In West Cork, an Economy Made of Stout Stuff

By Steven Pearlstein
Friday, June 16, 2006

CORK, Ireland Not 20 miles west of Ireland's bustling second city, highways give way to winding country roads framed by neatly trimmed hedges and the hilly emerald countryside captured in poetry and postcards.

For as long as anyone can remember, this has been dairy country, nurtured by government subsidies and organized around government quotas and farmer-owned cooperatives. Under pressures of new trade rules, however, those subsidies are about to disappear, and with them the viability of many of the 50- and 100-cow farms that were the foundation of the West Cork economy.

But this is a good news story, one about ingenuity and quiet ambition that goes a long way to explaining the emergence of the "Celtic tiger." For it turns out that those sleepy little cooperatives aren't waiting around for the day of reckoning. Rather, they're knee-deep into spinoffs and foreign acquisitions, mezzanine financing, and research and development. And in the process, they've created so many jobs that more than a few of those guys in overalls milking cows and baling hay speak Polish, not Gaelic.

Take the case of a little service operation started up in Bandon by a group of cooperatives in 1957 to help farmers breed their livestock and keep their accounts. Today, SWS Group is a profitable $40 million operation brokering real estate and financial planning, managing forests for foreign investors, providing back-office support services to government and private clients, and investing hundreds of millions of dollars to generate energy from wind and farm wastes.

Down the road in Ballineen is the Carbery Group, which now boasts sales of more than $200 million from its sales of fine Irish cheddar; whey protein additives for health foods, sports drinks and infant formulas; and a wide range of flavorings for the processed-food industry. It has 180 employees, subsidiaries in the United States and Britain, and a brand new research lab.

The thing you notice here is everyone seems to have gotten the economic strategy memo about "moving up the value chain" and decided to take it seriously. I don't just mean business executives and economists. I'm talking about undergraduates, call-center operators, cab drivers, bartenders, civil servants, union officials and university presidents. All of them realize that an economic boom based largely on cheap labor, tax breaks, knowledge of English and a backdoor into European markets can take you only so far. Now, with labor and land costs approaching Western European levels, tax incentives limited by new European Union rules, and India and Eastern Europe coming on fast, they know they need a second act.

And they are well on their way.

Wyeth, the pharmaceutical giant, started out in Ireland in 1974 making infant formula and vaccines. But by late last year, Wyeth had cut the ribbon on a $1.8 billion biotech plant on the outskirts of Dublin that now employs 1,200 people, nearly all of them with college degrees. A big factor: the government's commitment to doubling the number of PhDs coming out of Irish universities.

And Microsoft Corp., which a decade ago was producing software discs from a converted warehouse in Dublin, now has 1,000 workers at a suburban Dublin facility localizing software for the language and culture of every country in Europe, Africa and the Middle East and doing the only development on Windows outside of Washington state.

"For Microsoft in Europe, this is the place," said Paul Rellis, who heads the regional operations. "There's an amazing amount of skill and talent here right now."

And then there is Intel, which came to Ireland in 1989 for the cheap labor to assemble personal computers and stamp out circuit boards. But this year it is about to open a $2.2 billion manufacturing facility -- its fourth on what was once a stud farm outside of Dublin -- that will be the largest producer of Intel's newest, biggest and most complex chip wafers.

"The reason we invest here today is because of the knowledge and experience that we have developed with very high-end manufacturing," said Intel executive Trevor Holmes.

The Irish have an uncanny knack for reinventing themselves, perhaps because, unlike the French or the Germans, they never took themselves too seriously.

There was some hand-wringing, for example, back in 1983 when Murphy's, Cork's most famous maker of stout, was bought out of bankruptcy by the pilsner-brewing charlatans from Holland. But rather than try to block the sale to Heineken, as the French would have surely done facing a similar challenge to national pride and identity, the Irish decided to take advantage of the new owner's marketing prowess. As a result, the Murphy brewery here has since doubled its capacity and increased its share of a shrinking Irish beer market. And an unscientific, and as yet incomplete, survey now finds Heineken right alongside the Murphy's on the taps of most Irish pubs.

Steven Pearlstein can be reached

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