Ireland has dropped out of the top 20 most attractive global countries for venture capital and private equity investment, according to a new report published today.
The Global Venture Capital and Private Equity Country Attractiveness Index, which was undertaken by the IESE Business School in collaboration with Ernst & Young, places Ireland in 21st position, down from 16th place a year ago.
The US topped the list of 66 countries followed by Canada, the UK, Australia and Hong Kong.
The index is based on six key criteria that investors cite as most important to them: economic activity; the depth of capital markets; taxation; investor protection and corporate governance; the human and social environment; and entrepreneurial culture and opportunities.
"Today's top 10 list are all countries perceived internationally on the road to economic recovery. For example, Australia would not have a strong history as an attractive location for this type of investment however; its relative stability in the international turmoil has attracted many risk averse investors," said John O'Halloran, transactions director at Ernst & Young.
In its analysis of why Ireland is viewed as a less attractive location than in previous years, the report cites poor access to credit and a low risk appetite for investors. It also says the predominance of the retail, leisure and construction sectors is also a contributing factor in making Ireland an unsuitable place for investment.
In addition, the study lists a number of threats to Irish recovery in term of its attractiveness internationally. These include the depth of the Irish recession in comparison to other countries, the increase in company failures, and the fall off in volume of mergers and acquisitions
While critical, the analysis does highlight some opportunities that would enable Ireland to recover lost ground in terms of renewing its attractiveness to the international investor community.
The Government's emphasis on promoting high potential and so-called "smart economy" businesses, strong medical device and pharmaceutical sectors and a drop in valuations, are all cited as beneficial to investors.
The study – which is based on data going back nine years – reveals that China, Poland and India have taken major strides over the last five years in boosting their appeal to investors.
Among those countries that have slid in investor attractiveness are Kuwait, Latvia and Oman.
