A View from Ireland
14 August 2000
The global e-commerce revolution has had an enormous impact on all aspects of commercial life in Ireland and has contributed to making it the fastest growing economy in Europe. The growth of e-commerce related activities in the country is a result of a number of factors; cultural, commercial and legal.
The Irish government has traditionally worked hard to attract quality international technology companies to set up in Ireland, with the result that it now has a very strong IT sector. For example, according to the OECD 'Information Technology Outlook 2000', Ireland is the largest exporter of software goods in the world.
Multinationals such as Microsoft, Dell and Gateway have based their European headquarters here. The electronics sector is equally well represented with companies such as Intel, IBM and Hewlett-Packard having significant operations in Ireland. The presence of these world players has created an environment conducive to the rapid development of an e-commerce industry.
Part of the government's strategy of attracting e-commerce activities to Ireland involves taxation. A corporation tax rate of 10 per cent currently applies to manufacturing companies and certain qualified services such as software development. The Irish government has committed to introducing a 12 per cent corporation tax rate on trading income across the board from January 2003.
On the wider economic front, the so-called celtic tiger economy shows no signs of slowing down. Indeed, this week the International Monetary Fund issued an uncharacteristically glowing report on the Irish economy. Finally, Ireland's adoption of the euro considerably reduces any concerns about exchange rate exposure.
On the infrastructure side, significant investment has been made in additional bandwidth designed specifically to support the internet. This will add to an existing well developed telecommunications infrastructure. Culturally, Ireland is well placed for the e-commerce industry with a well-educated, English speaking workforce within the European Monetary Union.
Not all e-commerce activity is produced by foreign companies. Ireland has a large number of domestic success stories, the most noteworthy probably being Iona Technologies, Trintech, Baltimore and Parthus. Many of these companies have concentrated on producing secure systems to enable payments and information to travel over the web which are clearly fundamental to the successful development of e-commerce worldwide. The growth in the number of Irish e-commerce companies has resulted in a huge increase in the amount of available venture capital here. The capital tends to come not only from traditional venture capital companies but from individuals who are interested in investing in the new start-ups.
Most of the growth in e-commerce has been in the business to business end of the industry - the Irish market is probably not large enough to support a significant domestic business to consumer e-commerce industry.
The most significant step taken by the government in recent times to nurture and encourage the industry has been the speedy passing of the Electronic Commerce Act 2000 which is now in force. The new act in essence gives legal effect to electronic signatures and makes electronic documents admissible in evidence. The act is technology neutral and creates equivalence of treatment between electronic documents and their paper-based counterparts.
The act allows for the introduction and maintenance of a voluntary accreditation scheme and a supervision scheme for the issuers of advanced electronic signatures. It is regarded as a more straightforward piece of legislation than the UK bill. It does not, for example, give additional open powers to the police authorities to monitor emails and internet usage.
The result of this activity is a large amount of work for Irish firms across a whole range of areas from company law issues to intellectual property, including IPOs on overseas exchanges such as Nasdaq.
John Menton is a partner and head of the e-commerce group at Arthur Cox.