Ireland: The little country that could
For the past two years, Ireland has fought to recover its economy from the brink of ruin. Now the hard work, with a good dose of foreign investment, is starting to pay off.
Ireland is one such country that for decades has seen FDI in a positive light, because it depends upon the numerous benefits such investment brings to the country. Since Ireland went into meltdown, FDI has become even more important.
Ireland’s road to recovery has not been easy. For the past four years, it has endured a property bust that has seen house prices fall by 50 per cent and a banking crisis that brought the country close to collapse. While there’s still a way to go, it has been relentless in making a strong push for foreign direct investment, setting itself up for continued, sustained recovery in the coming years.
In 2006, Ireland was flying high. The country was the darling of Europe, with the Celtic Tiger in full swing. Unemployment was at near all-time lows – roughly 4.4 per cent – and consumers were spending like there was no tomorrow.
Unfortunately, the country was woefully unprepared for what was around the corner. After struggling to contain the financial crisis that threatened to engulf the country, Prime Minister Brian Cowan was forced to go cap in hand to Brussels. Since that day in late 2010, effectively the lowest point for the country for a generation, Ireland has worked to bring itself back from the brink.
The hard work is starting to pay off. Ireland has regained some of the competitiveness it lost during the boom years and companies are flocking to establish and expand operations in the country. Ireland was this year named by Site Selection magazine as the number one place to invest in Western Europe.
The IBM Global Locations trend report ranks Ireland first worldwide in terms of the value of projects in the investment it attracts from overseas.
It was also ranked first in the world for skilled labour, flexibility and adaptability in the IMD World Competitiveness Yearbook released earlier this year. The same report found that Ireland had risen to 20th in the world for competitiveness, up from 24th in 2011.
Australia in contrast, is moving in the opposite direction. It was ranked 15th in the world for competitiveness this year, but was ninth just 12 months ago, and fifth the year before that. Obviously, the persistently high dollar is hindering Australia’s competitiveness, having a negative impact on exports and a range of industries including tourism and retail.
And if Australia is known as "the lucky country”, Ireland should perhaps be known as "the scrappy country” for the persistence it’s shown since the GFC. By determinedly focusing on getting the country back on track, Ireland has regained the confidence of outside investors.
IDA Ireland, the country’s inward investment promotion agency, is looking to capitalise on the renewed confidence in Ireland, and its reach is far and wide. Speaking at an event in Melbourne this week, IDA director Brian Conroy called for Australian companies to consider Ireland when looking to locate in Europe.
At the same event the Irish ambassador to Australia, Noel White, also outlined Ireland's strengths for foreign investment: a skilled workforce, ease of adaptability and its coveted role as the only English speaking country in the eurozone.
He described Ireland’s increased competitiveness as a necessary adjustment, saying "prices and costs [in Ireland] have fallen significantly, and necessarily so.”
"Labour costs per unit of economic output as measured by the European Commission have declined. Between 2009 and 2013, labour costs per unit will have fallen by a cumulative 16.5 per cent,” he said.
Ireland’s progress is even more pronounced when we consider that unit costs across Europe have continued to rise.
Of course, Ireland's 12.5 per cent tax rate is a big factor in choosing Ireland as a European base. But its reputation as a centre of excellence in a range of fields including financial services, information and communication technologies and life sciences, as well as its commitment to investing in R&D and innovation projects, is known around the globe.
There's no doubt that Ireland has had it tough in the past few years. And as the battle continues in Europe, it has done the only sensible thing it can by keeping its head down and fighting through. In the end, when the euro crisis is finally resolved one way or the other, Ireland will be remembered as a country that acted with dignity in its darkest days. This alone is a great advertisement for those considering investing in the country.