Multinationals say they will spend more than US$7.5bn on their Irish operations over the next three years, leading to 20,000 new jobs, a new report published by the Economist Intelligence Unit says.
The report, commissioned by Matheson Ormbsy Prentice, surveyed 315 senior executives in global companies based in the US, EMEA and Asia-Pacific.
Almost half (49pc) were from the financial services industry, 15pc from IT/online, and the remainder from sectors including pharmaceuticals. In-depth interviews were also carried out with senior executives from some of the largest FDI operations in Ireland.
“The job creation estimates clearly show that foreign investors have a very positive attitude to Ireland," Liam Quirke, managing partner at Matheson Ormsby Prentice (MOP) explained.
“It is important that policy makers think about Ireland as an actual business, with actual customers, and make the needs of these customers a priority.”
The report examined the main factors that bring foreign investment to Ireland and the main challenges in attracting it. It identified that there are four key cornerstones to Ireland’s FDI offering – access to the EU internal market; the overall taxation infrastructure; the ability to supply a skilled pool of labour; and a stable legal and fiscal framework.
The prime motivation for global investors to invest outside of their home market is to access new markets – 58pc said this was their most important consideration. Some 46pc cited access to the EU market as a key competitive advantage for Ireland and 51pc said the size of Ireland’s domestic market was a disadvantage
“It is important to understand the relevance of Ireland to global investors,” Quirke explained. “Our key advantage is not offering a market for goods, it is acting as a gateway to a bigger market. With increasing investment likely to come into Europe from China, India, Brazil and the Middle East over the coming years, we need to position ourselves to ensure we can act as the gateway to Europe for those investors, just as we already do for the US.”
Competitive tax infrastructure
Around 46pc of respondents cited a competitive corporate tax rate as an important factor when considering investment decisions. And 44pc of those with investments already in Ireland cited the corporate tax rate as the original factor that attracted them to Ireland.
Some 29pc of respondents consider the corporate tax rate as one of Ireland’s key attractions, 16pc cited double taxation treaties as a key advantage and 40pc rated Ireland’s R&D tax credits system as more competitive than other locations.
The importance of the corporate tax rate varies depending on industry – 65pc of pharmaceutical firms rated it as an important attribute. Some 35pc of US firms cited it as important.
Personal taxation is perceived as the weakest element of Ireland’s tax offering.
“The headline corporate tax rate is clearly important. However, to compete successfully for mobile international investment requires a much more holistic approach in terms of our overall tax offering.”
According to the report, 28pc of respondents mention Ireland’s skilled workforce as a key competitive advantage and 23pc mentioned Ireland’s base of skilled labour from across the EU (due to open labour markets).
Ireland’s workforce is seen as being ‘reliable and able to handle complexity’.
However, once again, personal taxation is perceived as the weakest element of Ireland’s tax offering – how will this impact on attracting and retaining senior international executives.
“Ireland must ensure that FDI investors have access to the right pool of skilled labour. This means attracting the best and brightest people to Ireland, whatever their country of origin,” Quirke warned.
Best small country in which to do business?
Some 30pc of respondents said Ireland’s legal and fiscal stability was a key competitive advantage (33pc financial services, 26pc non-financial services) and 50pc said political stability was ‘very significant’ when it came to FDI decisions.
Fiscal certainty has been deemed important by 87pc of respondents.
The report shows that Government must consider the unintended consequences of regulation of the financial services industry.
“It is especially important that policy makers clearly understand that where trade-offs are necessary, the attractiveness of Ireland as a location for cross-border activity should be a priority consideration. This will require a differentiated approach between the regulation of domestic and international business activities, nowhere more so than in the regulation of financial services,” Quirke said.
Other notable findings of the EIU report:
· 51pc of those surveyed said that Government’s top priority for the next three years should be stabilising Ireland’s financial system. Some 37pc said attracting inward investment should be a priority
· Fifty-three per cent believe that Ireland’s economic policy is increasingly determined by international institutions
· When asked if they had more faith in the current Government than the previous one, almost one-third (31pc) said they had, while 54pc said they were ‘neutral’