Adele Begin and I have just issued a working paper (available here) on the performance of foreign-owned industry and services over the recession, and prospects for the future.
The non-technical summary reads as follows:
The current global downturn has been accompanied by a collapse in international foreign direct investment (FDI) flows. Having reached an all-time high in 2007, worldwide flows fell by 14 per cent in 2008 and by a further 30 percent in 2009. Given the FDI intensity of the Irish economy, this collapse might be thought to have particularly adverse implications for Ireland. FDI inflow data however are the outcome of complex MNC financial decisions and bear only a very weak relationship to MNC employment, investment and export activities in FDI destination economies.
The analysis presented here of the recent performance of Ireland’s inward FDI sectors shows them to have played an important role in helping to stabilise the economy in the face of severe downturns in both export and domestic markets. A critical factor in this has been the particular sectors in which foreign-owned MNCs in Ireland operate. Export demand for pharmaceutical products and medical devices in particular has remained relatively buoyant. Employment in Irish-owned exportables (i.e. in Enterprise Ireland-assisted firms), on the other hand, fell more over the course of the downturn than did employment in the entire private sector, which is largely ascribable to the weakness of sterling
The paper also explores the country’s medium-term prospects in key foreign-dominated sectors such as ICT, pharmaceuticals and international financial services, which are experiencing substantial structural change. The consequences of ongoing developments in the global FDI market – such as the growth of China – and in the international regulatory and corporation-tax environments – including recent and prospective policy changes on the part of the new US administration – are also assessed.