Ireland on the rise

In the Spring 2011 issue of Re:locate magazine, we reported that, after an unsustainable surge during the late 1990s and early 2000s, the Republic of Ireland’s ‘Celtic Tiger’ economy had all but ground to a halt. Nearly five years on, the story is very different.

Enda Kenny
After a difficult few years, the Republic of Ireland's economy has bounced back, with forecasts earlier in 2015 suggesting its growth this year would be the highest in the European Union.Commenting on the second-quarter boost to exports brought about by the low euro, Irish Minister for Finance Michael Noonan emphasised the broad-based nature of the economic recovery and the fact that Irish firms, not just big multinational companies, were contributing.Mr Noonan calculated that Ireland's debt-to-GDP ratio would fall to below 100 per cent by the end of 2015, rather than in 2016 as had been expected. It peaked in 2013, at 120 per cent of GDP.The good news continued, with the Irish government's budget for the fiscal year 2015, presented in October, forecasting economic growth of 6.2 per cent in 2015 and 4.3 per cent in 2016, and average growth of 3 per cent per year thereafter.According to figures presented in the budget, 130,00 more people are now in work compared with the low point in 2012, employment will increase by 48,000 during 2016, and unemployment (which has decreased from a peak of 15 per cent in 2012 to 9.4 per cent this year) will fall to 8 per cent by the end of 2016.

Risks to the economy

Ireland's is the fastest-growing economy of the Organisation for Economic Co-operation and Development's (OECD) 31 member states. In its two-yearly review of the Irish economy, the OECD confirmed the robust and broad-based nature of its recovery, but warned of five key risks:
  • The trend towards slower growth in the world economy
  • Another property-sector boom and bust
  • Changes to the international corporate tax regime at EU or OECD level
  • The effects of fresh upheavals in the Eurozone
  • A UK exit from the EU (Brexit), which might follow the in-out referendum promised by the UK government
Enda Kenny, Ireland's Taoiseach (Prime Minister) is also apprehensive about the possibility of a Brexit. Speaking at the annual conference of the Confederation of British Industry (CBI), he stressed the strong financial and social ties between the UK and his country, pointing out that Britain exported more to Ireland than it did to China, India and Brazil combined.Mr Kenny told the conference that his country's commitment to the EU was "clear and unqualified" and that he believed it was in Britain's interest to remain in the union, too."I think it is right – as your friend, closest neighbour, and the only EU partner with whom Britain shares a land border – to share our perspective with you. The Irish government's strong view, backed up by independent economic research published last week, is that a Brexit is not in Ireland's economic interest," he said.Mr Kenny believes that a Brexit could also the future of the peace process in Northern Ireland. "The EU provided almost €2.4 billion in funding over the period 2007 to 2013 to help Northern Ireland overcome the challenges of a peripheral region that has emerged from conflict," he said.

Attracting FDI

Ireland's "low and stable" corporation tax rate has remained important in attracting foreign direct investment, said the OECD review. However, the organisation welcomed the move to abolish, by 2020, the "double Irish" tax arrangement, the option to adopt which was closed to new companies at the beginning of this year.The OECD added that, given the strong presence of intellectual property- intensive IT and pharmaceuticals companies in Ireland, preventing artificial profit-shifting through the payment of nonmarket- priced royalties on intellectual property owned by companies in zero- or low-tax jurisdictions was crucial.The issue of corporate tax was highlighted in November, when US politicians from both sides of the political divide united against pharmaceutical giant Pfizer's $155 billion takeover of Ireland's Allergan to create the world's largest drugs company.From the Democrats' Hillary Clinton to Republican presidential candidate Donald Trump, the politicians criticised Pfizer's intention to relocate its international headquarters to Dublin in a move that would slash its corporation tax bill. The company's global administrative HQ will remain in New York.At a minimum, Pfizer will pay roughly 17 to 18 per cent in Irish corporation tax, compared with the 25 per cent it currently pays in the US. Other estimates have suggested that the percentage difference could be 20 per cent or more.The combined company, which will be called Pfizer, will have annual sales of $63.5 billion, a global workforce of 110,000, and a $9 billion-a-year spend in research and development (R&D). Executives expect the deal to result in cost savings of $2 billion, excluding tax, sparking fears of job losses in both the US and Ireland.

ICT sector flourishing

During the Celtic Tiger years, a host of big-name global companies, including Intel, Google, LinkedIn, Facebook, Microsoft, Dell, GE, IBM, Merck and Hewlett Packard, set up operations in Ireland, attracted by a young, skilled workforce as well as low corporation tax.Many of these firms are in the ICT sector. According to IDA Ireland, the Irish government's foreign direct investment agency, the country has become the global technology hub of choice when it comes to attracting the strategic business activities of ICT companies.Nine of the world's top ten ICT names are located in Ireland, and IDA supports over 200 firms in the sector, which employs more than 37,000 people and generates €35 billion in exports annually.Publicly funded research and development centres, the agency says, support the R&D programmes of many corporate research projects. This public activity complements private-sector research, which continues to be supported financially through a 25 per cent R&D tax credit and grants from the IDA.

Apple to expand

Many of the companies now established in Ireland have gone on to increase their presence. In November, Apple announced that it would expand its campus in Hollyhill, County Cork, adding a building that would provide office space and room for 1,000 additional employees by mid-2017.Apple has been in Ireland since 1980, when it launched its first facility in Cork. The latest expansion builds on two previous expansions of its data centre, which opened in 2009 following a €500 million investment.Richard Bruton, Ireland's Minister for Jobs, Enterprise and Innovation, said, "Big data is a key sector which we have targeted as part of our Action Plan for Jobs. In Ireland, we have major advantages in this area which we in government are determined to take full advantage of – a moderate climate, the presence already of many of the biggest ICT companies in the world, and a highly skilled workforce in this area – and we have put in place a range of measures to attract more investments in this area."For this small country with big ideas, the future looks bright.For more Re:locate news and features on Ireland, click here and for more on business and enterprise, click here
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