FDI to Republic at highest level for a decade

Greenfield investments in the Republic from foreign multinationals were at their highest level in more than a decade last year, according to a new report from the United Nations.

A “greenfield” investment is a form of foreign direct investment (FDI) where a parent company builds its operations in a foreign country from the ground up, as opposed to so-called “brass plate” investments that yield no jobs or benefit to the economy.

The World Investment Report 2017, published by the United Nations Conference on Trade and Development on Wednesday, shows greenfield investments to the Republic last year were valued at $6.4 billion.

This was up from $6 billion (€5.5bn) in 2015; $5 .9 billion in 2014; and an average of $5 .7 billion from 2005 to 2007.

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Globally, the value of greenfield FDI announcements increased by 7 per cent to $828 billion, pulled by some very large investments in a small number of developing and transitional economies, while the rest of the world experienced a widespread slump.

The value of greenfield projects in developed countries was down 9 per cent to $247 billion compared with 2015.

Taking FDI as a whole, rather than greenfield investments in isolation, global flows fell by about 2 per cent last year to $1.75 trillion.

Total FDI to Ireland fell from $188 billion in 2015 to $22 billion last year. However, the difference was due to financial and corporate restructuring by companies in response to new regulations in 2015.

European multinationals

Investment by European multinationals, which had surged in 2015, retreated significantly last year, falling 23 per cent to $515 billion. This was driven by sharp reductions in outflows from the Republic, down 73 per cent to $45 billion.

On Brexit, the report said it was likely to have just a “limited impact” on FDI until the terms of the UK’s departure become clear. Moreover, transactions that took place in 2016 are the result of decisions that predate the referendum.

Preliminary figures for greenfield projects show the UK “continues to attract the lion’s share of investments” in terms of financial services in the EU. It was “seemingly unaffected” by the Brexit vote.

In the United States, tax reform could “potentially affect FDI flows significantly”, the report said.

“If the United States introduces a change in corporate taxation rules that would reduce tax liabilities on overseas earnings of US multinationals, it is likely these multinationals would repatriate accumulated overseas earnings and create negative FDI outflows.”

Development goals

Although the report predicts a modest recovery of global FDI flows this year and next, they are expected to remain well below their 2007 peak.

“These developments are troublesome, especially considering the enormous investment needs associated with the sustainable development goals,” said UN secretary general António Guterres.

“Progress on sustainable development – and lasting peace – requires more investment in basic infrastructure, energy, water and sanitation, climate change mitigation, health and education, as well as investment in productive capacity to generate jobs and income growth.”