Chairman and Chief Executive Overview
The Irish economy continued its transformation in 2007. At the heart of this transformation is a belief in our ability to successfully compete with the best and a shared conviction that we can adapt, evolve and innovate in response to the increased challenges which lie ahead.
IDA Ireland has continued to play its part in winning the highest quality investments. Together in partnership with a wide array of national stakeholders, we have continued to re-position Ireland and ensure we are viewed as the innovation-led and knowledge-based economy of choice for global investment.
Ireland remains the most Foreign Direct Investment (FDI) intensive economy in Europe. Ireland’s achievements in 2007 alone include rankings as follows:
- First place as the most Global Nation for the third consecutive year.
- First place for its image abroad as a location for business development.
- Number one position as the most attractive European location for Life Sciences FDI, receiving 25% of all such investment into the region.
- Second place in all developed economies, when adjusted for size, for our share of all global FDI.
- Second place also for flexibility and adaptability when faced with new challenges.
- Second position again in the world for industrial productivity and third for overall economic productivity.
- Third place in the world for job creation per capita.
- The top ten globally as an attractive location to do business.
These are the findings of recently published independent reports - see sources at the end of this section.
Globalisation and market liberalisation continue apace; within Europe, Ireland has benefited most from open flows of goods, services and people. Since the beginning of the new millennium, the manner in which IDA Ireland does its business has been evolving in line with changes in the global economic environment. Our focus is increasingly aligned around significantly expanding investment across three key pillars, namely global services, high technology manufacturing and Research, Development and Innovation (RD&I).
Being cognisant of these changes means that future success will largely be measured on the IDA’s ability to secure:
- Additional high-end value-added investments from our existing client base and from new clients.
- Sustained increases in investment in Research, Development and Innovation.
The success of this strategy has been witnessed in the actual results achieved over the years and those delivered again in 2007.
Highlights for 2007
114 new investments of which:
- 26% were secured from clients new to IDA.
- 40% were R&D investments.
- 34% were expansions to existing facilities.
- A total of E2.3bn+ future capital investment secured.
- 33% of investments came from non-US corporations, demonstrating the global appeal of Ireland as an investment location.
Origin of all IDA Supported Companies
- 60% of these new roles in IDA supported projects have wage and salary levels in excess of E40,000 pa.
- Over 9,000 new full-time jobs with total employment in excess of 152,000 jobs in all IDA supported companies.
- In keeping with the IDA strategy of enhanced regional development, 64% of investments were located outside of Dublin.
The continued impact of Foreign Direct Investment
As Ireland continues its transition into a leading 21st century innovation-led economy, FDI will continue to play a significant role in our future growth and economic prosperity.
Our national wealth is the product of a number of interrelated economic activities, the complexity of which has increased in keeping with enhanced globalisation and the sophistication of the goods and services originating in our economy. This is the cornerstone on which our improved quality of life, greater social cohesion and prosperity depends. IDA Ireland’s ongoing success in attracting the highest quality FDI projects to Ireland has been and will remain paramount.
IDA supported companies in the year under review paid almost E3bn in Corporate Tax accounting for c.47% of the total corporate tax take, and they are a crucial element of our export base accounting for c.85% of manufacturing companies’ exports during the year.
In addition, just under 1,000 foreign-owned companies supported by IDA spent approximately E16bn in direct expenditure within the economy.
Expenditure in the Irish Economy
The major contributions made by Foreign Direct Investment are not confined to economic growth and employment, but in a multitude of ways they have also acted as pathfinders and catalysts in developing an effective national enterprise support infrastructure through:
- Investment in excellence in lifelong learning with educational and training institutes.
- Leading productivity improvements across their business activities and seeding techniques such as Six Sigma, Lean Manufacturing and Total Quality Management.
- Making inputs at both policy and infrastructural levels on a very wide enterprise agenda (education, science, physical and digital infrastructure) to the greater national benefit.
- Driving novel collaborations, consortia and independent research and innovation activities in conjunction with each other and with Third Level institutions.
- Enhancing an entrepreneurial ethos resulting in both internationally traded start-up businesses and those that supply goods and services to the existing FDI base.
IDA client companies have been instrumental in driving our national productivity performance through their adoption of leading international practice in technology, operations, logistics and human resource management. Our national productivity levels as a result are high by global standards. Maintaining and improving our productivity advantage is critically important in an open economy trading into an increasingly competitive global environment.
Industrial Production Index - Output per Person
(CSO Industrial Earnings and hours worked, October 2007)
Future of Foreign Investment
The critical challenge faced by IDA Ireland is to secure investments that are innovation intensive, technologically advanced, having the maximum economic impact and the highest calibre of potential employment.
Since the beginning of the new millennium, Ireland’s offering to potential investors has been re-invented in recognition of the progress in our economic circumstances and the changed needs of the global marketplace. In the highly dynamic and interconnected world of global business, multiple factors that are increasingly associated with the Irish - agility, inventiveness, a desire to seek performance improvements and productivity gains - are vital to corporate success and profitability. Clients comment positively on the coherence of national policy, the positive interaction of the development agencies and the speed and dexterity with which change is agreed and effected in Ireland.
These are factors that have proved critical to our success and will continue to be as the economy continues its transition to being increasingly innovation led. Our earlier advantages of having an abundant, highly educated labour supply and intrinsically low costs have been increasingly substituted by a depth of creative managerial talent, leadership in productivity, innovative business practice and in Research and Development expenditure resulting in superior ‘value-added’ activities.
Significantly, as demonstrated in our results, Ireland today successfully competes for the highest value Foreign Direct Investment projects in the world. Inevitably, however, in a developed economy that means the termination or transfer of certain activities which are no longer practicable. This ‘churn-effect’ is an inescapable fact of modern economic life and should not lead to lamentation about the end of our attractiveness as an investment location nor to suggesting Ireland is no longer a viable manufacturing location; this is patently not the case.
Manufacturing
During the last three years, in excess of E5bn in FDI projects approved by IDA Ireland were in manufacturing. These manufacturing investments are increasingly associated with product or process development activities. They are at the leading edge of technology where productivity and creativity are contingent on the skills, capability and agility of the labour force.
Future manufacturing projects will be of a similar nature and our focus will primarily be on attracting investment in: (i) capital and skills intensive activities, where labour cost is not a significant percentage of total costs, (ii) specific niche operations, e.g. producing high value products, focused on technology transfer, pilot runs or short production runs, and (iii) those with significant competence in demand fulfilment management.
Services
Globally, the services sector accounts for upwards of 70% of GDP in developed economies but only accounts for less than 25% of global exports, suggesting a significant opportunity for the future expansion of trade in services. Services by their nature make intensive use of advanced technology and require a highly skilled workforce. Ireland is an important location within the EU for a number of distinct service sectors, namely computer software, IT services, international financial services and regional services’ headquarters. Ireland is well positioned to take advantage of the globalisation of services by utilising our advantages of tax, scale and expertise. By doing so, IDA will position Ireland as the prime investment location for the next generation of business services and other novel advanced service offerings.
Research, Development and Innovation
The establishment of Science Foundation Ireland (SFI) and the first definitive national policy to establish a substantial foundation of world class research through the development of the science, technology and innovation agenda across the economy was articulated in the Strategy for Science, Technology & Innovation 2006-2013. This integrated approach has yielded a series of significant national industrial and academic research collaborations that would not have been possible heretofore. Ireland is gaining increasing recognition as a location in which to innovate and is empowering some of the leading global corporations to carry out research, development and innovation across a wide platform of activities, thereby enabling their future potential to create and commercialise new processes, products and services.
A noteworthy development is the number of foreign owned companies across multiple sectors who now look to Ireland as a way of enhancing their market presence and technology expertise through acquisition. This is an endorsement of the quality of research and innovation taking place here. Excellent examples in the Life Sciences include the acquisition of Clonmel-based Pinewood Laboratories by an Indian multinational, Wockhardt Ltd, or one of the largest commercial analytical laboratories in the USA, Lancaster Laboratories’ decision to take over Dungarvan-based Microchem Laboratories to strategically increase its market presence in Europe. This phenomenon has been witnessed in other sectors with Intel Inc. acquiring Havok Inc. in the ICT sector and, within financial services, Allfinanz taken over by reinsurance firm Munich Re.
Clearly, continued higher value FDI secured by IDA will be a key contributor to further economic growth. It has a crucial role in ensuring we remain correctly positioned as a highly innovative, dynamic, agile and pro-enterprise economy. IDA Ireland will continue to contribute through managing a balanced portfolio of investments across global services, high technology manufacturing plus Research, Development and Innovation (RD&I) over a variety of sectors and at different levels of scale.
Emerging Trends
Collaborative R&D
An ever more discernable development internationally is the increased level of cross-disciplinary and cross-sectoral work often in conjunction with academic institutions, carried out in a globally-distributed network, the so called Innovation Networks. This should be an area where Ireland can truly excel, given our advantage of size and disproportionate investment in the established clusters of Information and Communications Technology (ICT) and Life Sciences. In both these sectors, we hold a leadership position.
Clean Technology
Another key trend is the increasing global awareness of the delicate balance of enterprise and environmental agendas. Corporations are recognising the global challenges of climate change and sustainable resource use, and the EU has been extremely influential in setting this policy agenda and driving international dialogue.
Ireland is in a particularly strong position to demonstrate leadership, being recognised as a global player with a strong environmental record having avoided much of the older industrial activities. We are looking forward to new fruitful partnerships with academia and other agencies, as we assess the most appropriate positioning of our geographical advantages for investments in the emerging clean energy and new environmental goods and services sector, the so called ‘green technologies’.
The Globalization Index, A T Kearney 2006
Convergence
There is much discussion about convergence, which can be explained as the blurring of previously well recognised segments of the digital marketplace as seen where consumer electronics and communications technologies are merging, or more broadly where separate market sectors converge and seek novel products and services through the utilisation of their respective technological prowess. It is easy to imagine the huge societal advantages that could be reaped by the appropriate convergence of medical devices and computing or communications technologies in much the same fashion as the convergence of Pharmaceutical and Medical Devices.
Nanotechnologies
Despite some of the more daunting predictions, the role of Nanotechnologies across a wide spectrum of economic activities offers immense societal benefits if appropriately investigated, understood and applied. With some of the world-leading research activities already established within our academic institutions and clusters of best Pharmaceutical, Bio-technology and ICT innovators in situ, the potential for Ireland to establish novel industries or technologies in a variety of new disciplines, such as Bio-Nano, Nano-medical, Eco-Nano or Electro-Nano, are immense.
IDA Ireland, in conjunction with our sister agencies and other stakeholders, are committed to playing our parts to optimise Ireland’s position in securing a leadership position in these new and exciting markets of the future.
Business Development
IDA has continued to focus on seeking inward investment from top-tier corporations and companies within a number of high potential business sectors including Pharmaceuticals and Biotechnology, Medical Technology, Financial Services, International Services, Digital Media, Engineering and Information Communications Technologies (ICT). We are confident that there are further FDI opportunities for Ireland in these key sectors which will be augmented in the future by a number of emerging technologies and new business models as previously outlined.
Marketing
IDA continued a strong international marketing campaign, launched in 2006, using the theme of ‘the Irish mind’ as a novel way to differentiate the distinctiveness of the Irish FDI offering. It has been instrumental in conveying the unique characteristics of Ireland. These characteristics in the main mirror those vital for global business success and are focused on three key attributes of the Irish economic ecosystem - Vision, Talent and a Pro-Enterprise environment.
IDA Organisation
Under the theme Fit for the Future, IDA Ireland is investing in further developing our own skills in preparation for securing investments in an increasingly competitive environment. Our objective is to increasingly demonstrate ‘a competitive, client-focused culture’. In this context, IDA has increased its international presence in recent years through the expansion of existing offices and the development of new offices in France (Paris) and China (Shanghai). The expansion will be further developed in 2008 with new offices in India (Mumbai) and USA (Boston, Southern California) and extra personnel in Atlanta and London as part of a significant redeployment of personnel to our overseas activities.
Regional Development
National policy outlined in the National Spatial Strategy (NSS) aims to achieve a better balance of social, economic and physical development across Ireland. In order to drive development in the regions, it proposes that areas of sufficient scale and critical mass will be created through a network of gateways and hubs.
IDA in the past has increased the local potential for winning FDI through a national program of strategic investment in critical infrastructure, properties and large sites. This continued through 2007 while commencing activities to realign our portfolio of properties along regional lines in support of the NSS.
In 2007, circa two-thirds of projects approved were to locations outside of Dublin, resulting in an extensive reach of highly valuable investments across a wide variety of business sectors.
As Ireland competes for investments at the highest end of the value chain, the concept of scale becomes increasingly critical. Leading corporations require a significant talent pool of highly qualified people, effective physical and digital infrastructure coupled with easy availability of sophisticated professional support services. If we are to continue being successful in realising a geographical spread in our business portfolio, all economic and social stakeholders will need to adhere to the framework on which the NSS is constructed. In future, both thinking and action must be aligned and focused on a regional rather than a local basis; this requires a significant change in mindset.
Infrastructure Investments
Our national ambitions and clear sense of vision are well captured in the National Development Plan 2007-2013 and through the provision of E184 billion by the Irish Government, three times the amount allocated in the previous plan, to investment in science and innovation, infrastructure, transport, enterprise, and human capital.
The plan is fundamental to sustaining Ireland’s projected levels of future economic growth. Its timely implementation will help to secure our existing stock of FDI and increase our attractiveness for potential clients. In this context the following are priority issues:
Access - continued investment in transport infrastructure such as airports, ports, roads and rail.
Power - ensuring a competitive commercial offering is available in alignment with new investments combined with a robustness of supply and future upside.
Research - maintaining and enhancing the investments in R&D within the academic sector coupled with meaningful incentives to grow the base of business-funded research and innovation initiatives while building a viable post-doctoral base of research scientists and technologists.
Broadband - recognising Information and Communications Technology (ICT) is ubiquitous across all sectors of the economy and is the most significant enabler of productivity and innovation. A leading innovation economy must have competitively priced and high speed broadband available everywhere.
Innovation - enabling a cross-disciplinary, interconnected environment focused on investment, research and commercialisation of a range of novel convergent technologies. The fact that Ireland was recently recognised as the leader among twenty-six developed economies to benefit in the future from 'Innovation Networks' - strategic research partnerships between nations and corporations - is very encouraging.
Education - implementing impactful policy initiatives which will improve the quantity and quality of students who study science, engineering and business at undergraduate and postgraduate levels. These graduates are the necessary fuel to power the innovation economy of the future. Ensuring the initiatives set out by The Expert Skills Group - some of which are already in train - are brought to conclusion.
Team Ireland
The successes in any particular year are also won on the strength of the work in previous years. IDA Ireland is very conscious of the fact that winning FDI requires team-work, co-operation and collaboration between all key stakeholders including Universities, Institutes of Technology, Research Institutes, Local Authorities, Regulatory Bodies, Government Departments, Employers/Industry Organisations, Chambers of Commerce, Utility Providers, Infrastructure Providers, Service Providers, Construction Industry, and sister agencies such as SFI, Enterprise Ireland, Forfás, Shannon Development, Údarás na Gaeltachta and FÁS among others.
IDA Ireland wholeheartedly acknowledges the contribution made by all the above and various other organisations in winning FDI projects for Ireland. In particular, we recognise and appreciate the crucial role played by strong local management in IDA supported companies who actively position Ireland for further investments within their parent corporations. We greatly appreciate also the role many companies and their executives play in supporting visits from potential new clients.
Future Outlook - Opportunities, Challenges and Risks
Considerable changes have taken place in the global economy in recent years and the pace of change is likely to accelerate. Emerging nations such as Brazil, Russia, India and China will pose new competitive challenges and opportunities as will the developing markets in Eastern Europe and Asia. Ireland’s relative ranking in the global economy and our competiveness position will also fluctuate as these changes evolve and we need to continue to respond appropriately.
As we face a more uncertain external economic environment, it is vitally important that we learn from our past success and ensure all stakeholders take up their individual and collective responsibilities, continuing to actively contribute to bringing the shared national vision, articulated in the National Development Plan 2007-2013, to fruition. Active collaboration, robust dialogue and intense intellectual debate are what are now needed to keep Ireland ahead, charting the next steps on our economic journey, ensuring our past progress is not undone while grasping the challenge of increasing global competition.
As a small open economy that continues to outperform in terms of our size, national competitiveness is a matter of critical importance. A keen focus is needed on all the elements which constitute it. Service and infrastructure costs need to be benchmarked and aligned with best global practice. Clearly the challenge of leadership in these areas is great, but so also are the rewards.
At IDA Ireland, we face these challenges determined to deliver, with our sister agencies, on our shared national vision. We will strive to keep ourselves and facilitate our clients to be at the forefront of research, innovation, productivity and novel business practice; this is no easy challenge but one which we undertake with relish, knowing together we can deliver.
The outstanding investment achievements of 2007 are an integral part of the transformation of Ireland into a leading 21st century, innovation-led economy and a source of satisfaction and pride. Despite the economic turbulence currently being experienced, a reasonably strong investment pipeline coupled with our positive reputation in some of the world’s leading companies leads us to be optimistic that we will continue to secure for Ireland the best in innovation and investments from around the globe.
We are confident that Ireland can continue to outperform, providing we continue to create the best possible environment for innovation and enterprise, and IDA Ireland is determined to proactively play its part.
Staff
Finally, like all organisations, the quality of IDA’s output depends on the excellence of our staff. We are fortunate in the professionalism, dedication and sheer enthusiasm with which ‘Team IDA’ seeks to execute its mandate. We thank them all and, in particular, the guidance of our Chief Executive Officer, Mr Seán Dorgan, who retired after nearly a decade of substantial achievement at the end of 2007. We wish Seán every success in the future.