"We have not witnessed a pandemic of this nature in living memory. This is uncharted territory." As then Taoiseach Leo Varadkar spoke to the nation from the steps of Blair House in Washington DC, I watched on my phone in Dulles Airport. IDA Ireland's St Patrick's Day investment mission, which offers considerably higher levels of exposure and access to potential investors, had been cut short due to the rate of acceleration of the virus in the US.
Consequently, this year marked my first time spending March 17 in Ireland since becoming CEO of IDA. My initial concerns following the Taoiseach's address were of the tragic human toll that this virus could visit upon us.
As the virus grew exponentially worldwide, so, too, did a wave that had been already heading towards business: digital transformation. Covid-19 became the impetus for change. Industries that would have taken years to move to a remote or "distributed" working model in normal circumstances, did so overnight. Most Foreign Direct Investment (FDI) companies were agile enough to operate remotely.
Ireland had the advantage of possessing the skills and infrastructure which enabled a large portion of the workforce to transition to working from home.
During the same period, manufacturing companies ramped up production, ramped down production, halted production entirely, changed product lines, responded to critical needs of the health service, and altered their business and operating models. It has been a difficult period.
Just as our clients have had to alter their ways of working, so too did IDA. We adapted to our homes becoming our workplaces and became acquainted with a myriad of video-conferencing platforms. FDI companies and local enterprises were innovating overnight to do the seemingly impossible. I saw that same spirit in my own IDA team across the globe. It underlines just how productive, skilled, adaptable and resilient the Irish workforce is. I am not surprised, this is what I promote to investors.
At the start of 2020, we were marking the longest period of sustained FDI employment growth in IDA's 70-year history. At 245,000, we had the highest employment in multinationals and together with the mix of advanced sectors we have attracted here, Ireland was well positioned going into this crisis. Direct and indirect employment in multinationals account for one in five of the people who go to work in Ireland every day.
FDI is critical to Ireland's economic success. In addition to the employment provided, multinationals are responsible for more than two-thirds of all exports. FDI's continued performance in recent months has insulated the Exchequer, allowing the Government to do more in other areas than they would otherwise be able to do. The spending power of those employed in multinationals is also required for restaurants, bars and shops, to recover.
Multinationals account for the vast majority of corporation profit tax paid in Ireland and those employed in multinationals pay a significant proportion of the Exchequer's income tax return.
Now, months later, the economic fallout from Covid-19 is becoming more evident. Some parts of the economy have, unfortunately, taken a disproportionate blow: tourism, hospitality, retail and construction.
At this point, the existing base of FDI in Ireland is looking, for the most part, resilient relative to the rest of the economy, but it is by no means immune. We are still in the early days of this pandemic and a prolonged battle against the virus where economic activity remains restricted here or elsewhere could change this situation.
Last week, I announced that IDA had secured 132 investment projects in the first half of the year, only a 6pc reduction year on year and better than many might have expected. But that figure masks a subdued level of investment activity globally that will have a serious impact in the next 24 months. Until a vaccine or effective treatment arrives, investment activity will undoubtedly be challenging.
We need all parts of the economy, FDI, indigenous exporting companies, and locally trading businesses, to succeed for the economy to recover fully. Some who argue for a focus on home-grown companies or SMEs often fail to acknowledge that many indigenous companies are entirely dependent on multinationals for their business. A thriving FDI sector is critical to help drive that recovery in the rest of the economy.
As the Government considers a July stimulus package and a longer-term economic plan, it has difficult decisions to make. A focus on productivity enhancing areas including infrastructure investment, digital enablement and skills and training, that support the continued attraction of FDI will be key.
Ireland's sure-footed response to date in dealing with the pandemic has reinforced investor confidence in Ireland. We have been here before. I am keenly aware that the task in 2009 and 2010 looked every bit as daunting and yet we recovered more quickly than most of us could foresee at the time. We will do this again.
Martin Shanahan is CEO IDA Ireland and adjunct professor at Smurfit Graduate School of Business, UCD