Ireland can't be complacent in battle for foreign investment
Published 16/12/2010 | 05:00
IRELAND is still an attractive location for foreign direct investment but there is no room for complacency if it is to maintain this position, a major new study says.
Labour costs are the biggest perceived weakness for foreign firms, although the position has improved significantly in the last two years, the study by consultants Indecon found.
"Irish labour costs increased more rapidly than in competitor countries from 2005 to the first quarter of 2009, but have declined since and further adjustments are likely," the report says.
It finds the same pattern in other business costs, which account for more than half the total cost to companies.
They increased rapidly from 2005 but a drop of one-third in electricity prices since 2008 and a dramatic decline in property prices has closed some of the gap.
"The post-crisis developments in the economy have in fact improved Ireland's competitiveness for a specific type of inward investment," said Alan Gray, managing partner at Indecon.
"Ireland cannot, however, afford to be complacent. Given the policy mistakes in other areas, priority needs to be given to maintaining Ireland's attractiveness for foreign investment and on-going adjustments to costs, and improvements in infrastructure, are needed."
The report notes that the total stock of US foreign investment in Ireland is greater than total US investment in China -- and 81 times the level in Greece.
It says that Ireland's 12.5pc corporation tax is a major advantage, keeping the cost of capital for multinationals investing in Ireland the lowest of any OECD country.
"However, without other significant advantages, corporation tax would not explain the performance of foreign industry in Ireland," it says.
"Ireland's higher education and training system has one of the highest rankings internationally. This does not mean, of course, that it is perfect, or that positive ratings should be viewed as a basis for not addressing the gaps which exist," the report says.
Ireland's membership of the EU provides US firms with access to over 500 million people, the largest skilled labour force in the world, it added.