Thanksgiving month began this year with a visit to Dublin by US treasury secretary Janet Yellen. She was here for a number of engagements, including a business roundtable event hosted by the American Chamber of Commerce Ireland, with Finance Minister Paschal Donohoe and 14 leaders of US and Irish multinational corporations.
Sandwiched between the G20 meetings in Rome and Cop26 in Glasgow, it was an opportunity to discuss the historic OECD Inclusive Framework global tax agreement, now supported by 136 countries, including Ireland. American Chamber of Commerce Ireland’s chief executive, Mark Redmond, called it a framework “fit for the 21st century” and paid tribute to the Minister for Finance for his commitment to certainty and transparency in economic policy, protecting Ireland’s reputation as a trusted partner for US investment.
That matters, given that more than 180,000 people work in 800 US multinational operations across Ireland, and support a further 140,000 jobs indirectly. Happily, some 94 per cent of chamber members say their US corporate HQ has a positive view of Ireland as a location for further investment.
However, now that Ireland has agreed to sign up to the OECD agreement, the competition for investment and talent internationally will be even more intense, points out Regina O’Connor, AmCham’s director of public affairs and advocacy.
Competitor countries are continuously improving their offering to attract and grow inward investment. “Ireland needs to be even more agile and proactive in that space, so we remain attractive as a country in which talent wants to live and where businesses want to locate,” she said.
The chamber is particularly keen for Government to not raise personal taxation. This is because 93 per cent of members surveyed called out personal tax as a barrier to attracting and retaining talent here, with 40 per cent of them seeing personal tax as a barrier to further investment and expansion.
Housing is an issue too. “The challenge of securing affordable accommodation for those seeking to purchase and rent directly impacts on our campaign for talent,” she said.
That’s an issue because the American Chamber believes that, in future, inward investment decisions will be more about where people want to live than where companies want to go.
The good news is that it believes Ireland is well positioned on that basis, as one of the world’s most prosperous nations, ranked 13th in the World Happiness Report and second in the world for quality of life.
Ireland is in a “good space”, says Feargal de Freine, assurance partner and head of trade routes at EY Ireland.
Not alone is the footprint of US multinational corporations here deep, but the sectors it is concentrated in – life sciences, pharma, medical devices, software and financial services – have all performed very strongly in recent years too.
That helps maintain a virtuous circle. “The success those businesses have experienced here has demonstrated that Ireland is a good, stable location for FDI. Lots of the companies that came to Ireland a number of decades ago have expanded their footprint here, broadened the scope of what they do, and continued to thrive,” he said. In doing so, they have “credentialised” the country, in a way that sends out a very powerful message abroad.
In terms of challenges, however, he too points to concerns around talent. “The talent pool is the number one issue for investors, so it is important that personal tax is attractive for people coming here from overseas,” he said.
As part of the EU, Ireland is fortunate to have access to a much wider talent pool than it could otherwise offer, but that only works if people want to migrate here.
“Personal tax is important, as are other issues related to the ease and cost of living such as housing, transport, broadband and childcare. All are front of mind for all employers, including US FDI. As a country, it’s very important we are taking steps to address these,” he added.
The fact that there is now clarity around global tax reform will help. “To paraphrase the old business saying, no one every got fired for investing in Ireland. We have a strong track record, and we see continued investment in those areas where Ireland is particularly strong,” he said.
EY’s research indicates the three main sectors for cross- border investment now are digital, cleantech and renewables and life sciences, “all of which align nicely to Ireland”, he said.
In relation to sustainability, Ireland benefits from a perception of being green, and of having an abundance of resources such as wind.
“We also have lots of industry clusters in sectors such as pharma and medical devices which gives us an opportunity to lead the way in research, development and innovation in relation to how operations in these sectors could be run in a more sustainable way in the future,” he added.
Robust supply chains
The world has moved on from seeing sustainability as a project, to becoming a lens through which every project is now viewed, he pointed out. As part of this, companies are increasingly looking at how they report sustainability externally.
“Because of Ireland’s strength in shared services, it would be very natural now for that sector to get involved in leading the charge in relation to how companies report externally,” said de Freine.
While economic nationalism is on the rise globally, bringing with it fears of retrenchment or even repatriation, Covid has provided deep insights into the value of robust supply chains. “The pandemic has shown how trade flows work in reality, and that depending on a sole source of supply can create risks too,” he said.
“International trade requires on-the-ground presence. The need to be close to customers, and to be close to regulators too in some cases, as well as the number of big new projects coming on stream here, all point to a continued bright future for US FDI in Ireland.”