Xerox move a coup, but pressure builds

Winning the Xerox investment for Dundalk and Dublin is quite a coup for IDA Ireland. It is one thing to win a major project from a company which is expanding its global operations, but to persuade Xerox to invest at a time when it is slashing 9,000 jobs worldwide is quite extraordinary.

The US company is consolidating much of its European operations in a new site in Ireland, at a time when it might have been expected to retrench at one of its existing locations. That IDA Ireland managed to persuade Xerox to invest the major part of the operation in Dundalk in line with Government policy of moving investment outside Dublin is the icing on the cake.

The kind of consolidation being undertaken by Xerox is both a threat and an opportunity to Ireland. The opportunity obviously comes in trying to ensure that, as in this case, Ireland wins rather than loses in such reorganisations.

But inevitably some of the multinational subsidiaries here will also come under pressure as major multinationals with operations in a number of European sites decide to restructure either due to changing demand in their market segment or due to a new approach to marketing inside the euro currency zone. The pressure to keep the economy as competitive as possible in order to offer such companies an attractive site for investment will thus remain intense.

It will also be interesting to see whether any of our EU partners express unhappiness with the decision by Xerox to create jobs in Ireland at a time when they are slashing employment elsewhere. There was some mutterings last year when Boston Scientific, the US health-care group, promised to create more than 2,000 jobs here at a time when it was cutting its workforce in Belgium. And the situation is similar with Xerox, which has operations in several EU states.

Against this background, it is just as well that negotiations between the Government and the EU Commission are well advanced on a programme to move the entire corporation tax structure here to a single 12.5 per cent rate by early in the new millennium.

At the moment our 10 per cent manufacturing rate is still seen as an unfair incentive by some EU states, but moving all companies towards one 12.5 per cent level will lessen the weight of this argument, and, when all companies eventually move to one rate, will make it irrelevant.

In the meantime, it appears that the fight for mobile international investment projects is becoming an increasingly rough game. And with signs of more shake-ups on the way - in the electronics sector in particular - the winning and losing of major projects could yet become a matter of political controversy across the EU.