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.
U.S. companies in particular are attracted to Ireland as an exporting sales and support platform to the EU market of almost 500 million consumers and other global markets. Ireland is a successful FDI destination for many reasons, including a low 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).
The stock of American FDI in Ireland stood at USD 355 billion in 2019, more than the U.S. total for China, India, Russia, Brazil, and South Africa (the so-called BRICS countries) combined. There are approximately 900 U.S. subsidiaries currently in Ireland employing roughly 180,000 people and supporting work for another 128,000. This figure represents a significant proportion of the 2.31 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 thirty years, providing new technology, export capabilities, management and manufacturing best practices, and employment opportunities. Ireland has more recently 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.
Factors that challenge Ireland’s ability to attract investment include relatively 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; and absolute price levels that are among the highest in Europe. 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 relatively 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 helped economic recovery and Ireland’s economy was the one of the fastest growing economies in the Eurozone area annually to 2019. As a result, 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. Despite the prolonged difficulties caused by the COVID-19 pandemic, Ireland’s economic performance continued to be the best in the Eurozone in 2020 with an estimated three percent growth, achieved on the back of strong exports from the food, pharmaceutical and med-tech sectors.
Brexit and its Implications for Ireland
The UK’s exit from the EU (Brexit) on January 1, 2021, leaves Ireland as the only remaining English-speaking country in the bloc. The UK is now a non-EU member that shares a land border with Ireland. . The December 2020 agreement dictates the future trading relationship between the UK and the EU and will likely have an affect on Ireland’s economic performance. The agreement allows for tariff-free Ireland – Great Britain (England, Scotland and Wales) trade but comes with increased customs procedures. Existing Ireland – Northern Ireland trade continues unimpeded. While some disruption has been noticed in the supply chain of retail and agricultural sectors (due to their traditional use of the UK “land-bridge” to move products to and from the EU), Irish companies have generally been able to find alternate routes (i.e., using ferries from Ireland directly to continental Europe, though this has raised costs in some sectors.
With Brexit, Ireland has lost a close EU ally on policy matters, particularly free trade and business friendly open markets. Ireland continues to be heavily dependent on the UK as an export market and source especially for food products, and the full effect of Brexit may yet hit sectors such as food and agri-business with disruptions to supply chains and increased red-tape. Irish trade with its EU colleagues has already seen a dramatic switch to direct shipping rather than using Great Britain as a land-bridge for trucking products. A number of UK-based firms (including U.S. firms) have moved headquarters or opened subsidiary offices in Ireland to facilitate ease of business with other EU countries. The Irish Department of Finance and the Central Bank of Ireland (CBI) have estimated Brexit will cut Ireland’s economic growth modestly in the near term but such models are complicated with the ongoing COVID-19 pandemic.
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 six existing offices in the United States (Austin, TX; Boston, MA; Chicago, IL; New York, NY; San Francisco, CA; and 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 (DFA) has responsibility for economic messaging and supporting the country’s trade promotion agenda as well as diaspora engagement to attract investment.
- Department of Enterprise, Trade and Employment (DETE) supports the creation of jobs by promoting the development of a competitive business environment where enterprises can 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 Companies Registration Office (CRO). A foreign corporation with a branch in Ireland has 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. There are no recent example of this, but Irish residents received priority in share allocations in the 1998-sale of the state-owned telecommunications company Eircom. 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. In the past, all non-EU nationals needed written consent from the Department of Agriculture, Food and the Marine before acquiring an interest in land zoned for agricultural use but these limitations no longer exist. 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 in place but is in the process of drafting the legislation which is expected to be enacted in 2021. (The bill was delayed due to the government’s efforts to respond to the COVID-19 pandemic.) As a member of the EU, Ireland is required to implement any common EU investment screening regulations or directives such as the EU Framework.
Other Investment Policy Reviews
The Economist Intelligence Unit and World Bank’s Doing Business 2020 provide current information on Ireland’s investment policies.
All firms must register with the Companies Registration Office (CRO online at www.cro.ie). 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).
The Ireland pages in the following links gives the most up-to-date information:
https://www.doingbusiness.org/en/data/exploretopics/starting-a-business#close and https://investmentpolicy.unctad.org/country-navigator/102/ireland
Enterprise Ireland assists Irish firms in developing partnerships with foreign firms mainly to develop and grow indigenous firms.