Despite the downturn, IDA Ireland had another strong year attracting foreign investment and boosting job creation
SITTING IN the busy reception of IDA Ireland’s headquarters in Dublin’s Wilton Place, a mixture of international accents permeate the air. Despite the distinctly retro decor – the slightly jaded building was built in the early 1980s – this is the place where Ireland Inc interfaces with the rest of the world as it looks to encourage international inward investment.
Upstairs in his office overlooking the Grand Canal, chief executive Barry O’Leary is decidedly upbeat about the agency’s performance.
While the agency is still compiling 2011 figures – it will not publish its annual report until early next month – this year has been the IDA’s most successful year, according to O’Leary,
“In terms of the number of investments into Ireland, it has been our best year so far” says O’Leary, a performance which chimes with this week’s end-of-year statement from Enterprise Ireland’s which showed a record year for exports, including €1 billion in new export sales.
It’s an impressive achievement in what was arguably one of the toughest years for corporate investment globally. It’s all a far cry from 12 months ago. The end of 2010 saw the IMF arrive in Dublin after months of speculation and denial.
With whisperings about the threat to Ireland’s corporate tax rate refusing to go away, the IDA had a major communication challenge on its hands. In January and February, O’Leary himself embarked on what he describes as “a global offensive”.
“We met the CEOs or C-level executives in the top 65 multinationals that have a presence here. It was important to send out a message . The reasons why companies come to Ireland in the first place – the talent pool, strong track record, tax rate, the technology – they all remained intact.
“Added to that, Ireland had become more cost competitive. For instance, about three or four years ago Ireland was the fifth most expensive in the world for office rents. Today it’s 45th.”
The year just ending also brought other challenges, most notably the closure of TalkTalk call centre in Waterford’s IDA industrial estate and the loss of 575 jobs. Could the IDA have done more?
“We had a lot of discussions with TalkTalk. We would always have had concerns about a company that was dependent totally on the English market, where the revenue stream was in sterling but where the Irish costs were subject to the ups and downs of the euro. TalkTalk is, of course, a big loss, but there are far more successful companies than there are losses.”
O’Leary’s optimism is borne out by the stats. This year the agency is set to top its performance in 2010, when IDA-backed firms created 11,000 new jobs, well in excess of the 4,615 positions generated in 2009.
IDA companies in Ireland employ about 140,000 people directly, most in high-end jobs, and 240,000 people indirectly. Among the new wins in 2011 were global biotech giant Amgen, online shopping group Gilt Groupe, which set up in Dublin and Limerick, and Twitter, which opened an international office in Dublin, while established companies such as Intel, Paypal and Dell, substantially increased their investments in Ireland.
Perhaps the strongest indication of Ireland's global dominance in terms of foreign direct investment, was this year's IBM Global Location Trendsreport, which named Ireland as the top destination in the world for foreign direct investment in terms of the value of the projects and investment it attracts, though it was bypassed by Singapore as the country with the most jobs created per capita through foreign direct investment.
How big is the threat from other low-tax destinations?
“I don’t think it is a major threat,” says O’Leary.
“It’s competitive for everybody. The issue for us is how we are going to secure investment for Ireland in an ever-reducing pot of global FDI (foreign direct investment) overall.
“Companies could go to countries like Singapore and Switzerland, which can negotiate tax rates as low as zero, but they still come to Ireland. It proves that other factors, such as our track record in attracting investment, the establishment of clusters of businesses, the educated workforce are key factors.”
He is also unapologetic about the IDA’s reliance on the US as a source of inward investment into Ireland.
“Yes, the US is our biggest investor, and will remain so. Over the last number of years, we have opened international offices in places like India, China and Moscow, but investment from these markets will be additional business; it will not replace investment from the US.”
Nonetheless, he is not complacent about the challenges facing the IDA. Over the last number of years, it has been busy cultivating so-called second-tier companies as well as the big-name multinationals, targeting businesses with a revenue in the range of €110 million to €750 million. Wins in this sector this year include software firm Quest, market researcher NPD and biopharma business Biomarin.
Similarly, the IDA in January 2010 set up a specific business unit to identify and manage emerging companies, those with a maximum revenue of €20 million and which may have already attracted venture capital funding.
“Take Zynga for example” says O’Leary, referring to the online games company which this week launched an IPO.
“Its chief executive, Mark Pincus, recalled this year in an interview that some of our IDA guys in Mountainview went to talk to them a couple of years ago when they only employed 30 people. Today they have their European headquarters down in Shelbourne Road.”
One of the other features of the IDA’s inward investment strategy is encouraging companies which already have a presence here to scale-up and transform their offering – crucially a way to create new jobs.
Existing IDA clients that have added R&D functions this year include Boston Scientific, MSD, Covidien, Analog and IBM.
IDA staff also have a role to play. Employees are under pressure to perform, and required to work to specific targets – for example, delivering a certain number of jobs, or investments in a given period.
“At any given time we need to have about 100 investments in the pipeline, to make sure we meet our targets,” O’Leary says.
Much of IDA activity involves traditional networking – “cold calling, knocking on doors, working existing contacts” as O’Leary puts it – while staff also maintain close contact with companies that are already in place.
“Our staff would be in contact with anywhere between five and 25 people in some of the top client companies, meeting about twice a year.”
Looking forward to 2012, O’Leary is reluctant to predict how business will fare given the volatility of the global economy. “We have to be conscious of the overall low growth scenario, though we’re going into 2012 with strength,” says O’Leary.
Nonetheless, the agency has a number of high-level announcements pencilled in for the first three or four months. Life sciences and ICT are among the areas that will see activity, though the services sector is also being targeted.
“One of the advantages of the services sector is that it tends to create jobs pretty quickly. While we do want more and more manufacturing, it can take years to build a facility.”
O’Leary also downplays the impact of the so-called “patent cliff” – which sees a number of major pharmaceutical companies lose patent protection on their drugs – on Ireland’s multinational industry, pointing out that the industry has already made strides in developing high-value biopharmaceutical products, which are coming on stream.
As he surveys his office, the collection of Christmas cards from across the globe illustrates the agency’s strong international links, the card with a picture of the White House, a particular reminder that Ireland has friends in high places.
For O’Leary – who mentions he has visited the US twice in the last few weeks – 2012 will most likely involve another year of international travel.
“There’s no point in waiting for the phone to ring. Our job is to get out there and make the calls.”
