Irish Economy
US firms invested almost $18bn in Ireland in H1 2011- - most of investment likely came from existing affiliates
By Finfacts Team
Sep 30, 2011 - 6:48 AM

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US firms invested almost $18bn in Ireland H1 2011 but most of this investment likely came from existing affiliates in the country. Nevertheless, it was an increase  of 49% from 2010 and put Ireland on a similar level with the Netherlands, Canada and the UK.

The data on 2011 investment comes from fDi Intelligence, a unit of The Financial Times, and is in a new report commissioned by the American Chamber of Commerce Ireland, which has revealed that US investment in Ireland is now worth $190bn and has grown five fold over the past decade coincident with static employment. Ireland's share of total US investment in Europe has risen from 5.2% to 8.7% over the same period and on an annual basis, now accounts for one quarter of Irish GDP.

The report authored by US-based economist Joseph P Quinlan ‘Built To Last - The Irish US Economic Relationship' (pdf) provides a history of US Foreign Direct Investment (FDI) in Ireland and the US/Ireland economic relationship. However, while it highlights that "Ireland’s steadfast refusal to raise its corporate tax rate, have buttressed the appeal of Ireland as a destination for foreign direct investment," and "despite pressure from certain policy makers in Europe, Ireland continues to maintain its 12.5% corporate tax rate, half the European average," it ignores the threat from a cash-strapped US focused on companies maintaining big cash hoards overseas while struggling to create jobs at home.

Microsoft in response to questions this year from the Securities and Exchange Commission (SEC) on its falling effective tax rate, said it is increasingly channeling earnings from sales to customers throughout the world through the low-tax havens of Ireland, Puerto Rico and Singapore.

Microsoft's pre-tax profits booked overseas almost tripled over the past six years, to $19.2bn in the fiscal year to June 30, from $6.8bn in the year ended in June 2006, according to company filings. By contrast, its US earnings have dipped to $8.9bn from $11.4bn in the same period. Foreign earnings now make up 68% of overall income.

The report says "by various metrics and surveys, Ireland still ranks as one of the most competitive economies in the world, a development nothing short of stunning given how underdeveloped the nation was coming out of World War II. Ireland, to a large degree, is Europe’s version of an Asian NIC - -  or newly industrialised nation - - economically advancing and developing along similar lines as South Korea, Taiwan, Hong Kong and Singapore."

However, the highlighted falling unit labour costs mainly result from rising output with static employment levels.

The report says total US affiliate employment in Ireland at 90,000, has remained relatively constant between 2000 and 2010 thanks to expanding employment in service activities. The latter has offset the decline in manufacturing employment and is likely to expand in the years ahead.

In the early years of the last decade, Ireland won 25% of US greenfield investment into Europe with 1% of the region's population. In recent years, as we already have affiliates of big US firms in Ireland, new projects tend to be on a small scale.

IDA Ireland's net additional jobs target in supported firms this year is less than 4,000.

There is also an interesting fact that Irish companies in the US invested $8bn last year. That brings total Irish investment in the US to more than $30bn for the first time. It is estimated that Irish companies employ some 120,000 workers in the US.

This is a useful talking point but is CRH an Irish company when most its 80,000 staff are located overseas and up to 90% of its shares are held outside Ireland?

The report says:
  • US firms have invested more capital in Ireland since 1990 (some $189bn on a cumulative basis) than the four BRIC nations combined ($159bn).

  • In addition, US FDI to Ireland totalled $17.7bn in the first half of the year, a rise of 49% from the same period a year ago.

  • Globally, only the Netherlands, Canada and the United Kingdom attracted as much US FDI as Ireland in the first half of this year.

  • Exports, the bulk of which are from multinationals, continued to expand, underpinned by declining prices at home (energy, office rents, construction, and, in some cases, wages) and by the exporting presence of leading global companies like Boston Scientific, Abbott, Medtronic, Pfizer and MSD in health sciences, tech firms like HP, Microsoft, Google, Intel, IBM, Apple, Dell and services firms such as Bank of America Merrill Lynch, Citi and PayPal .

When it comes to international business and FDI, the figures only tell a partial story.
 
For example, the millions of Apple products sold each year are made in China, not by Apple but by a Taiwanese company.
 
China is crucial for Apple but that wouldn't be obvious from its investment data.

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