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Dáil Éireann díospóireacht -
Tuesday, 21 Oct 2003

Vol. 572 No. 6

Written Answers. - Foreign Direct Investment.

John Bruton

Ceist:

159 Mr. J. Bruton asked the Tánaiste and Minister for Enterprise, Trade and Employment if her attention has been drawn to a study published by a company (details supplied) on 26 and 27 June 2003 which showed that growth in foreign investment here in 2002 as against 2001 was at a lower rate than growth in Britain, France, Portugal, the Czech Republic, Poland, Hungary, Romania, Bulgaria, Turkey and Russia; and if she will make a statement on the findings of this survey. [23925/03]

Despite the global economic turndown, the level of foreign direct investment, FDI, in Ireland relative to the size of the economy remains one of the highest in the world. Ireland continues to win a significant proportion of the projects available, despite the generally strong performance of many eastern European countries and the overall decline in the number of FDI projects in Europe as a whole. The recent world investment report from UNCTAD shows that worldwide investment flows declined from a peak of $1.4 trillion in 2000 to $651 million in 2002, a drop of 54%, and that flows into Europe declined by 45%. In contrast, it shows that FDI in Ireland, having declined from $26 billion in 2000 to $16 billion in 2001, a drop of 38%, recovered in 2002 to $19 billion, an increase of 19%.

The IDA has informed me that for a number of reasons, the recent Ernst & Young report does not accurately reflect Ireland's performance in the FDI market. For example, the report includes a large number of projects in the automotive sector and the petrochemical sector, in which, for the most part, Ireland does not compete; Ireland is a small country and consequently has a very focused FDI strategy which targets a discrete number of sectors suited to Ireland's characteristics and strengths; and the report measures announcements of projects, many of which inevitably do not proceed, as opposed to actual start-ups.
Because only a limited number of sectors are of relevance to Ireland, the IDA commissions its own market share report, an annual survey of FDI trends in Europe. This survey is carried out by Buck Consultants International of the Netherlands and shows that Ireland's performance and market share is holding up well in the sectors in which it competes. According to the 2002 report, during the period 2000 to 2002, Ireland increased its share of inward manufacturing investment to 9%, an increase of 3%, retained the same share of investment in software, 42%, increased market share in customer contact centres to 25%, an increase of 1%, and registered a similar gain in shared services to 34%, an increase of 1%. In a new investment category included this year – research and development centres – Ireland won an initial market share of 8%. The report also states that overall, the market share statistics point to a very good performance by Ireland when one considers the reduced number of inward investment projects available in the European marketplace and increased competition from lower-cost countries in central Europe.
However, there is no room for complacency. Ireland is becoming increasingly uncompetitive for many basic manufacturing companies and we are putting policies in place to meet the challenge of moving companies here into higher value activities and attracting projects to replace those that are lost. If we are to benefit fully from an upturn in the world economy we need to ensure that pay increases here are in line with those in competitor countries and do not run ahead of increases in productivity; aggressively promote Ireland, particularly the regions, as an attractive location for high quality investment projects; continue the build-up in investment in research, technology and innovation that has commenced in recent years – this involves not just increased funding for third level research and development but also greatly increased support for innovation by indigenous companies and encouragement for these companies to link up with local third level colleges; deliver on critical infrastructure, particularly in transport, broadband and water and sewerage; and promote greater competition in the non-traded sector of the economy.
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