Brendan Keenan: 'FDI employers are evolving and our system has got to adapt'
HERE is an obscure but instructive factoid. In the 1950s, when the great maritime powers were building new transatlantic liners for the post-war era, the Dutch launched the 'Rotterdam', a ship which could double as either passenger vessel or cruise ship.
This ability in long-term planning is an important aspect of the much-admired Nordic models, but is even more difficult to replicate than most.
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It requires some conclusions about how the world will look in the future, followed by decisions about what needs to be done to succeed in that future.
In many ways, the future is already upon us. Brexit is a bolt from the blue, but there has long been acute awareness of the vulnerability of Ireland's long-established system of offering low tax rates to attract fast-growing companies with high-value products.
There is less recognition of the fact that, even if the well-known threats do not materialise, the pattern of foreign direct investment (FDI) is already changing, to the detriment of some regions and the benefit of others.
Between 1973 and 1997, the five counties of Cork, Dublin, Limerick, Galway and Clare (which means Shannon) averaged 57pc of IDA-supported jobs per year, but in the following 10 years, that proportion jumped to 68pc. It has accelerated since the crash, and these areas currently get three-quarters of such employment.
Fourteen counties have seen an actual fall in the number of existing foreign jobs.
In total, the 21 counties outside the big five have the same number of such jobs as they did in 1997, when the earlier policies - once dubbed 'a factory in every town' - began to wither.
The IDA has returned to explicit regional development in its 2015 corporate strategy. For the first time, it has set growth targets for each region amounting to 30-40pc over the current five-year period.
There have always been complaints from local representatives about their particular area losing out on foreign investment.
At county level, the differences can be very large.
IDA-assisted business jobs made up 30pc of the total in Galway and only 1pc in Monaghan. On the other hand, Monaghan has done rather well for itself without them.
A question - how much does it matter? - has always lain below the surface of the debate. The historical data is summarised in a paper by Gerard Brady, chief economist at the employers' body IBEC, published in the summer edition of the Economic and Social Review (ESR).
What is new is that this is the first attempt to count at a local level the number of new jobs created on top of the direct employment from IDA-assisted firms. Previous estimates have been based on models and forecasts, with a considerable range of differences on just what the impact is.
The key finding is that one new IDA-supported job to an Irish county other than Dublin typically creates around three jobs in other sectors in that county.
That is a very large 'multiplier', at the top of the range for estimates at national level.
The high wages typically paid by foreign firms, coupled with strong labour mobility in the regions, combine to make IDA-supported jobs very valuable to the localities. By definition, that means the reduction in such jobs in recent years is a significant loss.
As of now, the threats to FDI seem to outweigh the potential for future gains.
Chief among these is the pressure to make multinationals pay more tax, whether coming from the EU Commission, the OECD or Donald Trump.
Handily, the ESR also contains a paper on this question from Prof Frank Barry, who has spent years unravelling the mysteries of the global giants' tax arrangements and their relevance for Ireland.
His work has always stressed that Ireland's controversial role owes as much and more to the US tax system as it does to the Irish one.
Its unique, defining feature in this context is that the overseas profits of US companies are not taxed in the USA unless and until they send the money home.
The lower the foreign tax rate, the more the firm can hold on to abroad. The Irish tax attraction did not begin as a way of tapping into this oddity. But down the years, it has been tailored to maximise the advantages for the US multinationals.
We were not the only ones, but even the Dutch, with their famous 'sandwich', did not devise the 'stateless' company with no tax liability anywhere, as revealed in the Apple case.
The European authorities have long been exercised by tax competition within the EU, but latterly the US became concerned about the lack of tax on overseas profits paid at home.
Unlike the EU so far, the Trump administration took action, with the Tax Cuts and Jobs Act of 2017.
Two things stand out in the Barry paper. One is the scale of Ireland's role in US tax planning.
The Central Bank noted the fall in Ireland's reported holdings of US government bonds of - wait for it - €50bn and concluded this might well be the repatriation of retained profits by the Irish subsidiaries of US multinationals. Trump's law did what many presidents have done before - collect a big one-off tax payment while retaining the essence of the US imperium; incentives for acquiring overseas assets.
But unlike most of them, in Barry's view, the legislation also rewrote the broad fundamentals of how the US tax system operates.
It will be years before the full implications are clear, but the second, encouraging standout point is the paper's conclusion that Ireland's overall attraction for US firms will not be significantly reduced, and may even be enhanced in some areas.
There are those in this country who would like to see the MNCs hit with bigger tax bills, but they should be careful what they wish for.
If Brady's multipliers are correct, the loss of such firms would hit Ireland hard, with the less urbanised areas hit the hardest.
There are no convincing alternatives to the foreign jobs and their attendant benefits, although the search for them must be part of any planning.
That is the problem with planning. You have to make assumptions about the future before deciding what to do now.
The 'Rotterdam' would have looked pretty silly if cruising hadn't caught on.
Pessimism, however easy to slip into, is pointless. All one can do is prepare for the most plausible favourable outlook.
In this case, that would represent continuation of significant foreign inflows, but with more emphasis on services and, notwithstanding the best efforts of the IDA, a greater concentration in the larger urban areas.
How many of these should there be, where should they be, and what facilities should they have?
Answering those questions begins to draw a picture of what the country itself will look like and how the different parts of its economy will fit together.
In a week when proposals to cull half the national herd to reduce carbon emissions coincided with plans for yet another power-guzzling data centre, and the prospect of €100m from the clouds for the beef industry, one cannot be confident that any such picture will be drawn.