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FDI and the Irish economy

FDI and the Irish Economy

FDI has been identified as one of the key drivers of Ireland’s return to economic prosperity. The Irish Government has continued to demonstrate its commitment to the FDI sector by establishing a business environment that is conducive to FDI activity and Ireland remains a location of choice for many of the world’s leading companies. Indeed, over 1,100 companies, including many of the world’s leading brands, have decided to place Ireland at the hub of their European operations. Ireland is regarded as the number one destination for attracting high-value FDI according to an IBM 2015 Global Locations Trends Report. The report tracks destination countries by average job value of investment projects in 2014. It is the fourth consecutive year that Ireland has topped the poll.

(4.73 is the World Average). Courtesy of Roel Spree, IBM Global Business Services.

Factors that contribute to this include:

• a competitive economic and business environment that includes a low corporation tax regime and a well-educated and young workforce;
• improving productivity levels (the IMD World Competitiveness Yearbook 2014 places Ireland 3rd for GDP per capita ahead of Singapore, 18th, France, 6th, and the UK, 21st);
• membership of the European Union with consequent ease of access to EU markets;
• its strategic location, with easy access and excellent transport links.

 In addition, Ireland’s education system enjoys a reputation to rival the world’s best, being ranked 5th in the world for meeting the needs of a competitive economy and 5th for the percentage of 25-34 year olds with tertiary education (IMD World Competitiveness Yearbook 2014).

Like most jurisdictions, Ireland experienced significant economic challenges during the financial crisis.  However, this has also had a positive influence in helping Ireland regain much of the competitive advantages that had been eroded during the economic boom of the late 1990s and the first half of the 2000s and, for the 4th year in a row, Ireland has increased its ranking in the IMD World Competitiveness Yearbook.  The 2016 edition of the Yearbook places Ireland 7th out of 61 nations (up from 16th place in 2015) for overall competitiveness, and 1st for the following; real GDP growth, flexibility and adaptability of the workforce, availability of finance skilled workers and for investment incentives (attractive to foreign investors). Ireland is currently listed as 24th in the World Economic Forum Global Competitiveness Report. According to the World Bank’s Doing Business Report 2016, Ireland scores highly internationally for ease of doing business, with its ranking 13th in the OECD-32. In Forbes’ annual ranking of the Best Countries for Business 2015, Ireland grabs an impressive 4^th place.

The key State agency with responsibility for driving Ireland’s FDI strategy is IDA Ireland.  With more than 40 years’ experience in fostering and encouraging Ireland’s FDI activity, its track record in attracting and developing this sector in Ireland is significant, it secured 213 large inbound investments in 2015. The IDA launched their new strategy Winning: Foreign Direct Investment 2015-2019 in February 2015. This strategy includes ambitious targets to boost foreign direct investment in Ireland by over 40 per cent, securing 900 new investments and creating 80,000 new jobs in the economy over the next five years.

Today, Ireland hosts most of the significant players across a range of sectors including:

• information and communications technologies;
• life sciences;
• medical technology;
• international financial services;
• entertainment and media.

 Government strategy and support – in particular for research, development and innovation (RD&I) – has been particularly successful in attracting significant FDI to Ireland in the above sectors.

In July 2014, the Irish Government issued its ‘Policy Statement on Foreign Direct Investment in Ireland’. In the Statement, the Minister for Jobs, Enterprise and Innovation, Richard Bruton, acknowledges the significant role played by FDI in advancing Ireland’s economic development over past decades and that it will continue to do so in the coming decades.

Noting that FDI is ultimately a business decision and that international competition for mobile investment is intensifying he states that “Ireland is determined to be a location of choice for innovative activities and enterprises and to take the steps necessary to realise our ambition to be the best small country in the world in which to do business.” He notes the need to constantly review what Ireland has to offer and that the Statement “sets out the blueprint and steps we will take to truly differentiate Ireland’s offering”. “We will work in partnership with companies and potential investors, to listen and understand how we can maintain a globally competitive business environment. We will build viable clusters and ecosystems for key sectors, combining Irish owned and foreign firm activity, sub-supply, research and supportive regulations. We will maintain a focus on managing our relative cost competitiveness and we remain committed to maintaining an open, transparent, stable, and competitive corporate tax regime.”

The Statement is available on the Department of Jobs, Enterprise and Innovation website[1].

Demonstrating further commitment to FDI the government has recently introduced new legislation reforming and modernising Ireland’s employment permits regime. The Employment Permits (Amendment) Act 2014 is available on the Oireachtas (the Irish Parliament) website[2]. Included in the Act are provisions to provide clarity and certainty for potential investors and employers regarding circumstances surrounding the granting of a permit. It also makes the system more flexible to deal with changing labour market, work patterns and economic development.  The Act was enacted into legislation 21 July 2014.

In addition, in March 2015 the Government published its IFS2020: A Strategy for Ireland’s International Financial Services sector 2015-2020.[3] International Financial Services is a well-established and core area for Ireland. 35,000 people are currently employed in the sector and notably 200 of the 400 companies are international. Ireland is the 4^th largest exporter of financial services in the EU, it ranks 1^st for availability of skilled people and 2^nd for the availability of people with financial skills. For example, 50% of the worlds leased commercial aircraft are owned or managed from Ireland. The goal of the strategy is to “create a globally recognised international financial services sector in Ireland based on world-class people, processes, products and technology across indigenous and multinational businesses”.

Ireland Statistical Information

The Economy

Ireland is now the fastest growing economy in Europe for the third year in a row according to the IMF Economic Outlook and Ireland’s Central Statistics Office (CSO). The CSO estimates for first quarter of 2017 that there was an increase of 5.8 per cent in GDP in real terms compared with Q2 in 2016.

In May 2017, the CSO released the results of the Quarterly National Household Survey which shows an annual increase in employment of 3.5% or 68,600 in the year to the first quarter of 2017, bringing total employment to 2,045,100. This compares with an annual increase of 3.3% or 65,100 in employment in the previous quarter and an increase of 2.4% or 46,900 in the year to Q1 2016.

Real GDP Growth

Source: IMF Economic Outlook 2016 (IDA Facts about Ireland 2016)

Population

Results from Census 2016 released by the CSO show the population at 4,757,976, an increase of 169,727 compared to 2011. The appeal of Ireland as a destination for many multinationals has been its young and adaptable work force with a ‘can do’ attitude.

Ireland is the most youthful nation in Europe

Ireland is the most youthful nation in Europe according to ‘Being young in Europe today’ Eurostat 2015 report. 8 This means that 4 out of every 10 people in Ireland are aged 30 or younger (40.1% population under 30).  Indeed, one third of Ireland’s population is under 25 years of age, making Ireland the youngest population in Europe.

% Population Under 25 Years

Source: Eurostat, 2016 via IDA Facts about Ireland 2016