Wednesday 16 October 2019

IDA chief keen to place Ireland in the driving seat for next car revolution

In person: Martin Shanahan

Supporting growth: IDA chief Martin Shanahan is keen to recognise the value of foreign investment. Photo: Steve Humphreys
Supporting growth: IDA chief Martin Shanahan is keen to recognise the value of foreign investment. Photo: Steve Humphreys
Donal O'Donovan

Donal O'Donovan

Ireland's next big push could be into the global car manufacturing industry, according to IDA chief executive Martin Shanahan. Given John DeLorean was about the last person to evangelise about building up a car industry on the island of Ireland, it is hard to think of anyone less likely to follow in his wake than Shanahan.

The Kerry native is the tidy, sober, hyper-professional embodiment of the State investment agency he heads up.

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But he's quite serious. The traditional car industry is changing radically and the way Shanahan sees it is that it creates an opportunity for Ireland.

The kind of heavy manufacturing that for the bulk of a century made parts of Germany, the US, Japan and the UK rich, and supported millions of well-paid industrial jobs, is no longer where the action is.

Robots now do that heavy lifting, and the higher value-added elements of the supply chain no longer need to be physically close to the increasingly automated plants. As Shanahan sees things, the opportunity now is to be the base for the research and development activities that will shape the next century of driving.

READ MORE: IDA 'not doing enough' to push its North Cork sites

He cites real-world examples. Aptiv, once part of General Motors and now a stand-alone company developing the technology for automatic cars, quit the UK and shifted its global headquarters to Ireland last year. French automotive supplier Valeo Vision Systems is also working on tech to cut CO2 emissions for car makers.

Ireland competes hard to win technology investment, so why would car makers be any different?

Silicon Docks
Silicon Docks

"We are now starting to develop our strategy for 2020 to 2024, and at the top of our minds is what else can we compete on? And it is throwing up surprises," Shanahan says.

READ MORE: Irish tech firms helping to drive the future

"Historically, Ireland wouldn't be seen as a car manufacturing base. Now, on the tech, Ireland can compete."

The surprising answer was thrown up by a question about concentration risk - the danger that maybe the country, and Dublin in particular, has made too big a bet on the likes of Facebook and Google.

Tens of thousands of jobs in Dublin are now directly or indirectly dependent on a handful of digital media giants. If some shock hit that sector, couldn't it be devastating, I wonder?

Shanahan doesn't see things quite the same way. "There can be concentration risks, but Irish FDI is heavily diversified," he says. Within technology, there is a wide mix of activities, he adds.

"Tech in all forms is a strategic focus, alongside international financial services, life sciences, engineering and food. That's certainly been a focus - but those are also the building blocks of a modern economy."

We're meeting in the IDA's brand-new office on Hatch Street in Dublin. The eighth floor reception has surprisingly sweeping views on all sides.

IDA chief Martin Shanahan. Photo: Mark Condren
IDA chief Martin Shanahan. Photo: Mark Condren

From the Dublin Mountains to Howth and out to the bay, the city skyline is dominated by dozens of construction cranes, rising in all directions, with many building offices for IDA clients, or apartments for their workers.

The bright, beautifully laid out offices are a big change from the IDA's old Soviet-era home on nearby Wilton Terrace. The new digs are closer to what the global CEOs who routinely drop into Ireland might be used to.

Ostensibly, we're here to talk about the IDA-backed Invest in Ireland Awards, a scheme to recognise excellence among the foreign direct investment (FDI) companies with bases in Ireland, that is now in its second year. The awards night is November 7, at the Intercontinental Hotel in Dublin. The Irish Independent is a media partner for the event.

READ MORE: The Invest in Ireland Awards are back: Here’s a look at last year’s winner

Shanahan is enthusiastic about the event, though the IDA keeps an arm's length from the judging process. "If you just look at some of the categories - regional development, diversity in the workforce, innovation - FDI has led the way in many of these things here," he says.

The event has been picked up by industry, he says: "The FDI community are a competitive bunch."

But part of his support is driven by a fear that the level of overseas investment here is something that can be taken for granted.

There's always been a degree of public cynicism - at home and abroad - that tax policy is the key anchor for a lot of the investment.

"Tax is only part of the offering; I can say this until I'm blue in the face and it's not going to resonate with some people," he admits. Ireland, he says, has been "extraordinarily successful" at attracting investment that "any number of countries" have fought for.

For a long time, the IDA could take for granted that Irish people were largely unambiguously in favour of more jobs and investment landing here.

Some of the mood music around FDI has shifted though, as high-profile business people like Paddy Cosgrave, the Web Summit founder, have raised concerns that the country's support for FDI comes at the expense of domestic businesses.

Shanahan bristles ever so slightly. "I do not believe we have been successful in attracting FDI to the detriment of indigenous enterprise," he says emphatically.

"There are two agencies - IDA and Enterprise Ireland - both resourced to do their respective jobs, and you have Fáilte Ireland dedicated to the tourism industry, and dedicated agencies for agri-foods like Bord Bia. It's not the case resources all go to FDI. There are resources for both. The same taxation regime applies to everybody."

READ MORE: Dan O'Brien: 'Ireland remains a magnet for US investment - but if globalisation goes into full retreat, everything changes'

Shanahan fires numbers at will to back up his thesis: 230,000 directly employed at IDA-backed firms, 400,000 indirectly; multinationals paying 80pc of corporation tax; €19bn spent a year on wages, services and materials.

Indigenous businesses here have gained management know-how, access to innovation, and have infiltrated the FDI global supply chain as suppliers because those big multinationals are here, and that is right across the country, he says.

"Whatever the perceived negatives, this isn't about one or the other."

One reason the multinational sector might be starting to be taken for granted is, I suggest, because it's been a while since we've suffered a big jobs shock - the region-destabilising exits like Dell shutting manufacturing in Limerick, or Ford shutting its Cork factory.

There is a loss of jobs every year, Shanahan says, but in the past five years, closures have also been very low by historic levels, and openings have been very high.

He thinks Brexit has a bigger role in that than raw data - for instance, on banking job moves - suggests, across a swathe of sectors where regulation and stability matter.

Brexit means Ireland is more competitive for the jobs that would have been in play anyway, and more jobs are in play.

"One consequence of Brexit is that investment that would not otherwise have been mobile now is, and our job at the IDA is to get that for Ireland."

READ MORE: Richard Curran: 'We can never take our foreign investment wins for granted'

He expects another Brexit wave, once final terms are clear.

A five-year run of investment has strained Irish infrastructure; Dublin's housing and transport are at breaking point.

Should the IDA take its foot off the accelerator while quality of life catches up?

Shanahan's cool threatens to desert him, though not his good humour. Ireland can't temporarily stop fighting for jobs and investment if it expects a hearing when it opts back into the fray, he says.

"There's no tap. People have this idea we have the big lever and we can direct FDI. If they saw what it's really like..."

READ MORE: IDA chief: Brexit can help lure investment from UK

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