Comment: There has been some hand wringing recently in relation to Ireland's alleged loss of competitiveness for inward investment. A particular focus for this anxiety has been the recent announcements of closures and scaling back of overseas-owned manufacturing operations in some areas of the country.
From a US perspective, Ireland remains very attractive as an investment location. US investment in Ireland exceeds $73 billion (€61 billion) and accounts for direct employment of 90,000 people. In addition, it is estimated that a further 225,000 jobs in Irish industry are directly supported by the 600-plus US companies based here. The trade figure is also impressive, with US firms accounting for annual exports of €23 billion. US companies paid €2.7 billion in corporation tax to the Government in 2004, while they spent more than €17 billion on wages/services in the same year.
There is a very strong base of US firms in Ireland operating across multiple sectors. Over the past 15 years, Ireland has migrated from being an agriculture-dependent economy to one which is firmly based on modern, knowledge-based industries such as pharmaceuticals, electronics, information technology, financial services and shared services.
US investment continues to grow. In the first half of 2005, more than 20 new investment projects and 3,000 new jobs were announced. These included new investments by global leaders such as Yahoo and Amazon. Very importantly, the investments are not confined to Dublin. They are spread around the regions, with companies like Bysis opening a new financial services operation in Waterford; Engenio setting up in Cork, and PFPC establishing financial services operations in Navan and Wexford. This is in addition to existing companies such as Dell, Microsoft and Intel expanding their operations here.
This excellent performance is an indication of Ireland's continuing competitiveness in attracting inward investment and it augurs well for the future. It shows that Ireland can continue to prosper in an increasingly competitive global environment.
Ireland is succeeding because of a number of key elements - our corporation tax regime being the main one. The 12.5 per cent rate is vital to our continued success. Overseas companies don't have any emotional attachment to Ireland. They come here because they can make significant profits and because it makes sound business sense, and the favourable tax regime makes a very strong contribution to this.
Ireland's skilled and flexible workforce also makes a significant contribution. Another success factor is Ireland's political stability. When compared with some emerging competitor countries, Ireland's political and economic stability is a strong advantage. There is a strong pro-enterprise environment in Ireland and Americans like doing business here. Ireland has a very strong, proven track record and that is very attractive to them.
The recent National Competitiveness Council report supports this view. Despite competition from other countries, Ireland remains highly competitive in terms of both corporation tax (Ireland ranks first of the 16 countries benchmarked) and personal taxes (first out of 15).
In terms of the labour market, adaptability of Ireland's regulations - ranked seventh out of 16 countries benchmarked - were perceived to facilitate business activity. Furthermore, Ireland is perceived to have one of the most open economies in the world in terms of trade in goods and services, and in foreign investment. Ireland continues to have the highest stock of foreign direct investment per capita amongst the benchmarked countries.
Ireland has also jumped four places in the latest rankings of competitive economies, published this week by the World Economic Forum. Ireland climbed to 26th place in this year's table from 30th position in 2004.
However, despite these strengths, we must recognise that the nature of investment is changing. Ireland is no longer a low-cost base for manufacturing operations. Costs are a significant issue for all companies, both indigenous and multinational, and every effort must be made to keep energy, labour, transport and other costs below or in line with the major economies with which we compete.
We cannot and we should not attempt to compete with countries where unit labour costs are a fraction of those pertaining in Ireland. It would be a retrograde step to even attempt this.
Ireland has moved up the value chain and our highly skilled workforce has been a key driver of this move. The recent opening of the €1.8 billion Wyeth Biopharma Campus in Grange Castle, Co Dublin, is a clear indicator of this move. This is the largest biotechnology campus of its kind developed as a single project anywhere in the world.
We are also seeing a major change in a shift from reliance on manufacturing to internationally-traded, value-added services. Ireland's total share of world services exports has grown from 0.5 per cent to 2 per cent since 1998. Ireland's share of world trade in services is now greater than our share of world trade in goods.
But if we are to continue on this path where jobs from older manufacturing industries are replaced by those in modern, value-added services, we must meet a number of challenges. These include urgent improvements in our transport infrastructure to enable people to travel to and from work in greater comfort and to facilitate easier international access to all parts of the country.
However, of utmost importance will be the development of human capital. Eighty per cent of the people in the workforce will still be employed in 2015. As technology advances and the nature of employment changes, we need to look at the workforce and ensure that they are properly trained and upskilled. It is not just the supply of new workers coming out of the colleges that matters - the current workforce is vitally important as well. This will require a major investment in lifelong learning by industry and the Government.
Ireland has many reasons to be cheerful in relation to its current competitive status and its attractiveness for foreign direct investment but, as always, such a position is transient and we must not allow any sense of complacency to damage it.
Joanne Richardson is chief executive of the American Chamber of Commerce in Ireland.
