Ireland is the second most attractive country in world for FDI

25 Feb 2011

Ireland is now the second most attractive country globally for foreign direct investment (FDI) after the Netherlands, and the number of companies locating operations here increased 15pc on last year with a corresponding increase in the rate of job creation.

That’s according to the latest National Irish Bank/FDI Intelligence Inward Investment Performance Monitor, which found that the quality of jobs created are high, with a relatively high proportion involving R&D and headquarter facilities.

The results of the monitor follow on related research in January, where Ireland ranked second after Hong Kong as the second-most globalised economy in the world, moving up one place in the rankings of the Ernst & Young Globalisation Index 2010.

The National Irish Bank monitor indicates that improving global economic prospects should result in continued FDI growth in 2011.

“(The year) 2010 was another good year for FDI into Ireland, and 2011 has started well,” said Dr Ronnie O’Toole, chief economist, National Irish Bank.

“We continue to see a steady flow of mid-sized projects, particularly in services industries, such as software and customer support, though also with some high quality manufacturing projects.”

The year 2010 saw the number of projects coming to Ireland increasing 15pc on 2009, with a corresponding increase in the rate of job creation.

“The quality of these projects was high. Fifteen per cent of projects involved the establishment of headquarters in Ireland, second only to the Netherlands. Ireland was also very successful in attracting R&D projects, coming in fifth in the 100 countries ranked, behind Finland, Taiwan, Israel and Puerto Rico.”

Reasons why Ireland is attractive for FDI multinationals

There are a number of reasons why Ireland remains attractive to foreign multinationals, despite the economic crisis.

It offers access to a highly skilled workforce and a low corporation tax rate, while cost competitiveness has improved as many non-pay costs have fallen since 2008. Ireland has built a critical mass of firms in a number of important industries, such as pharmaceuticals, internet services and financial services, which in turn makes Ireland attractive for further investment in these areas.

The number of internationally mobile investment projects this year should increase, according to the UN trade and investment body, UNCTAD.

It forecasts that FDI flows will rise to between US$1.3trn and US$1.5trn in 2011, up from US$1.1trn in 2010. Improved macroeconomic conditions in 2010 strengthened multinationals’ cash holdings and boosted stock market valuations, which firms can start to translate into new investments in 2011.

The prospects for the global economy in 2011 are positive. According to Dr O’Toole: “Asian growth is strong and activity indicators in the US and Europe have turned higher.

“While the euro debt crisis remains unresolved, the immediate sense of crisis has passed, with countries like Germany returning to strong economic growth.

“If Ireland can continue to win a disproportionate share of this FDI pie, then further growth in inward jobs should be seen this year,” Dr O’Toole said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years