Chairman & Chief Executive Overview
Competition for investment requires us to take a global perspective rather than a local view of Ireland. In IDA, our view of Ireland today is frequently very different to that of other people’s perceptions. It is taken from the perspective of credible international sources and commentary from world-leading business contacts. It is a positive and optimistic view at this time.
Sean Dorgan,
Chief Executive
John Dunne,
Chairman
Ireland's Advantages
Ireland is the most globalised economy in the world, the number one in Europe in the growth of creative capacity. It has the best education system in meeting the needs of a competitive economy and the most flexible and adaptable workforce when faced with new challenges. Our third level education system has the highest proportion of science and engineering graduates in the EU and we have the highest proportion of young people likely to graduate from third level education compared with their counterparts in the OECD world. And we can still boast of having the youngest population in Europe. None of those comments originate from IDA but come from the most authoritative voices in their fields internationally.
(See references at end of this section.)
In 2003 Ireland was the only country in the EU to enjoy a sharp increase in FDI, more than doubling its inflow, according to the United Nations Conference on Trade and Development. Ireland also increased its market share of inward manufacturing greenfield investment into Europe by three percentage points. And the US Department of Commerce again confirmed that Ireland continues to consistently give the best rate of return to US companies investing in the EU.
Endorsing Ireland's position as a good location for inward investment, a range of the 64 new projects we negotiated during the year included world leaders in some key new areas of global business such as Google, eBay/PayPal and Overture (now Yahoo) setting up key European centres in internet services, Ingersoll Rand making Ireland the centre for its global sales and service activities, HVB Bank headquartering its extensive property and real estate portfolio management in Ireland and SAP, Europe’s leading software company, setting up its global technical support centre here. Examples such as these give us confidence that Ireland is continuing to be an attractive location for inward investment.
Highlights 2003*
| Total new jobs filled | 9,182 |
| - of which first time jobs | 7,002 |
| Total full time employment | 128,993 |
| Change in full time employment | -3,011 (-2.3%) |
| Total number of companies | 1,054 |
| Projects fully agreed | 64 |
| - of which Greenfield | 33 |
| - of which Expansion | 31 |
| R&D Projects approved | 39 |
| Corporation Tax paid (estimated) | €2.6 billion |
| Total IDA grants paid | €96.5 million |
A Knowledge Economy
Promoting Ireland as the knowledge economy, which it undoubtedly is, has become the key message to the world from IDA Ireland. This transformation has been underway for some time and has positioned us well for winning a new breed of inward investment. The ability to use knowledge quickly, flexibly and creatively is a distinguishing feature of Ireland for many world-leading companies and IDA is reinforcing this image through a new marketing brand campaign under the banner “Ireland, knowledge is in our nature.”™
Ireland is building some unique features in the economy that will ensure its continued attractiveness for inward investment in the future. We will retain the outstanding advantages we have in the quality of our people, especially the young and their positive, outward looking attitudes. We will retain the flexible and agile way in which we respond to rapid changes in the world and its markets. We will retain the low corporate tax that has been the cornerstone of our success.
To these we will have added the richness in capability that will flow from the current strong investment in education, in science and in research. We will have higher skills levels throughout the workforce, providing higher earnings and greater job satisfaction. We will also have completed much of the investment that is underway in the creation of world-class infrastructure to support the world-class businesses operating here. We will be as competitive as an open, global economy demands.
Such transition has required many changes within IDA and in our operating activities. As international business evolves, so too does IDA. In other parts of this Report we highlight some of the new ways we do business in the international FDI markets and in the regions in Ireland. We have married the best of traditional IDA approaches with additional expertise and focus where we need to respond in new ways.
The Road Ahead
It is now widely understood and accepted that future inward investments will be based on high skills, knowledge and innovation. It does not follow from this that Ireland will no longer be a good location for manufacturing investment. In fact, it is critical that the economy continues to be competitive for manufacturing.
The investors we want to now win are those seeking locations for more advanced manufacturing, to a greater extent depending on high skills and doing high value work, often connected to research activity. The type of industrial job that will increasingly emerge in Ireland will be at the top end of the value chain: the innovation, the research and development, the pilot production plants for new advanced products, the first location for that company using the newest technology in the industry worldwide. Over time, the more basic manufacturing – the commodity products – will migrate to low cost locations in Central and Eastern Europe, Latin America and Asia.
High cost countries can still compete and win manufacturing activity, if they create high value, as proven for example by Germany and the UK, which remain key manufacturing centres, or Finland, Italy and the Netherlands which have increased their manufacturing output in recent years. In Ireland manufacturing output continues to increase and we continue to win key new manufacturing investments. As long as such manufacturing is integrated into other elements of the value chain then Ireland has a strong future in manufacturing.
Some of the highlights of projects won in 2003 illustrate this point. For example Abbott Laboratories’ €155 million investment in Longford and Sligo will require 80% of its 950 employees to have third level qualifications. Pfizer adding a financial shared services centre to its Irish operations is directly linked to access to a broad range of skilled people in Ireland.
The addition of high level research activity to manufacturing also adds significant value, as evidenced by the decision, for example, of GlaxoSmithKline to invest a total of €35 million in three R&D projects at its Cork facility. Intel establishing an Innovation Centre at its Leixlip site was further endorsement of Ireland’s capacity to handle high level innovation as well as advanced manufacturing.
To underline the progress being made in winning quality projects, almost 40% of new jobs negotiated in IDA supported projects in 2003 will pay salaries in excess of €37,000 per annum, reflecting the education and skills base of activities now being attracted to Ireland. The addition of strategic functions and new R&D investment continue to deepen the roots of overseas companies here. During 2003, twenty three companies added significant new business functions to their existing operations in Ireland and thirty nine R&D investments, totalling over €100 million, were approved in IDA supported companies.
2003 Overview
While acknowledging that 2003 was a tough year generally in FDI markets, we are pleased to record that 64 projects were negotiated and secured by IDA during the year, compared with 55 in 2002. Ireland also increased its share of the inward investment into Europe in a market where we now compete at the higher end of skills and value chain. The projected job numbers associated with these projects is somewhat lower than applied previously for job intensive investments but this will be an ongoing feature of the more advanced type of inward investment activity.
9,182 new jobs were recruited during 2003 in IDA supported companies, which is on a par with job creation in the mid-nineties. There was a net loss of 3,011 jobs in the year; gross losses at 12,193 were disappointing, but showed a continued slowing of the job loss trend seen in 2001 and 2002. Total employment is now just short of 129,000 in IDA supported companies, which is 40% higher than ten years ago. The areas of growth during the year were in pharmaceuticals and medical technologies and in international services, while electronics and engineering and other manufacturing had declining job numbers. Job trends reflect the move of lower value activities to lower cost locations and their replacement by higher value business. IDA supported companies now spend €14.7 billion in the Irish economy from their annual sales of €69.3 billion and exports of €65.2 billion, a reflection of their key role in the economy and their importance in future growth.
It is worth noting the overall position of Ireland for inward investment within Europe. Independent market share analysis, undertaken across the key FDI markets, shows that Ireland wins a disproportionate share of FDI for a country that represents less than 1% of the population of the EU. Of FDI into Europe Ireland wins:
- 9% of manufacturing investments
- 31% of pharmaceutical/medical technologies
- 12% of information and communications technologies
- 41% of all software projects
- 25% of pan-European customer contact centres
- 34% of pan-European shared service centres
- 8% of R&D centres
We want, over the next year or two, to see continued recovery in investment markets internationally, particularly in the US. We want those markets to understand what Ireland now offers, and to be convinced by the excellent results delivered to so many global companies operating out of Ireland. That, as always, will be the best endorsement for future investment location decisions. By being flexible and responsive in delivery, IDA and Ireland can continue to be successful in the more advanced and demanding global competition we face.
“Our employees have consistently proven their ability to master the engineering, scientific and manufacturing disciplines involved in the world’s most advanced technologies.”
- Jim O’Hara, Vice-President TMG and General Manager, Intel Ireland.
References for paragraph 2:
“Most globalised economy - AT Kearney Globalisation Index 2004
“No 1 in growth in creative capacity - Demos, Independent UK-based think tank
“Best education system - IMD World Competitiveness Yearbook 2003
“Most flexible - IMD World Competitiveness Yearbook 2003
“Highest proportion of science - Eurostat, the EU statistics office
“Highest proportion of young people - Education at a glance, OECD Indicators 2003