Exporters feel ripples from overseas

The economic difficulties which have hit Russia, Japan and South Africa have created concerns about markets which between them provide business worth more than £1.6 billion to Irish exporters.

Companies selling food and drink, services, information technology and a range of other products to the three markets are concerned about the developments. All three markets have been growing significantly in recent years and are locations for which some Irish exporters have ambitious plans.

The Japanese market last year took £1.124 billion worth of Irish exports, making it more important than the Northern Ireland or Spanish markets as far as exports for the Republic. The value of exports sold to Japan grew by 30 per cent last year but the rate of growth is now likely to be hit because of the economic turmoil.

Mr Declan Collins, of the Irish Trade Board/Enterprise Ireland office in Tokyo, says that as the Japanese economy is the second largest in the world, it is vital for Irish exporters. "Every Irish company interested in growth and exports must pay attention to this market," he says.

"We have been able to capitalise on the deregulation under way in the construction, telecommunications and aerospace sectors. Irish companies have made great progress penetrating these markets." He believes that long term problems with the Japanese economy are now being faced up to and this is a cause for optimism.

Mr Frank Bryan, sales manager, with Kilkenny-based footwear manufacturers Padmore and Barnes, says the economic difficulties have not hit his company's sales to Japan yet, as orders come six months in advance. "We are moving into the new season and indications at the moment are that everything is all right and that there is still a lot of interest in our product."

The biggest difficulty is the currency situation with the changes in the value of the yen now making Irish products about 12 per cent more expensive. "That is our biggest difficulty so until the new season's shoes go on sale we will not be sure. There are a lot of ifs and buts and until we get the orders into our hands we won't be sure."

The Kilkenny company employs more than 180 people. It has been selling into the Japanese market for 25 years and Japan provides about 60 per cent of its footwear business.

Ms Breda Kelliher, export manager with Monaghan-based Century Homes, says her company hopes it can profit from the difficulties in Japan. despite sales there being down about 50 per cent this year. "We feel that some of the bigger players may lose interest in the Japanese market and we might be able to stay there and build up loyalty."

Century Homes sells timber-framed house kits and has been selling to Japan for about four years. Japan accounted for about 10 per cent of sales last year.

Since the collapse of the Russian stock market earlier this year the biggest worry for Irish exporters has been a possible devaluation of the rouble. Mr Kevin McLoughlin, manager at the Moscow Irish Trade Board/Enterprise Ireland office, says that with the recent intervention of the International Monetary Fund (IMF) the danger of a devaluation has now receded.

"Companies are saying that business is down by about 20 to 30 per cent compared to last year. Importers are holding onto their money and seeing which way the situation will turn." However, he believes that with the IMF intervention business is likely to pick up again after the summer break. If services are included then the Russian market is worth about £260 million to companies exporting from Ireland. The largest export is Irish beef, which accounts for more than a third of exports to Russia. Aer Rianta is one of the companies with the largest involvement in Russia, through its involvement with the duty free shops at Moscow and St Petersburg airports.

A spokesman for Aer Rianta says the difficulties in Russia have not affected its business. "In fact our business continues to grow, probably because we are not involved in a downtown business." There is significant growth on Russians going on holiday and business trips, and this is adding to revenue at the shops, he said.

Thermoking, the US company which employs more than 1,200 people in Dublin, Galway and Limerick, sells refrigerated transport units into Russia. It has not been making the progress it had been hoping for in the Russian market. "We are having problems getting payments," says Ms Sinead Dolan, market analyst with the company. "We work on a lot of deals but only a few of them come together in the end because of financing problems."

"We are aiming at developing our business as the economy develops. Sales have slowed down this year compared to last year, but hopefully it will pay off eventually."

The Irish Trade Board/Enterprise Ireland feels quite positive about the prospects for selling into the South African markets, despite the current difficulties. "It is a growing market for us and it is also a conduit to the other markets in southern Africa," says a spokesman. Exports from Ireland to South Africa were worth about £225 million last year.

The impact of the recent devaluation of the rand on Irish exports is not yet clear, according to Mr Michael Ryan, chairman of the Irish/South African trade association. "Irish exports will now become dearer and the impact of that will be seen over the next few months. We'll just have to wait and see. The currency had already been depreciating steadily and that had not had an impact."

Food, information technology and pharmaceuticals are the major sectors selling into South Africa, with the Irish Dairy Board's sales of Kerrygold butter being one of the better known success stories. "The rand issue is having an effect on our business, there is no doubt about that," says Mr Tony Mackey, regional executive with the Irish Dairy Board. South Africa pays in US dollars for the Irish butter and because of the currency devaluation, now has to pay a high price for dollars. "The rate has moved from 5 to 6 rands per dollar, so that makes the butter very expensive on the shelf," says Mr Mackey.

He says there are a number of initiatives being considered but did not want to disclose them. They do not include a drop in the price being charged. "You can't expect to make profits in a situation like this. We are looking at the market in the long term." Last year sales of Kerrygold to South Africa were worth $4.8 million (£3.4 million). This year that figure is likely to be down to $4 million.