Foreign Direct Investment in IrelandEssay title: Foreign Direct Investment in IrelandIntroductionForeign Direct Investment has had a profound effect on the Irish economy since 1990. In this essay I will examine the role of foreign direct investment in Ireland since 1990. Ill examine what policy the Irish Government has implemented in order to attract this investment and other factors which have helped Ireland in attracting FDI. Ill also examine quantifiable changes in the Irish economy which are related to rising FDI. Undesirable characteristics of increased FDI in the economy will also be tackled as well as the miserable performance of indigenous industry and Ill question indigenous industries ability to achieve economic goals in the past and going forward.
“Dangerous” FDI is now so widespread and the country is under threat by a lack of quality talent, low investment by multinationals, low corporate management etc. Ireland is a nation of young people facing serious risk not only for their futures but also for their lives. I believe the investment in Ireland will continue, however, until many of these young people have fully embraced the opportunities offered by Irish companies and invested in Irish firms. I believe that Ireland will be a major investment destination and the country as a whole will be a prime destination in terms of increasing the global growth rate of Irish businesses and the future growth prospects that the country will be able to grow or find. The government of Ireland is currently focused on a strong economy and, especially, on keeping it growing and creating jobs as part of the current recovery. I believe that the government will attempt to deliver on the promises made by the economic recovery but the long-term impact on the Irish economy will be far-reaching. It is our hope and hope will be that the government makes a positive progress. There are a number of positive aspects to Irish fiscal and fiscal policy which our government will aim to maintain as it has done in the past. If it is an economic model that remains viable and the growth is excellent and exports to the world continue as usual then it will create jobs and further attract investment. There is now a considerable amount of investment in Irish companies because the Government has invested in them so thoroughly. We believe that Irish Government cannot achieve its long term economic goals unless the economy continues to grow or exports to the world if there is no expansion in Ireland unless there is no improvement in Ireland. I believe that the Ireland Government will have to make some good progress in order to create a strong economic engine for Ireland to continue to attract FDI. For that to happen I want every country to do an honest assessment and to take a second look at what policies are best. I can see Ireland not achieving a strong economic model for the next 30 years and what a failure it is to think about policy at the moment. Ireland is probably better off on its own terms and with much better financial management. We also may be able to bring a great deal of the financial services sector back to its pre-Ferraro period. This includes the fact that I would argue that financial services could achieve an economic performance if firms did their well and that I could see Irish firms being more prepared to create jobs as that would improve Ireland’s ability to attract more FDI. That would increase the economy growth rate to its current level which depends on strong international markets. Irish businesses are highly competitive in the international context and I don’t think the Irish Government is better off in that regard either. My own experience of the Irish economic recovery over a 10-year period I think demonstrates that Ireland does not have the sort of financial services policy which can be justified under any circumstances. However, the Irish private sector is growing at much higher rates than those of other countries and there is a clear advantage to investment in Ireland and there is a benefit in raising the incomes of the Irish average worker. In other words the Irish private sector does not need the
“Dangerous” FDI is now so widespread and the country is under threat by a lack of quality talent, low investment by multinationals, low corporate management etc. Ireland is a nation of young people facing serious risk not only for their futures but also for their lives. I believe the investment in Ireland will continue, however, until many of these young people have fully embraced the opportunities offered by Irish companies and invested in Irish firms. I believe that Ireland will be a major investment destination and the country as a whole will be a prime destination in terms of increasing the global growth rate of Irish businesses and the future growth prospects that the country will be able to grow or find. The government of Ireland is currently focused on a strong economy and, especially, on keeping it growing and creating jobs as part of the current recovery. I believe that the government will attempt to deliver on the promises made by the economic recovery but the long-term impact on the Irish economy will be far-reaching. It is our hope and hope will be that the government makes a positive progress. There are a number of positive aspects to Irish fiscal and fiscal policy which our government will aim to maintain as it has done in the past. If it is an economic model that remains viable and the growth is excellent and exports to the world continue as usual then it will create jobs and further attract investment. There is now a considerable amount of investment in Irish companies because the Government has invested in them so thoroughly. We believe that Irish Government cannot achieve its long term economic goals unless the economy continues to grow or exports to the world if there is no expansion in Ireland unless there is no improvement in Ireland. I believe that the Ireland Government will have to make some good progress in order to create a strong economic engine for Ireland to continue to attract FDI. For that to happen I want every country to do an honest assessment and to take a second look at what policies are best. I can see Ireland not achieving a strong economic model for the next 30 years and what a failure it is to think about policy at the moment. Ireland is probably better off on its own terms and with much better financial management. We also may be able to bring a great deal of the financial services sector back to its pre-Ferraro period. This includes the fact that I would argue that financial services could achieve an economic performance if firms did their well and that I could see Irish firms being more prepared to create jobs as that would improve Ireland’s ability to attract more FDI. That would increase the economy growth rate to its current level which depends on strong international markets. Irish businesses are highly competitive in the international context and I don’t think the Irish Government is better off in that regard either. My own experience of the Irish economic recovery over a 10-year period I think demonstrates that Ireland does not have the sort of financial services policy which can be justified under any circumstances. However, the Irish private sector is growing at much higher rates than those of other countries and there is a clear advantage to investment in Ireland and there is a benefit in raising the incomes of the Irish average worker. In other words the Irish private sector does not need the
What has Ireland done to attract FDI since 1990?Ireland has been really successful at attracting FDI since 1990. Here I will demonstrate how Irelands economic policy has successfully led to increased investment and how some factors outside our control have also had a positive effect in the Irish economy.
Corporate Tax RateIreland has a very favorable corporate tax rate of 12.5% following a reduction from 16.5% a number of years ago. There was a rate of 10% for companies locating in the IFSC or involved in manufacturing but this has now been phased out except for a very limited class of business in the IFSC, trading internationally. A comparatively low tax rate has led to companies locating as much of their profit as possible in Ireland through the use of transfer pricing. This may be good for Ireland but we currently face pressure from the EU & the US to clamp down on transfer pricing. Increased regulation may be a challenge for Ireland going forward.
The Irish Development AuthorityThe IDA was established in the mid 1950s after economic policy changed from protectionist in nature to a policy focused on attracting FDI. The IDA attracts FDI by targeting organizations that can operate successfully in Ireland and help in achieving Irelands economic goals. They ensure necessary skills are available through links with 3rd level organizations and provide grants and develop infrastructure to make Ireland more attractive to FDI. The IDA has been successful in attracting high-profile companies such as Wyeth, Intel and Microsoft. IDA supported companies paid 2.8B corporation tax in 2006 and spent 15B in the economy.
EU MembershipIrelands membership of the EU has helped us gain access to larger European markets. It has also made Ireland more attractive to FDI because we have easy access to the UK and other European markets. Net Transfer payments received from other EU countries also helped develop Irelands infrastructure and education system making us more attractive to high value-added FDI.
Other FactorsIreland had a young, well-educated workforce in the 1990s which helped attract FDI. We also had an advantage over other EU countries such as Spain or Portugal because we are an English-speaking country which is important to US companies.
Another factor which has been critical to Irelands success at attracting FDI since 1990 has been the US economic position. An increasing $ and sustained growth over the 1990s led to US companies expanding into new markets such as the EU. Irelands position as a low-tax economy committed to foreign trade was attractive to US companies and helped us significantly increase FDI in the economy in this period.
FDI related changes since 1990Here I will examine some quantifiable changes in the Irish economy since 1990 which can be related to rising foreign direct investment.Exports & TradeIreland has experience rapid growth in manufacturing exports since 1990. FDI has been crucial to increasing exports and 50% of manufacturing employment is now provided by foreign-owned companies. Over 50% of manufacturers in Ireland are involved in exporting. Foreign-owned companies have been using Ireland as a base for exporting into the EU. Gross output exported increased from 72% to 87% between 1991 and 2001. Higher export propensities of foreign companies were mainly responsible for this increase because their export propensities increased from 88% to 94% while Irish companies remained at 49%.
Evidence suggests that Irish companies with higher productivity are more likely to export to the EU and the US. This indicates that a lot of Irish companies are not capable of competing internationally due to poor productivity. Between 1991