1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Irish government actively promotes 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 focused on Ireland’s international competitiveness by encouraging foreign-owned companies to enhance research and development (R&D) activities and to deliver higher-value goods and services.
The Irish government’s actions have achieved considerable success in attracting U.S. investment in particular. The stock of American FDI in Ireland stood at USD 442 billion in 2018, more than the U.S. total for China, India, Russia, Brazil, and South Africa (the so-called BRICS countries) combined. There are approximately 700 U.S. subsidiaries currently in Ireland employing roughly 160,000 people and supporting work for another 128,000. This figure represents a significant proportion of the 2.36 million people employed in Ireland. U.S. firms operate primarily in the following sectors: chemicals, bio-pharmaceuticals and medical devices, computer hardware and software, internet and digital media; 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, and employment opportunities. The activities of U.S. firms in Ireland span from the manufacturing of high-tech electronics, computer products, medical devices, and pharmaceuticals to retailing, banking, finance, and other services. More recently, Ireland has also become an important R&D center for U.S. firms in Europe, and a magnet for U.S. internet and digital media investment. Industry leaders like Google, Amazon, eBay, PayPal, Facebook, Twitter, LinkedIn, Electronic Arts and cybersecurity firms like Tenable, Forcepoint, AT&T Cybersecurity, McAfee use Ireland as the hub or important part of their respective European, and sometimes Middle Eastern, African, and/or Indian operations.
U.S. companies are attracted to Ireland as an exporting sales and support platform to the EU market of almost 500 million consumers and other global markets, mainly the Middle East and Africa. Ireland is a successful FDI destination for many reasons, including a corporate tax rate of 12.5 percent for all domestic and foreign firms; a well-educated, English-speaking workforce; the availability of a multilingual labor force; cooperative labor relations; political stability; and pro-business government policies and regulators. Ireland also benefits from 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 costs (such as for energy); sporadic skilled-labor shortages; the fall-out from the COVID-19 pandemic; and sometimes-deficient infrastructure (such as in transportation, energy and broadband quality). Ireland also suffers from housing and high-quality office space shortages; uncertainty in EU policies on some regulatory matters; and absolute price levels that are among the highest in Europe. Some Irish government agencies have in the past expressed concern that energy costs and the reliability of energy supply could also undermine Ireland’s attractiveness as a FDI destination. The American Chamber of Commerce in Ireland has called for greater attention to a “skills gap” in the supply of Irish graduates to the high technology sector. It also has asserted that high personal income tax rates can make attracting talent from abroad difficult.
In 2013, Ireland became the first country in the Eurozone to exit a financial bailout program from the EU, European Central Bank, and International Monetary Fund (EU/ECB/IMF, or so-called Troika). Compliance with the terms of the Troika program came at a substantial economic cost with gross domestic product (GDP) stagnation and austerity measures, while dealing with high unemployment (which hit 15 percent). Strong economic progress followed through government-backed initiatives to attract investment and stimulate job creation and employment. This aided economic recovery and Ireland’s economy was the one of the fastest growing economies in the Eurozone area annually to 2019. The high unemployment levels fell dramatically and by the end of 2019 reached 4.7 percent. In addition, the Irish government has successfully returned to international sovereign debt markets and successful treasury bonds sales, at low interest rates, exemplify renewed international confidence in Ireland’s economic progress.
Brexit and its Implications for Ireland
The UK’s exit from the EU leaves Ireland as the only remaining English-speaking country in the bloc. Ireland is the only EU country to share a land border with the UK. The future trading relationship between the UK and the EU will affect Ireland’s economic performance. A significance trade risk includes the imposition of trade tariffs following the transition period due to end December 31, 2020. Ireland will also lose a close EU ally on policy matters, particularly free trade and business friendly open markets. Ireland is heavily dependent on the UK as an export market, especially for food products, and sectors such as food and agri-business may be hardest hit. Ireland also sources many imports from the UK and cost rises are likely if supply chains are disrupted. Irish trade with its EU colleagues may also be impacted as Irish trade to the EU often uses the UK as a land-bridge for trucking products. A number of UK-based firms (including US firms) have moved headquarters or opened subsidiary offices in Ireland to facilitate ease of business with other EU countries. Initial econometric models from the Irish Department of Finance and the Central Bank of Ireland (CBI) in 2019 suggested Brexit would cut Ireland’s economic growth modestly in the near term. Revised modelling is anticipated post COVID-19.
Six government departments and organizations have responsibility to 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. IDA Ireland is also responsible for attracting foreign financial and insurance firms to Dublin’s International Financial Services Center (IFSC). IDA Ireland maintains seven U.S. offices (in New York, NY; Boston, MA; Chicago, IL; Mountain View, CA; Irvine, CA; Atlanta, GA; and Austin, TX), as well as offices throughout Europe and Asia.
- Enterprise Ireland (EI) promotes joint ventures and strategic alliances between indigenous and foreign companies. The agency assists entrepreneurs establish in Ireland and also assists foreign firms that wish to establish food and drink manufacturing operations in Ireland. EI has five existing offices in the United States (New York, NY; Austin, TX; Boston, MA; Chicago, IL; and Mountain View, CA); is planning on opening an office in Seattle, WA and has offices in Europe, South America, the Middle East, and Asia.
- Shannon Group (formerly the Shannon Free Airport Development Company) promotes FDI in the Shannon Free Zone (SFZ) and owns properties in the Shannon region as potential green-field investment sites. Since 2006, the responsibility for investment by Irish firms in the Shannon region has passed to Enterprise Ireland while IDA Ireland remains responsible for FDI in the region.
- 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 (DFAT) has responsibility for economic messaging and supporting the country’s trade promotion agenda as well as diaspora engagement to attract investment.
- Department of Business, Enterprise and Innovation (DBEI) supports the creation of 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 allows foreign corporations (registered under the Companies Act 2014 or previous legislation and known locally as a public limited company, or plc for short) to conduct 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 domestic 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 over all other investors. An example of this was the 1998 sale of the state-owned telecommunications company Eircom when Irish residents received priority in share allocations. The government privatized the national airline Aer Lingus through a stock market flotation in 2005, but chose to retain about a one-quarter stake. At that time, U.S. investors purchased shares in the sale. The International Airlines Group (IAG) purchased the Government’s remaining stake in the airline in 2015, and subsequently took an overall controlling interest which it continues to hold.
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.
Ireland does not yet have formal investment screening legislation but is in the process of developing it. As an EU member, Ireland will have to implement any future common EU investment screening regulations or directives.
Other Investment Policy Reviews
The Economist Intelligence Unit and World Bank’s Doing Business 2019 provide current information on Ireland’s investment policies.
All firms must register with the Companies Registration Office (CRO online at ). The CRO, as well as registering companies, can also register a business/trading name, a non-Ireland based foreign company (external company), or a limited partnership. Any firm or company registered under the Companies Act 2014 becomes a body corporate as and from the date mentioned in its certificate of incorporation. The CRO website permits online data submission. Firms must submit a signed paper copy of this online application to the CRO, unless the applicant company has already registered with www.revenue.ie (the website of Ireland’s tax collecting authority, the Office of the Revenue Commissioners).
Enterprise Ireland assists Irish firms in developing partnerships with foreign firms mainly to develop and grow indigenous firms.