Investing in ireland a survey of foreign direct investors

Investing in Ireland A survey of foreign direct investors A report from the Economist Intelligence Unit Sponsored by Matheson Ormsby Prentice Investing in Ireland: A survey of foreign direct investors Contents About this report Executive summary Introduction: Market access – Ireland’s FDI foundation Four alternatives: Market access drives investment in China, Singapore, the UK and the US The corporate tax infrastructure: An important ingredient The talent base: A differentiator under threat?12 Ireland’s biggest disadvantages: Outside control of policy15 Responding to the crisis: Boosting competitiveness at the same time19  Financial regulation: Getting the balance right 21 Conclusion: Ireland’s unique selling proposition 22 Appendix: Full survey results 23 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors About this report Investing in Ireland: A survey of foreign direct investors is an Economist Intelligence Unit report sponsored by Matheson Ormsby Prentice It examines the main factors that bring foreign direct investment to Ireland and the main ongoing challenges in attracting investment Ronan Lyons was the report author Aviva Freudmann and Jason Sumner were the editors To support this study, the Economist Intelligence Unit conducted a survey of 315 global respondents during September and October 2011 All respondents had responsibility for or familiarity with their companies’ investment decisions; and all had familiarity with their companies’ current or prospective investments in Ireland Overall, 60% of respondents were from companies with current operations in Ireland, and 27% were from companies not currently doing business in the country but planning to invest within the next three years A small proportion of the sample (about 10%) was not currently invested and not planning to invest in the next three years Respondents were split roughly equally between large firms (51% from companies with over US$500m in annual revenue) and small firms (49% from companies with revenue below US$500m) They held senior positions in their organisations (87% C-level) and were spread throughout the world: 55% from North America; 21% from western Europe; and 24% from the Asia-Pacific region or emerging markets By sector, 49% came from the financial services industry; 15% from the IT/online sector and the rest  came from multiple sectors, including pharmaceuticals To complement the survey findings, the Economist Intelligence Unit also conducted wide-ranging desk research and in-depth interviews with several executives and experts Our thanks are due to the following for their time and insights: l Lionel Alexander, vice president and managing director (Manufacturing), Hewlett Packard l Paul Duffy, vice president, external supply operating unit, Pfizer l John Fitzgerald, head of macroeconomics, Economic and Social Research Institute l John Herlihy, vice president of international SMB sales, Google l Bob Keogh, director, Goldman Sachs Bank (Europe) l Philip Lane, professor of international macroeconomics, Trinity College Dublin l Sean McEwen, director (Ireland), Abbott l Peter Neary, professor of economics, Oxford University l Christian Saller, managing director, KAYAK Europe l Willie Slattery, executive vice president and head of European offshore domiciles, State Street Corporation l Michael Whelan, director and chief country officer (Ireland), Deutsche Bank © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors Executive summary The survey suggests that investors see Ireland’s unique selling proposition as not a single factor, but the powerful combination of benefits that Ireland offers  Global foreign direct investment (FDI) dropped precipitously from the height of the boom years to the depths of the downturn and is only just now recovering In terms of jobs created through FDI, the numbers are stark: they declined from an estimated 1.3m globally in 2006 to just 750,000 in 2009, according to the 2011 Global Location Trends report by the IBM Institute for Business Value But by 2010 there were evident signs of recovery, with almost 1m FDI-driven jobs created globally Nowhere is this resurgence more important than in Ireland, where FDI played such a crucial role in its economic success before the financial crisis and will determine so much of its economic prospects in the years ahead And the signs there are pointing to recovery too According to the IBM report, Ireland was the top destination worldwide in 2010 for the average value of investment projects, and the second-largest per-head recipient of FDI jobs after Singapore IDA Ireland, the agency responsible for industrial development in the country, reported a record year in 2011, with 148 new investments creating over 13,000 new jobs Key questions are whether FDI will continue to grow again in Ireland and what policymakers can to strengthen the country’s unique selling propositions for investors © The Economist Intelligence Unit Limited 2012 This report seeks to aid that process by examining Ireland’s competitiveness and the challenges it faces in appealing to international investors It is based on a survey of over 300 executives with responsibility for and knowledge of investments in Ireland, as well as a series of interviews with key FDI decision-makers in Ireland and abroad As the report demonstrates, Ireland’s most important competitive advantages are access to EU markets, a competitive corporate tax infrastructure (including the headline rate and a number of other incentives including doubletaxation treaties and sector-specific incentives), a uniquely talented workforce – both homegrown and from abroad – and a stable regulatory framework that supports business Indeed, the survey suggests that investors see Ireland’s unique selling proposition as not a single factor, but the powerful combination of these benefits that Ireland offers Each of these four cornerstones of Ireland’s competitiveness is explored in detail in this paper: access to EU markets (see page 6); the corporate tax infrastructure (see page 9); the talented workforce (see page 12); and the regulatory framework, including specifically financial regulation (see page 21) Investing in Ireland: A survey of foreign direct investors The disadvantages in the eyes of investors, however, are largely out of policymakers hands and include the country’s small size and instability in the euro zone On the whole, the survey sample and interviewees are bullish on Ireland, with two particularly positive findings emerging from the survey First, of the 315 respondents, only ten say that they plan to reduce their level of investment in Ireland over the next three years Second, extrapolations from survey responses suggest that the respondents’ levels of investment over the same time frame could create up to 20,000 new jobs Although this is based on opinion data and is not a rigorous economic forecast, it is a demonstration of investors’ strong confidence in Ireland as a place to business in the near term In addition, interviewees overwhelmingly view the financial crisis as an opportunity to boost Ireland’s competitiveness The key findings from the research are as follows Access to European markets is Ireland’s FDI foundation Survey respondents and interviewees were clear about the foundation of their investment in Ireland: market access In general, global investors say their prime motivation for entering foreign markets is access – for 58%, this is the most important consideration, far outweighing the second and third most popular factors, namely availability of key skills (34%) and government incentives (32%) When it comes to Ireland specifically, access comes out on top, with “access to EU market” named by 46% of respondents, compared with 30% citing legal and fiscal stability and 29% citing the competitive corporate tax rate Other important drivers are also tax-related, including favourable double-taxation treaties (16%) and sector-specific incentives (14%) The headline corporate tax rate is important for competitiveness but it should be thought of as  © The Economist Intelligence Unit Limited 2012 one ingredient in the overall tax infrastructure; and policymakers need to put it in context when compared with other investment drivers Almost one-half of respondents (46%) say a low corporate tax rate is the most important government fiscal incentive they consider when investing abroad, and this was a particularly important component in decisions to bring investment to Ireland originally The headline rate is clearly important However, evidence from the survey and interviews suggests that excessive focus on the headline rate threatens to overshadow the total corporate tax infrastructure including double-taxation treaties, tax credits, transfer pricing or other sector-specific incentives It also needs to be put in context with other aspects of competitiveness, such as personal income tax reform or access to skills and talent When choosing among government incentives, pharmaceutical firms were the most likely to cite the corporate tax rate as their biggest draw to foreign markets, with 65% pointing to this factor Respondents based in the euro zone attached a similar importance to low corporate taxes (64%) US investors put less emphasis on the issue (35%), as did those planning to invest in Ireland for the first time (33%) Investors praise Ireland’s pool of domestic and foreign workers, but income taxes could be discouraging senior talent Survey respondents and interviewees say the quality of the local labour force is a strong point, especially the presence of formal qualifications and more innate abilities such as a practical approach to problemsolving Nonetheless, interviewees are concerned about what they see as imbalances in Ireland’s personal tax system As a result of tax credits that are generous by international standards, there is a large gap between the average all-in tax rate paid by the typical worker, which is among the lowest in the OECD, and the marginal tax rate for top earners, which is among the highest Interviewees believe that these high marginal Investing in Ireland: A survey of foreign direct investors tax rates will make it less attractive for senior executives to settle in Ireland The biggest disadvantages for investors are outside the Irish government’s direct control, but respondents say more should be done to improve regulation and reduce red tape The biggest downside of doing business in Ireland, cited by 51% of those surveyed, is the size of the domestic market, but this is a factor policymakers can very little to influence Three other factors which received more than 30% of responses included instability in the euro zone (33%), uncertainty in relation to government finances (32%), and Ireland’s peripheral location (31%) Ireland’s location mattered more to financial services firms than other sectors participating in the study, highlighting the importance of clusters Investors across the board say Ireland could improve on regulation and red tape Ireland is generally perceived as a more costly place to business than other investment locations According to investors, Ireland compares unfavourably with other countries across a range of cost criteria, with wages and salaries the biggest concern: 51% say Ireland is more expensive than other locations where they are invested, compared with 16% who say it is cheaper The cost of raw materials, the cost of living and the price of utilities and infrastructure also compare unfavourably The high cost of doing business was highlighted across all sub-groups in the survey, but the perception is greatest among those with no presence in Ireland and no immediate plans to invest There were variations according to location – euro zone and US investors were much more likely to believe Ireland was a costly place in which to business than investors from other developed countries  © The Economist Intelligence Unit Limited 2012 Respondents believe the Irish government’s post-crisis response is on the right track and view the country as an investment opportunity While there was little belief among respondents that Ireland would rebound quickly, there was definitely a sense, particularly among interviewees, that Ireland’s economic crisis represents a huge opportunity from an FDI perspective Overall, investors have more faith in the current Irish government than the previous one, although views are far more favourable among investors currently located in the country than among those based outside The government’s priorities are also in line with investor expectations – stabilising the financial system, attracting inward investment and addressing the budget deficit Some post-crisis policies will not require trade-offs between stabilising the financial system and boosting Ireland’s investment competitiveness, but in other areas policymakers will have difficult choices Tackling the high cost of doing business in Ireland is both a domestic vote-winner and a competitiveness-booster Likewise, tackling the deficit supports both domestic economic sustainability and convinces international investors that Ireland is a sound place in which to business Other aspects of Ireland’s recovery, however, have very real trade-offs One example is higher value-added tax, which may help close the deficit but pushes up Ireland’s already high cost of living, affecting competitiveness Another potentially more serious issue is the area of financial regulation, where interviewees believe that the government has failed to distinguish adequately between regulations on domestic banking and those on international financial services Investing in Ireland: A survey of foreign direct investors Introduction Market access – Ireland’s FDI foundation A major factor behind Ireland’s success in the 1990s, and a key differentiator between Ireland of the 1970s and of the 1990s, was improved access to the EU as a result of the Single Market Peter Neary, professor of economics at Oxford University  The single most important reason why companies in the survey look to invest in countries outside their home markets is to access new markets: three in five (58%) respondents highlighted market access as one of their top three motivations for setting up international operations, ahead of eight other factors, including availability of key skills (34%), government incentives (32%) and ease of doing business (32%) The respondents’ four top FDI locations other than Ireland all offer market access as a key part of their competitive proposition, either domestically, as in the case of the US and China, or regionally, as with Singapore and the UK (see sidebox, this chapter) Financial services and the rest – differing FDI priorities The importance of market access is similar across financial services (FS) and non-financial services (non-FS) respondents, with 55% of non-FS respondents mentioning it as a key factor for going international, compared with 61% of FS respondents There were differences in secondary factors, though Government incentives and the ease of doing business are both mentioned © The Economist Intelligence Unit Limited 2012 by almost 40% of FS respondents, compared with about 25% of others In turn, the cost base matters more for non-FS respondents, with over 40% mentioning either labour or non-labour costs as a factor for going international, almost twice the level of FS respondents Ireland’s specific advantage: access to the EU When asked specifically about Ireland’s main competitive advantages, access to European markets topped the list, with 46% of respondents citing it, much more than any other factor (see Figure 1) Interviewees’ opinions reflected the survey findings “A major factor behind Ireland’s success in the 1990s, and a key differentiator between Ireland of the 1970s and of the 1990s, was improved access to the EU as a result of the Single Market,” says Peter Neary, professor of economics at Oxford University Differences between first-time investors and those with existing operations in Ireland The factors stressed as Ireland’s main competitive advantages by those planning to invest there for the first time generally mirror those cited by the sample as a whole, with access to EU markets (44%) the principal competitive advantage, Investing in Ireland: A survey of foreign direct investors Figure In your view, which competitive advantages does Ireland have to offer? Respondents could select up to three responses (%) Financial Services All Non-Financial Services 60 60 50 50 46 40 30 20 22 10 Bob Keogh, director of Goldman Sachs Bank (Europe)  10 1212 13 14 16 12 15 15 15 24 25 24 28 26 29 31 27 30 43 40 30 33 26 20 16 10 10 although greater emphasis was placed on access to government and ease of doing business Access to skills, either locally or from across the EU, was less important: just 36% of respondents mentioned either factor, compared with 51% of all respondents For respondents with existing operations, the corporate tax rate was the main driver that had brought them to Ireland originally It was cited by nearly one-half of these respondents, and according to almost one-third the corporate tax rate will continue to underpin the attractiveness of Ireland’s business environment (in addition to © The Economist Intelligence Unit Limited 2012 Access to EU markets Legal & fiscal stability Corporate tax rate regime Access to skills locally Ease of doing business Access to EU skills Double-taxation agreements Access to government Sector-specific incentives English-speaking member of euro zone IT & telecoms infrastructure Ireland, in particular Dublin, thanks to the International Financial Services Centre (IFSC), is a global centre of excellence for mid- to backoffice staff 11 Existing clusters 23 23 23 30 49 other aspects of the corporate tax infrastructure, such as double-taxation agreements) For firsttime investors the picture is different, with access to EU markets the most significant factor For financial services particularly, the presence of a cluster of similar companies doing similar things was also important for an ongoing presence “Ireland, in particular Dublin, thanks to the International Financial Services Centre (IFSC), is a global centre of excellence for mid- to backoffice staff,” says Bob Keogh, director of Goldman Sachs Bank (Europe) “Just as Mayfair teems with traders, the IFSC has a core of people at work in the sector for the long term.” Investing in Ireland: A survey of foreign direct investors Four alternatives: Market access drives investment in China, Singapore, the UK and the US Four countries topped the list of alternative investment locations for respondents besides Ireland: China (33%), Singapore (29%), the US (28%) and the UK (27%) The remaining 16 options each received less than 20% of responses Among financial services firms, China was even more attractive (35%), while Hong Kong displaced the UK as the fourth most attractive destination (25%, as against 23% for the UK) Other popular FDI hosts in western Europe were the Netherlands, Switzerland and Belgium, chosen by 13%, 10% and 4% of respondents respectively (the US and China) or regionally (Singapore and the UK) After market access, each of the top destinations had different investor propositions (see Figure 2: Word clouds) China’s proposition is clearly based around its role as a growth market as well as its low cost, including taxes Singapore’s offering is based around a stable system, ease of doing business and low taxes Investment into the US focuses on its domestic market and the business opportunities there, while the UK’s offering is about market access, ease of doing business and skilled labour Among the top four destinations, the main driver was market access, either domestically Figure FDI propositions: Word clouds (main reasons why respondents chose FDI locations)  China US Singapore UK © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors The corporate tax infrastructure: An important ingredient Following the EU-IMF loan to Ireland in late 2010 and Ireland’s ongoing fiscal deficit, the country’s headline corporate tax rate has become a pivotal issue in its relationship with the rest of the EU Since then the corporate tax rate has become a symbol of Ireland’s sovereignty, with fears that a higher rate will reduce investment into the country Overall, the survey shows that the headline rate is part of a larger corporate tax infrastructure that policymakers must also monitor, and the tax infrastructure can be seen as one of four cornerstones in Ireland’s FDI proposition (along with market access, skills and talent, and a favourable regulatory regime) The survey shows that Ireland’s competitive corporate tax rate is indeed a key component of its FDI proposition As mentioned above, of those survey respondents who already have Figure The most important fiscal incentives for investors (%) Financial Services All Non-Financial Services 50 45 40 50 49 45 46 40 41 35 30 35 38 34 30 31 25 20 24 25 25 24 20 15 20 20 20 21 20 21 10 20 18 13 15 14 16 10 0 Low corporate Double taxation Transfer pricing Access to local Training & other tax rate agreements with taxation rules sources of credit human resources treaty countries & funding grants  15 © The Economist Intelligence Unit Limited 2012 R&D tax credits Personal tax rates Investing in Ireland: A survey of foreign direct investors Please indicate the three principal reasons why Ireland will remain an attractive business environment for your company over the next three years Please choose the top only (% respondents) Competitive corporate tax regime 30 Ease of doing business (eg, low bureaucracy, good labour relations) 22 Economic and political stability 21 Access to EU market 20 Sector-specific tax incentives (eg, R&D credits, low royalties) 19 Access to Irish market 17 Member of the euro zone and/or stability of the euro 15 Good physical and IT infrastructure 14 Interest rates 13 Certainty/clarity of legislation 13 Presence of a cluster in our industry or activity 13 Ability to operate in the English language 11 Educated and skilled labour force 11 Competitive labour tax regime 10 Access to government Personal tax rates Other, please specify If you are planning to expand operations or invest in new operations in Ireland, please indicate the approximate value you might invest over the next three years Please choose one answer only (% respondents) Less than $10m 40 $10m-$50m 31 $50m-$100m 15 $100m-$250m $250m-$500m More than $500m Don't know/Not applicable 28 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors If you are planning to expand operations or invest in new operations in Ireland, please indicate the approximate net number of jobs you might create in Ireland over the next three years Please choose one answer only (% respondents) Net addition of over 1,000 jobs Net addition of 500-1,000 jobs Net addition of 1-500 jobs 68 No net job creation 14 Don't know/Not applicable If your company is planning to expand operations or invest in new operations in Ireland, please indicate the three principal reasons why Ireland will be an attractive business environment for your company over the next three years (% respondents) Competitive corporate tax regime 32 Access to EU market 29 Member of the euro zone and/or stability of the euro 26 Ease of doing business (eg, low bureaucracy, good labour relations) 24 Economic and political stability 22 Access to Irish market 19 Competitive labour tax regime 18 Ability to operate in English 17 Interest rates 16 Good physical and IT infrastructure 15 Sector-specific tax incentives (eg, R&D credits, low royalties) 14 Educated and skilled labour force 13 Access to government 10 Certainty/clarity of legislation Presence of a cluster in our industry or activity Personal tax rates Other, please specify 29 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors If you are planning to contract operations in Ireland, please indicate the approximate amount by which you expect turnover in Ireland to shrink over the next three years Please choose one answer only (% respondents) Less than $10m 56 $10m-$50m 33 $50m-$100m 11 $100m-$250m $250m-$500m More than $500m Don't know/Not applicable If you are planning to contract operations, please indicate the approximate net number of jobs you might reduce in Ireland over the next three years Please choose one answer only (% respondents) No net job reduction 67 Net reduction of 1-500 jobs 33 Net reduction of 500-1000 jobs Net reduction of over 1,000 jobs Don't know/Not applicable If you are planning to contract operations in Ireland over the coming three years, please indicate the three principal reasons why Please choose the top three only (% respondents) High wage costs compared to other locations 40 Possibility of a tax increase or removal of tax benefits 30 High non-wage costs, including energy and property 20 Peripheral geographic location/poor links to other markets 20 Small local market 20 Red tape and excessive bureaucracy 20 Poor physical and/or IT infrastructure 20 Economic uncertainty, including the future of the euro zone 20 Restructuring and/or downsizing of entire business Difficulty in finding skilled labour Lack of investment incentives Other, please specify 10 30 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors If you have no plans to business in Ireland, please indicate the reasons why Ireland will not be an attractive business environment for your company in the next three years Please choose the top three only (% respondents) Size of domestic market 41 Economic uncertainty, including the future of the euro zone 38 Lack of investment incentives 31 Possibility of a tax increase or removal of tax benefits 22 Peripheral geographic location/poor links to other markets 19 High wage costs compared to other locations 16 High non-wage costs, including energy and property 16 Red tape and excessive bureaucracy 13 Difficulty in finding skilled labour Poor physical and/or IT infrastructure Restructuring and/or downsizing of entire business Don't know/Not applicable Other, please specify 16 31 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors In what year did you originally invest in Ireland? (% respondents) 1900-1910 1911-1920 1921-1930 1931-1940 1941-1950 1951-1960 1961-1970 1971-1980 1981-1990 1991-2000 23 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Don't know/Not applicable 40 If you are considering investing in Ireland, which business activities are you most likely to locate there? (% respondents) Back office/shared services 32 R&D 14 Treasury operations 12 Other, please specify 10 Manufacturing Customer call centre Headquarters Don't know/Not applicable 11 32 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors In your view, which competitive advantages does Ireland have to offer? Please choose the top three only (% respondents) Access to EU market 46 Legal and fiscal stability 30 Competitive corporate tax rate regime 29 Educated and skilled local work force 28 Ease of doing business in general 24 Access to skilled labour from across the EU 23 Double taxation agreements with treaty countries 16 Access to government 15 Sector-specific tax incentives (eg, R&D Tax Credit) 14 Only English-speaking member of the euro zone 12 Existing clusters (eg, R&D, technology, funds administration) 10 Strong IT and telecoms infrastructure Other, please specify In your view, what are the biggest risks or disadvantages of doing business in Ireland? Please choose the top three only (% respondents) Size of domestic market 51 Instability in the euro zone 33 Uncertainty in relation to government finances 32 Peripheral geographic location/poor links to other markets 31 High cost of doing business 19 Red tape and bureaucracy 17 Poor transport and physical infrastructure 17 Tax burden 14 Poor IT and communications infrastructure Lack of skilled labour Other, please specify 33 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors How does Ireland compare to the other jurisdictions (outside your home market) in which you business, in terms of the following aspects of business cost? (% respondents) Far more expensive Slightly more expensive About the same Slightly less expensive Far less expensive Wages and salaries 13 43 28 14 Raw materials 11 33 48 Overall tax burden 26 41 22 Cost of living 14 35 32 16 Rents 12 35 34 18 Utilities, infrastructure 36 44 13 How does Ireland compare to the other jurisdictions (outside your home market) in which you business, in terms of the following aspects of the tax regime? (% respondents) Far better Slightly better About the same Slightly worse Far worse Corporate tax rate 23 43 28 51 R&D tax credits 15 42 40 Network of double-taxation treaty countries 14 40 42 12 49 Personal tax rates 36 41 Training grants 39 Other incentives 36 53 41 Thinking about the recent financial crisis and its impact on the Irish business environment over the coming three years, please indicate whether you agree or disagree with the following statements: (% respondents) Agree Neutral Disagree Don't know The worst is over and the country's economy is improving quickly 31 40 28 The worst is over but it will take a few years until the economy is stable again 53 35 10 I expect continued fiscal and financial problems to impact the business environment over the next three years 55 35 I have more faith in Ireland's new government than in the previous one 31 54 10 Ireland's economic policy is increasingly determined by international institutions 53 34 © The Economist Intelligence Unit Limited 2012 40 Investing in Ireland: A survey of foreign direct investors In your view, what is the likeliest outlook for the growth of trade and foreign direct investment (FDI) in Ireland over the next three years? (% respondents) Ireland will see continued strong export growth and high levels of inward FDI 17 Ireland will see moderate export growth and inward FDI 49 Ireland will see weak export growth and FDI 26 It depends – please specify Don't know In your view, which of the following actions would most in order to boost the investment attractiveness of Ireland for your firm? (% respondents) Lowering corporate tax rates 14 Double-taxation treaty with my country 13 Better support for small, entrepreneurial businesses 13 Increased investment incentives - please specify 11 Better regulatory policies 11 Closer links between government and business Lowering personal income tax rates Reduced bureaucracy surrounding relocation (eg, work permits) Fewer links between government and business Increased intellectual property protections Other, please specify What should Ireland's fiscal, tax and trade policy priorities be over the next three years? Please choose the top two only (% respondents) Stabilising Ireland's financial system (including bank recapitalisation) 51 Attracting inward investment 37 Addressing the government deficit 30 Reducing unemployment 25 Stabilising Ireland's property market (including the National Asset Management Agency and mortgage arrears) 16 Promoting domestic demand 15 Other, please specify Don't know 35 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors In which country are you personally located? (% respondents) United States of America 51 Ireland 11 India China Russia Brazil United Kingdom Netherlands Singapore Germany Sweden Canada Spain Belgium Cyprus Hong Kong Italy Other In which region are you personally based? (% respondents) North America 52 Western Europe 23 Asia-Pacific 15 Eastern Europe Latin America Middle East and Africa 36 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors In which country are your company's global headquarters based? (% respondents) United States of America 54 Ireland India China Russia United Kingdom Brazil Netherlands Germany Singapore Sweden Canada Japan Switzerland Australia Cyprus Hong Kong Spain Other In which region are your company's global headquarters based? (% respondents) North America 55 Western Europe 21 Asia-Pacific 14 Eastern Europe Latin America Middle East and Africa 37 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors In how many countries worldwide you have operations? (% respondents) or fewer 36 Between and 10 29 Between 11 and 20 12 More than 20 23 Which of the following best describes your job title? (% respondents) Board member CEO/President/Managing director 18 CFO/Treasurer/Comptroller 14 CRO/Chief risk officer Chief compliance officer 11 Other C-level executive 39 SVP/VP/Director Head of business unit Head of department Manager Other, please specify 38 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors What are your main functional roles? Select up to three (% respondents) Finance 43 General management 40 Strategy and business development 24 IT 14 Operations and production 14 Marketing and sales 12 Risk Information and research R&D Customer service Legal Human resources Procurement Supply-chain management Other What is your organisation's global annual revenue in US dollars? (% respondents) Under $250m 29 $250m to $500m 20 $500m to $1bn 12 $1bn to $5bn 15 $5bn to $10bn $10bn or more 21 39 © The Economist Intelligence Unit Limited 2012 Investing in Ireland: A survey of foreign direct investors What is your primary industry? (% respondents) Financial services 49 IT and Technology 15 Manufacturing Professional services Healthcare, pharmaceuticals and biotechnology Energy and natural resources Consumer goods Chemicals Transportation, travel and tourism Agriculture and agribusiness Automotive Education Entertainment, media and publishing Telecoms Construction and real estate Logistics and distribution Government/Public sector Retailing 40 © The Economist Intelligence Unit Limited 2012 While every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd nor the sponsor of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in this white paper LONDON 26 Red Lion Square London WC1R 4HQ United Kingdom Tel: (44.20) 7576 8000 Fax: (44.20) 7576 8500 E-mail: london@eiu.com NEW YORK 750 Third Avenue 5th Floor New York, NY 10017 United States Tel: (1.212) 554 0600 Fax: (1.212) 586 1181/2 E-mail: newyork@eiu.com HONG KONG 6001, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) 2585 3888 Fax: (852) 2802 7638 E-mail: hongkong@eiu.com GENEVA Boulevard des Tranchées 16 1206 Geneva Switzerland Tel: (41) 22 566 2470 Fax: (41) 22 346 93 47 E-mail: geneva@eiu.com [...]... increases domestic economic sustainability and convinces international investors that Ireland is a sound place in which to do business Other aspects of Ireland s recovery, however, have very real trade-offs This is particularly the case in the area of financial regulation, a topic explored in more detail on the following page Investing in Ireland: A survey of foreign direct investors Financial regulation:... regime across six headings, including corporate tax, R&D tax credits or training grants Income tax was the Investing in Ireland: A survey of foreign direct investors Ireland must facilitate key executives to come here Junior talent joins a company to learn and leave; senior talent comes to build and stay John Herlihy, vice president of international SMB sales, Google weakest perceived competitive advantage.. .Investing in Ireland: A survey of foreign direct investors FDI operations in Ireland, corporate tax was the single most cited factor originally bringing FDI to Ireland, according to almost one in two respondents (44%) However, it is far from the only factor in the tax infrastructure As mentioned above, 29% of respondents highlighted the corporate tax rate regime as one of Ireland s three main competitive... appropriate.” Investing in Ireland: A survey of foreign direct investors Conclusion Ireland s unique selling proposition Very few countries offer investors any single factor that is completely unique to that location – instead, what attracts FDI is a unique combination of drivers The survey suggests that in Ireland s case, its “unique selling proposition” is a bundle of four factors attractive to investors. .. is already doing business in Ireland with no plans to change over the coming three years, please indicate the three principal reasons why Ireland was an attractive destination at the time of your initial investment in Ireland (% respondents) Competitive corporate tax regime 44 Access to Irish market 25 Ease of doing business (eg, low bureaucracy, good labour relations) 21 Economic and political stability... Mr Keogh of Goldman Sachs and Mr Whelan believe that given the high density of traders in London, if Ireland actually wants to win significant business in this area and bring traders to Dublin, the only way to compete would be through lower marginal tax rates on personal income Income taxes – a weakening competitive advantage? Survey respondents were asked to rate the competitiveness of Ireland s tax regime... Instability Uncertainty Peripheral High cost Red tape Poor Tax burden Poor IT/ Lack of in the about geographic of doing and transport/ communications skilled euro zone government location business bureaucracy physical infrastructure labour finances infrastructure © The Economist Intelligence Unit Limited 2012 0 Investing in Ireland: A survey of foreign direct investors Location matters more to financial... that had been a hallmark of Ireland s success This is turning around now, although Ireland still lacks IT graduates.” Trade-offs delineated In many areas, there is no trade-off between overcoming the crisis and boosting Ireland s competiveness For example, tackling the high cost of doing business in Ireland is both a domestic vote-winner and a competitivenessbooster Likewise, tackling the deficit increases... the top “all -in marginal income tax rate in 2009 for top earners was 50%, one of the highest in the OECD, a situation exacerbated by the introduction of the Universal Social Charge in 2011, a new tax on income.2 There is concern among interviewees about Ireland s personal income tax regime In the area of income taxes, Ireland s competitiveness has been seriously undermined,” warns Willie Slattery,... income taxes While there is consensus among both interviewees and survey respondents about the quality of labour available to firms that set up in Ireland, there is concern about how attractive Ireland will be for talent, especially senior talent, into the future Figures in this paragraph are taken from the OECD’s Taxing Wages 2010 and Taxation Database 2 13 For a typical worker, Ireland s taxes are very ... Investing in Ireland: A survey of foreign direct investors Ireland s biggest disadvantages: Outside control of policy Ireland s four main disadvantages in the eyes of global investors lie largely... rate the competitiveness of Ireland s tax regime across six headings, including corporate tax, R&D tax credits or training grants Income tax was the Investing in Ireland: A survey of foreign direct. .. marginal Investing in Ireland: A survey of foreign direct investors tax rates will make it less attractive for senior executives to settle in Ireland The biggest disadvantages for investors are