Mapping the future of investment

27 May 2003

In most countries, the capital city has an almost magnetic attraction for investors looking to establish operations. As the most populous city, the capital will have the necessary concentration of skilled labour, the best physical infrastructure in terms of airports and roads and proximity to government institutions and key suppliers.

The appeal of a capital city is hard to resist especially when you are the IDA and you are trying to persuade large US multinationals and other foreign investors to spend millions of euro establishing or extending an Irish operation. But the IDA is pursuing a strategy that it hopes will make investors just as likely to choose Cork, Galway, Waterford or a multitude of towns in between as Dublin itself when deciding where to invest.

The strategy is simple and revolves around building a network of high-quality business and technology parks around the country. By the end of this year, the IDA will have invested over €100m in this three-year programme.

Co-ordinating the strategy is the IDA’s head of regional development and property, Dermot Clohessy, who, based in Athlone, Co Westmeath, himself embodies the decentralised approach being taken by the IDA. The location of the parks, he explains, mirrors the provisions of the National Spatial Strategy (NSS) in that each of the nine gateways and 11 hubs specified in the NSS will have its own business and technology park (see panel below). In addition to these, the IDA plans to build business parks in locations it sees as strategically important, such as Carlow and Portlaoise. As a result, when its park-building programme is complete by this time next year, the IDA will for the first time have a presence in each county in the State.

While quantity is obviously important, so too is quality. Clohessy emphasises that high quality and consistency of approach are crucial elements of selling Ireland as a location in which to invest.

“In the IDA’s view there’s only one standard in which any of our properties can be presented to clients and that is whatever is necessary to match the best international standards,” he says. “The only difference in how we present that around the country is the scale of the business park. Whether you’re in College Park in Dublin or in the Athlone Business and Technology Park, it’s the same standard.”

‘Standard’ refers to both the physical environment — such as the overall look and feel of the park, the building design and aesthetics — and the infrastructure that underpins it, including roads, airports and telecommunication systems. It also covers softer issues such as the type of facilities available to employees. For example, it is envisaged that each business park will eventually include a childcare facility. The first of these is under construction and will open in Athlone in September, with several others to follow over the course of the next few months.

On the infrastructure side, the quality of telecommunications is particularly important given the type of high-tech client the IDA typically goes after these days. Here, the IDA looks for a choice of carrier in each park and comparable pricing to what’s available in the capital.

The IDA has let it be known on many occasions that it is unhappy with the country’s telecommunications infrastructure and is particularly concerned with what it sees as Eircom’s stranglehold on the ‘last mile’ — the portion of the network between a business premises and its local exchange — and the pricing structure, which means that it may cost a client company based outside the capital as much to get its telecommunications traffic onto the Global Crossing cable in Dublin as it does to send that traffic thousands of miles on the Global Crossing network.

While not minimising the challenges, Clohessy takes some comfort from the rollout of the Government’s broadband initiative which will see fibre loops being installed around 19 towns in Ireland this year and next. As part of the planning of the broadband project it was envisaged that each IDA business park would be connected to fibre and so gain access to a high-speed internet pipe.

“We’re encouraged to see that the rollout is happening and the sooner it’s delivered the better from the IDA’s point of view,” says Clohessy.

The roads programme is another cause for concern. While he welcomes the planned completion this summer of the motorway between Dublin and Dundalk — the first time that two gateway towns under the National Spatial Strategy will have been connected — Clohessy feels that the well-publicised delays to the national road-building programme can only make regional development harder to achieve.

“From an inward investment point of view, how you achieve balanced regional development begins with how you access the island — the key airports — and then distribute from those access points on roads,” he remarks. “It is disappointing that the National Development Plan is under-delivering in terms of the timeframe for the road infrastructure.”

The business model adopted by the IDA can be seen as a type of public private partnership. The IDA buys the land and develops the site infrastructure. It also designs the buildings on the site but goes out to tender to the private sector for their construction. The developers recoup their investment through the rental or sale of properties to client companies.

Clohessy points out that the IDA has no involvement in the Shannon region that covers north Kerry, Limerick and Clare. That is the role of Shannon Development, which has its own business park development programme. The two agencies work closely together, however, with Shannon Development presenting sites to IDA client companies where required.

Significantly in these times of deep spending cuts, the budget for the IDA business park programme does not come from the Exchequer but exclusively from a large property portfolio managed by the IDA, whereby the agency buys land and property and sells it on to client companies. “Property in the IDA operates commercially so we get all our land valued commercially and sell it commercially to clients,” Clohessy emphasises. “Whatever purchases we make are balanced by sales to clients — they have to be, we have no other source of funds.”

As well as its own client base, the IDA property unit also has the remit for Enterprise Ireland clients and so will provide facilities to Irish-owned as well as foreign businesses, although the latter still account for the bulk of its activity.

The IDA has always seen property as playing a key supporting role in winning foreign direct investment. What is different now is the agency’s commitment to ensuring that these properties are more evenly dispersed around the country and that the properties themselves are attuned to the needs of the client companies. “There’s a move towards more service-based activities from manufacturing and it’s important that our properties reflect this shift,” says Clohessy.

The IDA’s park-building programme is now about 70pc complete and Clohessy expects the gates of the final business park to open by the first or second quarter next year. The agency is acutely aware that building parks is one thing; filling them with client companies will be another challenge entirely. In this regard, the IDA will take heart in the fact that a number of sizeable companies has already moved into regional business parks. These include ICT, a US call centre bureau in Athlone, fellow tech firm NetIQ in Parkmore in Galway and Fort Wayne Metals in Castlebar, Co Mayo.

Where attracting foreign investment is concerned, the bottom line is that without an extensive network of first-rate business parks already in place, Ireland is unlikely to get the nod of approval over rival locations. “You can’t win investment by pointing to a field and trying to sell a vision,” Clohessy concludes. “You’ve got to have a developed solution for clients. Particularly in service industries, time to market is short and people are looking for turnkey solutions.”

By Brian Skelly