draft national risk assessment 2019 · 2019-05-30 · 1.1. overview of the national risk assessment...

Draft National Risk Assessment 2019Overview of Strategic Risks

Prepared by the Department of the Taoiseachgov.ie

Draft National Risk Assessment 2019Overview of Strategic Risks

gov.ie

Table of Contents1. Introduction 2019 1.1. OverviewoftheNationalRiskAssessmentProcess1.2. DraftRisks20191.3. OverviewofStrategicRisks

2. Draft Geopolitical Risks 2.1. DepartureoftheUKfromtheEU 2.2. Instability in Northern Ireland 2.3. FuturedirectionandstabilityoftheEU2.4. Changingdistributionofglobalinfluenceandmoveawayfromarules-basedsystem2.5. Terroristincidentsandarmedconflicts

3. Draft Economic Risks 3.0. Introduction 3.1. EconomicImpactofBrexit3.2. Lossofcompetitiveness3.3. PublicExpenditurePressures3.4. GlobalSlowdown,includingchangestointernationaltradingenvironment3.5. Internationaltaxchanges3.6. Relianceonmultinationalcorporationsandsectoralconcentration

4. Draft Social Risks 4.1. CapacityofHigherandFurtherEducationSystem

6

7

9

10

15

16

18

20

20

21

23

24

24

26

28

29

30

31

4

Draft National Risk Assessment – Overview of Strategic Risks 2019

34

35

4.2. SkilledLabourShortages4.3. AnAgeingPopulationincludingpensionsandhealthsystemchallenges4.4. ImpactofSocialMediaonPublicDebate4.5. SocialcohesionincludingPerceptionsofRuralandRegionalImbalances4.6. Migrationandintegration

5. Draft Environmental Risks

5.1. ClimateChange&Biodiversity5.2. Ensuringanaffordable,sustainableanddiverseenergysupply5.3. DeliveryofPublicInfrastructure5.4. Food safety 5.5. SupplyandAffordabilityofHousing

6. Draft Technological Risks 6.1. CyberSecurity6.2. Disruptivetechnologytrends6.3. Anti-MicrobialResistance6.4. MajorPandemics6.5. Nuclearcontamination

Annex 1. GovernmentTaskForceonEmergencyPlanning–NationalRisk AssessmentforIreland2017

Draft National Risk Assessment – Overview of Strategic Risks 2019

36

37

39

41

43

5

47

48

49

50

52

52

54

55

57

59

60

60

62

1. Introduction 2019

1.1. Overview of the National Risk Assessment Process 1.2. Draft Risks 2019 1.3. Overview of Strategic Risks

1.1. Overview of the National Risk Assessment Process

TheNationalRiskAssessment(NRA)pro-videsanopportunityfortheidentification,discussionandconsiderationofrisksfacingIrelandovertheshort,mediumandlongterm.SincetheNRAwasfirstpublishedin2014,theannualReporthasservedasanimportantindicatorofnational-levelrisks,andhascalledattentiontoanumberofrisksthatsubsequentlybecamemajorissuesforIrishsociety,includingBrexit,andrisksaroundhousingsupply,andcybersecurity.

TheNationalRiskAssessmentplaysanimportantpartintheearlyidentificationofpotentiallysignificantrisksthatIrelandmayface.Itisvitaltolearnfromthemistakesofthepast,andthisexercisewasintroducedtoensurethatwe,asaGovernmentandasawidersociety,encourageandparticipateinthesenecessaryhorizon-scanningdiscus-sionstoensurethatweidentifyrisksearlyandcanrobustlyprepareforthem.Whilenotintendedtoreplicateordisplacethedetailedriskmanagementthatisalreadyconductedwithingovernmentdepartmentsandagencies,theNationalRiskAssessmentdoesaimtoprovideasystematicoverviewofstrategicrisksthatcanformanimport-ant,andinclusivepartoftheoverallprocessofriskmanagement.

DetailedriskmanagementbeingconductedseparatelytotheNationalRiskAssess-mentprocessincludestheworkoftheDepartmentofFinanceandtheCentral

7

Intro

ducti

on 2

019

DraftNationalRiskAssessment–Overview of Strategic Risks 2019

BankofIrelandinrelationtofinancialandmacro-prudentialrisks;andtheworkoftheGovernmentTaskForce(GTF)onEmer-gencyPlanning,supportedbytheOfficeofEmergencyPlanning(OEP),whoproduceaNationalRiskAssessmentforIrelandcentredonrisksrelatingtopotentialcivilemergenciesatnationallevelwhichiscon-ductedinthecontextoftheStrategicEmer-gencyManagementNationalStructuresandFrameworkapprovedbyGovernmentin2017andIreland’sreportingcommitmentsundertheEUCivilProtectionMechanism.Inaddition,aNationalSecurityAnalysisCentre(NSAC)isbeingestablishedbytheGovernmentaspartoftheimplementa-tionofthereportoftheCommissionontheFutureofPolicinginIreland.TheNSACwillbringthevariousagenciesrelevanttonationalsecuritytogethertopoolexpertiseandinformation,soastoproduceacompre-hensivepictureofthethreatstotheStateanddevelopanintegratednationalsecuritystrategy.

TheDepartmentsandagenciesinvolvedintheseriskmanagementexercisesalsofeedintothisNationalRiskAssessmentprocess,therebyensuringcoherenceandalignmentwithotherelementsoftheoverallriskman-agementapproach.

Separately,andinaccordancewithacom-mitmentmadebyGovernment,anUpdateoftheWhitePaperonDefence(2015)iscurrentlybeingfinalisedbytheDepartmentofDefence.Akeystrandofthisisafullyupdatedassessmentofthesecurityenvi-

thatappropriatemitigationframeworksareinplace.Asoutlinedabove,thisincludestheworkoftheGovernmentTaskForceonEmergencyPlanning,supportedbytheOfficeofEmergencyPlanning,theworkoftheDepartmentofFinanceandtheCen-tralBankofIrelandinrelationtofinancialandmacro-prudentialrisks,thenewNSAC,andtheSteeringGrouprepresentinggov-ernmentdepartmentsandagencies,whichoverseespreparationoftheNRA.

AlloftheselayersofdebatewilltheninformthefinalReport,whichisgenerallyfinalisedandpublishedbyJulyeachyear.

Inthatspirit,wewouldthereforeliketowelcomeviewsontheDraftReporthere. Youcantakepartinarankingexercisetogaugeopiniononthepriorityofeachriskidentified,inthecontextofboththe‘Likelihood’and‘Impact’oftherisks,aswellasansweringthefollowingquestionsbelow:

1. Have the correct strategic risks been identified or are there other significant risks that should be included?

2. Are any of the risks listed not significant enough to warrant inclusion?

ObservationsontheDraftNationalRiskAssessment2019willbeaccepteduntilTuesday25June2019.

ronmentcarriedoutbyaninter-departmen-tal/inter-agencygroup.WhenapprovedbyGovernment,theupdatedassessmentofthesecurityenvironmentwillbepublishedaspartoftheWhitePaperUpdate.

AbroadanddiverserangeofcontributionstotheNationalRiskAssessmentareencour-aged through several layers of debate and engagement,toensureweavoidthepos-sibilityof‘groupthink’.AttheinitialstageoftheNationalRiskAssessmentprocess,aSteeringGroup,chairedbytheDepartmentoftheTaoiseachandcomprisingrepresenta-tivesfromallGovernmentDepartmentsandagencies,workedtogethertodrawupaninitialdraftlistofrisks,asinpreviousyears.

Asmentionedabove,oneoftheoriginalimpetusesbehindtheNationalRiskAssess-mentprocesswastoavoidthepossibilityof‘groupthink’whenidentifyingstrategicriskstothecountry.Tothisend,eachiterationoftheNRAhasinvolvedanopenpublicconsultationtogaugewhetherthereareanysignificantrisksthathavebeenoverlookedorunderplayed,andtoensureinclusiveengagementfromallcornersofsociety.

Inthatcontext,thisdraftNationalRiskAssessment2019isnowbeingpublishedasthebasisforapublicconsultationexercise

Forthisexercisetoberobust,comprehen-siveandinclusive,itisimportantthatallvoices–includingdiscordantorminorityones–areheard.Amorerigorousandwide-ranging debate will support our ability toidentifyandquantifytheriskswefaceandourabilitytomaketherightchoicesforthe future.

Inparallelwiththisconsultation,workwillcontinuewithingovernmentdepartmentstofurtherstrengthenthequalityofIreland’sriskgovernancemechanismsandtoensure

Intro

ducti

on 2

019


8

1.2. Draft Risks 2019

1.3. Overview of Strategic Risks

WhilemanyoftheStrategicRisksdiscussedinthe2018NationalRiskAssessmentcon-tinuetoberelevantfor2019,thecontextandpressuresaroundseveralofthemhaveshiftedandevolvedintheinterimperiod.

Forexample,wehaveseentheuncertain-tiesaroundtheformBrexitwilltakepersistandindeedincreaseoverrecentmonths,bringingwithitastrongerfocusonthepotentialriskofano-dealBrexitandtheimpactsuchanoutcomecouldhaveontheIrisheconomyandonstabilityinNorthernIreland,aswellaswiderimplicationsacrosstheentireriskspectrum.PotentialrisksfortheopenIrisheconomyarisingfromacon-tinuedincreaseintradetensionsevidentattheinternationallevel,andexacerbatedbytheemergenceofaglobaleconomicslow-down,alsocontinuetobeareasofconcernforus,warrantingclosediscussionandawareness.Domestically,emergingspend-ingpressuresmustbecloselymonitoredandcontrolled,toensurethatourpublicfinancesremainsustainableandstable,andtoensurewecanrespondtothechallengesarisingfromtheserisks.

Inaddition,severaloftheriskshaveevolvedinnewdirections,includingthosearoundthecapacityoftheHigherandFurtherEducationsystem,identifiedasastrate-gicsocialriskthisyear.Whilerisksaroundhumancapitalandskillsneedsforagrowingeconomywerediscussedlastyear,andinprevious years, and are dealt with this year undera‘SkilledLabourShortages’risk,anadditionalriskfor2019focusesaroundtheimportantroletheHEandFETsectorsplayintheIrisheconomy,andtheimportanceofensuringadequatelevelsoffundingfortheHEsectoraremaintained,andthatanappropriate,sustainablemodeloffundingisinplace,especiallyinlightofdemographic

challengesandtheincreasingdemandforthirdlevelplacesoverthecomingyearsthatisnowforecast.

Anotherstrategicsocialriskthathasemergedthisyearrevolvesaroundriskstosocialcohesionandinparticularrisksaroundperceivedimbalancesinaregionalandruralcontext,versusurbanareasandcities.InlinewithsimilartrendsinothercountriesinbothEuropeandtheUS,therearesignificantperceptionsofafocusonjobcreationandinfrastructureinvestmentconcentratedincities,andtothedetrimentofruralcommunities.

OtherongoingriskssuchasinternationaltaxchangesandtheIrisheconomy’sreli-anceonmultinationalcorporations’inaneconomiccontext,thesocialrisksassoci-atedwithourchangingdemographicsandageingpopulation,environmentalriskssuchassupplyandaffordabilityofhousingandovercominginfrastructuregaps,andongo-ingandevolvingcybersecurityrisksarestillrelevant,andarediscussedthroughouttheReport.

Forsomeongoingrisks,whiletheymaynotbenewrisksidentifiedforthefirsttimethisyear,greaterpublicawarenessandanincreasedsenseofurgencyandresponsive-nesstotheriskscanbefelt,forexample,inthecaseofbothClimateChangerisks,whereanincreaseddemandforactioncanbefeltfromthepublicandthepoliticalsys-tem,andinthecaseoftheimpactofsocialmediaonpublicdebate,withboththepolit-icalandpolicysystemandindustryrampingupactioninthisarea.

Asalways,andasevidentthroughtheabovediscussions,theinter-connectionsbetweentheserisksareeverapparentandmustbetotheforefrontinanydiscussionofindividualrisks.WeknowthatBrexit,

Intro

ducti

on 2

019


10

regardlessoftheformittakes,willimpactnegativelyontheIrisheconomy,whichinturnwillhaveimplicationsbothforotherpotentialrisksfortheeconomyincludingtheriskofoverheatingandlossofcompet-itivenessontheonehand,aswellasim-pactingonsocialrisksidentified,includingexpectationsforpublicexpenditure,andrisksandissuesaroundmigrationandinte-gration,tonamebuttwo.Indeed,Brexitcanbeseenasanoverarching,umbrellarisk,interactingwithandamplifyingthemajorityoftherisksidentifiedacrossthegeopolit-ical,economic,social,environmentalandeconomicspheres.

Similarly,inter-connectionsandknock-onimplicationscanbeseenbetweenunderin-vestmentinHigherEducation,theimpactofdisruptivetechnologytendsonjobsandtheeconomy,andperceptionsofregionalandruralimbalances.Andofcourseweknowthatnuclearcontaminationcouldhaveseri-ousimplicationsforfoodsafetyandanimaldisease,thatchallengesarisingfrombio-diversityriskshaveeconomicandsectoralimpactsaswellasenvironmentalimpacts,andthatrisksaroundsupplyandaffordabili-tyofhousinghavebothsocialandeconomicaspects,aswellasenvironmental.

WhilewecategorisetherisksinthisReportonthebasisofthemodelusedbytheWorldEconomicForum(geopolitical,economic,social,environmentalandtechnological),forthepurposesofbothorganisationandeaseofconsideration,manyoftheriskscross-cutseveralcategories,andtheRisksandReportshouldbereadandconsideredwiththatinmind.

GeoPolitical RisksAsasmallopeneconomy,weknowthatIrelandisparticularlyvulnerabletogeopolit-icalrisks.Whilethetop5strategicgeopo-liticalrisksidentifiedforthe2019National

RiskAssessmentmirrorthosediscussedin2018,itisclearthatineachcasetheriskshaveevolvedandinsomecasesincreasedsignificantly.

Asmentionedabove,therisksaroundBrex-ithavecontinuedtointensifyinthemonthssincethe2018Reportwaspublished,withbothuncertaintyandthepossibilityofano-dealBrexitpersistingthroughoutthenegotiationstodate.Alliedtothisarepotentialimpactsandriskstothestabilityof Northern Ireland, and to the Good Friday Agreement.These,andotherriskscontinuetoberelevantinthecontextofriskstothestabilityandfuturedirectionoftheEU,asitlookstothestartofanewlegislativecyclein2019withbothEuropeanParliamentelectionsinMayandanewEuropeanCom-missionlaterintheyear.

OutsideofEurope,thelasttwelvemonthshavealsoseenanincreaseingeopoliticaltensions at a regional and global level, as wellasthecontinuedwithdrawaloftheUSfromthefreetrademodelandincreasinglystrainedrelationswithRussia,withassociat-edrisksofreducedglobaleconomicgrowth,andincreasedinstabilitiesintheglobaleconomy,andfortheIrisheconomy.Risksarisingfrompotentialterroristincidentsandarmedconflictsendure,withsignificantpublicsafetyandsecurityimpacts,aswellaslonger-termreputationaldamage,shouldsuchanattackhappenhere.

Inthisincreasinglytensegeopoliticalland-scape,andwithsuchhighstakes,wemustensure that we are as prepared as possible forhowtheserisks–bothnearandfar-mightimpactonIrelandeconomicallyandsocially,aswellasinthecontextofpeaceandsecurity.

Intro

ducti

on 2

019


11

toprepareforan‘economicstorm’asglobalgrowthlevelsundershootexpectations.AsasmallopeneconomyIrelandishigh-lyexposedtosuchfluctuationsinglobaleconomicandtradingconditions,andtheeconomicrisksinthiscontextforIrelandaresignificant.Workoninternationaltaxreformcontin-ues,andcontinuestobehighlyrelevantforIreland,particularlyinthecontextoftheim-portanceofIreland’scompetitivecorporatetaxofferingwhichisanimportantpartofourwidercompetitivenessoffering,andtheemergenceofchallengestoourcorporatetaxregime.Relatedtothis,andasdiscussedinpreviousyears,oureconomyandemploy-mentareheavilyinfluencedbyarelativelysmallnumberofmultinationalcorporations,concentratedinafewenterprisesectors.While,ontheonehand,thismultinationalinvestmenthasbeentransformativefortheIrisheconomy,italsocreatesavulnerabilitytochangesinIreland’sattractivenessasalocationforthosecompanies,aswellastosector-specificchangesorrisks,andthesearediscussedinSection3.6oftheDraftReport.

Social RisksAsmentionedabove,someoftherisksidentifiedinthesocialcategoryhavetakenaslightlynewdirectioninthisyear’sRe-port,includingrisksaroundthecapacityoftheHigherandFurtherEducationsystemandthepotentialimpactsonoureconomy,discussedinSection4.1andrisksaroundagrowingpublicdiscourseonruralandregionalimbalancesinthecontextofsocialcohesionastheeconomicrecoverycontin-ues,whicharediscussedinSection4.4.

Aspreviouslymentioned,whiletherisksarisingfromtheimpactofsocialmediaonpublicdebatewereincludedinthe2018Report,increasingpublicawarenessandagreater sense of responsiveness on all fronts

Economic RisksWhileIreland’seconomycontinuestoperformstrongly,itsgrowthisagainstabackdropofcontinuinghighindebtedness(bothpublicandprivate)whichimpactsonourscopetobuildmeaningfulfiscalbuffersinthecomingyears,againstabackdropofBrexit,theshapeandimpactofwhichisstillunclear,andinthecontextofemergingspendingpressureswhichriskdestabilisingthepublicfinancesifnottightlycontrolled.

WeknowthatanyformofBrexitwouldhavenegativeimpactsfortheIrishecon-omy,buttheimpactsofano-dealBrexitwouldbeparticularlyharsh,andtheserisksaresetoutinSection3.2oftheDraftReport,withaparticularfocusonthemostvulnerablesectorsoftheeconomyinthisregard.

NotwithstandingthepossibleeffectsofBrexit,therisksofoverheatingintheecon-omy,andrelatedlossofcompetitivenesscontinuetoberelevantfor2019.Asthelabourmarketcontinuestotightenandtheeconomypotentiallyreachesandexceedsitssustainablelevelofproductioninthecomingyears,andinthecontextofongoingdifficultiesaroundinfrastructureconstraintsandhousing,wecouldseeriskstoourcompetitivenessandoverheatingpressuresemerge.

Inaddition,publicexpectationsofaddition-alexpenditureareanincreasingconcern,especiallyatthispointintheeconomiccy-cle,andinthecontextofsignificantdomes-ticandexternalrisks,andtheimportanceofmaintainingappropriatecontrolonexpendi-tureisdiscussedinSection3.3.

Thereareindicationsthatescalatingtradeconflictsattheinternationallevelnowappeartobeimpactinggrowth,withtheIMFrecentlywarningnationalgovernments

Intro

ducti

on 2

019


12

2020and2030.Itwillalsobecriticalbothtopricethecostofcarbonintooureco-nomicmodeltoprovideappropriatelong-termsignals,andtodefineourapproachtocarbonneutralityfortheagriculturesectorinawaythatallowsfortheachievementofourclimatetargetsanddecarbonisationgoalswhilerespectingsustainablefoodsecurity.

Intermsofenergy-relatedrisks,disruptionstothesupplyorpriceofoil,gas,orelectric-itycouldhavesignificanteconomic,socialorcompetitiveimpacts,andourgeographicpositionrendersusparticularlyvulnerabletosuchdisruptions.Brexitposesaparticu-larriskasIrelandimportsthevastmajorityofitsenergyrequirements,oil,gasandtransportfuels,fromorviatheUK.Thispro-videsanaddedimpetustoincreasetheuseofourrenewableresourcesandtodiversifyoursourcesofsupplybydevelopingfurtherelectricityinterconnectiontoneighbouringmarketsincludingFrance.Asweelectrifyvitalservices,newassociatedrisksarounddevelopmentcosts,andsocietalsupportandacceptancefornecessaryinfrastructuredevelopmentwillemerge.

Relatedtothis,widerrisksaroundourcapacitytoovercomeinfrastructuregaps,inthecontextofchallengesindeliveringasig-nificantincreaseincapitalinvestmentunderProjectIreland2040,arestillrelevant,particularlywhencoupledwithanongoingundersupplyofhousingandassociatedaf-fordabilityissues,atighteninglabourmarketandcontinuedstrongeconomicgrowth(asdiscussedinthecontextofoverheatingrisks).

Risksaroundfoodsafetycontinuetoberelevant,asinpreviousyears,withsignifi-canthealth,trade,andreputationalimplica-tionsshouldafoodscareorincidentoccur,andarediscussedinSection5.4.Again,

isapparent,withboththepoliticalandpol-icysystemandindustryrampingupactioninthisarea.Withlargenumbersofcitizensnowobtainingtheirnewsfromsocialmediaplatforms,thereareclearimplicationsforthegeneration,rapiddissemination,andimpactofonlinedisinformation.Large-scaledisinformationor‘fakenews’campaignsspreadonlineareahigh-riskissueforsoci-etyglobally,includingIreland,andinpartic-ularwheretheytargettheelectoralprocess,andelectoraloutcomes.DevelopmentsinthisareaareoutlinedinSection4.3.

Thischapteralsooutlinestherisksemerg-ingfromdemographicissues,andinpartic-ularpensionandhealthsystemdifficultiesinthecontextofourageingpopulation,aswellasexpectationsforpublicexpenditureandassociatedrisks,andtherisksinvolvedifwefailtomaintainourpositivetrackre-cordintermsofmigrationandintegration,madeallthemorepertinentinthecontextofBrexit.

Environmental RisksAsmentionedabove,whiletherisksaroundClimateChangeandBiodiversityhavebeendiscussedinpreviousyears,greaterpublicawarenessandanincreasedsenseofurgen-cyanddemandforactiononrelatedrisksareapparentthisyear.RecentresearchfindsthatEarthiscurrentlylosingbiodiversityatarateseenonlyduringmassextinctions.Inaddition,Irishbiodiversityishighlyvulner-abletotheimpactsofclimatechangeandhasalowadaptivecapacitycomparedtoothervulnerablesectors.

Intermsofclimatechangemitigation,weknowthatthecostofinactionexceedsthecostofaction,andthatthisdifferentialwillrisesteeplywithtime.PotentialcoststotheexchequerincludethoseassociatedwithnotachievingcompliancewithourEUGHGemissionsandrenewableenergytargetsto

Intro

ducti

on 2

019


13

inter-linkagesbetweenrisksarepertinenthere,withtheagri-foodsectoroneofthesectorsparticularlyexposedtoBrexit.

Finally,thesupplyandaffordabilityofhous-ingpersistsasasignificantriskinthisyear’sNationalRiskAssessment,witheconomicandsocial,aswellasenvironmentalim-plications.WhileCSOstatisticsfor2018showthatsupplyisincreasing,difficultiesaroundhomelessnessandaffordabilityarepersisting,andoverallhousingdemandisalsoincreasing.Inthecomingyears,housingshortagesarelikelytoactasaconstraintoneconomicactivityandcompetitiveness,andreflectoneofthemostprominentrisksfacingthecountry.

Technological RisksIntermsoftechnologicalrisks,risksaroundcybersecurity,includingpotentialdisrup-tiontocriticalinformationinfrastructure,anddatafraudandtheft,remainpertinentandcontinuetoevolveastheextenttowhichsocietyreliesondigitaltechnologyincreases.WithIrelandpositioningitselfasatechnologicalsociety,withagrowingdependenceononlineservices,theimpactofanattackorincidentontheprovisionofservices,andonthereputationofbusiness-esandpublicservicewouldbesignificant.

Disruptivetechnologytrendslikewisecon-tinuetoadvance,andtheseadvancesbringrelatedrisksastheypredictsignificantjobsshiftsanddisruption.Automationisexpect-edtoreplacesomejobs,re-shapeothers,andalsocreatenewones.Inaregionalcontext,recentresearchalsohighlightedthegreaterrisksforregionsfromautoma-tionandjobloss.Therisks,therefore,ifoureducationandskillssystemdon’trespondappropriatelyandintime,aresubstantial.

Asinpreviousyears,risksaroundAnti-Mi-crobialResistanceandMajorPandemics,

Intro

ducti

on 2

019


14

andNuclearContaminationarerelevant.Anti-MicrobialResistanceisanincreasingconcernglobally,withtheextensiveuse,misuse,andoveruseofantimicrobialsinhu-manhealthraisinglevelsofresistanceinawiderangeofpathogensinallcountriesandinpatientsofallagegroups.Intheanimalpopulation,therateofdevelopmentandspreadofantimicrobialresistancehasalsoincreased.Inaddition,therisksarisingfromapotentialMajorPandemichaverelevanceacrossseveralriskcategories,includingfinancial,geopolitical,social,environmental,andtechnological.Intermsofnuclearcon-tamination,whiletheprobabilityforIrelandislow,theobviousriskstopublichealthandwell-being,aswellasnegativeeconomicimpactsareclear,andbothawarenessandplanningisimportantinthisregard.

2. Draft Geopolitical Risks

2.1. Departure of the UK from the EU 2.2. Instability in Northern Ireland 2.3. Future direction and stability of the EU 2.4. Changing distribution of global influence and move away from a rules-based system 2.5 Terrorist incidents and armed conflicts

2.1. Departure of the UK from the EU

ThedecisionoftheUKtoleavetheEUpresentsuniquelysignificantandunprec-edentedpolitical,economic,socialanddiplomaticchallengesforIreland,giventheextentoftheinter-connectednessofoureconomiesandpeople.ThesearechallengesbothtoIreland’speaceandprosperity,andhowtheyaredealtwithinthemonthsandyearsaheadmayhavesignificantimpactsfor Ireland into the future.

Ireland’sprioritieshaveremainedconsistentthroughouttheprocess:minimisingtheimpactonIreland’stradeandeconomy;pro-tectingthePeaceProcessandtheGoodFri-dayAgreementinallitsparts;maintainingtheCommonTravelAreawiththeUK;andsecuringIreland’sfutureinastrongEU.Asa result of intensive and sustained engage-mentattheEUlevel,Ireland’suniqueissuesandconcernshavebeenfullyunderstoodbytheEU27andhavebeentotheforeoftheEU’snegotiatingapproach.

FollowingtwoyearsofintensiveArticle50negotiationsbetweentheEuropeanUnionandtheUnitedKingdom,theEuropeanCouncilendorsedtheWithdrawalAgree-mentandthePoliticalDeclarationonthefuturerelationshipinNovember2018.TheWithdrawalAgreementwassubsequentlypassedtotheEuropeanParliamentandis

awaitingitsconsent.TheBritishGovern-menthasalsoagreedtoboththeWith-drawalAgreementandthePoliticalDeclara-tion.However,theWithdrawalAgreementisstillsubjecttoratificationbytheUKParliament.

TheWithdrawalAgreementestablishesthetermsoftheUK’sdeparturefromtheEU.Itensures that the withdrawal will happen in anorderlymannerandofferslegalcertaintyoncetheTreatiesandEUlawceasetoapplytotheUK.TheWithdrawalAgreementcoversallelementsoftheUK’swithdrawalfromtheEUincludingcitizens’rights,thefinancialsettlement,atransitionperiod,ProtocolsonGibraltarandIreland,aswellasarangeofotherseparationissues.ItincludesaProtocolonIrelandandNorthernIrelandandalegallyoperational‘backstop’to ensure that there will be no hard border between Ireland and Northern Ireland. It containsUKcommitmentsnottodiminishtherightssetoutintheGoodFridayAgree-ment1998andrecognisesthatpeopleinNorthernIrelandwillcontinuetoenjoyEUcitizenshiprights,andtoprotectNorthSouthcooperation.ItacknowledgesthemaintenanceoftheCommonTravelAreaarrangementsbetweenIrelandandtheUK,andforthepreservationoftheSingleElec-tricityMarketontheislandofIreland.

ThereispersistinguncertaintyregardingtheratificationoftheWithdrawalAgreement


Dra

ft G

eopo

litica

l Risk

s

16

intheUKparliament.ThedecisionoftheEuropeanCounciltoextendtheArticle50processuntil31October2019providestheUKwithmoretimetoensureanorderlywithdrawal.However,thepossibilityoftheUKleavingtheEuropeanUnionwithoutanagreement–ano-dealscenario–remainsasignificantrisk.

Duetotheclose,highlyintegratedandcon-centratednatureofourtradingrelationshipwiththeUK,amongstallEUMemberStatesIrelandcouldbethemostadverselyaffect-edbyBrexitandtothegreatestextentinano-dealscenario.ThepotentialimpacthasbeensetoutinanumberofGovernmentpublications1,andtheeconomicrisksarediscussedfurtherinChapter3. TheprimarychannelthroughwhichBrex-it’seconomiceffectswouldemergewouldbethroughapplicationofWTOtariffsandregulatorydivergence(non-tariffbarriers).Thesecouldaffectsupplychainsandthecostand/oravailabilityofimportsfromtheUK. Further falls in the value of Sterling wouldimpactthecompetitivenessofIrishbusinesses,whileadeteriorationineco-nomicconditionsintheUKcouldimpactexports.

WhileBrexit’spotentialmacro-economicimpactsareinfocus,Brexithasthepoten-tialtoimpacteveryelementofeconomicfunctionality:tradeflows,supplychains,economicandbusinessoperations,thelabourmarketandconsumerconfidenceandspending.Therewouldbeparticular

1 TheseincludepreviousNationalRiskAssessments,Budget2019documentation,theCopenhagenEconomicsreport“IrelandandtheImpactsofBrexit”publishedbytheMinisterforBusiness,EnterpriseandInnovation(available:https://www.copenhageneconomics.com/publications/publication/ireland-the-impacts-of-brexit),the2019ESRI/DepartmentofFinancereport“IrelandandBrexit:modellingtheimpactofdealandno-dealscenarios”(available:https://www.esri.ie/news/new-study-estimates-the-impact-of-various-brexit-scenarios-on-the-irish-economy),andtheContingencyActionPlan,Dec2018(available:https://www.dfa.ie/brexit/getting-ireland-brexit-ready/governmentcontingencyactionplan/)

pressuresoncertainsectors,suchasagri-food,fisheries,aviationandroadtransport,pharma-chemicals,electricalmachinery,retailandwholesalebusiness.Theeconomicimpactisalsolikelytobegreaterincertainregions–especiallytheborderregion–andonsmallerbusinessesthataremoredepen-dentontradewithBritainandNorthernIreland.

AllformsofBrexitwouldhavenegativeconsequencesforIrishgrowth,bothintheshortandlongrun,relativetoano-Brexitscenario.ResearchpreparedbytheESRIandtheDepartmentofFinanceandpub-lishedinMarch20192findsthat,comparedtoano-Brexitbaseline,tenyearsafterBrex-it,IrishGDPwouldbearound2.6percentlowerinadealscenario,4.8percentlowerinanodealand5percentlowerinadis-orderlynodeal.Themagnitudeofeachoftheseshocksisconsiderableandwillhavenegativeeffectsthroughouttheeconomyonthehouseholdsector,thelabourmarket,firmsandthepublicfinances.ThestudyassessestheimpactoflowerUK-EUtradeonIreland’smaintradingpartnersandfindsthatitwouldseverelyreducethedemandforIrishexports.TheresearchalsofindsthatwhileIrelandmightbenefitfromtherelocationordiversionofFDIfromtheUK,whichwouldraiseGDP,ultimately,thepos-itiveimpactisoutweighedbythenegativetradeeffect.

AdditionalBrexit-relatedimpactsincludethosetotheCommonTravelArea(CTA)be-tween Ireland and the UK, allows Irish and Britishcitizenstomovefreelyandresideineitherjurisdictionandenjoyassociatedrightsandentitlementsincludingaccesstoemployment,healthcare,education,socialbenefitsandtherighttovoteinlocalandnationalparliamentaryelections.Aswellas

2Availablehere:https://www.esri.ie/news/new-study-estimates-the-impact-of-various-brexit-scenarios-on-the-irish-economy


Dra

ft G

eopo

litica

l Risk

s

17

theEast-Westdimension,theCTAar-rangementsalsounderpintheGoodFridayAgreementinallitsparts,aswellasthecross-borderfreedomscentraltothelivesand livelihoods of the people of Northern Irelandandtheborderregion.Anydiminu-tionoftheCTAcouldhaveadestabilisingimpactonthepeaceprocessandonNorth-Southrelations.TheIrishandBritishGov-ernmentshavecommittedtothecontinu-ationoftheCTAinallcircumstancesandaMemorandumofUnderstandingontheCommonTravelAreawassignedbybothGovernmentson8May2019.Separate,sectoralagreementstounderpintherightsoftheCTAhavealreadybeen,orwillshortlybeintroduced.Forexample,theagreementrequiredtomaintainthecurrentarrange-mentsinthefieldofsocialsecurityaftertheUKleavestheEUisinplace–itwassignedbybothStateson1February2019andcompletedtherequiredParliamentaryproceduresinbothStatesduringMarch.

BrexitwillalsoimpactontheoperationofawiderangeofEUlegalinstrumentscon-cerninglawenforcementandjudicialcoop-eration.OfgreatestconcerntoIrelandisthefutureoftheEuropeanArrestWarrant,aswellasEUinstrumentsthatprovidefortherecognitionandenforcementofjudgementsincivil,commercialandfamilylawmatters.DisruptiontolawenforcementandjudicialcooperationarrangementswouldhaveaparticularimpactatNorth-Southlevel3.

Inthecontextofimmigration,Brexitmayalsogiverisetoanincreaseinillegalmovementofthirdcountrynationalsinto

3ThePoliticalDeclarationsettingouttheFrameworkfortheFutureRelationshipbetweentheEUandtheUKoutlinesthebasisforaSecurityPartnershipwhichreferencesmeasurestoensurecoopera-tioninlawenforcementandjudicialcooperationincriminalmatters.IfaWithdrawalAgreementisratifiedtheapplicationofthefullEUacquistotheUKduringatransitionalperiodisofgreatimportance.IntheeventthataWithdrawalAgreementisnotratified,domesticlegislationisbeingpreparedtoensureworkableextraditionandimmigrationarrangementswiththeUKcancontinue.However,anycontingencymeasureswillnotandcannotmitigatetheoverallimpactofano-dealscenario.

IrelandfromtheUK,aswellaspossibleconsequencesforsecondarymovementsofasylumseekersandillegalmigrantsfromtheUKtoIrelandintheeventofUKdivergencefromEUasylumlaw. Ano-dealBrexitwouldbeanexceptionaleconomiceventwhichwouldbemetwithexceptionalmeasurestosupportthecontin-uedoperationoftheIrisheconomyandourinternationaltradinglinks.Extensivecon-tingencyplanningandpreparednessworkisunderwayacrossallGovernmentDepart-mentsandAgenciesforapossibleno-dealBrexit.Thisresponsewouldbeimplementedincloseco-operationwithourEUpartners.

2.2. Instability in Northern Ireland TheresultsofthereferendumontheUK’smembershipoftheEuropeanUnioninJune2016showedthatamajorityofvotersinEnglandandWalesvotedtoleavewhilstamajorityinNorthernIrelandandScotlandvotedtoremainwithintheEU.ThishasgivenrisetoconsiderableissuesforWest-minsterandthedevolvedadministrationstoconsider.

ThebreakdownoftheNIExecutiveandthecollapseofthetalksontheformationofanewExecutivetogetherwithincreasesincrosscommunitytensionscreatedbytheBrexitvote,meansthatNorthernIrelandisfacingachallenging-periodahead.TheinabilityoftheNorthernPartiestoreachacompromiseoncontestedissuesduringthetalksprocesshasallowedthedevelopmentofapoliticalvacuuminNorthernIreland,alongwiththeincreasedpossibilityofthere-introductionofdirectrulebytheUKGovernmentinNorthernIreland.ThisissomethingtowhichtheIrishGovernmentisopposed.


Dra

ft G

eopo

litica

l Risk

s

18

Therestorationoftheinstitutionsisessen-tialinthecontextoffullimplementationoftheGoodFridayAgreement.FollowingthetragickillingofLyraMcKeeinDerry,thetwoGovernmentsconvenedanewshortandfocussedtalksprocessaimedatrestor-ingalltheinstitutionsoftheGoodFridayAgreement.

TheGovernmentwillcontinuetoengagewiththeBritishGovernmentandthepartiesinNorthernIrelandasaco-guarantoroftheGoodFridayAgreementtosupportthere-establishmentattheearliestopportunityofthepower-sharinginstitutions.

Brexithasaddedanadditionalandsignif-icantchallengetothepoliticalsituationinNorthernIreland.Thelackofpower-shar-ingExecutiveinrepresentingandpursuingNorthernIreland’sinterestsinthecontextoftheEU-UKnegotiations,withtheUKandIrishgovernmentsasappropriate,isofsignificantconcerninrelationtothespecificchallengesofBrexitforNorthernIreland.

AnExecutiveisalsorequiredforthefunc-tioningoftheNorthSouthMinisterialCouncil,tooverseeandfurthercross-bordercooperationintheagreedsectorsandtoconsiderandaddresstheall-islandissuesraisedbyBrexit.ThelackofanExecutivehas resulted in a tangible slowdown in NorthSouthengagementatpoliticallevelandhashadadetrimentaleffectontheef-fectiveoperationoftheNorthSouthbodiessetupundertheGFA.

BoththeIrishandtheUKgovernmentshaveaffirmedthattheprinciples,proce-duresandinstitutionsoftheGoodFridayAgreementremainthebasisfortheiren-gagementinNorthernIreland.EnsuringthattheGoodFridayAgreementandthebenefitsofthepeaceprocessarenotdisturbedbyaUKexitfromtheEUispriorityfortheGovernment.

AsmentionedaboveasregardstheUKwithdrawalfromtheEU,theWithdraw-alAgreementalsoincludesaProtocolonIreland and Northern Ireland and a legally operationalbackstoptoensurethattherewill be no hard border between Ireland andNorthernIreland.ThereiscontinuinguncertaintyregardingtheratificationoftheWithdrawalAgreementintheUK.TheGov-ernmentsobjectivesinanyBrexitscenarioareclear–toavoidahardborderontheisland of Ireland and to ensure the integrity ofthesinglemarketandthecustomsunion.

BrexithasalsoplayedsignificantlyintothedebateinScotlandaboutitsfuturewithintheUK,raisingquestionsinrelationtothedevolutionsettlementandthepossibilityofafurtherindependencereferendum.DisagreementshavearisenbetweentheScottishandUKGovernmentsinrelationtotheoperationofcurrentdevolutionar-rangements,andinparticularthehandlingpost-BrexitofmattersofEUcompetencethatwerenotreservedtoWestminsterunderthetermsoftheScottishdevolutionsettlement.ThestatusofScotlandintheUnitedKingdomisaninternalmatterforthepeopleofScotlandandthepeopleoftheUnitedKingdom,andthereforeamatteronwhichtheIrishGovernmentdoesnotandwill not engage.

QuestionshavebeenraisedregardingtheapplicabilitytoScotlandofanyarrange-mentsmadetoaddressthechallengesposedbyBrexitforNorthernIrelandandfortheislandofIreland.However,thesituationinNorthernIrelandisuniqueandnotdirect-lycomparableto,thatinScotlandinparticu-lar, any other region, given the nature of the politicalandconstitutionalsettlementoftheGoodFridayAgreement.


Dra

ft G

eopo

litica

l Risk

s

19

2.3. Future direction and stability of the EU

Europehasundergoneaseriesofcrisesinrecentyears:theeurozonecrisis,themi-grationcrisis,terrorattacksinanumberofMemberStatesandtheshockofBrexit.Thesehaveplayedoutagainsttheback-groundofariseofpopulismasshowninelectoraladvancesbyextremeright-wingand/oreuroscepticpartiesinanumberofEUstateswhileinsomeCentralandEasternMemberStates,thereisagrowingdefianceofEUvaluesandnorms.

Inaddition,concernsaboutadversemarketreactionsasmonetarypolicynormalises,andvulnerabilitiesinthebroadereuroarearemain,particularlyinthecontextoftheunwindingoftheECB’sQuantitativeEasingprogramme,andsignificantamountsofdebtinsomeEUeconomies,includingIreland,withrelatedrisksaroundthesustainabilityoftheEurozone.

Ontheotherhand,employmentinEuropeisatarecordhighandunemploymentatarecordlow4.TheEuropeaneconomyisexpectedtogrowfortheseventhconsec-utiveyearin2019,butatamoremoderatepaceatatimeofmorepronouncedglobaluncertainty.

ThisyearmarksthestartofanewlegislativecycleintheEU.InMay,therewillbeEuro-peanParliamentelectionsand,inturnthenewParliamentwillelectthenextEuropeanCommissionPresidentandapprovetheap-pointmentofanewEuropeanCommission.

TheEuropeanCouncilisresponsibleforde-terminingthegeneralpoliticaldirectionandprioritiesoftheEUandinJuneitwilladoptanewStrategicAgendafor2019-2024.

4 Availablehere:https://ec.europa.eu/social/main.jsp?langId=en&-catId=89&newsId=9316&furtherNews=yes

ButarecentEuropeanCouncilonForeignRelations(ECFR)reportprovidesaworryingsnapshotofthepotentialdisruptiveeffectaone-third“anti-European”Parliamentcouldhaveonforeigntrade,theruleoflaw,mi-gration,foreignpolicy,andtheappointmentofthenextCommission5.

ThenewEuropeanParliamentwillalsohaveanimpactontheEUbudgetfor2021to2027,theMultiannualFinancialFramework(MFF).ThisisthefirsttimeIrelandwillenteranewMFFasanet-contributor.Itwillbeachallengetoensurethefinaloutcomere-flectsIrishprioritiessuchastheprotectionoftheCommonAgriculturalPolicyandpro-videsadequatefundingfornewchallengessuchasmigration.

AdditionalongoingorcontinuingriskstotheunityandeffectivenessoftheEUinclude:

• Riskofnegotiationsbreakingdown,caus-ingdivisionsamongstMemberStates–forexample,inrelationtotheEUbudget;• RiskthatthelossoftheUKvoiceinEUdecision-makingcouldtipthebalanceofintereststowardsamoreconservativeorprotectioniststance;and•RisksspecifictoIreland’sinterestsandin-fluencingpowerwithintheEUwhichcouldemergefromadisruptiveEuropeanParlia-mentandthelossoftheUKasanegotia-tionpartner.

2.4. Changing distribution of global influence and move away from a rules-based system

Geopoliticalvolatilityanduncertaintycontinuedthroughout2018andinto2019,giving rise to heightened threats to inter-

5 Availablehere:https://www.ecfr.eu/specials/scorecard/the_2019_European_election


Dra

ft G

eopo

litica

l Risk

s

20

nationalpeaceandsecurity,exacerbatedbyeffortstoweakenthemultilateralrules-basedsystem.

Thelasttwelvemonthshaveseenanin-creaseingeopoliticaltensionsatregionalandgloballevel,including(thoughnotlimit-edto)theKoreanPeninsula,betweenRussiaandtheUS,RussiaandUK,ChinaandtheUS,theUSandIran,andIndiaandPakistan.TheseriousconflictsongoinginSyriaandYemenarecausingsignificanthumanitariancrisesandirregularmigration.Thehumani-tarianandpoliticalsituationintheOccupiedPalestinianTerritorydeterioratedfurtherin2018,withsettlementbuildingincreasingintheWestBank,andsignificantunrestinGazabeingmetbyseeminglydispropor-tionateIsraelimilitaryforce.TheUSwith-drawalfromtheIrannuclearagreementhasincreasedtensionsacrosstheMiddleEast,andrisksdamagingthepotentialtoresolveotherglobalconflictsbymeansofinterna-tionalagreements.Themarkedincreaseintheuseofchemicalweaponsinrecentyearshasseriouslythreatenedtounderminetheuniversalprohibitionontheuseofchemicalweapons.

ThecurrentUSadministration’swithdraw-alfromtheJointComprehensivePlanofActionwithIran,aswellastheTrans-Pa-cificPartnership(TPP),re-negotiationoftheNorthAmericanFreeTradeAgreement(NAFTA),reducedroleattheWorldTradeOrganisation(WTO),andintroductioninMarch2018ofimporttariffsof25percentonsteeland10percentonaluminium(ex-emptingCanadaandMexico,andtemporar-ilyexemptingtheEUandSouthKorea),aswellas25percenttariffson$60bnworthofChineseimports,allfurtherstrengthenpreviousindicationsthattheUSaremov-ingawayfromthefreetrademodel,withassociatedrisksofreducedglobaleconomicgrowth,andincreaseduncertaintiesand

instabilitiesintheglobaleconomy.

Russia-USrelationsareincreasinglystrained,asarerelationsbetweenRus-siaandtheUKandWesternallies.Thisisreflected,forexample,intheexpulsionbytheUKof23diplomatsfollowingapoison-ingincidentintheUKinMarch2018withsuspectedRussianinvolvement,andthesubsequentexpulsionsbyanumberofEUandWesternstates,includingIreland,andtheUSandNATOinsolidarity.TheRussiangovernmentretaliatedwiththesubsequentexpulsionof59diplomatsfrom23coun-tries,including1fromIreland.

PreviousNRAReportsdiscussedglobalisa-tiontrendsinvolvinganongoingandsignif-icantshiftofpoliticalandeconomicpowertowardscountriesintheEastandSouth,representingachallengetotheexistinginternationalorder.Commentsthatsuchtrendsnecessitatemorestrategicanddeep-erengagementwithAsian,AfricanandLatinAmericancountriescontinuetobevalid,intermsofprotectingandpromotingIreland’strade,tourismandinvestmentinterests.

Asanopenglobaleconomy,anymoveawayfromarules-basedmultilateralismsystemattheinternationallevelwouldnotbeinlinewithIreland’sinterests,andcouldposesignificantrisksforus.

2.5. Terrorist incidents and armed conflicts

Therisksarisingfromterroristincidentsandarmedconflicts,ashighlightedinpreviousReports,remain.2018sawcontinuinghightensionsintheMiddleEastandinNorthEastAsia(DemocraticPeople’sRepublicofKorea)aswellasterroristincidentsandattacksacrossEurope,inparticularintheUK. Ongoing tensions between India and


Dra

ft G

eopo

litica

l Risk

s

21

Pakistanrepresentathreattoregionalsta-bility and thus Irish interests in the region. Inaddition,asbotharenuclearpowers,in-creasedconflictisathreattoIreland’spolicypositiononandeffortstosupportnuclearnon-proliferation.

Overthepast12months,conversationsaroundtheriskstoIrelandandtheIrishresponsecapacityinthisregardhavealsoincreased,highlightingincreasedawarenessoftherisksinvolvedintheIrishcontext.

Europoldatasuggeststhattheoverallthreatfromjihadistterrorismremainshigh,withthenumberofarreststotalling705in2017,downslightlyfrom718in2016.Therehasalsobeenasignificantslowdowninthenumberofforeign-bornfighterstravellingtoSyriaandIraq.Therehasbeenamarkedriseinright-wingextremistattacks,withajumpfrom99attacksin2016to137attacksin2017.ThistrendisevidencedbytherecentmosqueattacksinNewZealand.Leftwingandanarchistterrorismhasdeclinedslightlybetween2016and20176.

Likeothercountries,Irelandanditscitizenscouldbenegativelyaffectedbyterroristincidents,dependingonthelocationofsuchincidentsandtheirwiderimpact.The2017attacksinLondon,ManchesterandtherecentattacksonaMosqueinChrist-churchandSynagogueinPittsburghservetohighlightthechallengingnatureofthethreatandtheneedforcontinuedco-oper-ationamongpartnerstatestocounteractit.Suchanattackherecouldhavesignificantimpactintermsofpublicsafetyandsecurityintheshortterm,andtherecouldpossiblybelonger-termreputationaldamagetoIre-landasasafeandsecuredestinationtoliveandworkin,andtovisit.Anyimpactsonthetourismsector,forexample,couldhave

6EuropeanUnionTerrorismSituationandTrendReport2018;https://www.europol.europa.eu/activities-services/main-reports/eu-ropean-union-terrorism-situation-and-trend-report-2018-tesat-2018

potentiallyseriouseconomicconsequences.

Likewise,abreakdownininternationalpeaceandsecurityarisingfrominter-statewarsorotherarmedconflictscouldhavesignificantrepercussionsforIrelandandtheEU,includingpotentialimpactsonenergysupplies, transport routes or the environ-ment.

On the island of Ireland, the Good Friday Agreementhasdeliveredastablepeaceprocessthatcommandsoverwhelmingcrosscommunitysupport.Nonetheless,certaingroupsinbothcommunities,albeitwithverylimitedlevelsofsupport,remainintentondisruptingthesignificantprogresswhichhasbeenachievedandperpetratingactsofviolence.Recenthigh-profileincidents,includingattacksonsecuritypersonnelinNorthernIreland,thecarbombinDerryandthemurderofjournalistLyraMcKee,areareminderthatwecannotbecomplacent.Accordingly,therelevantauthoritiesneedtocontinuetheirworktocombatthesegroupsandtheiractivities.LegacyissuesarisingfromconflictinNorthernIrelandandcurrentsocialandeconomicchallengesalsoneedtobeaddressed.BoththeIrishandBritishgovernmentshavereaffirmedtheircommitmenttoensuringthatthebenefitsofthepeaceprocessarepreservedinanynewarrangementsarisingfromtheUK’sexitfromtheEU.


Dra

ft G

eopo

litica

l Risk

s

22

3. Draft Economic Risks

3.1. Economic Impact of Brexit 3.2. Loss of competitiveness 3.3 Public Expenditure Pressures 3.4. Global Slowdown, including changes to international trading environment 3.5. International tax changes 3.6. Reliance on multinational corporations and sectoral concentration

3.0. Introduction

WhiletheIrisheconomycontinuestoperformstrongly,thereareanumberoffactorsthatcouldpresentsignificantrisks.Therisksareoutlinedinthefollowingsectionsindetail.Theyshouldbeseenagainstabackdropofcontinuinghighindebtedness(bothpublicandprivate)andemergingexpenditurepres-sures.TheState’scomparativelyhighlevelofdebtmeansthat,atanadvancedstageoftheeconomiccycle,Irelandexhibitsminimalscopetobuildmeaningfulfiscalbuffersinthecom-ing years. In dealing with these issues, to date Irelandhasbenefittedfromabenigninterna-tionalfinancialenvironment.Anyreversalinlowglobalinterestrates,suchastheexpectednormalisationinECBmonetarypolicy,wouldleadtoincreaseddebtservicingcostsandassociatedimpactsonthepublicfinancesovertime.Thesefactors,andalackofmeaningfulfiscalspace,wouldamplifytheimpactontheeconomy,,shouldemergingspendingpres-suresriskdestabilisingthepublicfinances,andshouldanyoftheeconomicrisksoutlinedbelowmaterialise.

3.1. Economic Impact of Brexit

TheexitoftheUKfromtheEUisanunprec-edentedeventforIrelandand,assuch,itwillhaveseriousimplicationsforoureconomyandthepublicfinances.Thereremainsconsider-ableuncertaintyregardingmanyissues,not

leastofwhichisthelikelyformat–agreedorno-deal–thattheUK’sexittakes.

Asmentionedpreviously(Section2.1),itisclearfrompublishedstudiesthatallformsofaUKexitwillhaveadetrimentalimpactontheIrisheconomyandthatthemoredisorderlytheexit,thelargerthemacroeco-nomicimpact.Furthermore,givenIreland’suniquemacroeconomicandsectoralex-posurestotheUKtheseimpactswouldbedisproportionaterelativetotherestoftheEU.

Inano-dealexit,whileinaggregatetermstheeconomyislikelytocontinueexpand-ing,thepaceofgrowthwouldbelowerthaniscurrentlyexpected.Aspreviouslymen-tioned,researchcarriedoutbytheESRIandDepartmentofFinance1,findsthatcom-paredtoano-Brexitbaseline,tenyearsaf-terBrexit,GDPinIrelandwouldbearound2.6percentlowerinadealscenario,4.8percentlowerinanodealand5percentlowerinadisorderlynodeal.Theresultsindicatethatemployment,inthelong-run,wouldbe1.8percentlowerinadealscenario,3.2percentlowerinanodealscenarioand3.4percentlowerinadisorderlynodealscenariorespectively,comparedtoano-Brexitsitua-tion.Aspreviouslymentioned,themagnitudeofeachoftheseshocksisconsiderableandwillhavenegativeeffectsthroughouttheeconomy.

1 https://www.esri.ie/news/new-study-estimates-the-impact-of-var-ious-brexit-scenarios-on-the-irish-economy


Dra

ft Ec

onom

ic R

isks

24

ThestudyassessestheimpactoflowerUK-EUtradeonIreland’smaintradingpartnersandfindsthatitwouldseverelyreducethedemandforIrishexports.ItalsofindsthatwhileIrelandmightbenefitfromthereloca-tionordiversionofFDIfromtheUK,whichwouldraiseGDP,ultimately,thepositiveimpactisoutweighedbythenegativetradeeffect.ThefindingswhilebroadlyinlinewiththeestimatesrecentlypublishedbytheCentralBank2,arestarker.

Thereductioninthepaceofgrowthwillhavenegativespill-overstothepublicfi-nancesandtothelabourmarket.Inrelationtothepublicfinances,theheadlinedeficitcoulddeterioratebynearlyapercentagepointofGDPintheshort-term.Intermsofthelabourmarket,theunemploymentratewouldincreasebyanestimated2percent-agepointsrelativetoBudget2019projec-tions3.

TheCopenhagenEconomicsReport4(Feb-ruary2018)ontheeconomicimpactsofBrexitestimatesthatby2030GDPwillbelowerby7percentunderWTOterms(inthecaseofano-dealBrexit)relativetoastatusquobaseline.Ofthis7percent,1percentisestimatedtobeduetotariffsand6percentisduetonon-tariffbarriers(regu-latorydivergenceandservicebarriers).

Itisimportanttorecognisethatsuchesti-matesmaynotcapturethefullimpact.In-deed,theimpactincertainexposedsectorsand regions will be worse than the average, withthemostadverseimpactslikelytobefeltintheagri-foodandindigenousmanu-

2 https://centralbank.ie/news-media/press-releases/uncertain-back-drop-poses-risks-economic-growth-25-Jan-2019

3 https://www.dfa.ie/brexit/news/news-archive/minister-donohoe-outlines-initial-assessment-of-economic-and-fiscal-impact-of-no-deal-brexit.php

4CopenhagenEconomics(2018)‘IrelandandtheImpactsofBrexit,StrategicImplicationsforIrelandarisingfromchangingEU-UKTradingRelations’

facturingsectors,aspreviousresearch5 has shown. Inaddition,weknowthatimpactsonIrishtradewillbesignificantandall-pervasive,rangingfrombarrierstotradeingoodsandservicesandregulatorybarriers,tobar-rierstoaccessingprocurementmarkets,andnewskillsneedsforSMEstosupporttradediversificationandthemovementofgoodsacrossborders.TheriskofnewtradebarriersaccessingtheUKmarketislikelytohaveconsequencesforthecostbaseofmanufacturersinIrelandascostsassociatedwithcross-bordertrading,energyandtrans-portarelikelytoincrease.ThiswillalsohaveimplicationsforIrish-basedMNCsaccess-ingglobalsupplynetworks.TheincreasingvalueoftheEurorelativetotheSterlingisalreadybeginningtoimpactthecompeti-tivenessofIrishexportsintotheUKastheybecomerelativelymoreexpensive.ThisisparticularlyofconcernforgoodsexportersheavilyreliantontheUKmarket.

TheUKaccountedfor11percentoftotalgoodsexportsin2018and22percentoftotalgoodsimports.Forcertainsectorsandsub-sectors,however,thefiguresweremuchhigher.Some37percentofIrishfoodanddrinkexportswenttotheUKin2018,and34percentofallfishlandingsbyIrishvesselsarecurrentlytakenfromUKwaters.Inadditiontotradingdifficulties,theIrishfisheriessectoralsofacesverysignificantdifficultiesinthecontextofpotentiallossofaccesstoUKwaters,therisktothesustain-abilityoffishstocksinthewatersaroundIrelandfromasubsequentincreaseinfishingactivity,andpotentiallossofquotashare.

TheOECDestimatesthata‘HardBrexit’withtradegovernedbyWTOrulescouldre-

5 https://www.gov.ie/en/publication/e97608-uk-eu-exit-an-expo-sure-analysis-of-sectors-of-the-irish-economy/


Dra

ft Ec

onom

ic R

isks

25

duceexportsby20percentinsomesectorssuchasagricultureandfood6. The Depart-mentofFinance’sanalysisofBrexitsectoralexposureidentifiedPharma-chem;Food&Beverage;TraditionalManufacturing;Ma-terialsManufacturing;andPrintingasthemostexposedmanufacturingsectors7. The studyestimatedthattogetherthesesectorsaccountedfor75percentofmanufacturingGrossValueAdded(GVA)andover112,000jobs.Thestudyalsonotestheregionalspreadofthesesectorsismoreconcentrat-edinruralregionswhichhavehadacom-parativelyslowerpost-crisisrecoverythanthe Dublin region.

Theservicessectortoofacessignificantdis-ruption.TheIrishfinancialservicessectorisparticularlyintegratedintoCityofLondon,meaningtheimpositionofanynewbarri-erstotradecouldhavesignificantnegativeimpactsonthesectorhere.

Intermsofregulatoryrisks,ano-dealBrexitwillintroducebothimmediateandlon-ger-termdisruptionforIrishbusinessesandindustrieswhocarryoutsignificanttradewiththeUK.Inadvanceoftheoutcomeofnegotiations,thelevelofriskisdifficulttofullyassess.LessdemandingregulationcouldputUKfirmsatacompetitivead-vantagewhilstfurtheradvantagescouldemergeshouldtheUKbeabletosupportits industries and business through the use ofStateAidinthefuture.Regulatorydi-vergencewouldalsointroducebarrierstotrade,potentiallyinterruptingthesupplyofgoodsandservices,disruptingsupplychainsetc.

Moregenerally,Brexithasintroducedalev-elofuncertaintywhichmayresultinforeignenterprisesholdingoffoninvestmentde-

6 OECD(2018)EconomicSurveyIreland2018,availableat:http://www.oecd.org/ireland/economic-survey-ireland.htm

7 https://www.gov.ie/en/publication/e97608-uk-eu-exit-an-expo-sure-analysis-of-sectors-of-the-irish-economy/

cisionsuntilgreaterclarityemerges.ThereisaneedtomaintainafocusonenhancingIreland’scompetitivenessasaresultoftheincreasinglycompetitivemarketforinterna-tionalinvestment,andasotherEUMemberStatescompetetoattractforeigninvest-mentlookingforaccesstotheEUmarket.

3.2. Loss of competitiveness StrongeconomicgrowthrecordedoverthelastnumberofyearshasenabledtheIrisheconomytomovefromastageofrecoverytoamorematurestageintheeconomiccycle.Importantlygrowthintheeconomyhasbeenbroad-basedinrecentyears,withbothdomesticdemandandnetexportsmakingpositivecontributionstogrowth.AsoutlinedintheStabilityProgrammeUpdate2019,stronggrowthintheeconomyisex-pectedtocontinueoverthecomingyears,withGDPforecasttogrowby3.9percentthisyearand3.3percentin20208. Indeed, arguably,thebestindicationoftherecoveryintheeconomyhasbeeninthelabourmar-ket,with2.28millionpeoplenowworkingintheeconomy,thehighestlevelever.Inparallel,theunemploymentratehasfallenfromapeakof16percentinearly2012to5.6percentinFebruary2019.

Againstthebackgroundofrobusteconom-icgrowth,improvementsinthecountry’scompetitivenesshavealsobeenatthecornerstoneoftherecoveryintheIrisheconomy.Since2008,theCentralBank’srealharmonisedcompetitivenessindica-torhasimprovedbyapproximately21percent.Therestorationofcompetitivenesshasbeenhard-wonthroughimprovementsinproductivity,alongwithwageandpricemoderation.ImportantlyforIreland’scom-petitivenesshowever,therobustgrowth

8 DepartmentofFinance,April2019,StabilityProgrammeUpdate2019;Available:https://assets.gov.ie/8305/88ffede238074f2cb88f-c996854a12b3.pdf


Dra

ft Ec

onom

ic R

isks

26

intheeconomyhasnotyetgivenrisetoinflationarypressure.InJanuary2019,an-nualinflationasmeasuredbytheHarmon-isedIndexofConsumerPriceswasatjust0.8percent,havingaveraged0.7percentthroughout2018.Thisfollowsfiveconsecu-tiveyearsofinflationbelow1percent.

Despitethepositiveeconomicgrowthoutlookhowever,wemustremaincognisantofthedomesticrisksoureconomyfacesinrelationtooverheatingpressures,whichmayemergequicklyasthelabourmarkettightensandwhich,coupledwithchallengesaroundinfrastructureconstraintsandhous-ing,couldgiverisetorelatedriskstoourcompetitivenessincludingintermsoflabourcosts,prices,andinfrastructure.EstimatespublishedbytheDepartmentofFinanceinBudget2019,inrelationtothe‘supplyside’oftheeconomyindicatethattheeconomyoperatedmarginallybelowitspotentiallevelin2018(asmallnegative‘outputgap’).

TheNationalDevelopmentPlanandFutureJobsIrelandrecognisethatstrengtheningourresearch,developmentandinnovationcapacityiscentraltosustainingandbuildingcompetitiveness.IrelandisnotontracktoreachtheInnovation2020researchintensi-tytargetof2.5%ofGNPwithinthetime-frameset.Ourcurrentrateisjust1.62%(asatApril2019).InsufficientlevelsofpublicandprivateinvestmentinR&DcouldposearisktoIreland’scompetitiveness.

Thereisanelevatedriskthattheeconomywilllikelyreachandexceeditssustainablelevelofproductioninthecomingyears,withapositiveoutputgapemerging.Thisisconsistentwithaneconomyapproach-ingfullemployment,andprojectionsofasignificantincreaseinhousingsupplyinthecomingyears.Theunemploymentratecontinuestofall,andisnowwellbelowtheeuro-areaaverage.However,thedownward

trendhasbeenlevellingoffsincemid-2018,suggestingthelabourmarketisapproach-ingfullcapacity.Thisresonateswithrecenttrendsinbroadermeasuresofunemploy-mentsuchasthepotentialadditionallabourforceaswellasthenon-employmentindex.Labourcostshaverisennotablyinthelastyearwithaveragehourlytotallabourcostupby3.2%inyeartoQ42018.TheCSOpreliminaryestimatesindicatethataverageweeklyearningsroseby4.1percentannu-allyandby9.7%inthelastfiveyearstoQ42018.

TheIrishFiscalAdvisoryCouncil,alongwithotherdomesticandinternationalcommen-tators9,haswarnedthatwhilesignificantoverheatingisnotyetevident,itremainsarealisticriskforthedomesticeconomy,andsignificantoverheatingpressurescouldbuildupifafaster-than-expectedpick-upinhousingconstructionmaterialises10. In additiontothegeneralriskofoverheating,morespecificissuessuchastheeconom-icimpactsofconstructioncostinflation,includingrisinglabourcostsassociatedwithatighteninglabourmarket,andtheconse-quentimpactonvalueformoneybothfortheStateintermsofitscapitalprogrammes,aswellasfortheindividualconsumer,canbeidentified.

Theriskofoverheating,whichtheGov-ernmentisacutelyawareofandremainscognisantofatalltimes,isexacerbatedbythefactthat,despitetheadvancedstageoftheeconomiccycle,thereareinfrastructureshortagesinseveralcriticalareasincludinghousingaswellaspublicinfrastructuresuchastransportandwater,amongothers.Thisiswhyfromapolicyperspective,continued

9CentralBank,OCED(http://www.oecd.org/eco/outlook/eco-nomic-forecast-summary-ireland-oecd-economic-outlook.pdf),andECBPresidentMarioDraghi(https://www.oireachtas.ie/en/debates/debate/joint_committee_on_finance_public_expenditure_and_re-form_and_taoiseach/2018-11-08/2/)

10https://www.fiscalcouncil.ie/wp-content/uploads/2018/11/Fis-cal-Assessment-Report-November-2018-Final.pdf


Dra

ft Ec

onom

ic R

isks

27

vigilanceisrequiredtoensuretaxandrev-enueremainsonasustainablefootingandthatpro-cyclicalbudgetarydecisionsareavoided.Inaddition,prudentfiscalpolicywillneedtobebalancedagainsttheneedtoaddressexistingcapacityconstraintsandthepotentiallysignificantnegativeimpactsofinternationalshocksinthiscurrentperi-odofglobaluncertainty.

Finally,anotherissuewhichtheGovern-mentisveryconsciousofandwhichitisac-tivelytryingtoaddressisinrelationtothecostandavailabilityofbusinessinsuranceinparticularforsmallerfirms.

3.3. Public Expenditure Pressures

Followingonfromtheperiodoffiscalconsolidationintheyears2008to2014,ithasbeenpossibletoonceagainincreaseexpenditureonthedeliveryofpublicser-vices.Budgetssincethenhavesetaboutincreasingexpenditureinkeypriorityareaswhile also ensuring the viability of the publicfinances.TheenhancedengagementwiththeOireachtas,particularlytheSelectCommitteeonBudgetaryOversight,hasalsoassistedinformulatingBudgetswhilereachingbroadconsensusonkeypriorities.

Astheeconomicrecoverycontinues,theexpectations,fromarangeofsources,thatadditionalresourceswillbemadeavailabletomeetgrowingdemandsfornewservicesandserviceimprovementsmaynotbeconsistentwiththeavailableresourcesbothintheshortandmediumterm.Thisrequiresacontinuedfocusontheeffectivenessandsustainabilityofpublicexpenditureandabroad understanding of the need to en-surethatpublicexpenditureincreasesareaffordablebothtodayandoverthelongerterm,andthatcostover-runsandaddition-

alexpenditureiscontrolled.Atthisstageoftheeconomiccycle,emergingspendingpressuresmustbecloselymonitoredandcontrolled,toensurethatourpublicfinanc-esremainsustainableandstable,andtoen-surewecanrespondtothechallengesaris-ingfromtherisksdiscussedthroughoutthisReport.TheIrishFiscalAdvisoryCouncil,forexample,intheirNovember2018FiscalAssessmentReport,warnedthat“repeatedfailures to prevent unbudgeted spending increaseshaveleftthepublicfinancesmoreexposedtoadverseshocks”.

PublicServicesaredeliveredthroughtheworkofpublicservants.Consequently,thepublicservicepaybillisanimportantelementofoverallpublicexpenditure.Ex-pectationsinrelationtoincreasesinpublicservicepayneedtobemanagedwithinthecontextofensuringsustainablepublicfinancesandeffectivedeliveryofservices.

Further,Ireland’spublicdebt,andthepotentialforrisinginterestrates,marketvolatility,Brexit-relatedmattersandotherfactorstoimpactonthecostofservicingourpublicdebt,couldhaveconsequentimpactsontheappropriatefiscalstancefortheeconomy.Sustainabilitymetricsshowthatalthoughdeclining,publicindebted-nessremainshighinIreland.Thesemetricsincludetheabsolutelevelofdebt,debtinterestpaymentsasashareofrevenueanddebt to GNI*.

TheUK’sdeparturefromtheEUwillhavesignificantimpactsforsectoralpolicy,publicexpenditureandthewidereconomy.DedicatedmeasurestoprepareforBrexitwereannouncedinBudgets2017,2018and2019,toensurethatIrelandisinthebestpossiblepositiontorespondtothechallengesthatBrexitwillbring.However,theextentoftheimpactsandthenatureofriskswilldependonthebasisonwhichthe


Dra

ft Ec

onom

ic R

isks

28

UKdepartstheEU.Giventhisriskintheexternalenvironment,itisallthemoreim-portantthatexpenditurepressuresarisingfromotherareas,includingdemographicgrowth,capitalinvestmentneedsandpublicdemandsforincreasedservices,areman-aged,withunplannedadditionalexpendi-turecontrolledtoensuresustainabilityovertheeconomiccycle.

3.4. Global Slowdown, including changes to international trading environment

Ireland,asahighlyopen,export-focussedeconomyisparticularlysensitivetoaslow-downinworldtradeandoveralleconomicgrowth.AdverseexternaldevelopmentscouldimpacttheIrisheconomythroughnumerouschannels,includingthroughex-changeratefluctuations,reduceddemandforexports,increasedpublicandprivatesectorborrowingcosts,anddeterioratingconsumerandmarketsentiment.Inaddi-tion,increasedtariffandnon-tariffbarrierscouldcreatebarrierstotradethatwouldadverselyaffecttheexportsofIrishfirmsandMNCsoperatinginIreland.

Theoutlookfortheglobaleconomyhasbeenworseningsincethesecondhalfof2018.Thelatesteconomicdata,highfrequencyindicatorsandeconomicfore-castsallpointtothepaceofglobalgrowthslowing.TheIMFrecentlywarnednationalgovernmentstoprepareforan‘economicstorm’asglobalgrowthlevelsundershootexpectations.TheIMFreferenced‘tradetensionsandtariffescalation,financialtightening,uncertaintysurroundingBrexitandanacceleratedChineseslowdown’asthefourkeyfactorsunderminingglobaleconomicgrowth11.Inaddition,theECBre-

11 https://www.worldgovernmentsummit.org/events/annual-gather-ing/session-detail/a-conversation-with-christine-lagarde

centlycutitseuroareagrowthprojectionsfor201912,signifyingincreaseduncertaintyregardingtheoveralleconomicoutlook.Similarly,theWorldBankpredictsglobalgrowthtobemoderateaseconomicslackdissipates,monetarypolicyaccommodationinadvancedeconomiesisremoved,andglobaltradegraduallyslows,andtheOECDsuggestthatglobalGDPgrowththoughstrong,haspeaked.

Asasmallopeneconomy,andoneinwhichmulti-nationalcorporationsplayanim-portantrole,Irelandishighlyexposedtochangesinglobaleconomicandtradingconditions.TheEuroAreaaccountsforthelargestproportionofIreland’strade.Some29percentofourgoodsandservicesexportsweredestinedfortheEuroAreain2017,comparedto15percentofgoodsandservicesexportsdestinedfortheUKin2017.Havingoutperformedexpectationsin2017,growthintheEuroAreahasmod-erated.TheEuropeanCommission’slatestforecastsshowtheEuroAreagrowthratein2019willbealmosthalftheratein2017,reflectinggrowinguncertainties.

Momentuminkeyeconomiesisslowing.Severaladvancedeconomies,suchasJapanandGermany,experiencedcontractionsinthethirdquarterof2018.TheItalianeconomyfellintoatechnicalrecession(twoconsecutivequartersofeconomiccontrac-tion)inthesecondhalfof2018.ThepaceofgrowthintheChineseeconomyhasalsoslowed.UKeconomicgrowthremainsmodest,asuncertaintysurroundingBrexitcontinues.

Furthermore,escalatingtradeconflictsarenegativelyaffectingthegrowthoutlookinallcountries.Thereareclearindicationsthattradetensionsarebeginningtoim-

12 https://www.reuters.com/article/us-ecb-policy-forecasts/ecb-cuts-growth-inflation-forecasts-idUSKCN1QO1O9


Dra

ft Ec

onom

ic R

isks

29

pactgrowthwithtradevolumes,industrialproductionandmanufacturingpurchasingmanagersindex(PMIs)declining.Leadingindicatorsarealsoacauseforconcern.TheUSyieldcurve,whichhasgoodsignallingproperties,ispointingtoaslowdownintheUSeconomy.Similarly,theOECD’sCom-positeLeadingIndicatorspointtomoderat-inggrowthintheUK,theEuroAreainclud-ingGermany,FranceandItaly,andintheOECDareaasawhole.Whilstthereisacyclicaldownturninworlddemand,someofwhichisrelatedtocoun-try-specificidiosyncraticfactors(e.g.carindustryinGermany,tradetensionsetc.),therearealsolonger-termstructuralfac-torsatplaywhichhaveresultedinalmostnoexpansioninglobalisationoverthelastdecade.

InaEuropeancontext,theslowdowncanbeseentobeexacerbatedbyspecificeuroareavulnerabilities,forexample,Italianborrowingcostsremainelevatedandaweakereuroareaoutlookcombinedwithapossibleglobaleconomicdownturncouldpresentfurtherchallengeswithcontagiontotheeuroarearemainingasignificantrisk.TheconclusionofQuantitativeEasing(intermsofnetbondpurchases)willbringanend to a prolonged period of low interest rates,presentingamorechallengingfund-ingenvironmentintheyearsahead.Quan-titativetighteningmayalsofilterthroughtotherealeconomyvis-à-vishigherSMEborrowingcostsormortgageinterestrates,placingadditionalpressureonanalreadyhighlyindebtedhouseholdsectorintheIrishcontext.

Inadditiontothis,aslowdownintheUSandChineseeconomies,furtherintensifica-tionoftradetensionsandacontinuedmovetowardsprotectionistpolicies,increasingglobalindebtedness,changingglobalfinan-cialconditions,andthetimingandnature

ofBrexit,amongstotheruncertainties,poseriskstotheglobaleconomicoutlookgoingforward.

Asmentioned,thisslowingworldgrowthmomentumhasimportantimplicationsforIreland’seconomy.SensitivityanalysisintheBudget2019EconomicandFiscalOutlookshowsthatanexternalshockof1percentinworlddemandwouldreducethelevelofoutputbyaround0.3percentinthefirstyearandbyaround1.0percentafter5yearsrelativetoabaselineprojec-tion.Thisdecelerationwouldbereflectedinthelabourmarketandfiscalbalances.Thisunderlinestheimportanceofimprovingtheresilienceoftheeconomybybuildingfiscalbuffers,maintainingappropriatecontrolonexpenditure,andfocussingoncompetitive-ness.

Overall,recentexternaldevelopmentssuggestthattherehasbeenanoticeabledecelerationinglobaleconomicactivity,partlydrivenbyadversetradepolicydevel-opmentsinsomeofIreland’skeytradingpartners.

3.5. International tax changes

Ireland’scorporationtaxregimeisamajorfactorincreatingfavourableconditionsinwhichIrish-basedenterprisesoperate,aswellasinensuringastableenvironment,transparencyandpredictabilityforinwardinvestment.ItremainsanimportantpartofIreland’swidercompetitivenessofferingtosupport enterprises based in Ireland invest, innovateandcompeteinternationally13. However,thehighdependenceofIreland’soutputandvalueaddedonForeignDirectInvestment(FDI)presentsavulnerabilityintermsofhowanchoredforeignmultina-

13NationalCompetitivenessCouncil(2017)Ireland’sCompetitive-nessChallenge2017


Dra

ft Ec

onom

ic R

isks

30

TaxPractices.TheGovernmentpublishedanIndependentReviewoftheCorporationTaxCode14in2017andcarriedoutacon-sultationontheimplementationofsomeofitsrecommendations15.TheDepartmentofFinancepublisheditsCorporationTaxRoadmapinSeptember2018whichlaysoutthenextstepsinIreland’songoingworkoncorporatetaxreform.WorkisalsoprogressingonthetranspositionoftheAnti-TaxAvoidanceDirectives(ATADs),withControlledForeignCompany(CFC)rulesandanewExitTaxintroducedinFinanceAct2018,andapublicconsultationcon-ductedinearly2019onimplementationoftheATADanti-hybridandinterestlimitationmeasures.

ItisimportantthatIreland’staxofferingremainscompetitiveforfirmsseekinganEUbaseforoperations,andtoattractanddevelopknowledge-basedinvestmentrelatedtoR&DandIP.Astheinternation-altaxenvironmentischangingrapidly,maintainingagoodreputationhasbecomeincreasinglyimportantforthesustainabilityofcorporationtaxpolicyhereinIreland16. In thiscontext,andinparallelwithdomesticreformsandrestructuring,itisessentialthattheGovernmentremainsproactiveintheongoinginternationaleffortstoco-ordinatetaxstandards.

3.6. Reliance on multinational corporations and sectoral concentration

AsdiscussedinpreviousNationalRiskAs-sessments,Ireland’seconomyandemploy-mentareheavilyinfluencedbyarelatively

14 https://www.gov.ie/en/publication/fa53d4-review-of-irelands-corporation-tax-code/

15 https://www.gov.ie/en/consultation/47e576-consulta-tion-on-coffey-review/

16NationalCompetitivenessCouncil(2017)Ireland’sCompeti-tivenessChallenge2017;http://www.competitiveness.ie/News-Events/2017/Competitiveness%20Challenge%202017.pdf

tionalsaretotheIrisheconomy,whichisfurthercomplicatedbytheongoingprocessofinternationaltaxreform.

Irelandhasplayedanactiveroleinimple-mentinginternationaltaxreformsthroughtheBEPSproject,andisamongstthecountrieswhohaveadoptedearlythecoun-try-by-countryreportingforlargefirms.Inaddition,UStaxreformshouldleadtosomebehaviouralchangeandshouldeliminatetheabilityforUScompaniestopayverylowtaxratesontheirglobalprofits.Neverthe-less,thereisastrongnarrativethatlargefirmscontinuetohavetheabilitytooperatewithinajurisdictionwithoutpayinganap-propriateamountoftax.Workoninterna-tionaltaxreformcontinueswithadditionalproposalsunderdiscussionatEUandOECDlevelastohowdigitalcompaniesaretaxed.WhileanEUleveldigitaltaxappearslesslikely,theproposalscurrentlyunderdiscus-sionatOECDhavewidenedtoencompassthebroadereconomy.Ultimately,anyre-formwhichseekstoallocategreatertaxingrightstousersorcustomerlocationposeschallengesforsmallcountrieslikeIreland.

Irelandhastakensignificantactionsoncorporatetaxoverrecentyearsandhasintroducedmeasures,bothdomesticallyandaspartofthewiderinternationaleffort,toaddresstaxevasionandavoidance.TheOECD’sBEPSproject,andtherelatedDirectivesagreedatEUlevel,haveagaindemonstratedthatco-operative,multi-lat-eralagreementsarethemosteffectivemeanstofacilitateinternationaltradeandcounteractcross-bordertaxevasion.Chang-estoIrishcorporatetaxresidencyrulesim-plementedin2014and2015havereducedopportunitiesforaggressivetaxplanning.TheIrishKnowledgeDevelopmentBox,introducedin2015,hasbeenapprovedbytheCodeofConductonBusinessTaxationGroupandtheOECDForumonHarmful


Dra

ft Ec

onom

ic R

isks

31

experiencedadeclineinproductivityinrecentyears.Thenarrowbaseofenterpris-esinhighvalue-addedsectors,andwithinsectors,thereforedisguisesthemajorityofunderperformingfirmswhereproductivitygrowthisstagnantorfalling.Theresearchsuggeststhatthetop10percentoffirmsaccountfor87percentofvalue-addedinmanufacturingand94percentinser-vices;thishighlightsIreland’sexposuretofirm-specificshocks.

ThehighdependenceofIreland’soutputand value added on FDI presents a vulner-abilityintermsofhowanchoredforeignmultinationalsaretotheIrisheconomy.Manyoftheforeign-ownedenterprisesthatoperateintheIrisheconomytodayhavealong-standingandsubstantiveinvestmentinIreland.However,Ireland’srelationshipwithFDIislikelytobecomplicatedbytheongo-ingprocessofinternationaltaxreformandrisinganti-globalisationandprotectionistsentiments,inparticularintheUSandUK(thetwolargestsourcesofFDIinIreland),asdiscussedabove.ThesedevelopmentspresentarisktothesustainabilityofFDIinIreland,andhighlighttheincreasingexpo-sureoftheIrishpublicfinancestopotential-lyvolatilecorporatetaxreceipts.

TherearemanyreasonswhyfirmschoosetoinvestinIreland.However,theEU’sDigitaltaxproposalsforacommonconsol-idatedcorporatetaxbaseandthecurrentdiscussionsforfurtherBEPSreformatOECDhavethepotentialtosignificantlyimpactforeigninvestmentflowsinfuture.Asmentionedabove,theemergenceoftheprospectofatradewarbetweentheworld’slargesteconomiescoulddisruptglobaltradeandinvestmentflows,whichwouldsignifi-cantlyimpactIrelandasasmallopenecon-omyhighlydependentonforeigntradeandinvestment.Inaddition,thenarrowportfolioofMNCs

smallnumberofmultinationalcorporations(MNCs),concentratedinafewenterprisesectors.WhilemultinationalinvestmenthasbeentransformativefortheIrisheconomy,thisalsocreatesaparticularvulnerabilitytochangesinIreland’sattractivenessasalocationforthosecompanies,aswellastosector-specificchangesorrisks.

Foreign-ownedmulti-nationalcorporations(MNC’s)areconcentratedinIreland’smostcompetitiveexportsectors,suchasmodernmanufacturingandICT,andaccountforadisproportionatelylargeshareofoutput,value-addedandproductivity17.ThemostrecentavailableCSOdataindicatesthatasmallnumberof‘foreign-ownedMNCdom-inated’sectors18accountedfor39percentoftotalGrossValueAdded(GVA)in201719. Whileononehand,thisevidenceshowshowsuccessfulIrelandhasbeenatattract-ingandretainingFDI,ontheotheritseemstocorrespondwithmuchmoremodestperformanceamongstIrish-ownedfirmsinthesamesectors.

DespiteseveraldecadesofFDI-ledgrowthinIreland,thereareprevailingandincreas-inggapsinGVA,productivity(GVAperemployee)andwagesbyownership,withforeign-owned enterprises generally seeing muchhigherandincreasingproductivityandwages,relativetoIrish-ownedenterprises.Indeed,despiteIreland’sstrongproductivityperformanceinaninternationalcontext,researchbytheNationalCompetitivenessCouncil20showsthatmostbusinesseshave

17Dept.Finance,PatternsofFirmLevelProductivityinIre-land,March2018,seelink:https://www.gov.ie/en/publica-tion/975f17-patterns-of-firm-level-productivity-in-ireland/

18Theterm‘foreign-ownedMNEdominated’sector–usedfrequentlyinthepaper–referstoagroupofsubsectorswhereforeign-ownedMNEscreatemorethan85percentofthesectorturnover.

19Seelink:https://www.cso.ie/en/releasesandpublications/er/gvafm/grossvalueaddedforforeign-ownedmultinationalenterprisesan-dothersectorsannualresultsfor2017/

20NationalCompetitivenessCouncil,ProductivityStatement2018,seelink:http://www.competitiveness.ie/Publications/2018/NCC-Productivity-Statement-2018.html


Dra

ft Ec

onom

ic R

isks

32

verymuchconsistentwithdatafromtheRevenueCommissioners,whichshowthattradingprofits(excludingbalancingcharges)increasedby€63billion(66.5percent)between2014and2016(latestavailabledata).

Whilecorporationtaxincomevolatilityhasbeenpositivetodate,inascenariowhereeconomicgrowthslowsoradverseinter-nationaltaxand/ortradedevelopmentsreducecorporatetaxincome,Ireland’scur-rentfinancescouldencounterdifficulties.Inthiscontext,thereisariskoftheStatebecomingdependentonvolatilesourcesofnationalincome.

maygiverisetonegativespill-overeffectstoothersectorsofthelabourmarket.Industrysectorsthataredominatedbyforeign-ownedenterprisesexhibitedthehighestaverageearningsin2018,andthesesectorsalsodisplayedthehighestshareofnon-Irishworkersinrecentyears.Thereisthepotentialofcrowdingoutofemploy-mentinothersectorsasmorepersonsseekemploymentopportunitiesinMNC-domi-natedsectors.Asthesefirmsaretypicallylocatedwithinasmallnumberofurbanareas,thisriskcouldgiverisetoincreasingpressuresinrentalmarketsandthewiderconstructionsector.Highconcentrationmayalsodampencompetitionandinnova-tion.

ItisworthnotingthatIrishcorporationtaxishighlyconcentrated,withthetop10pay-erscontributingcloseto40percentofthistax.Reflectingthelargenumberofsmallandmicroenterprisesintheeconomy,75percentofcorporationtaxpayerspaidanamountlessthanorequalto€20,000;theseaccountforslightlylessthan2percentoftotalnetcorporationtaxreceipts.Therisingshareofcorporationtaxreceiptswithinoveralltaxation(circa19percentoftotalrevenuein2018)andtheconcentrationofreceiptswithinasmallnumberoffirmspos-esasignificantrisktothepublicfinances21.

The2018performanceofthecorporationtaxheadingwasexceptionallystrongwhichinturnhelpedtooffsetunder-performanc-esinotherheadings.Abouttwofifthsofthisfinalcorporationtaxover-performancewasnotanticipatedonBudgetdaywhichunderscorestheinherentvolatilityofthistaxheadingineitherdirection.However,itshouldbenotedthesurgeincorpora-tiontaxreceiptsfrom2015onwardshasoccurredintandemwithasurgeincor-porationprofitabilitysincethen.Thisis

21DepartmentofFinance,AnnualTaxationReport,February2019

Dra

ft Ec

onom

ic R

isks

33


4. Draft Social Risks

4.1. Capacity of Higher and Further Education System 4.2. Skilled Labour Shortages 4.3. An Ageing Population including Pensions and Health System Challenges 4.4. Impact of Social Media on Public Debate 4.5. Social Cohesion including Perceptions of Rural and Regional Imbalances 4.6. Migration and Integration

4.1. Capacity of Higher and Further Education System Anadequatelyresourced,flexible,responsiveandalignedHigherEducation(HE)andFurtherEducation&Trainingsystemhasakeyroletoplay in sustaining enterprise growth in Ireland. Skillsaretheglobalcurrencyof21stcenturyeconomies,andmanycountriesareplacingamajorfocusontalentdevelopmentandinvest-mentineducationandtraining.Researchcom-missionedbytheIrishUniversitiesAssociation(IUA),andpublishedinApril20191, found that theIrisheconomybenefittedby€8.9billionlastyearfromIreland’ssevenuniversities,withtheuniversitiesgenerating€386millionperannuminexportearningsand€1.5billioninR&Dimpacts.

Ireland’sHigherEducationInstitutions(HEIs)havebeencentraltodifferentiatingIreland’stalentpoolinaninternationalcontext,sup-portingtheestablishmentofasuccessfulentrepreneurshipecosystem,growingindige-nousmultinationalenterprises,andcontinuedattractivenessforforeigndirectinvestment.Ensuringthisalignmentbetweenenterpriseskillsneedsandgraduateoutputhelpsdrivein-firmproductivity,innovationandultimatelythecompetitivenessoftheIrisheconomy.

AnydiminutioninresourcesfortheHEsector

1 IndeconInternationalEconomicConsultants;https://saveourspark.ie/wp-content/uploads/2019/04/Delivering_for_Ireland_An_Impact_As-sessment_of_Irish_Universities_2019.pdf

would,however,poseachallengetothiscontinuedrole,placingasitwouldastrainonthesector’spotentialtorespondwithflexibilityandagilitytotheevolvingskillsneedsoftheeconomy-includingtotherequiredscale-aswellasthesupportingroleplayedbyIndustry-Academiacollabora-tionindrivingtheinnovationofindigenousand foreign-owned enterprises, and in turn theabilityofIrish-basedfirmstocompeteinoverseasmarkets.

Recentyearshaveseenaworryingdown-wardtrendofIrishuniversitiesinglobalrankings,attributedmainlytopost-reces-sionunder-investmentinthesector,andanincreaseinstudentenrolmentnumbers2. Therehasalsobeenasignificantincreaseinthenumberofstudentsenrollingforauniversityeducation,withover120,000studentsenrollingin2017,up40percentfrom20083.

Notwithstandingthatsignificantprogresshasbeenmadeinrecentbudgetsinin-creasinginvestmentinHEaswellasotherdevelopmentssuchasanewHumanCap-

2 Itshouldbenotedthatwhilerankingscanimpactoninternationalperceptionsofuniversities,theyrepresentaperceptionofqualityinthesectoronly.

3 AsperHigherEducationAuthoritystatistics,availableat:https://hea.ie/statistics-archive/


Dra

ft So

cial

Risk

s

35

participationratehasremainedbroadlyflatsince2011andisatthesamelevelastheparticipationrateintheearly2000s.Inaddition,whilesourcinginternationaltalentwillalsobenecessarytoaddresscapacityconstraintsintheshortterm,inthepost-re-cessionworlditislikelytobemoredifficulttoattractforeigntalent.Irelandmustcom-petewithothercountriestoattractbothhighandintermediatelevelskilledlabour.

RisksaroundskillsshortagesintheareaofDigital/ICTareparticularlypertinent.Theavailabilityofappropriateskillsfordevel-oping,implementingandusingICT,aswellasgeneralDigitalskills,areanimportantconditionforthecompetitivenessandinnovationcapabilityoftheIrisheconomy.ThestrongEuropeancompetitionforskills,especiallyinaregionwherethereisfreemovementoflabour,makesitimportantforIrelandtodevelop,attractandretaintherighthighlevel,andintermediatelevelDigitalandICTskillstosatisfythedemandacrosstheIrisheconomy.ItislikewiseimperativeforIrelandtobeabletocontin-uetoattractandservetheR&Dactivities,hightechmanufacturingandglobalservicescompaniesthatareimportantforIreland’seconomicgrowth.

Theeducationandtrainingsystem,encom-passingboththeHEsectorandFurtherEducationandTrainingSector,willplayakeyroleinaddressingexistingandemergingskillsneeds,providingeducation,trainingandskillsdevelopmentopportunitiestonewentrantsaswellasongoingupskillingandreskillingofexistinglabourmarketparticipants.Inadditiontotheriskstojobsfromautomation,thenewdigitalworldofworkwillalsocreatejobsnoteventhoughtoftoday.Weneedtoensureoureducationandtrainingsystemissufficientlyadaptable,andappropriatelyresourced,tomeettheneeds of the future.

italInitiative4,thereisariskaroundfailingtosustaintheselevelsofre-investmentinfuturebudgetarycycles,toensurethequalityoftheHEsectorismaintained,andtoaccommodatethestrongdemographicgrowththatispredicted.Recentlypublishedstatisticsestimatethatdemandforthirdlevelplaceswillincreaseeachyearupto2030,risingfromthebaselevelof184,000(in2017)topeakatover220,000studentsby2030.Thecontinuedre-investmentinHE,combinedwiththedevelopmentofalonger-termsustainablefundingmodel,willbenecessaryinordertocontinuetosupportthegrowthandqualityofourHEsystemintheyearsahead.

TheDepartmentofEducationandSkillsiscurrentlyengagedinaprocesstoidentifyamoresustainablefundingmodelforHEintheyearstocome,includinganeconomicanalysisofthethreepolicyoptionsidenti-fiedbytheExpertGrouponFutureFundingin2016.ThisanalysiswillassisttheJointOireachtasCommitteeonEducationandSkillsintryingtobuildpoliticalconsensusaroundthemostappropriatefuturefundingmodelforhighereducation.

4.2. Skilled Labour Shortages Astheeconomycontinuestoexpand,in-creasingtheparticipationrateandsourcingskilledinternationaltalentwillbeimportantsupplementsnecessaryinthecontextofgrowinglabourmarketdemandaswellasexistingskillsshortagesinspecificareas.DespiteIreland’srecoveryinthelabourmarket,theparticipationrateremainsbelowits2007peaklevel5andinfact,theoverall

4 Budget2019alsoannouncedanewHumanCapitalInitiativethatwillinvolveinvestmentof€300millioninhighereducationoverthe5yearperiodfrom2020to2024,with€60millionbeingmadeavailableineachofthoseyears.

5 ESRIQuarterlyEconomicCommentary,Winter2018.Seelink:https://www.esri.ie/system/files/media/file-uploads/2018-12/QEC2018WIN.pdf


Dra

ft So

cial

Risk

s

36

continuetogrow8.Thesecondisthatthedependencyratio-i.e.,theratioofper-sons under 15 and 65 and over to persons ofworkingage(15-64)-willincreaseintothefuture,intheabsenceofimprobablylargeimmigrationofpeopleofworkingage,whichwillimpactonareassuchasedu-cation,childincomesupports,healthcare,long-termcare,transport,employment,housingandpensionprovision.Eachofthesewillbeanareaofacuteconcernbutpensions,andchallengesforthehealthsys-temmaybeamongthemostserious.

TheEuropeanCommissionestimatesthatpension-relatedexpenditurewillincreaseby4percentageofGDPpointsby2070,whentakingonlydemographicfactorsintoaccount9.WhileIrelandhasacomparativelyyoungpopulationrelativetootherEuro-peancountries,itneverthelessfacesthesamelongertermageingchallenges.AkeychallengeinthisregardisthesustainabilityandcoverageofpensionsinIreland.Statepensionsaccountforthesinglelargestblockofsocialwelfareexpenditure,andtheIrishpensionsystemfacesanumberofveryseriousdemographic,adequacyandsustainabilitychallenges.Thetaskoffinancingincreasingpensionspendingwillfalltoadiminishingshareofthepopulationasprojectionsindicatetheratioofpeo-pleofworkingagetoeverypersonagedoverStatepensionagewillreducefromitscurrentrateof4.9:1to2.3:1overthenext40years.ThispresentssignificantfundingchallengeswiththeSocialInsuranceFundforecasttoaccumulateapotentialdeficitofupto€335bn10overthenextfiftyyears.

8 TheCentralStatisticsOfficeestimatesthatthenumberofpeopleagedover65willalmosttrebleto1.45millionpeoplebetween2011and2046.

9 EuropeanCommission(2019)EuropeanSemesterCountryReportIreland.Availablehere:https://ec.europa.eu/info/sites/info/files/file_import/2019-european-semester-country-report-ireland_en.pdf

10 DepartmentofEmploymentAffairsandSocialProtection2017ActuarialReviewoftheSocialInsuranceFund2015.Availablehere:http://www.welfare.ie/en/downloads/actrev311215.pdf

Continuedinvestmenttodeveloptalentandskillstomeetemergingskillsneedsisthere-foreimportant.ThisisparticularlyevidentintermsofthefullimplementationofProjectIreland2040,toensureadditionaleconomiccostsarenotincurredfromcapacityissuesinthiscontext.Thereisaneedtocontinuecooperationbetweenprovidersandem-ployers to ensure that training is addressing emergingskillsneeds.

4.3. An Ageing Population includ-ing pensions and health system challenges

Irelandfacessignificantrisksintermsofanageingpopulation.Theshareofpopulationaged65andoverisprojectedtoincreasefromoneineighttooneinsixby2030,andthenumberofpeopleaged85andoverisprojectedtoalmostdouble6. Older agecohortstendtobethehighestusersofmosthealthandsocialservicesandhavemorecomplexcareneeds.TheresultsfromCensus2016showthatIreland’spopulationincreasedfrom4.588millionin2011to4.762millionin2016.Thenaturalpopula-tionincreasewas196,100withnetoutwardmigrationestimatedat22,5007.Planningfordemographicchangesinthepopulationsoresourcesandservicescanbedirectedwhereneededisdifficult,andtheuncertain-tiesassociatedwithBrexitwillonlyaccen-tuatethisproblem.

Notwithstandingtheuncertaintiesassociat-edwithpopulationprojections,tworelatedissuesarehighlyprobable.Thefirstisthatthenumberofpeopleagedover65will

6 ESRI,2017.Availablehere:https://www.esri.ie/system/files?file=-media/file-uploads/2018-02/RS67.pdf

7 CentralStatisticsOffice(2016)Census2016SummaryResults–Part1(Dublin:CSO).


Dra

ft So

cial

Risk

s

37

ofpeopleinolderagecohortswillcreatesignificantadditionaldemandforarangeofhealthandsocialcareservices,includingnursinghomecare,homecare,andmedi-cines.

Inthecontextofthehealthsystem,IrishhealthexpenditureremainswellabovetheOECDaverage,notwithstandingouryoungpopulation13.AccordingtotheEuropeanCommission’s2018AgeingReport,long-termcareexpenditurewillseeanincreaseby1.9percentagepointsofIrishGDPbetween2016and2070,withanincreaseof1percentagepointofGDPforhealthcarespending,bothaboveEUaverageexpendi-ture growth.

Futurehealthcaredemandandthecostofhealthcareprovisionwillbeimpactedbyavarietyoffactorsincludingdemographics;increasingincidenceofnon-communicablediseases(i.e.heartdisease,stroke,diabetes,cancer,chroniclungdisease,anddemen-tia);lifestyleriskfactors;changestomodesofhealthcaredelivery(e.g.ambulatoryemergencycarereducingadmissionsfromEmergencyDepartments,shifttodaycasesurgery);availabilityofnewdrugsandothertechnologicaldevelopments;changesinthesocio-economicstructureofthepopulation(educationlevel,income,employment)andchangesinpeople’sexpectationsofhealthservices;proportionofthepopulationwithprivatehealthinsurance;andsupply-in-duceddemand(e.g.additionalfundingallocatedtoserviceprovision).

Themajorchronicdiseasesofcardiovas-culardisease,cancer,diabetesandchroniclungdiseasealreadyaccountforasignif-icantproportionofhealthcareactivity,including40percentofhospitaladmissions

13 HousesoftheOireachtas(2017)IrishHealthExpenditure:thecomparativecontext,availableat:https://www.oireachtas.ie/parliament/media/housesoftheoireachtas/libraryresearch/lrsnotes/Irish-health-expenditure---the-comparative-context.pdf

NotwithstandingthegradualincreaseinStatepensionagefrom65in2010to68in2028,itisestimatedthatthenumberofpersons at State pension age and older will morethandoublefrom586,000in2015,to1,402,000by2055.

Inaddition,Irelandalsohasaverylowlevelofprivatepensioncoverage,withapprox-imatelyonly35percentoftheprivatesector-employedpopulationcoveredbyasupplementarypension.Thissuggeststhatahighpercentageoftheworkingpopulationis not saving enough, or is not saving at all, forretirement,reflectingasignificantriskbothintermsofthefundingandsustain-ability of pensions in Ireland.

Ariskalsoexistsinhowourworkplaceswilladaptandsupportolderpeopletocontin-ueparticipatingintheworkforce.Whilstasignificantnumberofpeoplefeelretirementcomestooearlyandwishtocontinuetowork,itislikelythatthiscohortmayrequirespecificsupportoradaptions.Olderpeoplemaywishtoreducelevelsofresponsibilityorworkpatternsintheirroles,andthiswillrequirean“AgeFriendly”approachbyem-ployerstoutiliseandenablethiscohortef-fectively.Employedpeopleover50arelesslikelytoavailoforhaveaccesstolifelonglearningopportunities;lessthanoneintenpeople(8.0percent)aged50+participateininformaleducationandtraining11.Re-ducedopportunitytomaintainandincreaseskillslevelswillalsoreducethelikelihoodofolderpeoplestayingintheworkforcebe-yondthetraditionalretirementage.Whiletheemploymentrateforadultsaged50-64hasincreasedintheyears2014-2016,theemploymentratefor65+remainseven12.

Thesignificantincreaseinthenumber

11 Healthy&PositiveAgeingInitiative–PositiveAgeingNationalIndicatorsReport(2016)

12 Healthy&PositiveAgeingInitiative–PositiveAgeingNationalIndicatorsReport(2016)


Dra

ft So

cial

Risk

s

38

of how billions of people around the globe connectandcommunicate.Whilesocialme-diaplatformsoffermanybenefits,therela-tivelackofoversightofbothsocialmediausersandtheirdatahasledtoagreaterriskofthespreadingofdisinformationorso-called‘fakenews’,withassociatedchalleng-esforandrisksaroundregulatorysystemsreadilyapparent.Thetargetingofsocialme-diauserswithpoliticaladvertisementsandsponsorednewsstoriestoinfluencetheirbeliefs,opinionsandpossiblyvotinginten-tions,forexample,isofconsiderablecon-cern.Balancedandrepresentativediscourseand debate is vital to ensure the integrity of anyreferendumorelectoralprocess.Thereisalsoariskthatthemultiplicityofinforma-tionplatformscouldleadtomorepolarisedsocietalviewpoints.

Large-scaledisinformation15or‘fakenews’campaignsspreadonlinebymaliciousactorsareahighriskissueforsocietyglobally,includingIreland.Thereisinternationalconsensusthattheriskofpublicharmissubstantialwhenonlinedisinformationisdesignedtoinfluencepublicdebateonpoliticalissuesandattempttoinfluenceormanipulatetheoutcomeofelectoralprocesses.Amajordriverofthisriskisthatlargenumbersofcitizensnowgettheirnewsfromsocialmediaplatforms;thishasclearimplicationsforthegenerationandpotentialimpactofonlinedisinformationandhowitisrapidlydisseminated.Resultsofa2018EurobarometerSurveyindicatethatlevelsofawarenessoftheriskarehighinIreland-81percentofIrishinternetuserswerefoundtobeconcernedaboutdisinformationormisinformationonline

15DisinformationisdefinedbytheEUas:“…Verifiablyfalseormisleadinginformationthatiscreated,presentedanddisseminatedforeconomicgainortointentionallydeceivethepublic,andmaycausepublicharm.Publicharmcomprisesthreatstodemocraticpoliticalandpolicy-makingprocessesaswellaspublicgoodssuchastheprotectionofEUcitizens’health,theenvironmentorsecurity.Disinformationdoesnotincludereportingerrors,satireandparody,

orclearlyidentifiedpartisannewsandcommentary.”

and75percentofhospitalbeddays.Inad-dition,thepopulationwithlifelongdisabilitywhoareageingisalsoincreasing,leadingtoadditionaldemandforresidentialcareplaces,andtoincreasingcomplexityandcostofcareforthosereceivingdisabilityservices14.Some60percentofthoseagedover50reporthavingatleastonechroniccondition.Thelevelofmulti-morbidityisincreasingwith18percentofadultsover50havingtwoormorechronicconditions.Itisestimatedthatwithinthenextdecade,thenumberofadultswithchronicdiseaseswillincreasebyaround40percent,withrelativelymoreoftheconditionsaffectingthoseintheolderagegroups.Theeconomicburdenofhealthcareexpenditureinrelationtochronicdiseasesisconsiderable,notonlyforthehealthsystembutalsointermsoffamiliesandsocietyasaresultofreducedincome,earlyretirement,anincreasedreli-anceonsocialcareandwelfaresupportanddiminishedproductivityandabsenteeism.

Atthesametime,therearedifficultiesattractingandretainingsuitablyqualifiedhealthcareworkerstomeetdemand.Ourworkforceisageing,with21percentaged55yearsorover.TheEuropeanCommissionhasestimatedapotentialshortfall,withintheEU,ofaround1millionhealthworkersby2020.Globaldevelopmentsintechnol-ogywillalsoimpactonourworkforcewithunpredictableconsequences,includingthepotentialfornewrolesandskilldevelop-mentbutalsotheautomationandredun-dancyofotherroles.

4.4. Impact of Social Media on Public Debate

Socialmediahasbecomeanintegralpart

14 WorkingGroup1,TransformingLives(2018)ReportonFutureNeedforDisabilityServices.DepartmentofHealth.https://health.gov.ie/wp-content/uploads/2018/06/Working-Group-1-Report-on-future-need-for-disability-services.pdf


Dra

ft So

cial

Risk

s

39

assessthephenomenonofdisinformation,andadjustpolicyobjectivesinlightofitsevolution.

RecognitionatanEUlevelofthesignif-icantthreatofonlinedisinformationtodemocracyisalsoclear,asevidencedbyvariouscountermeasuresbeingprogressed,includinganActionPlanagainstDisinfor-mation,launchedinDecember2018,whichsetsoutmeasurestotackledisinformationinacoordinatedapproachamongtheEUinstitutionsandincooperationwithMem-berStates.MeasuresincludeaRapidAlertSystem(RAS)–aninformation-sharingmechanismondisinformationactivities;anEU-widevoluntaryCodeofPracticeonDis-information;andsupportinganindependentnetworkoffact-checkers,medialiteracyinitiativesandtoolstopromotequalityjournalism.

Inthecontextofdataprotection,thedisclosureofharvestingofthirdpartydataanditsuseintargetingcertaingroupsandcohorts,aswellasongoinginvestigationsandcommentaryinboththeUSandUKaroundelectionmanipulationbythirdpar-ties(includingforeignactors),underlinetheneedbothforgreaterprotectionofcitizens’privacyrights,andgreatertransparencyfromorganizationsonhowtheyareusinganypersonaldatatheycollect.TheGeneralDataProtectionRegulation(GDPR),whichcameintoeffectacrosstheEuropeanUnionin2018,isdesignedtoachievethesegoals.Inaddition,theDataProtectionAct2018includesaprovisiontolimitthescopeofanyprocessingofpersonaldatarevealingpoliticalopinionstopreventmisuse.

Thesewiderconcernsalsoraisebroad-erquestionsaroundthesustainabilityoftraditionalmedia,whichhavebeenviewedhithertoascustodiansofthepublicinterest,

duringthepre-electionperiod16.

Asignificantnumberofrecentelectioncam-paignsacrossEuropeandelsewherehavebeencharacterisedbysubstantivereportsofapparentdeliberateattemptstomanip-ulateoutcomesusingavarietyofdifferentmeansincludingonlinedisinformation.Incertainjurisdictions,officialinvestigationsintosuchallegedactivitiesremainongoing.

Irelandisalsovulnerabletothisrisk,aswasseen,forexample,duringthereferenduminMay2018ontheThirty-sixthAmendmentoftheConstitutionBill2018.TheTrans-parentReferendumInitiative(TRI)17 built a public,searchabledatabaseofpoliticaladsbeing targeted at Irish voters related to the referendumandinformationonthesocialmediaaccountspromotingthem,andfoundthatadsfromuntraceablegroupswereusedto‘misleadvoters,discreditpoliticalfiguresandgroups,mimicofficialorneutralinfor-mationsources,gathervoterdataandsharedisturbingimages’.18InitsfirstpublishedRe-port,theInterdepartmentalGroup(IDG)ontheSecurityofIreland’sElectoralProcessandDisinformationfoundthatwhileriskstotheelectoralprocessinIrelandarerelative-lylow,takingintoaccountthemitigatingfactorsalreadyinplace,amoresubstantialriskisposedbythespreadofdisinforma-tiononlineandtheriskofcyber-attacksontheelectoralsystem.ThisisinlinewithEUfindingsandrecentinternationalexperi-ence.Giventherapidpaceoftechnologicalchange,itisthereforeimportantthatpolicyresponsesarecomprehensive,continuously

16SpecialEurobarometer477DemocracyandElections,EuropeanUnion,2018.p.56;http://ec.europa.eu/commfrontoffice/publi-copinion/index.cfm/survey/getsurveydetail/instruments/special/surveyky/2198

17TheTRIisavolunteer-led,civicinitiativethatwasestablishedtoadvocateforincreasedtransparencyofdigitaladvertisingduringelectoralcampaignsinIreland.Seehttp://tref.ie/

18 PolicyProposalsforregulatingonlineadvertising-TransparentReferendumInitiative–June2018https://docs.google.com/docu-ment/d/1zGdjWuilY9gms7NkHjYRXyYbR7Vdn3OzBeCGrg8uRvQ/edit


Dra

ft So

cial

Risk

s

40

befurtherexacerbatedbytheroleofsocialmediainpublicdebate,discussedfurtherinSection6.3.Conversely,inthecontextofsocialmedia,thereispotentialforanin-creasingsenseofisolationandexclusionforthosewhomaynothavethenecessaryre-sourcesorskillsintermsofaccesstosocialmediaandservicesdeliveredonline,againwitharuraldimensionintheIrishcontext.

InIreland,taxationandsocialtransferpolicieshavebeeneffectiveinoffsettingmarketincomeinequality.In2017,transfersreducedtheat-risk-of-povertyratefrom32.3percentto15.7percent,apovertyreductioneffectof51.4percent.IrelandisthebestperformingEUmemberstateinthisregard,underliningtheeffectivenessofsocialtransferpoliciesandtaxationinoffsettingincomeinequality21.Similarly,thequintileshareratio,i.e.theratiobetweentotalincomesreceivedbythetop20percentofearnerscomparedtothebottom20percentofearners,stoodat4.8in201722, slightlyabovethe2016figureof4.7.Thisfigureis,however,downfrom5.1in2012attheheightoftheeconomicdownturn.Inrecentyearstherehasbeensomeimprove-mentinmeasuresofpovertyandinequality,withtheGinicoefficient23 for disposable incomefallingbelowtheEUaveragein2015,andfallingfurtherin2016to29.3.Nonetheless,measuresofconsistentpover-tyremainedsubstantiallyabovethetargetssetfor2020.Migration,discussedinSection4.5below,canbeanotherfactorandpotentialchal-lengeinrelationtotheerosionofsocialco-hesion.Thecontinuedsuccessfulintegration

21 http://cso.ie/en/releasesandpublications/er/silc/surveyoninco-meandlivingconditions2016/

22 https://www.cso.ie/en/releasesandpublications/ep/p-silc/sur-veyonincomeandlivingconditionssilc2017/introductionandsummary-ofresults/

23 TheGinicoefficientmeasurestheextenttowhichthedistribu-tionofincomeamongindividualsorhouseholdswithinaneconomydeviatesfromaperfectlyequaldistribution.AGinicoefficientofzerorepresentsperfectequality.

andtheirrolebothinIrelandandglobally.Athriving,independentmediaisessentialtoahealthysociety,especiallyinthisincreasing-lyonlineera,whereriskstotraditionalprintmediaandtheiraudiencesandreadershiplevelsarebecomingincreasinglyapparent.

4.5. Social cohesion including Perceptions of Rural and Regional Imbalances

Therecentrecessionandtheconsequentneedtostabilisethepublicfinanceshasraisedconcerns,airedinothercountriesalso,aboutincomedistributionandinequal-ity.AccordingtotheOECD,growingin-comeinequalitycanhaveanegativeeffectonsocialcohesionandimpedeeconomicgrowth19.TheOECDhassaidthateconomicrecoverysince2010intheOECDareahasnotledtoinclusivegrowth,andhasnotreversedthetrendofincreasingincomeinequality20.

Asdiscussedabove(Section2.3),theglobaltrendofrisingpopulismandanti-estab-lishmentsentiment,evidentinFrance,Poland,HungaryandAustriaamongoth-ers,isfurthercontributingtorisksaroundthiserosionofsocialcohesionandtrustininstitutions.Thisinternationalpopulismcanbe seen as partly rooted in great divides, suchasthosebasedonage,geographyandwealth,aswellasaphenomenonofincreas-ingurbanisation.

Inlinewithdevelopmentsinothercoun-tries,weareseeingincreasingperceptionsofregionalandruralimbalancesinIreland.Issuesarisingfromgrowinginequality,cou-pledwithariseinpopulismandperceptionsofregionalorgeographicdifferences,may

19 OECD(2015)InitTogether:WhyLessInequalityBenefitsAll(Paris:OECD).

20 OECDIncomeInequalityUpdate(Paris:OECD)http://www.oecd.org/social/OECD2016-Income-Inequality-Update.pdfb


Dra

ft So

cial

Risk

s

41

laneousProvisions)Act201824.Anotherconsequenceoftherecentre-cessioninIrelandwasadamagingeffectonpublictrust.TheOECDnotesthatthedeclineofpeople’strustininstitutionsintheaftermathoftheglobalfinancialcrisishasbeena“keypolicyconcern”inrecentyears.Furthermore,lowerpublictrustininstitutionslimitsthecapacityofGovern-mentstoimplementtheirpolicies,andhasbeenlinkedtoincreasingdissatisfactionwithdemocracy.25Thereportalsoreflectstheextenttowhichthepopulationfeelsithasasayinwhatgovernmentdoes.Accord-ingtothereport,IrelandisbelowtheOECDaverageintermsofthepercentageoftheworking-agepopulationwhofeelthattheyhaveasayinwhatthegovernmentdoes26.

The2019EdelmanIrelandTrustBarome-terfindsthatthemediaistheleasttrustedinstitutioninIreland,mainlydrivenbya

24 TheEmployment(MiscellaneousProvisions)Act2018wassignedintolawon25December2018.

25 OECDHow’sLife2017https://read.oecd-ilibrary.org/economics/how-s-life-2017_how_life-2017-en#page186

26 OECDHow’sLife2017https://read.oecd-ilibrary.org/economics/how-s-life-2017_how_life-2017-en#page185

ofsecondandthirdgenerationimmigrantsinIrelandwillbeimportantinensuringthatriskdoesnotmaterialiseinanIrishcontext.Socialgroupsthatcontinuetobedispropor-tionatelyaffectedbypovertyincludejoblesshouseholds,thoselivinginsocialhousing(oftenassociatedwithspatialconcentrations)andlone-parenthouseholds(mainlyfe-male-headed)acrossthelifecycle,withchil-drenmorelikelytobeinpovertythanadults.Eurofound,OECD,ILO,NESCandtheESRIhaveallcommentedonthefactthatthekeyrouteoutofsocialexclusionissupportforindividualstobeinwork,andthatenhancedtrainingandeducationcanbebeneficialinachievingthis.Althoughthelabourmarkethasseensignificantrecoveryinrecentyears,risksremaininthisareaintermsofaccesstoandthequalityofwork.Accesstostableemploymentremainsakeychallenge,inparticularforyoungpeople,andtheuseoftemporaryandprecariousemploymentprac-ticesbyindustryalsoremainsarisk,althoughlegislationhasbeenintroducedtoaddressthisintheformoftheEmployment(Miscel-


Dra

ft So

cial

Risk

s

42

Figure 1: Gini coefficient Ireland versus EU, 2010-2016

Source:Eurostat

ampleincludingBrexit-relateddiscourseintheUK,andsimilartrendsintheUS,publicdiscourseinIrelandexhibitssignsthatthisperceptionexists,andthisriskmustthere-forebemanagedandmitigatedbyincreas-ingpublicawarenessthroughclear,positive,andevidence-basedmessaging.

Inaddition,andasmentionedaboveintheEconomicRiskssection,inthecontextoftheeconomicimpactsofBrexit,weknowthatsomesectorswillbeharderhitthanothers,andthatforthesesectors–theagri-foodandfisheries,andindigenousmanu-facturingsectors–theirregionalspreadismoreconcentratedinruralregions,whichhavehadacomparativelyslowerpost-crisisrecoverythantheDublinregion.Asdis-cussedinSection6.2onDisruptiveTech-nologies,astudybytheESRIfoundthatat a regional level, Dublin is the region at leastriskfromautomation(2percentathighrisk,mainlyinRetailandHospitalitysectors),whiletheMidlandsregion(5percentathighriskand64percentatmediumrisk)andBorderregion(5percentathighriskand62percentatmediumrisk)aretheregions’mostatrisk.Inaddition,actionsneededtoaddressclimatechangecouldpotentiallyimpactmoreadverselyonruralandregionalareasoverthecomingyears.ThedifferinglevelsofimpactfromBrexit,ClimateChange,andotherrisksonregional,ruralandGaeltachtareas,mustthereforeremaintotheforefrontaswetacklethesechallenges.

4.6. Migration and integration

Migrationhasbecomeoneofthemostcontentiousandcontestedissuesinpoliticaldebatesacrossmanycountriesinrecentyears.ItplayedasignificantroleintheUK’sreferendumonBrexit,ithasfuelledtheriseofextremenationalistpoliticalparties

distrustinsocialmedia(27percent)ratherthantraditionalmedia(67percent),how-evertrusthasrisenslightlysince2018.ThemosttrustedinstitutionsinIrelandareNGOs,whichalsosawamodestriseintrustsince2018.Globally,trustinemployershasrisento75percent,whichissharedbyIrishrespondentstothesurveyas69percentofIrishemployeeshavetrustintheiremploy-er.WhiletrustinGovernment,themedia,andNGOsrosebetween2018and2019,trustinbusinessdecreasedmarginally,andIrelandisamong20ofthe28countriessurveyed who displayed overall distrust in institutions.TheTrustBarometeralsohigh-lightsthat64percentofpeoplesurveyedinIrelandareworriedaboutfakenewsbeingusedasaweapon.Overall,theEdelmanreportnotesthatdistrustisatarecordhighglobally27.

Asmentioned,thereisanincreasedrisktosocialcohesion,andofunderminingtheworkdoneinrecentyearsinthisarea,shouldperceptionsofruralandregionalimbalancepersistorincrease.Inagrowingeconomy,therecanbeaperceptionthatruralandregionalareasarenotbenefittingequallyfromtheeconomicprosperitytakingplace,includingjobcreation.Therecanbeaperceptionofafocusonjobcreationwithincertaincities,andthereforethattherecoveryandbenefitismoreurbancentric,withinvestmentinlargerinfrastructureprojectslocatedintheseurbanareas,tothedetrimentofruralcommunities.Whetherthisperceptionisarealitycanbechal-lengedbyevidence.Howeverthepercep-tionitself,whichcanbestronglyfelt,canleadtoareducedconfidenceofruralandregional dwellers and entrepreneurs, and canthereforecontributetoanincreasedriskofreducedsocialcohesion.Inlinewithdevelopmentsinothercountries,forex-

27 Edelman2019TrustBarometerhttps://www.edelman.com/sites/g/files/aatuss191/files/2019-02/2019_Edelman_Trust_Barom-eter_Global_Report_2.pdf


Dra

ft So

cial

Risk

s

43

insomecountriesandithascausedothercountriestore-establishsomeformofbor-dercontrolswithinEurope.EventhoughIre-land’slocationinEuropemeansthattodateithasnotfeltadirectimpactfrommanyofthesepressures,thisshouldnotinducecomplacencyabouttheissuesthatmigra-tionandintegrationcangenerate,particu-larlyinthecontextofcontinuingpressuresfromtheMediterraneanandAfrica,andthesheervolumesseekingtomigrateintotheEU.

Inaddition,asmentionedinSection1.1above,BrexitintroducesnewpotentialrisksaroundimmigrationincludinganincreaseinillegalmovementofthirdcountrynationalsintoIrelandfromtheUK,aswellaslegaldivergencepossibilitiesinrelationtoasylummatters.AsBrexitevolvestheremayalsobesignificantlabourmarketimplicationsforIreland.Togiveoneexample,theexpansionoftheconstructionsectorinIrelandmayat-tractmanyEasternEuropeanConstructionworkerscurrentlybasedintheUK.ThishasbothpositiveandnegativeimplicationsforIreland,dependingonthescaleofimmigra-tionofsuchworkersfromtheUK.

Intermsofinternalintegrationrisks,Irelandhaschangedfromanethnicallyhomoge-neoussocietytoamuchmoremulti-ethniconeinslightlyoverageneration,atrans-formationreflectedinruralaswellasurbancommunities.Census2016showsthat810,406peopleor17.3percentofthepopulationwerebornoutsidetheState(thisfigureincludespeopleofIrishnationalitywhowerebornoutsidetheState,includ-inginNorthernIreland),andthat535,475peopleor11.6percentofthepopulationdonotholdIrishnationality28.Whilethisrepresentsasmalldecreaseonthe2011

28 CentralStatisticsOffice(2016)Census2016SummaryResults–Part1(Dublin:CSO).

Census29,itrepresentsanincreaseofalmost139percentinthenumberofpeoplewithoutIrishnationalitysince2002,thefirsttimetheCensusincludedaquestiononnationality30. This brings with it a need to be responsive tothechangingnatureofsociety,forexam-pleintermsoftheneedsofanowmultilin-gualsocietyandthepotentialforlanguagetobecomeabarrierinaccessingGovern-mentcommunicationsandservices.

Structuralrisks,includingbarrierstomi-grantsaccessingemploymentorprogress-ingwithintheworkplace,therebycreatingpotentialsocialexclusion,andincreasedincidencesofracismagainstmigrantcom-munities,havebeenidentifiedbynumeroussources.TheseincludereportsbytheEco-nomicandSocialResearchInstitute(ESRI)andtheEuropeanAgencyforFundamentalHumanRights(FRA),theMigrantIntegra-tionStrategyMonitoringandCoordinationCommittee,GovernmentDepartmentsandstakeholders.IrelandhasaMigrantInte-grationStrategy(2017-2020),ledbytheDepartmentofJusticeandEquality,whichdefinestheactionstobetakenonintegra-tionduringthatperiod.

TheincreaseintheimmigrantpopulationinIrelandhashappenedinaveryshorttimeand without any of the upheaval that has occurredinothercountrieswithsuchdra-maticmovementsofthepopulation.Failuretomaintainthislevelofcohesion,especiallyassecondandthirdgenerationmigrantcommunitiesemerge,representsasignifi-cantriskofnegativeconsequencessimilartothoseexperiencedbyothercountries.

29 The2011Censusshowedthat544,357people,or12percentofthepopulation,didnothaveIrishnationality

30 Inthe2002Census,224,261peoplewererecordedasnothavingIrishnationality.


Dra

ft So

cial

Risk

s

44

5. Draft Environmental Risks

5.1. Climate Change & Biodiversity 5.2. Ensuring an affordable, sustainable and diverse energy supply 5.3. Delivery of Public Infrastructure 5.4. Food safety 5.5. Supply and Affordability of Housing

5.1. Climate Change & Biodiversity

ObservationsshowthatIreland’sclimateischangingandtheobservedscaleandrateofchangeisconsistentwithregionalandglobaltrends.ThemostimmediateriskstoIrelandwhichcanbeinfluencedbyclimatechangearepredominantlythoseassociatedwithchangesinextremes,suchasfloods,precipitationandstorms.However,futureimpactsofclimatechangearealsopredictedtoincludesealevelrise;watershortagesinsummer;andadverseimpactsonwaterquality.Indeed,sealevelriseisalreadybeingobservedandisproject-edtocontinuetoriseintothefuture,whichwillincreasebothfloodanderosionrisktoourcoastalcommunitiesandinfrastructuralassets,aswellasthreatencoastalsqueezeofinter-tidalhabitats.Inaddition,itisprojectedthatthenumberofheavyrainfalldaysperyearmayincrease,whichcouldleadtoanincreaseinfloodingincidents.

TherearesignificantthreatstoIreland’sbiodiversity,withtheBiodiversityIndicatorSurveyfor2017statingthat91percentofourhabitatsdesignatedunderEUlaware“inad-equate”orof“bad”status1.Headlineresultsfromthe2018LivingPlanetReport,publishedbytheWorldWildlifeFund,revealthatEarthiscurrentlylosingbiodiversityatarateseenonlyduringmassextinctions.ThisrequiresIrelandtodevelopacomprehensiveseriesofmeasurestomaintainandwherenecessary

1 https://indicators.biodiversityireland.ie/

restorethesehabitats.AsaPartytotheUNConventiononBiologicalDiversity,IrelandisalsocommittedtoprepareActionPlanstowardstheachievementoftheConven-tion’stargets.ImplementationoftheNa-tionalBiodiversityPlan(2017-2021)willbeakeypartofaddressingtheserisks,andtheNationalDevelopmentPlanalsorecognisestheneedforincreasedfundingforbiodiver-sity.

Irish biodiversity is highly vulnerable to theimpactsofclimatechangeandhasalowadaptivecapacitycomparedtoothervulnerablesectors.ClimatechangehasmajorindirectimpactsonIrishbiodiversitythroughitsinteractionwithotherstressors,inparticularhabitatfragmentationandloss;over-exploitation;pollutionofair,waterandsoil;andspreadofinvasivespecies.

IntermsofClimateChangeMitigation,thereisaneconomicrationalefortakingearlyactiontomitigategreenhousegas(GHG)emissions,investinrenewableen-ergy,improveenergyefficiencyandimple-mentadaptationmeasurestotheeffectsofclimatechange.Thecostofinactionexceedsthecostofactionandthiscostdifferentialwillrisesteeplywithtime.Itwillbecriticaltotakeactiononclimatechange,assetoutintheNationalDevelopmentPlan,theNationalAdaptationFrameworkandthenewAllofGovernmentPlanonCli-mateDisruption,toavoidthreatstohumanhealth,economicdevelopment,property,


Dra

ft En

viro

nmen

tal R

isks

48

infrastructureandecosystems,aswellasrepu-tationaldamage.

PotentialcoststotheexchequerincludethoseassociatedwithnotachievingcompliancewithourEUGHGemissionsandrenewableenergytargetsto2020and2030.Thereisarangeofeconomicrisksassociatedwithfailingtopricethecostofcarbonintooureconomicmodel.Providingappropriatelongtermpricesignalsonthecostofcarbonwillbeimportantinor-dertoinformmediumtolongterminvestmentdecisionsintheprivatesectorandtoencour-agebehaviouralchangeinbroadersociety.Itwillalsobecriticaltodefineourapproachtocarbonneutralityfortheagriculturesectorinawaythatsupportstheachievementofourcli-matetargetsanddecarbonisationgoalswhilerespectingsustainablefoodsecurityandtomakeinvestmentstodevelopnewandinno-vativeeconomicopportunities,forexampleinthebioeconomy.

Aswetransitiontoalowcarboneconomyandtraditionalindustriesandpracticesaredis-rupted,decouplingoureconomicgrowthfromcarbonemissionswillbecomeincreasinglycriticalinmaintainingourcompetitiveness.Itwillalsobeimportanttoplanforthesocietaldisruptioncausedbythistransitionandpre-pareretrainingandreskillingopportunitiestoensureindividualsandcommunitiescanmakethenecessarychanges.

Arelatedriskisfailingtoplanforsuccessandeconomicgrowthinthiscontext.Ireland’sgreenreputationcouldalsobeimpactedbyaclimate-changerelateddegradationinthequalityofournaturalenvironment.

Bothpoliticalandsocietalwillingnesstotacklethelonger-termrisksofclimatechangecouldpresentachallenge,assignificantup-frontinvestmentisrequired,whichmaynotyieldbenefitsformanydecades.Fundamentalbe-haviouralchangewillbenecessaryinthisre-

gard,fromthepublicandprivatesectorsaswellasthegeneralpublic,giventhatouref-fortstotackleclimatechangeeffectivelyarepredicatedonsignificantbuy-infromthesegroups.EngagementwiththesegroupscanbefacilitatedthroughinitiativessuchastheNationalDialogueonClimateAction.

5.2. Ensuring an affordable, sustainable and diverse energy supply

Ireland’ssituationasanislandonthepe-ripheryofEuroperendersitparticularlyvul-nerabletodisruptionstothesupplyorpriceofoil,gasorelectricitywhichwouldhavesignificanteconomic,socialandcompetitiveimpacts.Suchdisruptioncouldarisefromnaturaldisaster,economictrendsorgeo-politicalchange,suchasBrexit,disruptiontooilsuppliesintheMiddleEast,RussiansanctionimpactsongassuppliesandOPECcuts.

BrexitposesaparticularriskasIrelandim-portsthevastmajorityofitsenergyrequire-ments,oil,gasandtransportfuels,fromorviatheUK.ThepotentialimpactofBrexitontheSingleElectricityMarketisalsoofparticularnote.Thisprovidesanaddedimpetustoincreasetheuseofourrenew-ableresourcesandtodiversifyoursourcesofsupplybydevelopingfurtherelectricityinterconnectiontoneighbouringmarketsincludingFrance.

AsIrelandelectrifiesvitalservices,suchastransportandheating,whichwillbenec-essarytomeetclimatechangeobligations,thechallenges,developmentcostsandrisksaroundenergysecuritywillcontinuetoshiftandevolve.Withenergydemandincreasingfromagrowingpopulationandeconomy,thereisarealneedtoensurethatwecanbuildsocietalsupportandacceptanceto


Dra

ft En

viro

nmen

tal R

isks

49

developappropriatelevelsofinfrastructuretoservicethisgrowth.

AlargeproportionofIreland’senergyneedsaremetthroughimports-circa66percentin2017.However,itisworthnotingthatindig-enousenergyproductionisincreasing-from12percentofthetotalprimaryenergysupplyin2015to34percentin2016.ThisisinpartduetothecomingonstreamofnaturalgasproductionfromtheCorribproject.Increasinglevelsofrenewableenergywillhelpoffsetourdependencyonimportedfossilfuels,intro-ducemorecertaintyintheenergyfuelmixandmoveIrelandtowarditsfuturerenewableen-ergytargetsassetoutintheNationalEnergyandClimatePlan(NECP).

Ensuringanenergysupplythatisnotonlyaffordable,sustainableanddiversebutalsosecurewillbeextremelyimportantaspres-sureincreasesontheworld’sresourcesduetoclimatechangeandincreasedenviron-mentalconcerns.Therearealsogeopoliticalimplicationscontributingtothisrisk,withinternationalrelationsandtensions,includingincreasedpressureonglobalfreetradeagree-ments,creatingdoubtoverthesecurityandpriceofenergysupply.

Inthelastfewyears,thepriceoffossilfuels,particularlyoil,havebeenmorevolatile,withinternationalpricesbeginningtoriseafteraperiodofsustainedlowprices.Thishasbeenpassedthroughtotheconsumerwithpriceincreasesevidentinthegas,electricityandtransportfuelsectors.

5.3. Delivery of Public Infrastruc-ture

IrelandwasagainthefastestgrowingeconomyintheEUin20182,anditspopulationiscon-

2 OnthebasisofGDP;https://www.cso.ie/en/releasesandpublications/er/na/quarterlynationalaccountsquarter42018/

tinuingtogrow,expandingby3.8percentovertheinter-censalperiod2011-2016.Thiscontext,coupledwithanunder-sup-plyofhousingandassociatedaffordabilityissues,atighteninglabourmarketandthecontinuedstrengthofeconomicgrowth,couldgiverisetooverheatingintheecono-my(seeSection2.4formorediscussiononrisksaroundoverheating).ThisbringswithittheriskofnegativeimpactsforIreland’scompetitivenessandvalueformoneyconcernsfortheStateintermsofcapitalprogrammes,aswellasfortheindividualconsumer.

Followingasignificantreductioninpubliccapitalexpenditureoverthecourseoftherecession,thelevelofcapitalexpenditurehasincreasedastheeconomyhasreturnedtogrowth,andthepublicfinancesrecov-ered.However,whileProjectIreland2040waslaunchedinFebruary2018,andsetoutboththe20-yearNationalPlanningFrame-work2040andadetailedcapitalinvest-mentplanfortheperiod2018to2027(theNationalDevelopmentPlan2018-2027),risksaroundcapacityconstraintswhichcouldprovechallengingforitsfullimple-mentationareapparent.Inparticular,risksintermsofbothinstitutionalcapacityandcapacityintheeconomyincludingskillsconstraintscanbeseen,withskillscon-straintsparticularlyevidentintheconstruc-tionsector.ThesechallengescouldhindertheimplementationanddeliveryofprojectsundertheNDPandNPF,withtheassoci-atedriskofcontributingtopriceinflationiftheseconstraintsarenotalleviatedinordertoensureinfrastructureconstraintsareaddressed in a sustainable way3.

By2040anadditionalonemillionpeoplewillliveinIreland,almostaquarterofwhom

3 Inresponse,theGovernmenthasestablishedtheConstructionSectorGroupwhichwillleadthedevelopmentofpoliciesandindus-trypracticeswhichcandriveanimprovementinproductivity,attractyoungpeopletopursuecareersintheconstructionsectorandhelptheindustrybecomemoreenvironmentallysustainable.


Dra

ft En

viro

nmen

tal R

isks

50

willbeover65(doublethecurrentlevels).Anadditionaltwo-thirdsofamillionpeoplewillworkhere,andanadditionalhalfamillionhomeswillbeneededtoaccommodatethisgrowth.

Aplan-ledapproachtoinfrastructuralinvest-mentisthereforevital.Historically,constraintsonpublicfinancesandamarket-anddevel-oper-drivendevelopmentenvironmenthasresultedininfrastructurefollowing,ratherthandriving,changeanddevelopmentforthebenefitofsociety.Failingtorenewanden-hanceourinfrastructuralcapabilitiesthroughastrategicplanwillimpactoncompetitiveness,qualityoflifeandourabilitytomeetnewenvi-ronmentalchallenges.

Preparingforandmanagingprogressiveandsustainablegrowthrequirescarefulprepara-tionandplanningforallregions.Inaddition,decouplinggrowthfromaddingtoenviron-mentalpressuressuchasclimatechangeanddecliningbiodiversityiscritical.Inresponse,theNationalPlanningFrameworkwasdevel-opedinparallelwiththeNationalDevelop-mentPlan.Thestrategiescombinetopres-entamapforeffectivespatialplanningandstrategicinvestmentininfrastructure,whichwillallowIrelandtoaccommodateanticipat-edpopulationgrowthwhileensuringgrowthcontinuesinabalancedway.

TherisksandimplicationsofnotdeliveringontheobjectivesinProjectIreland2040areclear.Thedeliveryandmaintenanceofcom-petitively-pricedworld-classinfrastructure(e.g.energy;telecoms;transport;waterandenvironmentalservices)andrelatedservicesiscriticaltosupportcompetitiveness,whichinturndeterminesthesustainabilityoflivingstandards.Inadditiontothecapacityandskillsconstraintsoutlinedabove,theNationalCompetitivenessCouncil(NCC)quotesIMFestimateswhichshowthatanincreaseof1percentagepointofGDPininvestmentspend-

ingcanincreaseoutputbyapproximately0.4percentinthesameyearandby1.5percentfouryearsaftertheincreaseininvest-ment.4 Overall, in delivering upon the ob-jectivesofProjectIreland2040,itisimport-anttoensurethatefficiency,effectivenessandvalueformoneyremainatthecentreofprogrammeandprojectimplementation.

TheabilityoftheStateanditsagenciestodeliverinfrastructureprojectsontimeandonbudgetiscritical.WhileIrelandhasmademuchprogressindeliveringprojectsontimeandwithinbudgetoverrecentyears5, withprojectscominginonbudgetacrossmostsectors,itisclearthattherecentexperienceofcertainprojects,suchastheNationalChildren’sHospital,exceedingtheirinitialcostestimatesmustbedrawnupon,andlessonslearned,toensurethatthisriskisavoidedinfuture.Arangeofreformsarethereforebeingprogressed,includingtherevisionofthePublicSpendingCodeandthedevelopmentofthenextgenerationoftheCapitalWorksManagementFrame-work6intheOfficeofGovernmentPro-curementtoensurebetterprojectappraisalmechanisms,morethedeploymentofstrongercommercialskillsinthedeliveryofprojectsandbetterestimationandmanage-mentofprojectcosts.

Furthermore,inadditiontopotentialriskstocross-borderinfrastructureprojectsinthecontextofBrexit,impactsonroadinfra-

4 NationalCompetitivenessCouncil(2017)Ireland’sCompetitive-nessChallenge,availableat:https://dbei.gov.ie/en/Publications/Pub-lication-files/Irelands-Competitiveness-Challenge-2017.pdf

5Inparticular,recentyearshaveseenmajorprogressintheprofes-sionalismofprojectmanagementinthewatersector,motorwaysandpublictransportarea,withanormnowwell-establishedthatallsuchprojectsshouldcomeinontimeandonbudget.Reformsarecurrent-lybeingdevelopedwhicharedesignedtoextendthesamelevelsofdiscipline,professionalismandperformanceacrossthepubliccapitalprogrammemorebroadly.

6 TheCapitalWorksManagementFramework(CWMF)isastruc-turethathasbeendevelopedtodelivertheGovernment’sobjectivesinrelationtopublicsectorconstructionprocurementreform.Itconsistsofasuiteofbestpracticeguidance,standardcontractsandgenerictemplatedocuments.Allthedocumentsthatmakeuptheframeworkareavailableonline.


Dra

ft En

viro

nmen

tal R

isks

51

structurefromanincreaseinsevereweatherevents, and unforeseen budgetary pressures onplannedcapitalfundingoverthecourseofProjectIreland2040,asignificantthreattodeliveryofProjectIreland2040isrisinglevelsoflitigationleadingtodelaysininfrastructuredelivery.Thereisalsoariskthatthegrowinginfluenceofsocialmediamaybecomearele-vantfactorinthecontextofoppositionofcit-izensandcommunitiestotheimplementationofinfrastructureprojects.Widercommunitieshaveinsomecasesopposedprojectsdespiterigorousplanning,environmentalassessmentandconsultationprocesses.Enhancedmech-anismstocreatebettercommunityownershipofandparticipationinrequiredinvestmentprojectsmaygosomewaytomitigatingthisoppositionbyallowingthosemostaffectedtobenefitmoredirectlyfromthedevelopmentofsuchinfrastructure.Ireland’sdevelopmentconsentsystemsneedtoberobustandeffi-cienttomaximisecertaintyandminimisedelayinconvertingcapitaltoprojectsthatdeliver.

5.4. Food safety Potentialrisksaroundfoodsafetyandani-maldiseaseclearlyrepresentbothahumanhealthriskand,asaconsequenceofthat,riskstointernationaltradeinIrishfood.Ourfoodsafetyandproductionstandards,whichincludeafavourableanimalhealthandwelfarestatus,arekeytoconsumerconfidenceinIrishfoodanddrinkproductsbothathomeandabroad.Whilethepossibilityoffoodcontam-inationoranoutbreakoffood-bornehumanillnessclearlyrepresentsarisktothehealthofcitizens,afoodsafetyincidentofIrishoriginoramajordiseaseoutbreakinfarmedanimalsinIrelandcouldalsojeopardiseinternationaltrade in Irish food.

Anysuchadverseincidentcouldleadtoim-mediateexclusionfromcertainmarketsanditcouldtakeaconsiderableperiodoftimeto

recoverconsumerconfidenceandmarketshare.Giventhevitalimportanceoftheagri-foodsector,anditshighdependenceonexports,thiswouldleadtosignificantimplicationsfortheIrisheconomy,partic-ularlyinruralareas.Theagri-foodsectorishighlyexportdependent.In2018,thevalueofagri-foodexportswasover€13.7billion,representingagrowthof74percentsince2009.41percentor€5.55billionofthisisexportedtotheUK,leavingthesectorpar-ticularlyexposedtorisksrelatedtoBrexit.

5.5. Supply and Affordability of Housing

OneofthemostcriticalchallengescurrentlyfacingtheStateisthesupplyofhousing.Housingsupply,bothsocialandprivate,isessentialforsocietalwell-beingandeconomicgrowth.However,housingandrelatedmarketshavedisplayedmarkedvol-atilityinrecentdecades,includingthepricecorrectionduringtherecessionyears,whichactedasasevereshocktotheconstructionsector,inadditiontowiderfiscal,consump-tion,creditmarketandothermacro-eco-nomicimpacts.

Thishasnegativelyaffectedthecountrybothsociallyandeconomicallywithchal-lengesintheprovisionofsocialhousinginthefaceofincreaseddemand,lackofaf-fordabilityforthoseonaverageincomes,anincreaseinhomelessness,andconstraintsoncompetitiveness.

Underlyinghousingdemandhasoutpacedactualsupplyinrecentyears,manifestinginstrongergrowthinhousepricesandrents,withsuchincreasesbeingrapidinDublinandotherurbanareascomparedwiththerestofthecountry.HousingundersupplyhasbeencompoundedbytherapidgrowthoftheIrisheconomyinrecentyearsresult-


Dra

ft En

viro

nmen

tal R

isks

52

inginaffordabilityissuesandrentalpropertypricesrisingabovetheirpreviouspeaks.

Thelackofaffordableaccommodationhastranslatedtorisinglevelsofhomelessness,withsignificantsocialandfinancialcosts.Inadditiontotheincreasednumberofroughsleepersrecordedinrecentyears,homelessfamilieshavebeenlivingforlongperiodsoftimeinemergencyaccommodationwithconsiderableimpactsonfamilylife.Difficultiesaccessingaffordableaccommodationareamajorsourceofconcernformanypeople.

Thereisnowagrowingriskaroundtheissueofaffordabilityas,evenassupplyincreases,affordabilitypressurespersist.Thisisofpartic-ularconcerninIreland’scities.Thesepressuresmayfurtherexacerbatealreadyincreasingwagepressures,whichmaythenleadtoafur-therincreaseinhouseprices,whichcouldinturnresultincontinuingaffordabilitychalleng-es.Intermsofincreasingwagepressuresfromthepublicsector,suchrisksarelinkedwithincreasingexpectationsforpublicexpenditure,whichisdiscussedaboveinSection4.3.

Collectively,thesechallengespresentarisktothecontinuedrelativecompetitivenessoftheeconomy,withpotentiallyadverseimpactsonIreland’sabilitytocontinuetoattractForeignDirectInvestment(FDI),asavailabilityofhous-ingisakeyconcernforlargemulti-nationalsconsideringlocatinghere.

Currently,pressuresonthehousingmarkethaveledtoovercrowdingandloweringofqualityoflife.Theimmediatetaskistomoder-atepricemovementsandimproveaffordabilityinrentalandpurchasemarketsbyencouraginggreatersupplyofhousingintherightlocationsandincreasingthesupplyofsocialhousinginaplannedandsustainablemanner.

Increasingsupplytomeetdemandalsocarrieswithitrisksfortheconstructionindustryand

creditsector,whichisundergoingalengthyandasyetunfinishedrecovery.Alongertermtaskistodampenvolatilityandsup-pressthecyclicalnatureofhousingmarkets,sothatwehaveahousingsysteminwhichrealhousepricegrowth(andrents)donotdeviateforlengthyperiodsfromrealeco-nomicgrowth.WhiletheCSOstatisticsfor2018showthatsupplyofhousingisincreasinginlinewiththegoalsundertheGovernment’sRebuildingIrelandprogramme7, and there isstronggrowthinthesupplyofsocialhousingbylocalauthorities,overallhousingdemandisincreasingtoo,andinthecomingyearshousingshortagesarelikelytoactasaconstraintoneconomicactivityandcom-petitiveness,andreflectoneofthemostprominentrisksandchallengesfacingthecountry.

ThepotentialeffectsofBrexit8, in what-everformitoccurs,arealsolikelytohaveanimpact,withrisksincludingconstraintsontheavailabilityofconstructionmateri-als,impactsonavailabilityofconstructionworkers,impactsonconstructiontimelinesandpotentiallyahigherdemandforhous-ing.TheDepartmentofHousing,Planning&LocalGovernmentcontinuestomonitorthesituationinthisregardandpreparationstomitigatetheeffectsofBrexitcontinue.

7 http://rebuildingireland.ie/

8 https://data.oireachtas.ie/ie/oireachtas/committee/dail/32/joint_committee_on_housing_planning_and_local_government/re-ports/2019/2019-02-07_examining-the-potential-impacts-of-brex-it-on-ireland-s-housing-market_en.pdf


Dra

ft En

viro

nmen

tal R

isks

53

6. Draft Technological Risks

6.1. Cyber Security 6.2. Impact of Disruptive technology trends on jobs and the economy 6.3. Anti-Microbial Resistance 6.4. Major Pandemics 6.5. Nuclear contamination

6.1. Cyber Security Disruption to critical information infrastructure

Cybersecuritymattersbecausetheextenttowhichsocietyreliesondigitaltechnologyisnowsoall-encompassingthatthistechnologycannolongerbeviewedasbeingataremovefromeverydaylife.Almostallaspectsofourliveshaveadigitaldimension,andtheubiquityofconnecteddevices-the“InternetofThings”(IoT)-hasbroughttrulymassivebenefitstooursocietybuthasalsoopenedupanumberofnewandunpredictablethreatvectors,andawiderangeofsignificantrisksforkeynation-alinfrastructureincludingenergy,transport,telecomssystemsandfinancialsystems.WithIrelandpositioningitselfasatechnologicalsocietywithagrowingdependenceononlineservices1,theimpactofanattackorincidentontheprovisionofservices,andontherepu-tationofbusinessesandthepublicserviceissignificant.

Europolcurrentlyjudgestheriskofcyber-ter-rorismtobeoneofhighpotentialbutlowprobability,thoughtheprobabilitymaybeincreasing.ThisisanissueofgrowingconcernatEUandinternationallevelsreflectingtheimportanceofcontinuingtobuildourexper-tiseandcapacityincybersecuritytoenableustoaddressthesethreatseffectively.

1 Suchasbuild-to-shareandfinancialmanagementSharedServicesprojectswhichrequirenetworkconnectivity,andcloud-basedserviceswhichrequireconnectivityfromanexternalprovider

Inaddition,criminalenterprisesoperatingindifferentpartsoftheworldhavegrowingcapabilitiesintermsoflaunchingdisruptivecyber-attacksandalsoholdingentitiestoransomwheretheysucceedinencryptingbusinessandpersonaldata.Tworecentincidentshighlightthecontinuedthreatofcyber-attacks.OnaEuropeanfront,thedataofhundredsofGermanpoliticians’wasleakedfromregional,nationalandEuropeanparliamentsattheendof2018.Thiscameonfootofalonglineofpreviousattacksonpoliticians,militariesandseveralembassies.Morelocally,thedataofalmost3,500usersoftheLuaswebsitewashackedatthebe-ginningof2019.AccordingtotheEuropeanUnionAgencyforNetworkandInformationSecurity(ENISA)ThreatLandscapeReportfor2018,thethreatofmalwareremainsasthetopcyberthreat,withthethreatofweb-basedattacksandphishingincreasing.Thisindicatesthatthethreatofphishingat-tacks,andotherattacks,maybecomemorefocussed,personalisedandstrategicallytargeted.

ThepossibilityofsuchattacksareincreasedbyrisksincludingtheriseofArtificialIn-telligence(AI)inthecontextofopenplat-formswhichhaveputthesesystemsintothehandsofeveryone,includingmaliciousactors;therisksaroundcriminalsandexter-nalattackersby-passingsecuritymeasuresbyattackingtheauthorisedusersofthesystems;andrisksthroughpersonaltech-


Dra

ft Te

chno

logi

cal R

isks

55

nology,i.e.asdevicesbecomemoreusefulforusersweriskexposuretoriskthroughtheirowndevicesinteractingwithoursystems.

Theriskoffurtherattacksremains,attackswhichcouldhaveseriouseffectsontheeconomyandonthecohesionofsocietyingeneral2.Thepotentialimpactontheprovisionofserviceshasthepotentialtoleadtocivilunrestinadditiontosignificantdisruptionforcitizens3,whileprolongedorrepeatedinci-dentsriskcreatingabacklashagainstdigiti-zation,withfurthereconomicconsequencesandreputationaldamagetobusinessesandthepublicservice.RelatedtothisistheriskofCyber-activismwherecivilunrestorprotestisexpressedthroughdisruptivepracticesonpublicbodiesorcriticalinfrastructure.

Cyberspaceisanintegralpartoftherules-basedinternationalorder.Thebestguaranteefor a future with an open, free and stable internetisacommonunderstandingamongnationsthatexistinginternationallaw,normsandprinciplesforstatebehaviourontheinternationalstagealsoapplyincyberspace.Toprotectnationalinterests,mitigaterisks,andenhancethesecurityofInternetusers,thereisaneedforcontinuedcyberdiplomacybetweencountries.ThefocusoftheEUisthegovernanceandapplicationofinternationallawincyberspace,includingprotectingthefreeandopenInternet,reducingcybercrime,buildingcapacityinthirdworldcountries,en-hancinginternationalstability,andprotectingthedigitaleconomy.

2 Forexample,theFirstReportoftheInter-departmentalGrouponSecurityofIreland’sElectoralProcessandDisinformationidentifiestheprimarycyber-relatedriskstothesecurityoftheelectoralprocessasDestabilisationEvents,ManipulationoftheElectoralRegister,andDataExfiltration;Seemorehere:https://www.gov.ie/en/news/37e936-government-publishes-first-report-of-the-interdepartmental-group-on-/

3 Forexample,anyattackthataffectstheavailabilityofcashsuchasatBanks,PostOfficesorATMswillrestrictaccesstocashforsocietyanddependingonthedowntimecouldhaveseriouseffectsonthosedepen-dentonSocialProtectionPaymentsandtheeconomyingeneral.

Wehaveseenactivitybynon-stateactorswhoarereadyandwillingtomoveintofillavoidignoredbystates.Thesecurityandresilienceofcyberspacecanonlybefullyachievedthroughcollaborationandcoop-erationwithvariousactors,includingnationstatesandtheprivatesector.

Data fraud and theft

Asmentionedabove,theinternetisakeyenablinginfrastructureforeconomicgrowthand prosperity. Side-by-side with its in-creasingimportance,however,hasbeenagrowthinattemptedcyber-attacks,duetothehighvalueofpersonalandcorporatedata.Althoughtherehavebeensignificantimprovementsinbuildingresiliencetoat-tacks,thiscontinuestobeagrowingchal-lenge for businesses and individuals, and societyingeneral,includinginregardtotheprotectionofgovernmentdigitalassets.

Immediaterisksforbusinessesandindivid-ualsincludethelossortheftofpersonalorbusinessinformation,oreventhede-structionofpropertyorcriticalrecordslikemedicalrecords.Theimpersonationofindi-vidualsinordertomakefraudulenttrans-actionsisamajorissueinvolvingbillionsofeuroglobally.Significantdatabreacheshavebeen reported over the past several years byanumberofmultinationalcompanies.

AnychallengetothequalityofIreland’sdataregulationenvironment,whichhasbeenacriticalfactorinthecontinuingex-pansionandgrowthofthedigitaleconomyinIreland,createsariskofbusinessdisrup-tionaswellasreputationaldamage.Irelandhasthepotentialtoleveragethesignificantexpertisethatexistsinourprivatesector,aswellasinformation-sharingandcooperationwithagenciesinothercountries,inordertoaddressthisrisk.


Dra

ft Te

chno

logi

cal R

isks

56

Thepublicserviceisalsoamajorcollectorandprocessorofdata.Aspecificriskisthetarget-ingofpublicservicedatarepositoriesandthetheft,exfiltration,denialofaccessto,orcom-promisingof,thatdata.Asuccessfulincidentwouldhavetheimmediateeffectofreducingconfidenceinpublicserviceadministrationandtheuseoftechnologyforpublicservices.

TheGeneralDataProtectionRegulation(GDPR),whichcameintoforceinMay2018,isaregulationtostrengthenandunifydatapro-tectionwithintheEU.Itwillgivetherighttoapersonwhohassufferedmaterialornon-ma-terialdamagetoseekcompensationfromadatacontroller.Asignificantdatabreachcouldresultinsignifi-cantcompensationpaymentsbeingmade.

Thechallengesdiscussedabovearejustsomeofthemanyformsthatcybercrimemaytake.Thecyberdimensiontoconventionalcrimebringswithitsignificantdemandsintermsofthetoolsneededtogatherevidence,identifyperpetratorsandundertakepreventioninitia-tives.Attacksonthedatastoredoncomputersorthesystemsthemselvesisanotheraspectofcybercrimethatposesbothlawenforcementissuesandinsomecases,Statesecurityissues.Theinternationaldimensiontoinvestigatingcybercrimebringswithitmanychallengesintermsofinternationalcooperationandjuris-diction.Therearefurtherchallengesfacedbylawenforcementagenciesincludinglossofdata,encryption,virtualcurrencies,lossoflocation,theneedforexpeditedmeasures,managingonlineinvestigations,andmanagingpublic-privatecooperation,amongstmanymore.

6.2. Disruptive technology trends

Disruptivetechnologytrendsarecontinuouslybringingnewwaysofconductingbusiness,manufacturingproductsandmakingdecisions

whichcoulddisrupttraditionalmethodsandleadtosignificantjobshiftsandlossesinaffectedsectorsandroles.Legislativeandregulatorychallengesmaycomewithadvancesindigitaltechnologies,aswellasthreatstocurrentformsofemployment.Thespeedofadoptionoftechnologicaladvancesisseeingtheemergenceofnewglobalbusinessmodels,products,markets,sectorsandactivities;aswellasdisruptingwaysofworkingandimpactingonskillsneeds.

A2018OECDstudy(NedelkoskaandQuintini)suggeststhat14percentofjobsinOECDmembercountrieshaveahighprobabilityofbeingautomated.Itshouldbenotedthatalternativemodelsandmeasure-menttoolshavebeenusedinotherstudiesinthisareawhichhavegeneratedsignifi-cantlyhigherestimatesofjoblossesarisingfromautomation.Inaddition,andasmen-tionedinSection4.2aboveindiscussingSkilledLabourShortages,whiletheimpactofautomationonjobsisexpectedtovarybetweencountriesandregions,theOECDhavefoundthatonaverageasmuchastwooutofeveryfivejobscouldbesignificantlyimpactedbyautomationoverthenexttwodecades4.Automationislikelytoreplacesomejobs,re-shapeothersbutalsocreatenewones.Therefore,inthecomingyearsitwillbecriticalthatworkerscanacquiretheskillsnecessarytotransitionsuccessfullyastechnologytransformstheworldofwork,includinginthecontextoftheFETSectorintermsofdevelopingintermediatelevelskills.

IntermsofregionalimpactsinIreland,theExpertGrouponFutureSkillsNeeds

4 JobCreationandLocalEconomicDevelopment2018,Pre-paringfortheFutureofWork,seelink:https://read.oecd-ilibrary.org/employment/job-creation-and-local-economic-develop-ment-2018_9789264305342-en


Dra

ft Te

chno

logi

cal R

isks

57

(EGFSN)publishedareport5inDecember2018,whichfoundthatDublinistheleastatriskfromautomation(2percentathighrisk,mainlyinRetailandHospitalitysectors),whiletheMidlandsregion(5percentathighriskand64percentatmediumrisk)andBorderregion(5percentathighriskand62percentatmediumrisk)aretheregions’mostatrisk.GiventhelikelyimpactofBrexitontheseregions,andwithunemploymentalreadyhigher than average in these two regions, this isparticularlychallenging,especiallyinlightofconcernsofruralandregionalimbalanceexpressedearlierintheReport(Section4.4).

Inaddition,arecentUCCstudy6identifiesthetownsinIrelandthataremostatriskfromjobautomation7.Thereportfindsthattheauto-mationriskfortownsismainlyexplainedbypopulationdifferences,educationlevels,agedemographics,thepro-portionofcreativeoccupationsinthetown,thetownsize,anddifferencesinthetypesofindustriesacrosstowns.TheresultssuggestthatthepatternofjobriskfromautomationacrossIrelanddemandspolicythatisnotone-size-fits-all,butratheralocalised,place-based,bottom-upapproachtopolicyintervention.Thereportfoundwidedifferencesbetweentheaveragenumbersofjobsathighriskofautomationacrosstowns,fromalowof26percenttoahighof58percent.Inadditiontheanalysisfoundthatmany‘athighrisk’townshave‘atlowrisk’nearbytownsandmany‘atlowrisk’townshave‘athighrisk’neighbours.Theanalysisalsofoundthattherearesomeconcentrationsof‘atlowerrisk’townsandseparately,concentrationsof‘athigherrisk’towns.Forexample,intheDublincityregion,Malahide,SkerriesandDonabateareallatlowerriskofautomation.TheReportpointed

5 EGFSN(2018)‘DigitalTransformation:AssessingtheImpactofDigital-isationonIreland’sWorkforce’Availablehere:http://www.skillsireland.ie/Publications/2018/Digital-Transformation.pdf

6 https://www.ucc.ie/en/media/projectsandcentres/srerc/SRERCWP2019-1_upload.pdf

7 Acrossthe200townswhichhaveapopulationof1,500ormoreusingdatafromthe2016census

outthattownsexposedtoagricultureandmanufacturingshouldbekeyconcernsastheyarelikelytobethetownsmostdis-ruptedbyfutureautomation.Itnotesthatmakingskillsdevelopmentandeducationmorefinanciallyaccessibleandremotelypossiblewillhelptocurb‘braindrain’andunlocklocalcompetenciesinperipheraltowns.

Whilenosectorwillbeimmunetotheimpactofdisruptivetechnology,jobsandfunctionsthatrequiregreaterdegreesofcognition,subjectivethoughtandpersonalinteractionwillbesomewhatcushioned.Theacquisitionofnewskillsisvitaltokeeppacewithadvancesintechnology.Similarly,theavailabilityoftherightskillsisakeyen-ablerofenterpriseperformanceandgrowth.Jobsasweknowthemareundergoingaprocessofchangewiththeskillsrequiredwithmanyjobschangingsignificantly.Nu-merousacademicstudiesandreportshaveidentifiedthatre-skilling/up-skillingoftheworkforceisarequirementofthefutureasjobsbecomeincreasinglydigitalised.Thusitisessentialthattheworkforceisequippedwiththerequisiteskillstofullyunlockthebenefitsofthedigitaleconomy.

Inaddition,therearerisksassociatedwithdisruptivetechnologiesaroundfailingtocommunicatethevaluethattheycanprovideingrowingtheeconomy,andfailingtocapitaliseoneconomicopportunities,andfailingtodeploytheminpublicsectorrapidlytoprovideconcurrence(andensurevalueformoney)withtheprivatesector.Failingtoassessandmitigatetheadversesocietal,workplaceandsocialimpactofdisruptivetechnologiesonthelivesofourcitizens,associatedregulatorychallenges,andfailingtoadequatelyplanforemploy-mentshifts,arealsoriskstobeconsideredand addressed at an early point.


Dra

ft Te

chno

logi

cal R

isks

58

Technologicaladvanceswillalsoleadtonewjobsbeingcreated,aswellaseconomicben-efitsassociatedwithmoreefficientwaysofdoingbusiness.AccordingtoPwCanalysis,smartautomationhasthepotentialtoadd$15trilliontoglobalGDPby2030.How-ever,thereisariskthatthesenewjobswillbelessdependentonhumanlabour,orwillrequiresignificantre-skilling.Thescaleofthere-skillingproblemisbecomingakeypriorityfortheEuropeanCommission,asithasbeensuggestedthatinthenearfuture,90percentofexistingjobswillrequiresomedegreeofdigitalskills.Whilethispresentsbothoppor-tunitiesandthreatstheresearchgenerallyin-dicatesthat,acrossallcountries,workerswithalowerlevelofeducationareatthehighestriskofdisplacement.Asartificialintelligence(AI)continuestodevelopitcouldalsobethatinthefuturehigherskilledoccupationsmayfacehigherriskofautomationthanthecur-rentstateoftechnologyimplies.WhilethisisnotariskuniquetoIreland,itrequiresactionsacrossarangeofareasincludingasignificantincreaseinourdeliveryoflifelonglearningandskillsdevelopmentaswellastheneedforcontinuedinvestmentinthedigitaleconomyandR&D,andappropriatesocialsafetynetmeasures.

IrelandhasparticipatedinthecreationandagreementoftheEUCoordinatedPlanontheDevelopmentandUseofArtificialIntelligencewhichwaspublishedbytheEuropeanCom-missioninDecember2018.ThePlansetsoutaframeworkofissues,togetherwithsuggest-edinitiatives,whichneedtobeaddressedbyMemberStatesinordertoenabletheEUtocompetegloballyinthefieldofAI.ThePlanalsospeakstotheneedtoensurethatAIsolutionsareethicallysound,makingsurethattheyarefreefrombiasandunintendedconsequences.IrelandiscurrentlydevelopingaNationalArtificialIntelligenceStrategytoalignwithEU-relatedinitiatives.TheGovern-mentalsoestablished,underProjectIreland

2040,ofa€500millionchallenge-basedDisruptiveTechnologiesInnovationFund,reflectingtheimportanceofaction,andinvestmentinthisarea.

6.3. Anti-Microbial Resistance

Anti-microbialresistance(AMR)isanin-creasingconcernacrosstheglobe,withtheWorldHealthOrganisation(WHO)describ-ingitas“acrisisthatmustbemanagedwiththeutmosturgency”8.Antimicrobialshavebeenessentialfortheprovisionofmodernmedicalcaresincethe1940s,substantial-lyreducingmortalityandmorbidityfrominfectiousdiseasesandcomplications.Theseadvancesarenowbeingputatriskbyasignificantriseintheprevalenceofbacteriathatareresistanttooneormoreantimicrobials,withknock-onconsequencesforhumanhealthaswellastheeconomyintermsofmoreexpensivetreatmentcostsandlostproductivity.

TheWorldEconomicForum’sGlobalRisksReportfor20189includedareflectionontheevolutionofthisriskontheworldstage.ThisquotedresearchfromtheWorldBank,theUKGovernmentandtheWellcomeTrustestimatingAMRwouldexertadragonglobalGDPofbetween1.1percentand3.8percentbetweennowand2050,aswellascosting$100trillionandkilling10millionpeople over that period. That report also notedthatresistancetoeventhestrongestantibioticscontinuestospread,astheyareincreasinglyusedtocombatdiseasesresistanttoweakerantibiotics.Itnotesthatresearchconductedin2017demonstratedthatbacteriaresistanttocolistin,the“anti-bioticoflastresort”,hadspreadthroughouttheworldwithin18monthsoftheresistant

8 WEFGlobalRisksReport2018http://reports.weforum.org/glob-al-risks-2018/anti-microbial-resistance/

9 https://www.weforum.org/reports/the-global-risks-report-2018


Dra

ft Te

chno

logi

cal R

isks

59

strainfirstemerging.Additionally,theOECDpredictthatresistancetosecondandthird-lineantibiotics,whicharealastlineofdefenceintreatinginfections,isexpectedtoincreaseby70percentacrossOECDcountriesby2030,overtheanti-microbialresistancerateseenin200510.

Theextensiveuse,misuseandoveruseofantimicrobialsinhumanhealthhasincreasing-lyraisedlevelsofantimicrobialresistanceinawiderangeofpathogensinallcountriesandinpatientsofallagegroups.Intheanimalpop-ulation,therateofdevelopmentandspreadofantimicrobialresistancehasalsoincreased.Theincreasingglobaldemandforaffordablefood,andinparticularanimalprotein,hasledtointensificationincertainanimalsectors,whichcanresultinhigherpotentialrisksofdiseaseoutbreaks.Thereforeastrongrelianceonavailabilityofeffectiveantimicrobialstotreatdiseaseandprotectanimalwelfarehasoccurred.

Therearealsoincreasingconcernsabouttheroletheenvironmentmayplayinthespreadofclinicallyrelevantantimicrobialresistance.Environmentalregulatorsmonitorandcontrolsomeofthepossiblepathwaysresponsibleforthereleaseofantimicrobialsintotheenviron-ment,e.g.throughwatercontaminationandagriculturalrun-off.Howeveragreaterunder-standingofmanyofthekeyissuesinrelationtotheenvironmentalrolewillfurtherenhancethedeliveryofenvironmentalprotectionfromAMR.Theriseinantimicrobialresistanceisthusoneofthegreatestpotentialthreatstohumanhealthatglobal,Europeanandnationallevelswithseriousconsequencesforpublichealth,animalhealthandwelfare.Giventhatthenaturalresponsesofmicrobestotheuseofantimicrobialsisresistance,theythereforeneed to be used as prudently as possible to retaintheirefficacy.

10 OECDStemmingtheTideReport,October2018.https://read.oecd-ilibrary.org/social-issues-migration-health/stemming-the-superbug-tide_9789264307599-en#page18

6.4. Major Pandemics

Everyfewyearsanewpathogenemerges.Thevastmajorityarevectorborneand,asaresult,arenotasignificantriskinIreland.

PandemicinfluenzawasdeterminedasthereasonableworstcasescenariointheIrishcontext.Theinfluenzavirusmutatescontinuouslyandtherehavebeen12pandemicinfluenzassince1895,themostrecentofwhichwasin2009.Historicalevidenceshowsthatsuchpandemicshavethepotentialtocausedeathandillnessonasignificantscaleandtodisruptnormalsocialandeconomicactivity.Advanceplan-ningandpreparednessarecriticaltohelpmitigatetheimpactofapandemic.Whenthenextpandemicoccurs,itwillrequireawhole-of-governmentresponsetoensurethatthreattopublichealthanddisruptionofservicesandsocietyareminimised.

TheInternationalHealthRegulations(IHR)(2005),togetherwithDecisionno.1086/2013/EU,providesthelegalframe-workforthetimelyandeffectiveman-agementofabroadrangeofseriousandpotentiallyinternationalpublichealthrisksand events. Through these, Ireland is rep-resentedontheEUHealthSecurityCom-mittee,andtheDepartmentofHealthandtheHealthServiceExecutivemaintainclosecontactwiththeEuropeanCentreforDis-easePreventionandControlandtheWorldHealthOrganisation.Theseclosecontactsareusedtomonitor,predictandmitigatethespreadandimpactofpandemicinfluen-za,andotherinfectiousdiseases.

6.5. Nuclear contamination

Contaminationasaresultoffalloutfromanuclearaccidentisariskthathastobeacknowledged,despitethelowprobability


Dra

ft Te

chno

logi

cal R

isks

60

associatedwiththisforIreland.Obviousriskstopublichealthandwell-beingarise,aswellasthepotentialfornegativeeconomicimpact.Thisissignificant,inparticularinrelationtopotentialreputationalrisktotheagriculturalsector.ThereisariskofconsumerresistancetoevenminisculelevelsofradioactivityinthefoodchainandIreland’scompetitorsportray-ingIreland’sfoodproductsasunsafe,werecontaminationtooccur.

ApaperpublishedbytheEconomicandSocialResearchInstitute(ESRI)examinedthepo-tentialcosttotheIrisheconomyofanumberofscenariosinvolvingvaryinglevelsofcon-tamination11.Whilestressingtheverylowriskofanuclearaccidentandwithoutmeasuringthelikelihoodofanyparticularscenario,thestudyassessedpotentialcoststoIrelandinfourhypotheticalscenarios:costsrangedfrom€4.1billioninascenariowithnocontamina-tionwherelossesarereputational,throughto€115billion,wherehighlevelsofradioactivecontaminationwouldnecessitateaprolongedperiodoffoodcontrolsandagricultureprotec-tiveactions.Thepaperalsoestimatesthatin-directlossesintheIrisheconomywouldrangefrom€287millioninascenariowherelossesarereputational,to€44billioninascenariowithhighlevelsofcontamination.

TheintersectionsofthisriskwithFoodSafetyarehighlightedintheESRIpaperwhereitisstatedthatmeatanddairyproduceaccountfor57percentofthelostvalue,wherelossesarepurelyreputational.Inthemostextremescenariodealingwithhighlevelsofcontamina-tion,thetotalvalueoflossofexportmarketsissome€84bn,withmeat,dairyandseafoodproduceaccountingforover€50bn.

Inviewofthepotentiallycatastrophichuman-itarianconsequencesofanucleardetonation,

11 ESRIDisastercostassessment:Acasestudyofthepotentialeco-nomicimpactofanuclearaccidentaffectingIreland:https://www.esri.ie/events/disaster-cost-assessment-a-case-study-of-the-potential-econom-ic-impact-of-a-nuclear-accident-affecting-ireland

itwillremainimportanttocontinueinter-nationalengagementrelatingtonuclearsafety,aswellasonnucleardisarmamentandnon-proliferation.


Dra

ft Te

chno

logi

cal R

isks

61

Annex 1. Government Task Force on Emergency Planning – National Risk Assessment for Ireland 2017

ThisNationalRiskAssessmentcomplementsthedetailedriskassessmentworkcarriedoutbytheGovernmentTaskForceonEmergencyPlanning,chairedbytheMinisterwithre-sponsibilityforDefence,whichisconductedinthecontextoftheStrategicEmergencyManagementNationalStructuresandFrame-workapprovedbyGovernmentin2017andIreland’sreportingcommitmentsundertheEUCivilProtectionMechanism(UCPM).ThroughtheOfficeofEmergencyPlanning,undertheDepartmentofDefence,athreeyearNationalRiskAssessmentprocessandmethodologyisapplied,whichfocusesonrisksrelatingtopotentialcivilemergenciesatnationallevel.

TheWhitePaperonDefence(2015)setsouttheGovernment’scommitmenttomain-tainandfurtherdeveloparobuststrategicemergencymanagementframework,andtheGovernmentTaskForce(GTF)onEmergencyPlanningconductsacyclicalprocessofhazardanalysisandriskassessmentasanessentialstepintheprocessofidentifyingthechalleng-esthatmayhavetobeaddressedbysociety,particularlyinthecontextofemergencyman-agement.

TheGTFriskassessmentprocesswasfirstcar-riedoutin2012andledtothepublicationofthefirstNationalRiskAssessmentforIreland2012,whichwasacceptedbytheEuropeanCommissionasmeetingtherequirementsoftheUnionCivilProtectionMechanism(UCPM).Followingareviewin2016bytheOfficeofEmergencyPlanningandDublinCityUniversityBusinessSchool,theGTFincorpo-ratedanumberofmethodologicalchangestothisprocess,whichweredesignedtoreflectcurrentriskmanagementstandardsandinter-nationalgoodpractice.

ThisledtotheproductionofafurtherNationalRiskAssessmentforIreland2017,whichconsideredspecificrisksrelatingtopotentialcivilemergenciesatnationallevelandwasadoptedbytheGTFinMarch2017andwassubsequentlynotedbyGovern-ment,submittedtotheEUCommissionandpublishedatwww.emergencyplanning.ie.

TheNationalRiskAssessmentforIreland2017hasspecificallyidentifiedtwentykeynationalrisksthatwillbeusedtoguidefuturemitigation,planningandpreparationactivitiesatnationalandregionallevelandwillhelpinformfutureassessmentsofriskmanagementcapabilities.Floodingremainsoneofthehighestlikelihood/impactrisksonthisNationalRiskMatrix2017,withInfectiousDisease,FoodContamination,NuclearIncidents(abroad),DisruptiontoEnergySuppliesandNetworkandinforma-tionSecurity/CyberIncidentshighlightedashavingpotentiallythehighestimpactonIreland.

InlinewithgoodpracticeandtheUCPMrequirements,whicharecurrentlyunderreview,theaimistorepeatthisprocessatthreeyearlyintervalssoastocapturenewandemergingthreatsandchangingtrends.TherevisedUCPMandthesubsequentGuidelinesbeingdevelopedwillrequirePar-ticipatingStatestoreportontheirNationalRiskAssessmentsandRiskManagementCapabilityAssessmentsagainbytheendof2020.


62

gov.ie

draft national risk assessment 2019 · 2019-05-30 · 1.1. overview of the national risk assessment...

Documents