Ireland now Germany's land of opportunity

GERMAN customers wishing to send a package with United Parcel Services (UPS) simply dial a freephone number and give the details of their order to a friendly assistant. What few customers know is that the assistant, who always speaks German, is in Dublin rather than Hamburg or Frankfurt.

The Customer Service Telephone Centre in Dublin exists alongside a similar operation in Germany. It's been running for almost a year and it's very successful," said Ms Susan Burnham, head of public relations for UPS in Europe.

"The attraction of Ireland was the employment resources we had there. With telecommunications, geographical location is not so important."

The UPS centre, which employs more than 200 people, is one of the most striking manifestations of Ireland's growing powers of attraction for German businesses, but it is by no means the only one. There are now 170 German companies operating in Ireland, employing more than 10,000 people, making Germany our second largest investor after the United States.

The media giant, Bertelsmann, is about to site its new online computer service in Dublin, a DM300 million joint venture with the US company, America Online, which would create 550 jobs. The IDA fought off tough competition from Scotland to secure the Bertelsmann contract and Mr Barry O'Leary, who heads the IDA in Germany, made no secret of his pride in the deal.

"We spoke to them before they even formed the contract with America Online," he said.

Bertelsmann has gone public by saying it would not make a profit until 1999, so tax was not an issue. "The quality of the people and the infrastructure were decisive," he said.

Ireland was not the only country to benefit from the growing trend among German firms to locate new operations outside Germany. Siemens announced plans last year for a £1.1 billion sterling semiconducter plant in the north east of England, creating 1,800 jobs, while much of Germany's heavy industry is moving eastwards, to Poland and the Czech Republic.

Germany's high labour costs, both in terms of wages and employers' tax and social security contributions, are the main reason for the exodus. Mr O'Leary pointed out it was still unusual for companies to lay off staff in Germany in favour of cheap labour abroad. But companies wishing to expand their operations are increasingly looking outside Germany for cheaper, more flexible arrangements.

With unemployment at its highest level since the end of the second World War, the exodus of industry has become an emotive issue in Germany. The Chancellor, Dr Helmut Kohl, has formed an alliance of employers, trade unions and politicians to devise ways of making Germany more competitive but few economists expected him to achieve his aim of halving the jobless figure by the year 2000.

Apart from labour costs, Germany's high rates of company tax were making many firms look towards Ireland, notably in the field of financial services. The German authorities are investigating 30 companies with offices in Dublin on suspicion of tax evasion.

Many German banks and finance houses have opened branches in Dublin in recent years to take advantage of Ireland's 10 per cent tax rate, compared with rates of up to 45 per cent at home. By routing loans through Ireland, German banks can increase their profits on interest payments by more than 50 per cent.

Mr O'Leary conceded the field of financial services warranted close scrutiny but he said most German banks in Dublin played by the rules and he was hoping to attract more. He maintained the key to winning more contracts was improving language skills and he applauded the setting up of a Government task force to ensure that Ireland would soon have many more speakers of foreign languages.

"There's no doubt there are many projects to be won for Ireland as long as we can convince them of language availability," he said.