State needs to reassure US firms

The lobby group representing US multinationals operating in the Republic entered the pre-Budget debate yesterday when it called on the Government to invest in infrastructure as a matter of urgency, even at the risk of increased borrowing.

Warning that the State is in danger of losing its attractiveness to US investors, the American Chamber of Commerce in Ireland presented the Tánaiste, Ms Harney, with a litany of inadequacies that it says must be addressed if the Republic is to ride out the global slowdown.

Competitiveness was being threatened by substandard infrastructure, spiralling inflation, uncertainty over future corporate tax rates and a fall in the numbers studying science and engineering at school and college, said Mr Bernard Collins, president of the chamber.

Failure to confront these issues may discourage US multinationals from investing in the State, he told a Thanksgiving luncheon in Dublin at which the Tánaiste was guest of honour. The chamber represents some 570 US companies employing 90,000 people in Ireland. The value of direct US investment is estimated at €33 billion.

Acknowledging that the State was no longer a low-wage economy, Ms Harney said investment in higher value industries was now a priority. The Government recognised that improvement to infrastructure was the key to the long-term sustainability of inward investment, Ms Harney told the luncheon.

Mr Collins called for tax breaks to be offered to companies engaged in research and development.

"Ireland will be put firmly on the map in terms of international developments and creativity in the fields of sciences, engineering and technology if vital support is given to companies engaging in R&D," he said.

Speculation that the EU is set to introduce tax harmonisation has alarmed multinationals that have benefited from the State's generous corporation tax rate, which will be amongst the lowest in Europe at 12.5 per cent if the Government reduces it in the Budget as promised. It is vital that the State reassures US investors by immediately moving to copperfasten its corporate tax regime, Mr Collins said.

It is important, however, that the Republic doesn't talk itself into recession, Mr Collins said. ESRI predictions of 4 per cent growth this year suggests the outlook isn't entirely bleak.