Irish Examiner view: Double-edged sword of FDI

Shoppers on Grafton St in the centre of Dublin.

A snapshot of the Irish economy is available in the latest research to emerge from the Economic and Social Research
Institute. The report is by economist John FitzGerald and the title, ‘Understanding the Irish Economy’, suggests that many general readers will seize upon it for insight.

There is no shortage of conversation-starters in the report, which finds that in spite of the high cost of living in Ireland, living standards in the Republic are above the European average.

However, what is likely to draw most people’s attention is one particular element of the report — a third of the €111bn paid in wages across the economy are accounted for by all types of multinational companies, and about half of the €37bn that multinationals pay in wages comes from US-owned companies.

In and of itself, this is a considerable vote of confidence in the Irish economy; it is almost a cliche to hear that Ireland is a competitive location for high-value industries, but this report shows that to be the case in black and white. The assiduous work of the IDA over the years should be acknowledged here, as those companies do not decide upon Ireland by accident — they are encouraged to operate here, and clearly many of them find it an appealing destination.

It is not a contradiction, however, to point out that it may also be a concern to have an economy so reliant on one particular type of business. The range of industries and enterprises covered by the term “all types of multinational companies” is highly varied, and Ireland is clearly not so reliant on one particular industry that uncertainty in that sector could be catastrophic.

However, an increase in indigenous businesses employing more people should still be an objective, no matter how successful foreign direct investment (FDI) programmes are.