From Malin to Mizen we are still too dependent on FDI for creating our jobs
Published 19/11/2015 | 02:30
As the Tim Cook and Apple Inc show rolled into town last week, the chief executive of the most valuable company in the world brought some very good news. The announcement of 1,000 more jobs for Cork was big. It came after Apple had already increased staff numbers there by 1,000 in the last 12 months.
The other potentially significant piece of Apple news came from a comment Cook made to the Irish Independent. Referring to Apple's long relationship with Ireland he said: "We've been here through tough times and Ireland stood by us. And now we both get to enjoy the fruits of hanging with each other for a long time and growing together."
This comment came after strong speculation that a sizeable chunk of our unexpected boost in Corporation Tax revenues this year may have come from Apple booking more profits through Irish entities in its global corporate structure.
While Cook would not and could not confirm that, there is a sense in which the Department of Finance might want to take Cook's comments to the bank. Remember, a previous structure by which some Irish-registered Apple entities didn't have to pay tax anywhere is gone. In last month's Budget Michael Noonan announced a fast-tracking in Ireland of greater corporate disclosure of where large multinationals are making profits.
It makes sense for very large global businesses to tweak their structures ahead of that disclosure to show they are paying a reasonable level of Corporation Tax somewhere. We may see big business gradually paying more tax in different countries - and why not Ireland?
If it plays out correctly, the Irish exchequer could hit that sweet spot it has always wanted - namely have sizeable foreign direct investment jobs while also ensuring a reasonable level of Corporation Tax is paid by those companies. That is a win/win.
If anything, foreign direct investment has been one of the most incredible success stories of the last seven years. IDA Ireland's investment book is on fire.
In the first six months of this year, IDA approved 110 investment projects, which are expected to lead to 9,000 direct jobs this year and over future years. Jobs announced aren't always jobs achieved but in general many companies have been delivering on targets.
To put this in perspective, back in 2012 IDA Ireland set a target of having 132 investments in the whole of 2013. This year it has bagged 110 in just six months. There are a few flies in the ointment. Some of them IDA, Jobs Minister Richard Bruton or the Government can do nothing about. Others require attention and effort.
Technology companies are enjoying a massive boom which has led to concerns about a technology bubble in the valuations of some businesses. If that starts to turn, it could affect the investment and spending plans of many technology giants and not just those billion dollar pre-flotation businesses known as "Unicorns".
Recently, Fidelity Investments, one of the biggest investors in the world, marked down the value of its stake in social media site Snapchat by 25pc. It also wrote down its stake in cloud storage company Dropbox by 31pc.
A cooling of investor sentiment for some IPO technology companies might be contained to specific firms and not spread to the sector as a whole. Equally, you never know.
Another fly in the ointment is that so much FDI success can lead to knock-on problems which could restrict Ireland's ability to deliver on its potential. So many job announcements for Dublin, will only fuel the rented housing crisis. Higher rents lead to higher wages and a loss of competitiveness. In the case of technology and pharma companies, it is about keeping places like Dublin affordable and attractive for highly sought after, talented people to come and take up jobs.
The other big drawback is the regions. Questions have been asked about the spread or lack of it, when it comes to locating FDI investment around the country. One argument says the kinds of companies we are now attracting in, do not want to be outside of Dublin or Cork.
The other argument, favoured by rural politicians in the run-up to an election, refutes that analysis and says IDA Ireland and government need to do more to market certain regions for FDI. Dail debates are full of politicians saying how long it has been since IDA Ireland brought a delegation to their area.
IDA Ireland executives know their business and the agency is delivering massively. Government policy seems to be towards striking a middle ground in all of this. It reduced its previous unattainable target of having 50pc of FDI investment each year going outside Dublin and Cork.
It simply wasn't realistic. In 2012 the figure achieved was 25pc. In 2013 it was 30pc. Earlier this year a new regional jobs strategy for IDA targeted an increase in investment per region by 30pc to 40pc. This is ambitious but perhaps more attainable.
It means those regions with relatively low FDI presence should see a boost but a percentage increase on a low base means that overall foreign company presence there will remain quite low. Those with a higher presence today are aiming to build on that substantially.
Bearing that in mind, the situation is improving in the regions both for multinational investment and indigenous job creation. Since July around 18 of the 32 job announcements I could see on the IDA website went to Dublin. But Limerick got four and Cork got three, which included the Apple "biggy". Between January and June, several major FDI projects went outside Dublin. This week Richard Bruton announced a regional jobs strategy for the West region, his fifth regional jobs plan. These plans get little national media coverage because as the election approaches, there is a natural scepticism about how real they are.
Nevertheless, the West Action Plan for Jobs targeted a 10pc to 15pc employment growth in the Galway, Mayo and Roscommon region. Some of it is highly ambitious. It targets a 25pc increase in the number of start-ups in the region and a 25pc improvement in the survival rate of new businesses.
Achieving those targets would require a fairer tax system, a better banking sector and more training for the entrepreneurs starting the businesses.
The plan is to increase the number of IDA investments in the region by 30-40pc up to 2019. This would require 92 additional projects for the West region by 2019. Advance IDA facilities being built in Castlebar and Galway, should help, but it is still a tall order.
New jobs are flowing to regions like the West which has seen 11,000 more people at work since a low of 2012. Employment numbers are rising again but only in a meaningful way since about 2014. Employment in the capital is up 39,000 since its low point of early 2011.
Few can fault the Government by responding to the regional inequity in job creation the way it has in 2015. There is a genuine awareness of the gaps that have emerged and they have put together a response. Rightly or wrongly it will stand or fall on landing more FDI into places that many multinationals are uneasy about. Galway will land them, but will Roscommon or North Mayo?
Inevitably, the future of some regions lies with indigenous enterprise. Building that takes time and money.