context of EU relations with China must first be assessed. It will then become possible to understand the ever-growing relationship between China and Ireland on the individual level.

14.2 EU – China Relations: A Brief Overview
What is now called the European Union first officially recognised the government of the People’s Republic of China as the legitimate government of China in 1975 and concluded its first bilateral trade agreement in 1985. Since the 1980s, the European Union has developed its long-term relationship with China based on political, social and economic developments[i]. This has involved numerous diplomatic and political meetings and agreements that have included the signing of a Trade Agreement on April 3 1978, an EC-China agreement on textile trade signed on July 18 1979 and the creation of a delegation of the European Commission in Beijing on October 4 1988. However this relationship was not always as amicable as initially invisioned. Following the June 4 1989 incident in Tiananmen Square, relations cooled between the two, with the EC imposing a number of sanctions on China, including an arms embargo[ii]. It was not until October 1990 that the Council and European Parliament decided to gradually re-establish bilateral relations with China.

There was not much significant political activity between the two until the EU-China Energy Dialogue that was established in 1994 and as a result bilateral relations expanded at a rapid pace. In June of that same year a new bilateral political dialogue opened between the EU and China. This was accompanied, on July 15 1995, with the publication of the European Commission’s first official communication on China entitled ‘A Long-Term Policy for China-Europe Relations’. Increasing relations resulted in the creation of a Dialogue on Human Rights issues, which was released in January 1996. In 1998 the next official Communication was released by the European Commission entitled ‘Building a Comprehensive Partnership with China’. One of the most important bilateral agreements took place on May 19 2000 with China concluding a market access agreement with the EU, which was an essential milestone in China’s WTO accession process. The EU has opened its markets to China, since then, because of the benefits to its citizens as well as to obtain reciprocal market access. It has also used this as a way of promoting economic and political lineralisation within China. 2001 saw the European Commission publishing the Communication ‘EU Strategy towards China: Implementation of the 1998 Communication and Future Steps for a more Effective EU Policy’. This was followed by the March 1 2002 European Commission China Country Strategy Paper 2002-2006. On September 10 2003 the European Commission adopted a policy paper entitled ‘A Maturing Partnership: Shared Interests and Challenges in EU-China Relations’. This was followed, on October 13 of the same year, with China releasing its first ever policy paper on the EU. In March 2004 the European Union becomes the biggest trading partner of China, with China becoming the second largest trading partner of the EU. In February 2005 the first ever EU-China Financial Dialogue meeting was held. On March 20 2006 the first ever EU-China bilateral consultations with a focus on Climate Change Partnerships were held. October 24 of that year saw the Commission adopts its Communication entitled ‘EU-China: Closer Partners, Growing Responsibilities’, as well as a policy paper on trade and investment. Over the years the EU has become one of the most significant trading partners of China. Read more

Bookmark and Share

Irish Investment In China. Setting New Patterns ~ Contents, List Of Abbreviations & Glossary Of Terms

IrishAsia2Now online:  Nicholas O’Brien – Irish Investment in China. Setting new patterns. 

Consideration of Irish investment in China will be located within the context of investment theory. Accordingly, chapter two examines the seminal literatureon foreign direct investment and sets out an appropriate model of investment theory within which this research shall be considered. The limited literature on Irish outward FDI is also considered, with specific emphasis on Barry et al’s model on Irish outward FDI.
Chapter three outlines the results of this research and emerging themes are identified. This allows conclusions to be drawn as to whether Barry et al’s model holds in the case of Irish FDI into China. It should be stressed that this is not in any manner a judgement on Barry et al’s model. Rather, it is a reflection on the nature of China as an emerging economy and the unique political economy which it enjoys.
Chapter four draws on the research to explore the opportunities and challenges which China represents. The principal locational advantages and disadvantages which China poses are set out. It is argued that the major potential which China represents for Irish investors lies in market opportunity rather than in low labour costs, an opinion which is supported by the relevant literature on FDI in China. The principal locational disadvantages are identified as existing in the regulatory, cultural and legal environments. This allows conclusions to be drawn on our sub-hypothesis, namely the challenges which China poses for investors.
Chapter five explores the nature of Irish FDI into China. The non-application of Barry et al’s model to China is discussed together with our prescriptive research question, namely the desirability of state involvement in outward FDI. This chapter also seeks to explain why Irish FDI into China is different from that in the traditional destinations for outward FDI.
The concluding chapter draws on previous chapters to identify conclusions which can be drawn. Key findings are highlighted and potential areas for further research suggested.

Abstract & Acknowledgements

Chapter 1 – The Giant Arises
Research Methodology

Chapter 2 – The Nature of Outward FDI
Investment Defined
Dunning’s Eclectic Paradigm
Investment Theory
The Role of the Multinational Enterprise in FDI
Why FDI Occurs
Irish Outward FDI
Barry’s Model on Irish Outward FDI
China and Inward FDI
Relationships and Contract Law

Chapter 3 – The Views of Investors
Profile of the MNEs Included in This Research
Structure of the Chinese Subsidiaries
Rationale for Investing and Incentives
Experience Since Investing
Disincentives and Barriers to Investing in China
Intellectual Property Rights
Contract Law
Role of the State
Investors in Eastern Europe

Chapter 4 – A land of Opportunity and Challenge
Locational Advantages which China Offers
Locational Disadvantages which China Poses
The Regulatory Framework
China’s Culture
Contract Law
Intellectual Property Rights
Corruption and the Giving of Gifts
Regionalism – Advantages and Disadvantages for FDI

Chapter 5 – Irish FDI into China–Evidence, Potential and Policy
Barry’s Model
Irish FDI into China and Barry’s Model
The Potential for Irish Investment
Home Country Effect
Irish Public Policy

Chapter 6 – Conclusions & Bibliography
Main Findings

Bibliography Read more

Bookmark and Share

Irish Investment in China. Setting New Patterns ~ Abstract & Acknowledgements

According to the Industrial Development Path Hypothesis (Dunning, 1981, 1986, 2001), outward Foreign Direct Investment is symptomatic of successful advanced industrialised economies. After a decade of unprecedented growth and prosperity from the mid-1990s, the Irish economy had reached a sufficient level of maturity that Irish firms were beginning to seek new markets in which to invest.

Barry et al’s (2003) authoritative work states that Irish outward FDI is disproportionately horizontal and oriented towards non-internationally traded sectors. This study was based exclusively on developed economies – Europe and North America, rather than developing economies or emerging markets. Such countries have not yet featured in the literature on outward Irish FDI. Given the importance of China as the largest global recipient of inward FDI, this book explores the nature of Irish FDI into China and specifically considers whether Barry et al’s model on Irish outward FDI holds for current Irish investment into China. This consideration will be conducted within the framework of Dunning’s Eclectic Paradigm, which contends that locational, ownership and internalisation advantages must exist for successful investment to occur.

While the level of Irish FDI into China is limited, research was conducted among all Irish firms which had invested in China (this research was conducted in 2006 and 2007). It was found that the nature and scope of Irish FDI into China differs from earlier patterns identified by Barry et al in the case of developed economies. Irish FDI into China is found to be predominately in the traded sector and can be described as only marginally horizontal.

In order to gain a deeper understanding of this development, the locational advantages and disadvantages which China poses are explored. The principal locational advantage is identified as market opportunity. Perhaps the most significant challenge facing investors is the risk to the protection of intellectual property rights (IPR). It is argued that this has the potential to affect the ownership advantage which Irish MNEs possess. Accordingly, there is a need to utilise internalisation advantage to protect IPR. Consideration is given to the role which the state can play in the provision of ‘soft supports’ for investors, primarily through the provision of market information.

The experience and insight offered by senior business executives offered a valuable and unique perspective on the world of private sector decision making. I am particularly grateful for the level of access and openness which I received. I would also like to thank senior staff in the Irish Government state agencies, Enterprise Ireland and the Industrial Development Agency for the valuable information and assistance provided. Without the openness and positive disposition of my interviewees, this research would not have been possible.

I wish to acknowledge the support and encouragement of my doctoral thesis supervisors Dr. Andrew Baker, Queen’s University Belfast and Dr. Michael Mulreany, Institute of Public Administration, Dublin. Their guidance and support were particularly important and insightful in helping me develop my line of argumentation. I should also like to acknowledge the support of the Department of Foreign Affairs for their positive attitude and support towards continuing professional education. A special word of thanks is due to the staff at the Department’s library, who aided my search for literature in a professional and helpful manner.

Finally, I should like to thank my wife Caroline who, on a snowy afternoon in Monscheau, Germany, suggested that I pursue a doctorate. Together with my daughters, Ciara and Niamh, she provided support, encouragement and especially the time to facilitate my studies.

Nicolas O’ Brien

For anybody with an interest in investing in or doing business in China, Nicholas O’Brien’s scholarly and informative book should be essential reading. Given the growing importance of China in global trade this is a very timely work which I highly commend.
Dick Spring, former Deputy Prime Minister and Foreign Minister of Ireland

This book identifies clear differences between Irish investment into China and that into traditional FDI locations such as the US and UK. It is an authoritative work, particularly in view of the author’s experience as a senior diplomat in China and offers clear conclusions as to the benefits and challenges of investing in China”.

Dr. Michael B. Murphy, President, UCC

This is a must read for Irish people considering investment in China. The author discusses why considerable challenges still remain. A very comprehensive insight into informed investment in China.
Donal O’Callaghan, former Chairperson, Ireland China Association

Dr Nicholas O’Brien worked at the coalface of the transformation of modern China during his four years as Irish Consul General in Shanghai. His work is a testament to intelligent observation and the insight that experienced observers can have. The sideline sometimes brings more perspective than those on the pitch have. His book greatly expands our store of knowledge on this subject in an accessible manner with lucid division of what he is discussing and crystal clear conclusions.
Richard Barrett, Treasury Holdings

This admirable book charts the experience of Irish investors in China and has valuable pointers and good advice for business investors planning to invest in the Middle Kingdom. Given the author’s wide international experience, in particular his unique insight as Irish Consul General in Shanghai, this book is an authoritative source on the challenges and opportunities which China offers.
Dr T P Hardiman, Asia Europe Business Forum

Bookmark and Share

  • About

    Rozenberg Quarterly aims to be a platform for academics, scientists, journalists, authors and artists, in order to offer background information and scholarly reflections that contribute to mutual understanding and dialogue in a seemingly divided world. By offering this platform, the Quarterly wants to be part of the public debate because we believe mutual understanding and the acceptance of diversity are vital conditions for universal progress. Read more...
  • Support

    Rozenberg Quarterly does not receive subsidies or grants of any kind, which is why your financial support in maintaining, expanding and keeping the site running is always welcome. You may donate any amount you wish and all donations go toward maintaining and expanding this website.

    10 euro donation:

    20 euro donation:

    Or donate any amount you like:

    ABN AMRO Bank
    Rozenberg Publishers
    IBAN NL65 ABNA 0566 4783 23
    reference: Rozenberg Quarterly

    If you have any questions or would like more information, please see our About page or contact us:
  • Like us on Facebook

  • Follow us on Twitter

  • Archives