Ireland’s relationship with Europe is often central to swinging foreign direct investment decisions
LAST week the head of Intel in Ireland, Jim O’Hara did something that no other tech company leader in this country ever did before. O’Hara decided to go to his bosses in Silicon Valley and tell them he intended to use his position as one of Ireland’s largest employers to get off the sidelines and urge a ‘Yes’ vote in the upcoming Lisbon referendum.
“This is not a political campaign,” O’Hara who has over 40 years’ experience in multinational companies – the last 20 of which with Intel – told journalists assembled at the Science Gallery in Dublin.
Intel employs 4,500 people in Leixlip and at its research and development operation in Shannon. Over the past 20 years, the company has invested $7bn in Ireland. Last month, Intel announced that 294 jobs were to go in Leixlip because of a reduction in demand for 200nm processors.
Having been at boardroom meetings in Intel and elsewhere when important investment decisions have been made about where to invest, O’Hara was at pains to point out that the perception of Ireland as being at the heart of Europe was a factor that often swung the decision.
But if three European referendums are voted against in this country in 10 years that perception may be shattered.
“Why did Intel come to Ireland? It came to Ireland because of its low corporation tax, its educated workforce, its competitive cost structures and the fact that, as part of the EU, it was a gateway into Europe. Intel made those choices in full belief that investment in Ireland was an investment in Europe.”
He pointed out that 300,000 jobs exist in US multinationals in Ireland, representing over €100bn worth of investment. “Ireland is a small country that is part of the EU. Despite its size, it received from the US more foreign direct investment than the combined Brazil Russia India China (BRIC) countries. That is inextricably linked to its role in Europe.”
O’Hara said he believed that during the last referendum businesses sat on the sidelines and left the job of convincing the electorate to the politicians. Businesses can’t afford to take such a risk this time round.
“I am a citizen of this country. As a business leader, this message wasn’t heard loud and clear. Intel Corporation supports me in this regard.”
O’Hara admitted that if a ‘No’ vote is the result in October no switch is going to go off, Ireland will still be in the EU and the multinationals aren’t going to depart. “Ireland has a reputation of being influential in Europe. The absence of that positive when it comes to making investment decisions is what worries me.”
On an industrial estate in Galway, the same facility has been in continuous use for 40 years and is an example of the enduring power of a multinational in Ireland. Earlier this week, that facility – once home to Digital Equipment Corporation before it was acquired by Compaq, which was then acquired by Hewlett-Packard (HP) – in the midst of a global recession won business that could put Ireland at the cutting edge of cloud computing.
HP’s Ballybrit plant will be working with Canada-based GS1 to spearhead a cloud-based recall service that traces and removes harmful food products from the global supply chain. Winning the deal has encouraged HP’s local bosses to conduct negotiations with IDA Ireland about initiating a global competence centre that will create high-value jobs and place Ireland at the forefront of the digital economy.
HP Ireland general manager Martin Murphy is under no illusions about the importance of EU membership to foreign direct investment decisions by companies like HP, which employs over 3,500 people in Ireland and earlier this year announced 500 new jobs with the potential for 1,000 more.
“The European dimension is very strong when it comes to securing investment decisions. For me, it is wider than the Lisbon Agreement. It’s about being part of a system that will create tens of thousands of jobs and I want those jobs to be in Ireland.”
Microsoft, which employs over 1,500 people, has been here since 1985 and is currently constructing a $500m data centre in west Dublin. The general manager of Microsoft Ireland, Paul Rellis, says that Ireland has used its membership of the EU in a positive way. “I personally feel I belong in Europe and the Irish people belong in Europe. These are our neighbours and this is what we’ve been part of for almost 40 years.
“Your partners in life, you stick with during the good times and the bad times. We need to get beyond the spurious arguments about what’s in the Treaty or isn’t. Our mindset right now must be on survival. Our whole economic recovery is linked to membership of the EU.”
Last year, pharmaceutical giant Pfizer revealed plans to invest €200m to build a cutting-edge biotechnology assembly plant in Cork, adding 100 high-skilled jobs to the company’s 2,000-strong workforce as well as 500 construction jobs. I put it to Paul Duffy, vice-president of manufacturing at Pfizer, and president of the American Chamber of Commerce, that O’Hara’s fears must be correct when it comes to investment decisions.
“It’s a brave move for someone like Jim to put himself out there in the public domain to be either admired or criticised. What you would have seen after the last ‘No’ vote was people asking what was going on in Ireland. What investors look for when deciding to invest in Ireland is certainty and security that it is the right place to invest. A ‘No’ vote places uncertainty. Investors base their decisions on the next five to 10 years. Once you remove those pillars, it’s a difficult sell.
“From my own point of view I have three young kids. The eldest girl is going to secondary school this year. I have worked in multinationals for many years and I would hope my daughter has similar opportunities. Everything that’s happened in the last 25 years is fundamentally down to our involvement in Europe.
Duffy says the headquarters of multinationals make their decisions on a long-term basis and it is impossible to quantify what the effect of a ‘No’ vote would mean for Ireland.
“The predictions for unemployment around the world are that 50 million people will lose their jobs in the coming year. Ireland has had a lot of bad news, but in relative terms we’re coming from a high and we’re not going to go to the same low we had in the past. But as a country we need as many aces in our hands as possible right now.
“The uncertainty around Europe takes those cards away and Ireland is currently playing with a lesser deck in the investment stakes,” Duffy warns.
Pictured above: Intel Ireland general manager Jim O’Hara and Pfizer Ireland’s head of manufacturing and president of the American Chamber of Commerce, Paul Duffy