NDP investment vital to attracting overseas firms

THE GOVERNMENT will have to complete the investments in infrastructure outlined in the National Development Plan (NDP) if Ireland is to maintain current levels of investment by overseas businesses, according to IDA Ireland.

Speaking at the publication of its annual report, John Dunne, chairman of the investment and development agency, said it was "absolutely imperative that the infrastructure side of the National Development Plan is completed on schedule and in full".

Last year the IDA supported 114 new investments, of which 26 per cent were secured from new clients, 40 per cent related to research and development (RD) projects and 32 per cent were expansions of existing facilities. Overall the IDA supported capital investment commitments of more than €2.3 billion in 2007. That figure has fluctuated between €1.8-2.5 billion over the last three years .

The number of people working in IDA-supported companies at the end of the year was 152,431 - broadly flat on the 2006 level. Ireland loses on average about 6-7 per cent of its jobs each year, according to IDA chief executive Barry O'Leary. This compares to a level of about 10 per cent in the US. Client firms created 9,216 jobs last year.

IDA Ireland received €124.6 million in Government grants last year, down from €131.2 million in 2006. Grant refunds from client companies amounted to €14.5 million, up from €10.7 million the previous year.

The agency said despite the global credit crunch the prospects for foreign direct investment in 2008 were good.

"We've had a very good start to the year and the pipeline is strong for the rest of the year," said Mr Dunne. "We are very optimistic the out-turn will be in line with our projections, but that's not to minimise the challenges we face."

The agency has added resources in the US, China, India and Britain to enable it to win more investment. Mr O'Leary said that although the fall-out from the sub-prime crisis had really begun to bite last September the IDA has subsequently announced a number of large projects.

While IDA Ireland markets the Republic as a "gateway to Europe" in the US and Asia, Mr O'Leary said that Ireland's rejection of the Lisbon Treaty would not have an impact on investment in the short term. He said the IDA would not like to see the relationship with Europe diluted and that a two-tier European Union is "not in Ireland's interest".

Regarding the possibility that the EU may try to harmonise tax rates, particularly corporation tax, Mr O'Leary said the idea was unlikely to win support from enough member states.

"It is highly complicated and I don't believe it will happen," he said. Mr O'Leary also said the first proposal on harmonised tax dated back to 1972. IDA-supported firms paid €3 billion in corporation tax in 2007, or 47 per cent of the total.

The annual report shows that the value of the support provided per job created has fallen significantly since the early 1990s. In the period 1992-98 the IDA provided average grants of €20,266 to sustain a job over the seven-year period. For the period 2001-2007 this figure fell to €12,577.

Ireland's efforts to move up the value chain is demonstrated by the fact that manufacturing and development projects now involve an investment of €100,000 to €1.2 million per employee, according to Mr O'Leary.

IDA client companies now account for 85 per cent of all Irish exports. They spent €16 billion in the local economy last year, of which €7 billion was payroll.