What EU leaders need to know about Irish FDI

19 May 2011

EU leaders who believe Ireland’s corporate tax is an unfair advantage don’t realise that if Ireland lost foreign direct investment (FDI) here as a result of tax changes, multinationals would not relocate elsewhere in Europe, but would go to Asia instead.

That’s the view of the head of a local multinational on the edge of Europe that five years ago was facing closure. Speaking with Siliconrepublic.com, the head of electronics manufacturer Microsemi’s Ennis operations and VP of group operations globally Richard Finn explained how in 2006 the operation was scheduled to close.

The workers’ backs were to the wall and they all faced redundancy. It was a bleak situation. However, through determination and hard work, focus and skill, the local operation was able to fight hard to advance within Microsemi by becoming more efficient and strategic.

They succeeded in growing employment from 60 people who were facing the dole five years ago up to 270 people today as the local site won the transfer of production lines and newer, prestigious products.

Finn is now head of manufacturing in Ireland but also heads up manufacturing sites in Massachusetts on the east coast of the US. Including Ennis, he is responsible for a workforce of more than 700 people.

The Ennis facility is now Microsemi’s global supply chain headquarters, as well as the main site for applications engineering. Two local staff were recently appointed vice-presidents of business development at the company.

Microsemi, as a corporation, is hurtling towards US$1bn in revenue next year after recently reporting a 75pc increase in Q2 revenues and profits.

The company is now expanding into the burgeoning area of solar energy power management and is driving advancements in power management chips for computers, transport and medical devices.

I spoke to both Finn and Microsemi’s CEO James Peterson about how the Ennis operation turned itself around from a near closure to an international success story.

“It was really the strength and integrity of the team,” Finn explains. “We made a decision to fight it out. It was a total team effort and the workforce demonstrated tremendous flexibility, energy and focus on what we were doing.

“We started focusing on opportunities within Microsemi and worked strategically to make Ennis the principle site in Europe. In the last five years, we added over 200 people.

“What’s remarkable about Microsemi in Ennis is that while we’re a manufacturing site and test house, more than half of our workforce has a third-level qualification. It’s a very talented workforce.”

FDI in Europe

Peterson said one of the hallmarks of the Ennis operation has been attention to detail. “Richard has done a fantastic job and we want him to take what they’ve done in Ennis and emulate that in our factories in Boston.”

Peterson praised IDA Ireland for how it worked with FDI companies. “The IDA is unusual in the fact that you can work with them properly and consider them a strategic partner in what you are attempting to achieve.”

Peterson says that like many US-based CEOs he has been watching the debate around Ireland’s corporation tax and believes EU’s leaders are incorrect if they believe Ireland has an unfair advantage over other locations in Europe.

“In France, for example, the tax rate on the face of it appears higher, but the effective tax rate is lower – in single-digit numbers compared to Ireland’s 12.5pc corporation tax.”

He warned that European leaders would be wrong if they think that if the corporation tax were to be increased it would level the playing ground for other countries to win some of the FDI projects Ireland has won so far.

“Mobile foreign direct investment (FDI) is being championed in Asian countries and they are playing the game just as competitively as IDA Ireland has in recent years.

“The reality is that instead of relocating to somewhere else in mainland Europe, these operations would go to Asia.”

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