Sunday 24 September 2017

IDA's Shanahan: 'We don't have natural resources other than the quality of our people'

The man at the coalface in Ireland's drive to attract jobs tells Colm Kelpie that Brexit could be an opportunity, global investors are 'agnostic' about our election results, and that other regions don't get a raw deal in comparison to Dublin

‘There are very few times in the year that Ireland registers on the international consciousness. It [St Patrick’s Day] keeps Ireland to the forefront,’ says Martin Shanahan. Photo: Mark Condren
‘There are very few times in the year that Ireland registers on the international consciousness. It [St Patrick’s Day] keeps Ireland to the forefront,’ says Martin Shanahan. Photo: Mark Condren
Colm Kelpie

Colm Kelpie

Atop a cabinet at the back of Martin Shanahan's spacious office, stands a framed photo of three men. Shanahan, the IDA chief executive, is on the left of the photo, and on the right is Taoiseach Enda Kenny. Taking pride of place in the centre, is a smiling Tim Cook, the head of Apple.

It's an apt image. The investor is centre stage.

"Somebody else framed it," Shanahan says, laughing, before turning further around in his seat to look for a separate photo.

"I've met with CEOs of various companies. There was another one [photo] there which was the CEO of Huawei. It's one of the nice things about this role. I get to meet global CEOs, whether it is Tim Cook or Omar Ishrak, the head of Medtronic, or Jack Ma, the head of Alibaba."

Employing around 5,000 in Ireland, Apple's a particularly important investor, and Shanahan is keen to stress that Cook has signalled Apple is here to stay, whatever verdict comes from Europe regarding its tax arrangements with Ireland.

"The company's been clear, there has been no state aid. The Government is clear, there's been no state aid," he says.

"The Government has also said if there is an adverse finding it would take the issue further. We are now close to two years waiting on a decision. Other cases that had been mooted around the same time have concluded. The Commission has said we want to investigate this and that is all that has happened to date. There have been no findings good, bad or indifferent.

"Tim Cook was here late last year... [and he] said regardless of the outcome of any investigation, that Apple was committed to Ireland."

Shanahan is part politician, part diplomat, and part salesman.

In the latter role, he's flogging a product small in size, but big on reputation. It has a proven track record of reliability, is low maintenance, can withstand knocks, and comes at a good price.

As the head of the state agency tasked with boosting foreign direct investment, Shanahan's primary role is to ensure a continued inward flow of foreign companies and employment growth.

His job is a mix of wooing and charming international business chiefs, selling brand Ireland to prospective clients, keeping sweet those that are already here, and talking up what successive governments argue is a stable and pro-business climate.

"We don't have alternatives, we don't have natural resources other than the quality of our people and the fact that the grass grows greener than anywhere else," he quips.

But surely stability has taken a knock thanks to the election's inconclusive result? Even Bloomberg mentioned "political turmoil in Ireland and Spain" on Friday as among the risk issues for the Eurozone.

Shanahan doesn't agree. "There is a government until there's a new government," he says, referring to the caretaker administration.

"Investors looking in, they have no reason to be particularly concerned at this point. The ISEQ has been stable, bond yields have been stable and since December, there's no perceptible change. That's reflective of the fact that people believe it's business as usual. There's been an election, a new government will be formed and we'll get on about our business. While there's a lot of interest domestically in the election... internationally we haven't seen a perceptible move."

Despite the domestic obsession with the make up of the next Dáil and the rise of Sinn Féin and Independents, Shanahan says global business chiefs - bar those companies perhaps already based here - don't really care that much. What does matter to them are the policies that will be put in place when a new government is eventually formed.

"To a large extent, they tend to be agnostic on the shape and hue. What they look at is, is there a perceptible change in what has been a very stable environment for business over decades in Ireland?"

The coming days will bring the first opportunity to test this theory, as the annual St Patrick's Day exodus takes place.

Shanahan flies out tomorrow for a week-long series of US-based engagements that will see him travel to Austin, Texas, and Washington DC and New York.

It will be the second year that the IDA has attended South by Southwest (SXSW) in Austin, the world's biggest technology culture conference and festival. Shanahan and his team on the ground will be tapping into the tech-savvy audience, ripe with startups, in a bid to lure some to this side of the Atlantic.

"We'll host some receptions, we'll have a dinner for some senior executives. Austin is fertile ground for startup technology as well as some very significant large technology clients that are based there and it's an opportunity for us to speak to a lot of people at the one time," he says.

"Ireland will be extremely visible."

The IDA has two people staffing its office in the recently opened Irish consulate in the Texas city, complementing its team across the US where it has operations in Atlanta, Boston, Chicago, New York, and Mountain View and Irvine in California.

After Austin he'll travel to Washington DC to take part in the various political events around the St Patrick's Day celebrations, and then on to New York for an extensive schedule of print and broadcast interviews with US-based media outlets. All the while he'll be "promoting the Irish message", ie, talking up the economy and the strength of the recovery. That story plays well with US clients.

"The investors that I speak to, and these are large companies, feel that Ireland took decisions early and pulled itself up by the bootstraps and got on with the job. Particularly in the US there is quite a lot of admiration for that."

And he'll be carving out extensive time to meet clients. As with any good salesman, pressing the flesh is of ultimate importance, and Shanahan places great stock on meeting investors, potential and existing. Companies with operations already in Ireland account for 70pc of investments, he reminds me, so they can't be overlooked. When he's travelling, he ensures his team sets up client meetings wherever he goes.

"Meeting clients, that's at the core of what we do. I will always check in with the senior leadership teams of our key clients, and typically we're in with the CEO, CIO, or CFO and we will always do that and do that regularly," he says.

"That's the process of maintaining a relationship and making sure we know what their plans are, making sure that they know what's happening in Ireland and trying to identify opportunities. That's a key part of the job."

And the St Patrick's Day events, although often criticised at home in the past, couldn't be more important for keeping Ireland on the radar, particularly in the US, Shanahan says.

"There are very few times in the year that Ireland registers on the international consciousness. It keeps Ireland to the forefront."

Ireland now accounts for almost a fifth of all new US investment flows into Europe, with FDI between the two countries strengthening significantly over the past decade.

A report commissioned by the American Chamber of Commerce Ireland found that FDI into Ireland from the United States had amounted to $310bn by the end of 2014. Ireland's portion can be compared favourably to that of Germany and France, the Eurozone's biggest economies.

The UK, however, is the hub of choice for FDI into the EU. But will that continue if the British vote to pull out of the European Union come June 23?

Shanahan sees opportunities, both from companies in the UK that could potentially look to leave, and investments that may have been looking to Britain, but in the event of a Brexit, could look elsewhere. And he says companies are already sniffing around, scouting out the alternatives, with Ireland a strong contender.

"From an FDI perspective, I would say that there is uncertainty, and that causes those that are already based in the UK and servicing a European market or an EMEA market from the UK, to consider the 'what if' scenarios and 'what if they leave' and how they're going to react to that," he says.

IDA's conversations with companies have "increased and heightened" because of the uncertainty around Brexit, he says.

"Certainly, even in the week prior to last week, I met with some financial services companies, and they are absolutely considering their 'what if' scenarios and if there is a leave vote, and companies have to do something to mitigate against that, some of that investment may come to Ireland."

Does that mean the IDA is seeing increased interest from companies looking at Ireland as a potential place to invest because of Brexit?

"Certainly. We're in discussions with companies about future investments and Brexit is part of that context, so yeah, absolutely."

One would therefore assume that the IDA is ramping up its efforts to attract either UK-based companies considering their future options, or potential investors who may have been considering establishing a UK base, but may be open to alternatives.

Shanahan doesn't give a definitive answer. He hints and grins a lot, while stressing he isn't trying to be coy. He reveals the agency moved its European director from Germany to London last September, but he doesn't openly state it was as a result of the impending vote.

"We are keenly aware of the opportunity," he says simply. "We are keenly aware of the Brexit context and all of our efforts reflect that. So we are extremely active in the UK market."

He says the agency has had a lot of interest from and discussions with financial services, and points out that the agency has had some significant wins in that sector, but adds they were unrelated to Brexit.

"When I say we are active all the time, we are, but the context has changed. We are clearly not blind to the context. There are more reasons for both investors who are located in the UK and potential investors coming into Europe to look at Ireland than there was before," he says.

But he adds: "Brexit alone, while it's a significant issue, it's not going to be a panacea or a tap."

The IDA courtship process can take a long time, sometimes even years. "What you want to do, and what we try to do, is build up relations with companies and individuals. Individuals move and assume other senior positions in other companies, so having a relationship with those individuals is extremely important. That doesn't happen overnight, that's over a long period of time."

The agency takes understandable pride in its success. Set up in 1949 as part of the Department of Industry and Commerce, the body was initially tasked with stimulating, supporting and developing export-led business and enterprise in Ireland.

In 1994, following a government review, the agency was broken up and the IDA we know now was instructed to focus exclusively on the promotion and development of high quality FDI into Ireland.

More than 170,000 people here are employed in multinationals, the equivalent of close to one in ten workers.

So what pushes an investment over the line? An intervention by Shanahan himself, or perhaps even the Taoiseach?

Sometimes both, he says. "The access to government and access to Taoiseach and ministers is very important. It demonstrates to our prospective clients the level of interest and focus there is in Ireland on developing enterprise."

Shanahan gives the often quoted answer that it's not just for tax reasons that companies locate here, but also for the skilled workforce and availability of labour.

But housing costs, skills shortages and personal rates of taxation are, businesses here argue, fast becoming a deterrent. Shanahan says skills shortages are being experienced by other countries also, and not just Ireland. And he argues efforts are being made to deal with the shortage of quality housing.

He's a little more exercised about tax rates.

"It certainly is an issue. I wouldn't say that it comes up regularly, but we're aware that it is an issue for potential and current investors. It limits the ability to attract top talent. Government has started the process of addressing the higher marginal rate, and from our perspective, it remains an issue. We would like to see movement on that."

But the IDA's task isn't just to secure investment. It must also ensure that that investment is balanced regionally, which isn't an easy task.

Local communities understandably want a slice of the FDI pie, and part of Shanahan's job is to ensure the obvious attractiveness of the capital doesn't overshadow other parts of the country.

Under its strategic plan out to 2019, the IDA said it was targeting a minimum of a 30pc to 40pc increase in the number of investments for each region outside of Dublin.

Almost 19,000 jobs were created last year by IDA client companies, with over 9,000 jobs outside the capital. "These [targets] are not going to be easily delivered. There is no question about that," Shanahan says.

"Coming from Abbeydorney in Co Kerry, I appreciate as much as anyone what lack of employment or loss of employment can do to a local area, therefore I would be extremely anxious that IDA does what it can in this regard. But it is extremely challenging."

Shanahan says the international trend is that, increasingly, FDI is going to major urban hubs. "One has to bring an element of realism to the discussion also as to what is possible," he says. "In some people's minds, it is a choice between Dublin or a regional location. That is simply not the case.

"Dublin, because of its size, because it's a capital city, because of its brand recognition and that it has a technology hub, it will attract investments which will never go to the regions, any region.

"It is an attractor in its own right."

To persuade companies to leave the capital, the agency is putting in place advanced offices and facilities around the country, with nine being rolled out to 2018. Technology parks are also being upgraded.

And there are sweeteners in the IDA's armoury that can help, including grants for employment.

"Companies ultimately make the decision. Sometimes they come with fixed ideas about where they want to be and would have made up their mind before IDA has an opportunity to influence them. Sometimes they come with an open mind, they will go through different locations, but they may still decide that they need to be in Dublin or close to Dublin, or Cork," he says.

"We have at our disposal the ability to provide grant support. There are employment grants which we can use in regional locations, we have R&D and training supports which we can provide anyway, and we have capital supports. The main differentiator is employment."

Shanahan takes comfort in the fact that site visits across the regions are up, as are employment numbers. But he accepts it's a tough ask.

It's a punishing job for Shanahan, who was appointed to the €168,000-a-year job in June 2014. Prior to that, he was head of Forfás, and before that, worked in the tourism industry via Fáilte Ireland.

He's on the road one in every three weeks, visiting the agency's 19 offices around the world. While he's jetting off to the US tomorrow, he came back from the States just under a fortnight ago, where he held client meetings in Boston and caught up with the IDA's North American team in Chicago.

"I was primarily meeting with existing clients and prospective clients. Some of them are at the point where they're making decisions and I would have gone to meet them with project executives on the ground to try and help that process along and get them across the line in terms of their decision making."

The US, while by the far the most important, isn't the only investor market. Later in the year he's in Asia. He was in China "three or four times" last year, and just before Christmas travelled to Japan, Korea and Singapore. Moscow is in the diary for a few months from now.

"I have a very understanding partner, thankfully. I travel a lot and typically have to travel on weekends. It eats into a lot of time.

"This is not 9-5. I could have a breakfast meeting, then a lunch and then a dinner with clients."

He had to hang around Logan Airport in Boston recently for five hours waiting for a connection.

And yet, despite the repetitive globe hopping, he enjoys travelling. But he admits that's likely to fade with time.

"Last year I holidayed in Ireland."

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