Development agency needs political support to deliver in challenging environment, writes JOHN COLLINS

WITH THE plethora of corporate results, economic indicators and changes to the State pension announced last week, the publication of IDA Ireland’s new strategy did not attract the attention it deserved.

Foreign direct investment was one of the bright spots of the boom and the State agency responsible for attracting investors to these shores has set itself tough targets. It aims to support the creation of just over 62,000 jobs over the next four years, which in turn will create another 43,000 jobs in other areas of the economy.

To make things even more challenging, half of those jobs are to be created outside of Dublin and Cork, while it is hoped one-fifth of them will come from firms in emerging markets such as Brazil, Russia, India and China.

Putting the target of 105,000 new jobs by 2014 into context, foreign direct investment currently supports about 140,000 direct jobs and 240,000 jobs in total thanks to the knock-on effect in supplier firms.

The Horizon 2020 document lays out clearly the changing nature of foreign direct investment, the global trends in business – and how Ireland can position itself to gain maximum advantage from their intersection.

While the IDA enjoyed huge success during the 1990s and early years of the last decade, the competitive landscape is unrecognisable from that time. Replicating the successes of the past will not be easy.

Ireland is competing against a much larger group of nations for a much smaller pot of global investment.

A survey released last month by National Irish Bank and FDI Intelligence showed that the number of jobs created by foreign direct investment fell 25 per cent globally last year.

Ireland fared even worse, with the number of jobs created dropping 42 per cent from 12,900 to 7,500. While the country still punches above its weight in attracting investment, we slipped from 21 to 23 in a ranking of some of the world’s largest 30 economies.

The nature of the projects that we can attract is changing as we move up the value chain. The number of jobs involved tend to be smaller, even if the jobs pay better. Facebook’s establishment of an international headquarters in Dublin last year was seen as a coup for the IDA, but it only created an initial 70 jobs. The days when three Government ministers would turn up to welcome a (usually) US firm creating hundreds of manufacturing or assembly jobs in a provincial town are long gone.

Even with our rapidly falling cost base, which IDA boss Barry O’Leary welcomed last week, those investments go to eastern Europe, Asia and Latin America.

While the international environment is at best challenging, factors at home complicate things for IDA Ireland and suggest a radical rethink of enterprise policy is required.

It’s an open secret in the business community that relations between IDA Ireland and the Minister for Enterprise, Trade and Employment are not good. In private, IDA executives admit to having been embarrassed by Mary Coughlan’s lack of business acumen and often unparliamentary language.

Certainly the IDA was far more comfortable bringing her predecessor Micheál Martin on roadtrips to meet potential investors.

Craig Barrett, the former Intel chief executive, said last month that Ireland is now “distinctly average” and cost-cutting alone will not be enough to revive the economy. Comments by Barrett and Google’s man in Ireland John Herlihy, about the quality of our education system, or rather lack of it, gave the lie to the notion of our young, educated workforce and helped shine the light on grade inflation.

Although Colm McCarthy’s report on public sector cost-cutting stopped short of recommending a merger of IDA Ireland and its sister organisation Enterprise Ireland, which supports indigenous business, the logic of a merger is becoming more compelling.

In its own strategy, the IDA talks about the need to work more closely with leading indigenous firms and how the presence of innovative multinationals can benefit them. Barrett also suggested that far from trying to incentivise foreign investors, we should focus our energies on creating our own multinationals. For example, Ireland prides itself on the strength of its technology sector, but this is based primarily on overseas firms here – fewer than 20 indigenous software firms have revenues over €10 million.

A lesser-noticed fact is that a key piece of national infrastructure is now under the control of one of our main competitors for investment projects. Eircom, the former incumbent operator, which still owns a significant proportion of the telecoms assets in this country, is majority-owned by a division of Singapore’s sovereign wealth fund, STT. If the desire to create a smart economy is real, then a world-leading telecoms infrastructure is the foundation it will be built on.

The arrival of STT has been welcomed by the telecoms industry and the communications regulator as it is seen as a long-term investor. But the IDA must be concerned that a key asset is controlled, if even indirectly, by a competing nation.

The IDA hasn’t been dealt a very strong hand of cards. But on the basis of Horizon 2020, it is determined to play those cards as strategically as possible.

With 430,000 unemployed people in this country, it is essential it gets the political support it needs to deliver.