Foreign direct investment (FDI) in Ireland fell sharply in 2009, a new report has found, with job creation by foreign multinationals slipping 42 per cent.
According to the National Irish Bank/FDI Intelligence Inward Investment Performance Monitor, the global FDI market was weak, with the number of new jobs created falling 25 per cent compared to 2008.
In Europe, new jobs declined by about a third, while Ireland was particularly hard hit with jobs falling from 12,900 to 7,500. However, the report said Ireland attracted a large share of global FDI flows given its small size, accounting 0.7 per cent.
"The particularly sharp fall in investment in Ireland is largely due to the negative perceptions Ireland has suffered following the rapid increase in unemployment and the sharp deterioration in the Government's finances over the last 18 months. Other factors – such as the strength of the euro – also didn't help," said NIB's chief economist Dr Ronnie O'Toole.
It was the services rather than manufacturing sector that was strong in 2009. Over the past decade, services exports grew from €20 billion in 2000 to around €70 billion last year. In contrast, there was no growth in the goods exports from 2000 to 2009, which totalled €80 billion.
"This is indicative of the extent to which the export sector has successfully moved away from low value-added manufacturing activities to better quality services jobs," said Mr O'Toole.
Ireland also slipped in the overall Inward Investment Index, which looks at job creation, the number of investment projects and the amount of money invested. Last year, the country fell to 23rd from 21st place in the ranking, which includes 30 of the world's largest economies.
"Even with this fall Ireland's place in the index is significantly higher than you'd expect of a country our size. While 2009 wasn't a good year, Ireland still managed a higher ranking than larger economies such as Sweden or Denmark," said Mr O'Toole. "Ireland remains an attractive place for foreign investment, though clearly the reputational issue caused us problems last year."
But there are further troubles looming ahead, the report said, with total global FDI remaining weak into next year making it more difficult for countries like Ireland to attract new investment. Competition will grow, the report warned, with little prospect of an immediate jobs boost.
"On the positive side, some of the more extreme fears about the Irish economy in 2009 have now eased, particularly with the very strong measures the Government has taken to reign in the borrowing deficit," Mr O'Toole said. "This, coupled with falling costs in the Irish economy, should help attract more firms here once the global slump is over."
