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The Real Economic value of the Agri food sector to the Irish
Economy ..
Ciaran Fitzgerald
The analysis below attempts to evaluate the “Real Economic
value of the Agri food sector .
This analysis highlights the “true” position of the sector as the key
driver of employment and economic activity in the Irish economy .
Much of this real value comes from the fact that the sector sources
80% of its spend ,on wages and salaries, services and raw
materials in the Irish economy …
No other sector of the economy has anything like the same
linkages. …for the modern economy sector the equivalent spend
in the Irish Economy amounts to on average 20% of their overall
expenditure.
The current measurement of economic value based on Gross
Value Added ,give a distorted picture of the “Real Value “ due
mainly to the transfer pricing activities in much of the” modern
Economy.
This issue is captured in gross terms in the discrepancy between
GDP and GNP of approx 30 BN Euro (National Accounts CSO
2009)
The purpose of this analysis is not to diminish the contribution of
these sectors but to properly position the Agri Food sector so that
when National policies on Economic stimulus ,Trade negotiation
and employment creation are being prepared the primacy of the
sector is recognised in these policy platforms .
Jobs
The Agri food sector accounts for almost 230 000 jobs or 1 job in
8 across the economy v 25 000 directly in Pharma manufacturing
..(Census of industrial production 2008 CSO).
This figure is made up of 45 000 jobs in Manufacturing 60 000 jobs
in distribution and wholesaling 30 000 jobs in supply and services
and 120 000 jobs in farming (Some part time )CSO
 Manufacturing employment in the sector thus supports 4
additional jobs in the Irish Economy .
 This compares to a ratio of 1: 1 for the modern economy
sectors .

How do we capture this relative value in GDP/GNP terms ?
I.E. if you take the current /normal approach, share of GDP/GVA is
the measure of the value of a sectors activity across the Irish
economy ..
The Table below from a FORFAS publication” Enterprise statistics
at a glance” highlights the current perceptions of sectoral hierarchy
in the Irish Economy …
Thus the GVA in Pharmaceutical industry is shown at 16.9B N
Euro and ICT at 8.4BN rank way ahead of the Food and Drink
sector ahead of Food and Drink at 4.5BN GVA..
The more correct figure as per the CSO for GVA (Census of
production 2007 final estimate October 2009 ) shows GVA in
Pharma at 13 BN v 7BN for the Food and Drink sector .
These GVA figures inform the overall GDP figure for the economy.
In essence GVA reflects the profitability of the businesses in the
sectors .
However this is not the true reflection of the relative importance of
these sectors as indicated by the employment figures set out
above or the value of economic activity in these sectors that is
linked to economic activity in the Irish Economy.
We know that approx 30 BN of GDP is repatriated every year
from Multi national firms operating in the Irish economy ,as
this is captured in the smaller GNP measure .


We also know that the this comes principally from those
sectors most involved in transfer pricing ..Pharma and ICT.
The exact amount of transfer pricing/repatriation is not
attributed by sector but the level of repatriation can be
estimated from the share of GVA generated by foreign
owned firms in each sector …as set out below ..

Thus all but .1 BN of the 16.9 BN GVA in Pharma is
generated in non Irish companies
The fact that profits are repatriated doesn’t mean that activity in
these companies is insignificant .
What is does mean is that we need a measure other than GVA to
establish just how much Irish economy activity is linked to these
businesses .
Ireland gets a very significant contribution in terms of employment,
investment and Corporation tax from these sectors .
However this contribution is not as significant as the GVA figure
indicates, not just because of transfer pricing but also because of
the source of inputs of raw materials and services in these sectors.
Irish Economy spend
On the inputs side the Forfas study of Irish Economy Expenditure
below shows that the Agri food sector sources approx 8.6BN Euro
of goods and services(expenditure net of wages and salaries) in
the Irish economy .
Thus Pharma sector spends 2.2bn euro excluding wages and
salaries in the Irish economy and ICT 1.5 BN Euro .
In order to understand what the true impact of activity in
business sectors actually impacts on the Irish economy we
need to measure expenditure in the Economy ,plus
employment and taxes earned .
Putting all of these into the mix and using Turnover as the “gross
measure” produces the following “True” estimates of the Net Irish
economy value associated with these sectors .
Irish Economy Value
Agri food 20BN out of 24BN turnover
Pharma
7BN out of 36BN turnover
ICT
5.5bn out of 26 BN turnover
In the Agri food sector 15% of its inputs are sourced outside the
Irish economy and 40 % of GVA accrues to non Irish firms
…thus 4BN of the 24 BN turnover in the sector is not linked to
Irish economy activity …..
in the Pharma sector the contribution to Irish economy activity is
made up of the 2.2BN in inputs sourced in the economy ,1.3BN
in salaries and 3.5BN in corporation tax i.e. a total of 7 BN
approx .
 The current perception of Economic value is resulting in
policy and planning that is prioritising sectors whose net
impact on the Irish economy is significantly lower than the
Agri food sector
 A further and perverse ,consequence of the embedded
value of the Agri food sector is that because it buys so much
more of its inputs in the Irish Economy it is much more
impacted by the uncompetitiveness of Irish costs such as
labour ,energy and waste management than other sectors