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Why our industrial strategy poses several questions

By Esmond Birnie, senior economist at Ulster University

There's the old joke about buses - you wait for ages and then two come along at the same time. At the end of January two consultation documents were published - one on an industrial strategy for Northern Ireland (NI) and other a green paper on a UK industrial strategy.

When you consider that the last 10 months have been marked by the Brexit vote, a new Prime Minister, and the start of a new administration in the USA, it looks like a good time to refresh the economic strategy which NI has had since 2012. Particularly when considered alongside its predecessor, there is much to commend in this draft strategy. In particular, the document probably does provide an appropriate and aspirational picture of what the NI economy and society could and should look like by 2030.

The emphasis on comparators (usually international) to provide benchmarks of best or better practice is very useful.

There is recognition that NI does have a major problem in terms of falling short of UK and international standards of competitiveness - particularly in terms of relatively low levels of productivity.

At the same time, there may be a range of shortcomings relating to this strategy. Notably there is also a lack of clarity about how the "small advanced economies" against which NI's performance is to compared are defined. Seven are sovereign countries but one UK region (Scotland) is also included.

If Scotland is in the list why not include other relatively successful regions; Baden-Wurttemburg, North Carolina etc? The document proposes that the emphasis should now switch to "re-balancing" though that concept is not really defined and it is implied that the objective of rebuilding has been realised. In reality, it has not. The NI Composite Economic Index (NICEI) shows that the total volume of output in the NI economy remains 7% lower than its peak level in mid-2008.

The strategy contains little or no assessment of risks and associated sensitivity of outcomes. Both corporation tax change and Brexit are hardly mentioned.

Is it really worth asserting that we are being envied by people in the South East and London because of NI's measured high level of well-being?

There is no evidence of a strong migratory flow from the South East to NI. Neither is there much evidence that people in NI are prepared to accept a lower level of consumption and material standard of living because of perceived well-being.

The stated aim to achieve best economic infrastructure represents a worthy aspiration but it is question-begging - how might such infrastructure be funded?

There is the broader question, which is difficult to answer in the absence of an agreed Budget for 2017-18 or later years, as to how the proposed policy programmes are to be funded.

Some of the milestones or numerical targets are drafted using ambiguous language - for example, are the 80,000 jobs in the knowledge economy a total level in 2030 or the net addition during 2017-30? The stated aim is to get 380,000 qualifications at Level 3 or above by 2025 but it looks as though that milestone has already been reached.

There are questions about the appropriateness of some of the chosen milestones and then the broader point as to whether the various milestones are consistent with each other.

The rationale or evidence for the identification of the six (world-class) sectors is not spelt out in detail, and there are always risks when government attempts to pick winners. Some questions arise; why are pharmaceuticals not included in life sciences? Is construction a natural fit with materials handling? Why is tourism not included? Large areas of the public and private services (such as, retail, education, health and social care) are barely mentioned in this document.

There should be some recognition that these sectors do contribute to quality of life and may even, in some cases, have scope to earn export and external sales revenues.

To sum up, borrowing a phrase from medical ethics, this strategy will probably 'first, do no harm' and could even, to the extent it is implemented in detail, help to narrow the performance gap between NI and other regions/countries. As always, implementing a strategy is much harder than writing it.

In next week's Economy Watch, we hear from Neil Gibson of the UU economic policy centre

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