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Ireland’s allure for multinationals is about a lot more than tax rates

Karlin Lillington: Our strength, resilience and openness will keep attracting investors

Last week, on St Patrick’s Day, I wrote about how for years, I was guaranteed a March commission from a publication somewhere around the world, as audiences abroad were always interested in Ireland’s extraordinary transformation into a global technology centre.

This week, I'll offer the factors that gave Ireland such a dominating position. And then, I'll consider what has changed, whether our past advantages still stand to us now, and what we need to be doing to build a solid Irish tech future.

Our strengths back then remained consistent over many years.

Initially, the low cost of locating in Ireland was a significant draw. Wages and the cost of living were low to moderate. We were in the euro zone, offering stability. Ireland offered tax and government incentives. Although we now rightly question some of those arrangements, the argument that companies only came for tax reasons then is wrong. Many countries had (and have) lower taxes and attractive incentives.

But Ireland had broad appeal. Societal and cultural reasons were, I think, the most important. Ireland speaks English and was (and is) producing well-educated, skilled graduates.

Ireland also engaged at the highest levels with companies, striving to ensure questions were answered and problems addressed. Several companies back then told me how notable this was, when other countries left them talking to an uninterested junior official. And all were deeply impressed by both the IDA and what is now Enterprise Ireland.

Add to this critical ‘soft factors’. Ireland shares strong cultural ties with the US, and there were nearly always Irish-Americans contributing to investment decisions from the executive suite.

Irish culture was casual and humour-infused and a good fit with the laid back tech culture of the US west coast. Companies found it easy to get US employees to spend time in Ireland, and vice versa.

And, very significantly, a wave of 1980s and 1990s emigration produced a generation of well-educated, business-experienced individuals ready to move back to Ireland in the late 1990s and early 2000s. Companies found they had access to superb Irish managers and executives, sometimes already working within their own US or other European offices.

Attention-grabbing

With hindsight, we can take a sharper view of the pros and cons of that early environment. But all combined to drive technology investment in a phenomenal, globally attention-grabbing way.

It wasn’t clear initially whether Ireland’s tech growth would be a short-term or long-term development. Maybe companies would simply bail out to the next attractive location. But ultimately (and despite some media and political histrionics) few did. Those that did, such as Dell, stand out as exceptions.

What happened instead was a change so transformative that it has insulated Ireland from severe economic suffering, even through a recession and a pandemic. Tax receipts from tech have driven the Irish economy forward even during such terrible times (though arguably, they should be better used to benefit all).

But how do we stay attractive now? Many economic incentives are gone, as Ireland becomes one of the most expensive places to build, work and live. Some tax incentives are being stripped away. A new generation of Zoom workers can work anywhere. The public, here and globally, wants more accountability and transparency.

Economically, a key government priority must be to address the most urgent liveability problems (which the tech sector sometimes directly or indirectly exacerbates) such as the cost and availability of housing. Possible solutions are closely connected to other issues – investment and incentive decisions, such as the regions where investment goes (or is allowed to go).

We also desperately need long-delayed infrastructure such as better transport and national high-speed broadband, to enable workers and companies to go anywhere within Ireland.

Energy considerations are also becoming critical. We cannot afford endless energy-hog developments with low or mediocre employment, such as the alarming proliferation of data centres.

Political and regulatory stability are also essential. That doesn’t mean indulging companies, which generally prefer a stable system to a system of leniency coupled with uncertainty.

Abrupt political and policy shifts or regulatory waffle are more likely to weaken Ireland’s appeal than introducing reasoned, productive change, such as a more balanced global and domestic tax system and adequate supports for indigenous companies.

Education system

We also need a serious look at Ireland’s education system, from childhood to third level, which is underfunded by comparison to so many countries.

The State should not prioritise simply supplying STEM grads supposedly to suit the technology industry (remember Steve Jobs’ famous speech on the importance of a diverse workforce of many backgrounds and skills). But we should have a vibrant, properly funded and flexible schools and universities system which ideally reconsiders the artificial career-shaping dominance of the Leaving Cert.

And finally, don’t underestimate the importance of Ireland’s incredible intangibles. The country has shown itself to be strong, resilient and open, culturally and societally, standing out in the turmoil and churn of recent times. That quintessential modern Irishness is perhaps the most attractive national asset of all.