During Tuesday’s conference call with analysts, Medtronic Inc. CEO Bill Hawkins extolled the company’s operations in China: $500 million in annualized sales, 20 percent yearly growth rate, a state-of-the-art patient center in Beijing and a shiny new headquarters in Shanghai.
It wasn’t so long ago that medical device firms spoke in equally glowing terms about Ireland. The country was a beacon of high tech economic growth, Europe’s version of Silicon Valley.
Thanks to low taxes and a highly skilled workforce, Ireland attracted manufacturing and research and development operations from big medical device makers like Medtronic, based in Fridley, and Boston Scientific Corp., based in Natick, Mass., with major operations in Arden Hills.
Today, Ireland’s economy lies in ruins, a victim of shaky banks and severe recession. Earlier this week, after much reluctance, the Irish government officially applied for a bailout from the European Union worth over $100 billion.
Obviously, no country wants an economic bailout because there is no such thing as a free lunch. A rescue package likely means conditions the recipient isn’t going to like. And in Ireland’s case, that could mean the end of its beloved 12.5 percent corporate tax rate, the lowest in the EU and the reason why foreign companies flocked to the country in the first place.
Ireland Wednesday unveiled its budget plan, which raises personal income taxes and cuts spending, but leaves its corporate income tax in place. However, such an austerity program could depress consumer demand and worsen the unemployment rate.
But like fellow EU member Greece, Ireland lacks money to run its government and may need to raise taxes.
Ireland’s other attractive asset, its educated and highly skilled workforce, is disappearing. A poor economy has forced its people to seek jobs abroad. Experts say about 65,000 people left Ireland last year, and some estimate that the number may be more like 120,000 this year.
To be sure, medical devices remain a crucial component to Ireland’s economy. The country boasts the highest per capita employment of medical technology workers in Europe, with more than 25,000 employed in the industry. Medical devices exports totaled $8 billion last year.
Medical device makers are unlikely to leave anytime soon. Medtronic spokesman Brian Henry said Ireland’s bailout woes has not impacted its operations.
But how long can that possibly last? With its economy in tatters and skilled workforce in jeopardy, Ireland, to put it kindly, is no longer the medical device mecca it used to be.
After all, a country that applies for a $100 billion bailout doesn’t exactly inspire confidence in foreign investors.