As a country, we have been for a long time — and still are — extremely attractive to foreign direct investment (FDI).
That we remain so is once again confirmed by the announcement, in the last few days, of the creation of 265 jobs in the biopharma and life sciences sector.
This success is testament to the availability of high quality well-trained graduates.
Indeed, one of the companies concerned said that it served 18 of the top 20 global pharmaceutical companies and opined that its ‘success is attributable mostly to the excellent commitment and technical capability of our people’.
The attraction of such potentially high quality jobs is very important if our economy is to grow, to be sustainable, and to provide much need high value added employment.
The attraction of FDI has been good to us.
In 2014, according to a report from the former enterprise advisory board Forfás, there were just over 174,000 people employed in companies that were supported by IDA Ireland.
More than 50% of those work in international and financial services and software.
According to Finfacts, Irish manufacturing is dominated by US firms and accounts for approximately 11% of the total Irish workforce.
On the other hand, according to the European Commission, only 3% of Irish small firms are in manufacturing compared with 10% across the EU.
In addition, up to 75% of our exports are accounted for by the same multinationals.
The fact is that Ireland is one of the most globalised nations in the western world.
The end result is a very high dependency on potentially volatile FDI, or of having too many of our eggs in the one basket.
That volatility was underscored on Tuesday when it was reported that Ireland’s ability to attract FDI from outside the EU is more vulnerable to changes in corporate tax rates than any other member state.
That data from the Economic and Social Research Institute (ESRI) cited as an example that if Ireland’s 12.5% corporate tax rate was increased to just 13.5%, the move would reduce the country’s chance to attract new FDI projects from non-EU countries by 4.6%.
A second example used was that a more competitive UK corporate tax rate would also reduce Ireland’s attractiveness.
It’s also a time when Ireland’s tax rate is under threat.
The EU’s upcoming assessment on our corporate tax dealings with Apple is one such threat.
We also have to contend with the petty jealousies of our successes in attracting major high value-adding FDI from some of our European competitors and their ongoing attempts to change the structure of tax collection policies.
The omens are not particularly good and it would be a brave man or woman who would bet the house on our future prosperity and our ambition for full employment when slight changes in corporation tax can result in considerably higher changes in attracting FDI.
The ESRI report concluded that “in addition to maintaining a competitive corporate tax rate, our attractiveness to FDI would benefit from policies aimed at maintaining cost competitiveness and enabling further R&D investment.”
In 2015, Tom Healy – chief economist at the Nevin Economic Research Institute (NERI) - made some interesting observations. He noted that ‘there was no guarantee that Facebook, Google or other Silicon Valley companies would still be here in 10 years given the pace of economic change’.
Another was that Ireland’s heavy dependence on FDI, which currently supports 25% of GDP, exposed the fact that Ireland lacked a well-rounded native enterprise sector.
Both de Valera and Lemass had made attempts to develop an indigenous sector in their time in government without much success.
Mr Healy contended that our version of long-term vision is five to ten years, where 30-50 year visions are required.
If our current major focus of attracting FDI continues, without any concerted effort, to build up our own indigenous industry that can compete with the best in the world we will only have ourselves to blame.
We have been warned. We need not throw out the proverbial baby with the bath water but we need to have a parallel programme to ensure we build our own industrial base.
© Irish Examiner Ltd. All rights reserved