Despite a turbulent global environment, Ireland remains a leading location for United States foreign direct investment (FDI). Indeed, the importance of US FDI to Ireland cannot be overstated. Some 970 American firms employ more than 210,000 people directly, with a further 168,000 jobs supported indirectly in the supply of products and services. These companies are also responsible for the bulk of the State’s corporation tax revenue.
Most respondents to the latest AmCham FDI Insights Survey were optimistic about Ireland’s economic potential, with 97 per cent saying Ireland is competitive compared to other advanced economies. In addition, nine in 10 respondents said their corporate headquarters has a positive view of Ireland as an investment or growth location. But there is no cause for complacency in the face of intensifying competition for FDI.
“Ireland is one of the premier locations for multinational companies to grow their business internationally for a number of reasons, but primarily due to our talented and skilled workforce,” says IDA Ireland CEO Michael Lohan. “The international environment for attracting FDI is becoming increasingly competitive and challenging. Global economic headwinds require countries to work harder than ever to secure new investment.
“As a small open economy, Ireland will continue to face domestic as well as global challenges. It is acknowledged that Ireland’s carrying capacity and infrastructural development, particularly in the areas of housing and energy supply, needs to be accelerated.”
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In that latter regard, Lohan notes the ring-fencing of an additional €3 billion for the National Development Plan in October’s budget. “The NDP focuses on projects such as housing, water and energy supply, along with improved and sustainable connectivity,” he adds.
According to KPMG EMA regional head of technology and media, Anna Scally, the totality of Ireland’s FDI offer is greater than the sum of its parts.
“Ireland’s key competitive differentiators lie in its blend of advantages that are hard for other jurisdictions to replicate,” she says. “It’s English-speaking, EU-connected environment makes it a unique gateway to European markets. Moreover, the country’s strong regulatory framework and governmental support for innovation and R&D enhance its attractiveness to the tech and pharma sectors. These factors and a long-standing FDI support structure through agencies like IDA Ireland create a compelling and competitive proposition.”
Success tends to beget success, Scally points out: “Ireland has developed a strong ecosystem of multinational companies in sectors like pharmaceuticals, tech and finance, which provides new entrants access to a well-established supply chain and talent pool.”
She adds: “Ireland also delivers on quality of life and is ranked seventh worldwide in the latest UN Human Development Index, ahead of markets such as the US, UK, Canada and France.”
Another key differentiator is the talent pool. “Ireland has heavily invested in education and innovation, with universities and research institutions closely aligned with industry needs,” says Scally. “According to American Chamber of Commerce members, 52 per cent of US investors cite Ireland’s highly educated and skilled talent pool as Ireland’s main competitive advantage that has caused their company to invest and expand in Ireland. This talent pipeline, particularly in the ICT, biotechnology and pharmaceutical sectors, is challenging for other jurisdictions to match.”
The historical, economic and cultural ties between the US and Ireland have created a strong investment relationship, according to Andrew McIntyre, head of the William Fry Inward Investment Group.
“Ireland is regarded as a welcoming destination for investors due to its business-friendly climate,” he says. “Ireland’s tax system is also highly efficient on a global scale. Even though the global minimum tax rate rose to 15 per cent earlier this year – for businesses above a minimum revenue level, Ireland’s tax policies continue to be attractive to overseas businesses, including businesses in the US. Ireland’s location provides convenient time-zone benefits for business with the US.
“Ireland also has an innovative business environment that offers support for research and development through various incentives and grants. Ireland’s stable political environment and pro-business government policies also create a secure and favourable setting for long-term investment.”
However, maintaining that enviable position will require action on a number of fronts.
“To stay ahead of the competition, Ireland must address its housing crisis and ensure a sustainable supply of talent by investing in education and infrastructure,” says Scally.
McIntyre says Ireland must continue to foster a culture of innovation and entrepreneurship, as well as maintain its current economic and political stability. “Our sustained support, collaboration and steadfast membership of the EU will position us as a prime choice for overseas businesses looking to establish a presence in Europe,” he says. “Continued investment in infrastructure and maintaining a transparent regulatory environment will also play a crucial role in luring international investment.”
Simplification of the tax system should be a priority, according to PwC tax partner Harry Harrison.
“That’s not about enabling companies to pay less tax,” he says. “The burden of how you pay tax in Ireland has increased significantly in recent years. Companies are spending a lot of time with advisers to do it. We used to say the ease of doing business in Ireland was one of our key strengths. We spent years and years earning that reputation. You don’t lose it overnight, but it can erode over time. We need to address that”
Harrison adds that “still very positive, however”. “The pipeline of existing companies here in Ireland looking to invest and of new ones looking to locate here is quite good. Ireland is still attractive for US FDI,” he says.
Lohan agrees: “In today’s competitive FDI environment companies are making investment decisions based on fundamental requirements related to capacity, stability, capability and cost. Ireland ticks all those boxes, making it a very competitive and attractive location to ‘land and expand’.
“Ireland boasts an established and robust foundation, built over 75 years, and with ongoing investments in infrastructure and technology, the country is well positioned to continue attracting substantial FDI, fostering ongoing economic and societal growth.”