Irish wake or Greek tragedy?

By Terry Lacey

(February 19, Jakarta, Sri Lanka Guardian) An Irish wake is a funeral celebration when somebody dies. In this case it is the Irish tiger that is in danger of dying, despite some initial signs of recovery due to the Irish NAMA (the National Asset Management Agency) which has tried to purge the Irish banks of toxic debts, but without positive impacts so far on bank lending.

The International Monetary Fund (IMF) welcomed the NAMA but with reservations that it would not necessarily result in increased bank lending. (Irish Independent 09.02.10).

Recent experience in Indonesia confirmed that fiscal measures to help push the banks into lending may merely result in increasing their Capital Adequacy Ratios (CARs) rather than helping companies, especially SMEs, to find oxygen. Without oxygen, like the fishes in my daughter´s too small gold-fish bowl in Jakarta, the little fish die.

And unfortunately it´s been the same in Ireland for a while.

So what goes on in a small basement room of a three star hotel in Dublin at 8 am in the morning ? Is it an Irish wake or something out of a Greek tragedy ?

What happens is a voluntary liquidation meeting for yet another Irish company.

More than 1,700 Irish companies held similar meetings during 2009 with 8 Irish companies going down every working day of the year, and no sign of this slowing in 2010. So the Irish tiger is dying the death of a thousand cuts, unless something can be down to bring more oxygen to this wounded beast.

In a brief hour or so, the history of past struggles, of good times and bad, is paraded before the creditors and the revenue, who have come to count their losses, and fellow mourners who have come to support their friends.

What could be learned from this tale of woe of an SME on the front line of the retail chain, which saw its turnover double from 2006 to 2007 as the Irish tiger took a great leap forward?

The slide in 2008 halved turnover back down to the 2007 trading level. But the roller coaster ride continued in 2009 chopping turnover another 50 percent.

Firstly this was exacerbated by specifically Irish market volatility that hit particular retail sectors, especially pharmacies, underlining the need for smooth management of changes in regulatory frameworks rather than abrupt go-stop messages from government.

Secondly the revenue was too slow getting SMEs to pay more tax on the upswing and too fast to blow the whistle when they could not keep up on the downswing.

Reportedly the British tax authorities were a bit smarter than the Irish on this point, and a word from on high to go easy saved some unnecessary pain.

Thirdly the roller coaster to nowhere pointed to the fundamental weakness of the classic SME, usually led by a single hard-working champion who could not be expected to do everything. The core skill was to make a product and sell it, not to diligently follow an over-regulated paper-trail of rules, regulations and financial reports.

For the creditors and revenue to ask why the quest to save the company was not abandoned earlier was like asking a jockey at the Irish races when he should stop flogging a dead horse.

The man with the guts to run the race will always try to win and then to survive. He will only give up when there´s no chance. The questions of creditors and the revenue smacked of the benefit of hindsight from those with no such courage.

All over the world we depend on our small entrepreneurs and are thankful that they take the risks for all of us. No need to beat them black and blue when they are swept off their feet by a combination of regulations and powerful economic trends.

Perhaps we can all learn from the Battle of Britain.

It was easier to replace crashed Spitfires than it was to replace trained and experienced pilots.

Better to help them get flying again as quickly as possible rather than to blame and berate them when they crash against overwhelming odds, and then forbid them to fly for five more years. Next time give them more support on their weak spots.

Terry Lacey is a development economist who writes from Jakarta on modernization in the Muslim world, investment and trade relations with the EU and Islamic banking.