Foreign investment can rebuild our base

BACK in the mid-1950s the then government, not Fianna Fáil, targeted foreign direct investment (FDI) as a core part of our future economic strategy to help move us away from our very heavy dependence on agriculture.

Farming was the mainstay of the economy, apart from a smattering of local industries engaged in activities such as clothing and footwear manufacturing.

Those around at that time had enough foresight to see that we badly needed modern industry to help us become part of the evolving modern world. Without industry and sophisticated technology, we were destined to remain backwards.

As the industrial development process evolved, the prospects for the economy started to pick up and the country began to lose its backward, run-down image

And while we have advanced remarkably, we once again face daunting challenges. Emigration is back as a reality for thousands of Irish people. RTÉ highlighted the case of a father having to leave his wife and two young children to financially support them.

His four-year-old could not quite grasp why the daddy who had been so central to her young life was not going to be around in the way he once was.

This was just one example of the heartbreak from the fallout of the banking and property meltdown.

On the theme of FDI, a new study has shown that Ireland is ranked as the second most attractive country globally for inward investment.

This finding by National Irish Bank seems to defy logic given the awful state of the economy right now.

Only Singapore rates above us and who are we to argue with the bank’s chief economist, Ronnie O’Toole, who has always been an ardent advocate of the contribution multinational firms make to this economy.

Possessing a skilled workforce and the contentious 12.5% corporation tax rate are core factors, while improving competitiveness in the aftermath of the property meltdown is also putting a further gloss on our attractiveness as a location for such investors.

There is nothing new in any of the findings but the fact that we have retained our number two slot behind Singapore has to be a bonus at a time when good news is as scarce as hens’ teeth

The NIB/FDI monitor also found that the prospects for FDI in the current year are positive. FDI could climb to as much as €942 billion in 2011.

O’Toole is confident we can still win more than our share of FDI in 2011, despite warnings from some vested interests that US firms are questioning the desirability of setting up here given the meltdown of our banking system.

The more important point is that this country has achieved a lot of traction in critical areas of global production, including pharmaceuticals and chemical production.

Those sectors tend to be recession-proof and will be crucial in growing our exports in the years ahead. And it is these exports, economists say, that will provide the basis for any recovery this country is likely to experience.

Another report by Keith Walsh, an economist within the Revenue Commissioners, pointed out that over the past 10 years foreign companies have consistently accounted for about one third of all the taxes paid to the state.

As the indigenous sector wanes that proportion is set to increase and, barring a major upset within Europe which might insist on us imposing a higher CPT, then we at least have the comfort of knowing that despite the awful current setbacks, the vision of those in the mid-1950s continues to pay off and leaves the economy, ravaged and all as it, with a solid base on which to hopefully build.

Hopefully that is not just wishful thinking.