Economy

Cost competitiveness still key even if FDI position positive

Cantillon: Study shows Ireland remains attractive for foreign direct investment

New figures published by the Central Statistics Office show the Republic has the fourth-highest price levels in the EU after Denmark, Sweden and Luxembourg.

Thu May 3 2018 - 05:30

There may be ongoing concerns about Ireland’s cost competitiveness but the good news is that the State remains an attractive location for foreign direct investment (FDI).

A new study published on Wednesday shows investor interest in Ireland has remained robust even as FDI inflows have been somewhat irregular over the past few years.

The report from consulting firm AT Kearney reveals the Republic has moved up to 19th place globally in the company’s FDI confidence index. This marks a rise of one spot compared to last year and up four places versus 2016.

“The economic outlook is bright for Ireland,” the report says, adding that the State may well benefit from Brexit in the coming years.

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While this is welcome news, there is no getting over the fact that Ireland is an expensive place to live and work.

New figures published by the Central Statistics Office earlier this week show the Republic has the fourth-highest price levels in the European Union after Denmark, Sweden and Luxembourg.

High-cost location

This is an improvement versus the prior year when the State had the third-highest costs, but the improvement is largely a result of prices rising in other countries rather than declining here.

The National Competitiveness Council has consistently warned that Ireland remains a high-cost location and urged for action to be taken to ensure the Republic remains competitive.

Given that figures published last week show FDI into the Republic fell sharply into negative territory at the end of last year, it might be wise to heed its call.

According to OECD data, there was a $21 billion (€17 billion) disinvestment in the final three months of 2017. The negative flow was not sufficient to overshadow positive inflows for the rest of the year, with total inward FDI for 2017 amounting to $29 billion, up 131 per cent from the $12.6 billion recorded a year earlier.

But, with the global economy still fragile, the dip in FDI into Ireland should serve as a warning that we can take nothing for granted.

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