Policies Towards Foreign Direct Investment
The Irish government actively promotes foreign direct investment (FDI), a strategy that has fueled economic growth since the mid-1990s. The principal goal of Ireland’s investment promotion has been employment creation, especially in technology-intensive and high-skill industries. More recently, the government has encouraged foreign-owned companies to enhance research and development (R&D) activities and to produce higher-value goods and services in Ireland.
The Irish government's actions have achieved considerable success in attracting U.S. investment, in particular. As of year-end 2015, the stock of U.S. foreign direct investment in Ireland stood at USD 343 billion - more than the U.S. total for China, India, Russia, Brazil, and South Africa (the BRICS countries) combined. There are approximately 700 U.S. subsidiaries currently in Ireland, employing roughly 150,000 people and supporting work for another 250,000-- a significant proportion of the 2.05 million people employed in Ireland. U.S. firms operate primarily in the following sectors: chemicals, bio-pharmaceuticals and medical devices, computer hardware and software, electronics, and financial services.
U.S. investment has been particularly important to the growth and modernization of Irish industry over the past 25 years, providing new technology, export capabilities, management and manufacturing best practices, as well as employment opportunities. More recently, Ireland has become an important research and development center for U.S. firms in Europe, and a magnet for U.S. internet/digital media investment. Industry leaders like Google, Amazon, eBay/PayPal, Facebook, Twitter, LinkedIn, and Electronic Arts use Ireland as the hub of their respective European, and sometimes Middle Eastern, African, and/or Indian operations.
Ireland is a successful FDI destination for many reasons, including a 12.5 percent corporate tax rate for all domestic and foreign firms; the quality and flexibility of the English-speaking workforce; the availability of a multi-lingual labor force; cooperative labor relations; political stability; pro-business government policies and regulators; a transparent judicial system; good transportation links; proximity to the United States and Europe, and the drawing power of existing companies operating successfully in Ireland (a so-called "clustering" effect).
Conversely, factors that negatively affect Ireland’s ability to attract investment include: high labor and operating (such as energy) costs; sporadic skilled-labor shortages; eurozone risk; any residual fallout from Ireland’s economic and financial restructuring; sometimes-deficient infrastructure (such as in transportation, energy and broadband Internet); housing and office space shortages; uncertainty in EU policies on some regulatory matters, and absolute price levels that are among the highest in Europe.
The Irish government has expressed concern that energy costs and the reliability of energy supply could undermine Ireland’s attractiveness as an FDI destination. The American Chamber of Commerce in Ireland has noted the need for greater attention to a “skills gap” in the supply of Irish graduates to the high technology sector, and has asserted that high personal income tax rates can make attracting talent from abroad difficult.
In December 2013, Ireland became the first country in the eurozone to successfully exit an EU/ECB/IMF (Troika) bailout program. Compliance with the Troika’s terms came at a substantial economic cost, in the form of GDP stagnation, austerity measures, and chronically high unemployment. The economy has recovered; it was the fasting growing economy in the EU in 2016, with a growth rate of 5.2 percent. Meanwhile, government initiatives to attract investment are helping to stimulate employment. A number of recent successful sales of government bonds on sovereign debt markets appear to exemplify renewed international confidence in Ireland’s recovery.
Brexit and its Implications for Ireland
The UK will exit the EU in 2019, leaving Ireland as the only remaining English-speaking country in the EU. Ireland is also the only EU country to share a land-border with the UK. It is unclear what the full economic consequence will be for Ireland as it loses a close EU ally. Department of Finance and Central Bank econometric models suggest Brexit will cut economic growth modestly in the near term. Ireland is dependent on the UK for exports, especially of food products. As the UK prepares to leave the EU, many UK-based firms may seek to move headquarters or open offices in other EU countries. Ireland, as a member of the Eurozone, stands to be an attractive option for such moves, according to Irish government and business leaders, but faces heavy competition from cities like Frankfurt, Paris, and Luxembourg.
The following six government departments and organizations currently promote investment into Ireland by foreign companies:
The Industrial Development Authority of Ireland (IDA Ireland) has overall responsibility for promoting and facilitating FDI in all areas of the country, except the Shannon Free Zone (see below). IDA Ireland is also responsible for attracting foreign companies to Dublin's International Financial Services Center (IFSC). IDA Ireland maintains seven U.S. offices in New York; Boston, MA; Chicago, IL; Mountain View, CA; Irvine, CA; Atlanta, GA; and Austin, TX, as well as multiple offices in Europe and Asia.
Enterprise Ireland (EI) promotes joint ventures and strategic alliances between indigenous and foreign companies. The agency also assists foreign firms that wish to establish food and drink manufacturing operations in Ireland. EI has five offices in the United States: New York; Austin, TX; Boston, MA; Palo Alto, CA; and Mountain View, CA.
Shannon Group (formerly the Shannon Free Airport Development Company) promotes FDI in the Shannon Free Zone (see description below) and owns properties in the Shannon region as potential green-field investment sites. Under the 2006 Industrial Development Amendments Act, Enterprise Ireland assumed responsibility from the Shannon Group for investment by Irish firms in the Shannon region. IDA Ireland remains responsible for FDI in the Shannon region outside the Shannon Free Zone.
Udaras na Gaeltachta (Udaras) has responsibility for economic development in those areas of Ireland where the predominant language is Irish, and works with IDA Ireland to promote overseas investment in these regions.
Department of Foreign Affairs and Trade has responsibility for economic messaging and supporting the country’s trade promotion agenda as well as Diaspora engagement to attract investment.
Department of Jobs, Enterprise, and Innovation supports the creation of good jobs by promoting the development of a competitive business environment in which enterprises will operate with high standards and grow in sustainable markets.
Limits on Foreign Control and Right to Private Ownership and Establishment
Irish law does not prevent foreign corporations (registered under the Companies Act 2014 or previous legislation and known locally as a public limited company, or plc for short) from conducting business in Ireland. Any company incorporated abroad that establishes a branch in Ireland must file certain papers with the Registrar of Companies. A foreign corporation with a branch in Ireland will have the same standing in Irish law for purposes of contracts, etc., as a company incorporated in Ireland. Private businesses are not competitively disadvantaged to public enterprises with respect to access to markets, credit, and other business operations.
No barriers exist to participation by foreign entities in the purchase of state-owned Irish companies. Residents of Ireland may however be given priority in share allocations to retail investors. When Eircom -- the state-owned telecommunications company -- was sold in 1998, Irish residents were given priority in share allocations. The government privatized Aer Lingus, the national airline, in 2005 through a stock market flotation but retained about a one-quarter stake in the airline. U.S. investors purchased shares during its privatization. The International Airlines Group (IAG) purchased the government’s remaining stake in the airline in 2015.
Citizens of countries other than Ireland and EU member states can acquire land for private residential or industrial purposes. Under Section 45 of the Land Act, 1965, all non-EU nationals must obtain the written consent of the Land Commission before acquiring an interest in land zoned for agricultural use. There are many equine stud farms and racing facilities owned by foreign nationals. No restrictions exist on the acquisition of urban land.
Other Investment Policy Reviews
The Economist Intelligence Unit and World Bank's Doing Business 2017 provide current assessments of Ireland's investment policies.
All firms must register with the Companies Registration Office (www.cro.ie). As well as registering companies, the CRO also can register a business/trading name, a non-Ireland based foreign company (external company), or a limited partnership. A company registered under the Companies Act 2014 becomes a body corporate as and from the date mentioned in its certificate of incorporation. The website permits online data submission. However, a paper copy of this signed application must also be submitted, in conjunction with the online application, unless the applicant company has already been registered at www.revenue.ie (the tax collecting authority).
Enterprise Ireland assists Irish firms in developing partnerships with foreign firms mainly to develop and grow indigenous firms.