Ireland continues to prove one of the most attractive destinations for foreign companies looking to set up operations overseas. The latest World Investment Report from the United Nations Conference on Trade and Development (UNCTAD) shows that the State was the seventh most significant recipient of foreign direct investment in 2003.
In a year when investment in European Union member-states fell by 11 per cent, foreign direct investment to Ireland rose by 4 per cent. While global investment flows fell for the third year running to the lowest level since 1998, the $25.5 billion invested in this State came within touching distance of the 2000 record of $25.8 billion. It is an admirable performance and, with the report's authors predicting an upturn in global investment in 2004, the prospects seem strong.
Ireland's recent performance has been driven by the shift of foreign direct investment to the services sector. Services now account for two-thirds of investment by firms across national boundaries and UNCTAD acknowledges that Ireland has been ahead of the competition in targeting this sector. The UN agency expects the shift to investment in services to continue as the sector continues to become increasingly dominant in the global economy. It also sees rapid growth in the "offshoring" of services - the location of support services to locations remote from the head offices - driven by advances in information and communications technologies.
Again, Ireland has got the jump on international rivals. A 2001 report by the consultants McKinsey showed that Ireland was the largest single beneficiary of offshoring by international companies, ahead of India, Canada and Israel. In the past two years, the World Investment Report says the State has secured more than half of all the shared service centre investments in western Europe and 14 per cent globally. It has also punched above its weight in winning other offshoring investments.
However, one of the report's authors warns that Ireland will face increased competition for such investment in the year ahead. If it wants to maintain its share of global foreign direct investment, it will need to continue to move up the value chain. That means significant investment in both infrastructure and training. It will also require a continued concentration on cost-efficiency and an investment-friendly tax regime.
The UNCTAD report shows that the focus of successive governments on maximising the potential of our open economy has been rewarded but Ireland can ill- afford to sit back and bask in the success of the past.