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FDI survey gets the numbers right but the context all wrong

There's no point celebrating the nation's financial performance when its infrastructure is crumbling, says Billy MacInnes
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2 June 2022

“Surprisingly, despite the clear issue of housing, just 16% felt that government policy should focus on improving social infrastructure, including housing, schools, and hospitals” – How Ireland’s attractiveness is bolstering FDI performance, EY.

The latest EY European Attractiveness Survey had a lot of good things to say about Ireland. Most of us will have seen the headlines confirming that Dublin is the fourth most popular destination for FDI in Europe.

Pretty impressive, but that’s not all. The results also showed that Ireland “remains one of Europe’s Top 10 locations for FDI with a market share of 3% of all FDI investments – 152 projects – in 2021 according to the EY European Investment Monitor, and attracts the highest number of projects per capita among the Top 10”.

 

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Ireland was revealed as a favoured location for international headquarters and global business services investments. The biggest creator for projects was software and IT services, followed by business and professional services.

Respondents highlighted Ireland’s business-friendly tax regime, education system, quality of life, and business-friendly environment as major factors contributing to its attractiveness as a location for FDI. They also thought Ireland performed well on sustainability with better than average availability of skills for sustainability projects. The availability of finance for sustainability projects and the regulation to support sustainable business practices were also highly rated.

The least attractive factors were labour costs and housing affordability.

Nevertheless, the majority of respondents believe Ireland’s attractiveness will either improve or remain the same over the next three years.

Asked to identify priority areas for government action to maintain Ireland’s FDI attractiveness, they put the geographic rebalancing of the economy, investment in international connectivity and skills development at the top of the list. All thoroughly commendable most people would agree.

It’s possible, however, that the focus on Ireland as a location for international headquarters may, to some extent, have been responsible for making the geographic rebalancing of the economy away from Dublin a little bit harder. After all, if you’re going to have an HQ in Ireland, it’s most likely to be sited in Dublin which means most Irish-based employees will be drawn from that geographic area as well and have to live reasonably nearby. This may also be a contributory factor to disgruntlement around labour costs and housing affordability.

Joined-up thinking

Strangely, it doesn’t appear to have dawned on many respondents that none of these factors operate in isolation. Far too many are still drawn to the capital, soaking up most of the available pool of skilled workers, pulling more people into the city and away from the regions and creating unsustainable pressure on housing, transport and other infrastructure in Dublin.

The irony is that despite the social pressures exacerbated by the success of their presence, FDI companies have relegated government action to address those problems to near the bottom of the list.

There’s something endearingly naive in EY being surprised that only one in six FDI companies believes the government “should focus on improving social infrastructure, including housing, schools, and hospitals”. If anything, “surprise” seems the epitome of understatement when describing the fact 84% of FDI companies believe the basic needs and well-being of the general populace should be subservient to their immediate demands.

When you put it like that, it might not seem quite so palatable. Thankfully, government policy and investment is not solely based on satisfying the requirements of FDI companies. But there’s still a delicate trade off in maintaining a regime that attracts FDI companies but also improves the general lot of the country. This often means striking a balance between what’s required for FDI companies in the short term and for the country and its people over the short and long term.

In the end, attractiveness needs to apply to the people living in the country as well as to the FDI companies.

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