FDI in Ireland in the Coming

Times

IIEA Seminar
Frank Barry
January 2009

FDI-Intensity of the Irish Economy

Share of
foreign
affiliates in
manufacturing
employment

Share of
foreign
affiliates in
services
employment

FDI inward
stock (USD)
per head of
population
(2004)

Ireland

49

22

57372

EU15

23

10

9796

CEE

33

16

2403

The Changing Sectoral

Structure of FDI
Inward FDI stock in Developed Countries
% of total FDI in each year

Manufacturing
Services

1990

2002

46

34

54

66

The vast bulk of FDI still originates in the

developed world and goes to developed
world locations
Over the last decade, Europe has
accounted for over 57% of total US foreign
direct investment, and for about 43% of
fthe jobs created

U.S. firms invested $26.4 billion in China

since 2000, which is less than half of US
investment in Ireland.

World FDI Inward Flow

1500000
1000000
World FDI Inward Flow
500000

millions of USD

2003

2000

1997

1994

1991

1988

1985

1982

1979

1976

1973

1970

 World foreign direct investment (FDI) flows

reached an all-time high in 2007. 2007
also recorded the highest ever nominal
inflows to Ireland
The 2008 decline is likely to be around
25% both globally and in Europe. This
year it could well reach another 30% or
more

Besides the FDI recession, there are

increased threats for Ireland (quite apart
from IFSC-related issues)
We are entering a new era of much lower
global corporate profitability. 1990s was an
era of high global corporate profitability

Financial Times editorial

January 11, 2009
Current levels of government spending should
fall, or ministers will be forced to raise taxes.
This will be deeply unpopular. Even measures,
such as a carbon tax, that can be presented as
helping the planet as well as public finances
may well be unpopular. In the long run, its
commitment not to raise the 12.5 per cent
corporate tax rate may prove to be
unsustainable

Irish Times
Monday, March 17, 2008
Let's face it, Dell is on the way out
JOHN McMANUS
BUSINESS OPINION : Finally the unspeakable has been spoken: Dell, the US
computer giant that employs 4,500 people and accounts for something in the region of
6 per cent of Ireland's GNP, is on the way out the door and we better face up to it.
It is not going to happen overnight and it's not going to happen tomorrow, but it will
happen.
Whom do we have to thank for this unpalatable dose of realism? Is it the IDA, the
Minister for Enterprise and Employment or even Dell itself?
No. The appalling vista was in fact unveiled last week by a Trinity College professor,
Frank Barry, and his colleague from NUI Maynooth, Dr Chris Van Egeraat. It took
the form of comments they made after presenting a paper accompanying the
Economic and Social Research Institute spring quarterly which was released on
Thursday.

Irish Times
Friday, March 14, 2008
Higher-value work has foreign technology firms more embedded
FOREIGN TECHNOLOGY firms are now far more embedded in Ireland than when
manufacturing was their primary activity, according to new research published by the
Economic and Social Research Institute (ESRI), writes John Collins .
"I would be very sure Dell is on the way out of Ireland given the trend in the sector,"
said Prof Frank Barry from Trinity College, Dublin, one of the report's two authors.
However, he said that if Dell decided to cease manufacturing here it "won't be as
catastrophic as you might think" as less than half of its staff were now engaged in
manufacturing.

 Dell announced this month that it was shedding

1900 assembly jobs out of its total of about 3000
in Limerick plus 1300 in Cherrywood in Dublin
The jobs to remain in Limerick were in product
development, engineering and logistics, in
support of overseas manufacturing. The jobs in
Cherrywood are in sales and marketing support

The ones to remain are the better-paid

segments. (The assembly workers were making
just 10-14 per hour, which is well below the
average in the sector).

 Forfs data suggest that local sourcing of

components comprise also 30 percent of
material inputs
These figures, however, include
expenditures on items purchased from
local supply chain managers but
manufactured in other regions, as well as
expenditures on complete systems
manufactured by contract manufacturers
with local operations. More careful
analysis which excludes these items
brings the figure down to 10 per cent.

INTEL
Strong record in process development
Intel has invested some 7 billion in Ireland
since 1989, during which it has shifted its labourintensive assembly activities to Puerto Rico and
the far east and refitted its Irish plant for wafer
production.
Has spent 2 billion in Ireland in recent years to
construct its FAB 24 fabrication facility, which
will implement the worlds most advanced 300millimetre semiconductor manufacturing
technology.
Also new IT innovation centre.

Pharma and Medical Devices

In Pharma, Ireland competes with
Singapore and Puerto Rico
In Medical Devices, with Switzerland

IT Services
Persons Employed in Computer and Related Services and in All Services
Computer and
Related Activities
All Services
1999
18,612
515,500
2000
18,779
553,700
2001
22,260
608,500
2002
22,211
668,876
2003
24,030
713,117
2004
28,426
736,969
2005
no data
740,419
Absolute increase 1999-2004
9,814
221,469
Percentage increase 19992004
+53%
+43%

Employment in non-IFS Business

Process Services Export activities

Number of Services-Sector FDI Projects

by Destination Countries, 2002-2003

Call centres
EU15
Ireland

169
29
(17%)

Shared
services
38
19
(50%)

IT services
198
14
(7%)

Regional HQ
185
15
(8%)

 Ireland has the highest proportion of call centre

staff of any European country as a proportion of
its working population, at 3.6%, compared to its
nearest competitors, the UK at 2.8 and the
Netherlands at 2.5.
A UK report by CM Insight (2004, p 160),
however, finds that Ireland attracts more highvalue, less price-sensitive contact centre activity
than other offshore locations. The report notes
the substantial element of technical and
software support in the Irish sector as well as a
relatively high ratio of team leaders to agents,
the latter suggesting a focus on quality and more
complex (less scripted) contact centre functions.

IFSC
IFSC now employs > 16,000 people and pays an
estimated 15 percent of all corporation taxes
collected.
Almost 450 international financial institutions
operate from Dublin, including half of the worlds
top 50 banks and half of the top 20 insurance
companies.
Dublin specializes in back office activities, and
has a particular specialisation in four niche
areasfund administration, treasury operations,
corporate banking and insurance.

Employment allocation within IFSC

Funds/Asset Admin

42 percent

Banking

37 percent

Insurance

21 percent

Dangers for IFSC: Global reregulation

The rationale behind the financial-services policy
proposal was clear. The analysis suggested that a
combination of factors now created an opportunity for a
regional location like Ireland to become a player in the
international financial services industry. First, world
financial markets had become highly interdependent and
operated on a round-the clock basis. Second, the
technology to set up and run international data- and
fund-management centres was, in turn, creating, an
electronic market place, thanks to improvements in
international communications. And third, global
deregulation of financial services meant that an
increasing range of these services were provided from
beyond national boundaries

MacSharry and White: The Making of the Celtic Tiger, 2000, page 318

Dangers for IFSC: Financial R&D

Citi now employs over 1,500 in the
International Financial Services Centre
(IFSC) in Dublin and is the largest
employer in the IFSC. In July 2005, Citi
Ireland announced the creation of a
Research and Development Centre with
an investment of 10 million. This is the
first ever-dedicated R&D Centre
established by Citi worldwide.