Monday 9 December 2019

Martin Shanahan: We can achieve prosperity only by working with others

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

Martin Shanahan

Since Dr TK Whitaker first began persuading others of the benefits of open trade in the late 1950s, Ireland has set out its stall as an outward-looking open economy.

At its most basic level Mr Whitaker's approach has delivered the prosperity that has allowed the Irish population to increase from 2.8 million in 1961 to 4.8 million today and have almost 200,000 people employed in overseas companies across Ireland.

Since Mr Whitaker's time in the Department of Finance, successive Irish governments and, I believe, the Irish people have understood that on a small island, we must export and attract investment in order to earn our living, and that we can only achieve prosperity in co-operation with others.

The current environment poses many challenges, but we can overcome them by maintaining a relentless focus on reform and competitiveness domestically and by working with our European partners to develop a vision for Europe post-Brexit.

Ireland compares extraordinarily well for the amount of FDI won - more than twice as much as you would expect given our size. IDA client companies employed 199,877 people - a record - driven by a strong increase in jobs created (18,627) in firms across Ireland.

From time to time we hear from those that believe we should focus on indigenous enterprise rather than placing our eggs in a 'FDI' basket. The argument goes that multinationals can leave at the drop of a hat and that indigenous companies are more embedded. The reality is that both sectors are inextricably intertwined. It is also worth recollecting that multinationals on the whole have proven exceptionally 'sticky'.

As Ireland's fortunes, and indeed their own, have waxed and waned over the decades - they have reinvented themselves, moved up the value chain and crucially, reinvested in Ireland. This reinvestment is a testament to the strong value proposition that Ireland offers.

So what will the major political events of 2016 mean for Ireland in terms of trade and FDI? The short answer is that we don't fully know yet, but we can surmise on some potential impacts.

While Brexit has increased global uncertainty it has also the potential to increase the amount of mobile investment. IDA has seen a significant increase in engagements globally with investors who are considering their options post-Brexit.

We should be neither complacent nor alarmist in relation to what Donald Trump's presidency might bring. Expectations in some quarters are that his administration may herald more protectionist policies and that long-sought-after US tax reform may become a reality.

These may change the arithmetic for some US firms considering investment overseas; however, the fundamental need for US companies to internationalise will remain. Within Europe, Ireland is seen as one of the most stable and pro-enterprise jurisdictions. US MNCs will continue to be drawn by a skilled work force, ease of doing business, proximity to the European market and attractive tax regime.

There has been a disproportionate emphasis on our tax regime nationally and internationally. Tax is just one part of the value proposition for FDI. If it was the only offering, we wouldn't have the level or type of investment that we have. The reality is we have one of the most transparent, consistent and competitive tax systems in the world and we should be unapologetic about that.

While there was much coverage of the recent EU Commission tax ruling in relation to Ireland, what has been less well covered is that Ireland has been to the forefront of engaging in multilateral approaches to address global tax avoidance, specifically the OECD Base Erosion Profit Shifting initiative. We are one of the first countries to agree to country-by-country reporting and we also introduced the first OECD compliant Patent or Knowledge Development Box.

In a fast-changing world there are things we can't control. What is within Ireland's control is our own competitiveness. Now more than ever, we need to guard it and improve upon it. This will mean prioritising investment in areas that support enterprise development and jobs, including education and skills, and in necessary infrastructure.

We must ensure we have a functioning, sustainable commercial and residential property market, continue to support trade development and promotion of investment. We must drive productivity and innovation right across the economy, and ensure sheltered domestically trading parts of the economy are cost-competitive. This is not a medium or long-term requirement - this is required now.

For its part, IDA will respond, adapt and continue to win investment for Ireland as it has done for 67 years.

Martin Shanahan is the chief executive of IDA Ireland

Irish Independent

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