Poor infrastructure could hinder investment, says former IDA boss

Poor infrastructure threatens to hinder job-creating investments from multinational, former head of IDA Ireland Martin Shanahan warned on Friday.

The Republic’s infrastructure has failed to keep pace with economic growth, Mr Shanahan, who was chief executive of the agency responsible for attracting overseas companies to the State for eight years, told the Institute of International and European Affairs (IIEA). “More than anything else this runs the risk of deterring new investment,” said Mr Shanahan, adding that it also hampered companies already based here from expanding.

He highlighted housing, energy and water, along with planning and building the infrastructure itself, as key challenges for the State.

Mr Shanahan reminded the audience of the row over Apple’s plans to build a data centre in Athenry, Co Galway, which ended with the company dropping the project despite ultimately getting permission. He stressed that multinationals did not demand certain outcomes from the planning process, but instead wanted clear timelines to allow them complete their own plans.

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Housing is a “drag on investment”, he told the IIEA, but he acknowledged that the State’s success in attracting multinationals made it hard to argue that these problems had prevented companies from coming in here. The former IDA boss said that the more pertinent question was probably how it would affect future investment.

Mr Shanahan, who now works for accountants Grant Thornton, said he witnessed very little adverse reaction from multinationals to the likelihood that some will see their profits taxed at 15 per cent from next year, up from 12.5 per cent now. The increase stems from new tax rules agreed by the Organisation for Economic Co-operation and Development (OECD), of which the Republic is a member.

“I think all of them believed that it was better that Ireland was moving with the OECD, because otherwise Ireland would be isolated and the companies themselves risked being isolated,” he explained.

However, he said that the “allocation to market” proposals included in the same OECD agreement, where multinationals would pay tax on profits earned in the territories where they sold goods or services, were proving very difficult to execute. “That’s something that’s not going to happen any time soon,” Mr Shanahan added.

He told the audience at Friday’s seminar, Foreign Direct Investment – Continued Opportunity or Growing Challenge?, that any new government, irrespective of its politics, would have to have regard for what drives the economy.

Mr Shanahan pointed out that political promises mostly involved spending money. “And that money has to come from somewhere,” he said. “Ultimately in Ireland that’s driven by the very strong economic growth and multinational investment is a core part of that.”

Mr Shanahan said that instead of debating whether the Republic depended too heavily on multinationals for economic development, we should focus on ensuring continued success in attracting them here. “The single biggest threat to that model in my view is complacency. Ireland has no inherent right to multinational investment.”