FDI in Ireland in the Coming Times

8/10/2019 FDI in Ireland in the Coming Times

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FDI in Ireland in the Coming

Times

IIEA Seminar

Frank BarryJanuary 2009


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FDI-Intensity of the Irish Economy

Share of

foreign

affiliates in

manufacturingemployment

Share of

foreign

affiliates in

servicesemployment

FDI inward

stock (USD)

per head of

population(2004)

Ireland 49 22 57372

EU15 23 10 9796

CEE 33 16 2403


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The Changing Sectoral

Structure of FDI

Inward FDI stock in Developed Countries% of total FDI in each year

1990 2002

Manufacturing46 34

Services 54 66


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The vast bulk of FDI still originates in thedeveloped world and goes to developed

world locations

Over the last decade, Europe hasaccounted for over 57% of total US foreign

direct investment, and for about 43% offthe jobs created

U.S. firms invested $26.4 billion in Chinasince 2000, which is less than half of USinvestment in Ireland.


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World FDI Inward Flow

0

500000

1000000

1500000

19

70

19

73

19

76

19

79

19

82

19

85

19

88

19

91

19

94

19

97

20

00

20

03

World FDI Inward Flow

millions of USD


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World foreign direct investment (FDI) flowsreached an all-time high in 2007. 2007also recorded the highest ever nominal

inflows to Ireland

The 2008 decline is likely to be around

25% both globally and in Europe. Thisyear it could well reach another 30% ormore


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Besides the FDI recession, there areincreased threats for Ireland (quite apart

from IFSC-related issues)

We are entering a new era of much lower

global corporate profitability. 1990s was anera of high global corporate profitability


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Financial Times editorial

January 11, 2009

Current levels of government spending should

fall, or ministers will be forced to raise taxes.

This will be deeply unpopular. Even measures,such as a carbon tax, that can be presented ashelping the planet as well as public financesmay well be unpopular. In the long run, its

commitment not to raise the 12.5 per centcorporate tax rate may prove to beunsustainable


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Irish Times

Monday, March 17, 2008

Let's face it, Dell is on the way out

JOHN McMANUS

BUSINESS OPINION: Finally the unspeakable has been spoken: Dell, the UScomputer giant that employs 4,500 people and accounts for something in the region of

6 per cent of Ireland's GNP, is on the way out the door and we better face up to it.

It is not going to happen overnight and it's not going to happen tomorrow, but it willhappen.

Whom do we have to thank for this unpalatable dose of realism? Is it the IDA, the

Minister for Enterprise and Employment or even Dell itself?

o. The appalling vista was in fact unveiled last week by a Trinity College professor,

Frank Barry, and his colleague from NUI Maynooth, Dr Chris Van Egeraat. It took

the form of comments they made after presenting a paper accompanying theEconomic and Social Research Institute spring quarterly which was released on

Thursday.


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Irish Times

Friday, March 14, 2008

Higher-value work has foreign technology firms more embedded

FOREIGN TECHNOLOGY firms are now far more embedded in Ireland than when

manufacturing was their primary activity, according to new research published by the

Economic and Social Research Institute (ESRI), writes John Collins.

"I would be very sure Dell is on the way out of Ireland given the trend in the sector,"

said Prof Frank Barry from Trinity College, Dublin, one of the report's two authors.

However, he said that if Dell decided to cease manufacturing here it "won't be as

catastrophic as you might think" as less than half of its staff were now engaged inmanufacturing.


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Dell announced this month that it was shedding1900 assembly jobs out of its total of about 3000in Limerick plus 1300 in Cherrywood in Dublin

The jobs to remain in Limerick were in productdevelopment, engineering and logistics, insupport of overseas manufacturing. The jobs in

Cherrywood are in sales and marketing support

The ones to remain are the better-paidsegments. (The assembly workers were making

just10-14 per hour, which is well below theaverage in the sector).


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Forfs data suggest that local sourcing ofcomponents comprise also 30 percent ofmaterial inputs

These figures, however, includeexpenditures on items purchased from

local supply chain managers butmanufactured in other regions, as well asexpenditures on complete systemsmanufactured by contract manufacturers

with local operations. More carefulanalysis which excludes these itemsbrings the figure down to 10 per cent.


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INTEL

Strong record in process development Intel has invested some7 billion in Ireland

since 1989, during which it has shifted its labour-intensive assembly activities to Puerto Rico and

the far east and refitted its Irish plant for waferproduction.

Has spent2 billion in Ireland in recent years toconstruct its FAB 24 fabrication facility, which

will implement the worlds most advanced 300-millimetre semiconductor manufacturingtechnology.

Also new IT innovation centre.


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Pharma and Medical Devices

In Pharma, Ireland competes with

Singapore and Puerto Rico

In Medical Devices, with Switzerland


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IT Services

Persons Employed in Computer and Related Services and in All Services

Computer andRelated Activities All Services

1999 18,612 515,500

2000 18,779 553,700

2001 22,260 608,5002002 22,211 668,876

2003 24,030 713,117

2004 28,426 736,969

2005 no data 740,419

Absolute increase 1999-2004 9,814 221,469

Percentage increase 1999-2004 +53% +43%


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Employment in non-IFS Business

Process Services Export activities


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Number of Services-Sector FDI Projects

by Destination Countries, 2002-2003

Call centres Shared

services

IT services Regional HQ

EU15 169 38 198 185

Ireland 29

(17%)

19

(50%)

14

(7%)

15

(8%)


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Ireland has the highest proportion of call centrestaff of any European country as a proportion ofits working population, at 3.6%, compared to its

nearest competitors, the UK at 2.8 and theNetherlands at 2.5.

A UK report by CM Insight (2004, p 160),however, finds that Ireland attracts more high-value, less price-sensitive contact centre activitythan other offshore locations. The report notesthe substantial element of technical andsoftware support in the Irish sector as well as arelatively high ratio of team leaders to agents,the latter suggesting a focus on quality and morecomplex (less scripted) contact centre functions.


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IFSC

IFSC now employs > 16,000 people and pays anestimated 15 percent of all corporation taxescollected.

Almost 450 international financial institutionsoperate from Dublin, including half of the worldstop 50 banks and half of the top 20 insurancecompanies.

Dublin specializes in back office activities, andhas a particular specialisation in four nicheareasfund administration, treasury operations,corporate banking and insurance.


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Employment allocation within IFSC

Funds/Asset Admin 42 percent

Banking 37 percent

Insurance 21 percent


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Dangers for IFSC: Global reregulation

The rationale behind the financial-services policy

proposal was clear. The analysis suggested that acombination of factors now created an opportunity for aregional location like Ireland to become a player in theinternational financial services industry. First, worldfinancial markets had become highly interdependent andoperated on a round-theclock basis. Second, thetechnology to set up and run international data- andfund-management centres was, in turn, creating, anelectronic market place, thanks to improvements ininternational communications. And third, globalderegulation of financial services meant that an

increasing range of these services were provided frombeyond national boundaries

MacSharry and White: The Making of the Celtic Tiger, 2000, page 318


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Dangers for IFSC: Financial R&D

Citi now employs over 1,500 in theInternational Financial Services Centre(IFSC) in Dublin and is the largest

employer in the IFSC. In July 2005, CitiIreland announced the creation of aResearch and Development Centre with

an investment of10 million. This is thefirst ever-dedicated R&D Centreestablished by Citi worldwide.

FDI in Ireland in the Coming Times

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