Goerg, Hanley and Strobl write about FDI policy at Vox EU. Here’s the summary:
A chief concern for countries aiming to attract investment is how it will trickle down to the local economy. This column presents evidence on the effect of government grants to foreign companies investing in Ireland between 1983 and 2002. It finds that the grants had little effect on generating supply links with local firms and argues that governments should instead work towards reducing partner search costs.
8 replies on “FDI in Ireland”
Isn’t this the smae old case again where FDI was centred in Dublin Cork Limerick and lacked in local areas because there was simply no hunger to invest in these areas? Lack of roads, universities hospitals etc??
You could give grants all day but FDI would still struggle to make viable links or invest in rural economies…and it’s also Ireland where Rural is RURAL!
…unless its our new ‘power market’ of wave and wind energy of course!
This topic isn’t debated enough, this should be a key priority running in tangent with calming the public deficit.
I would think one of the problems is that to become an important local supplier (excluding routine services/supplies) a firm would have to be of a particular size, likely exporting and have a lot more than an ISO standard to become part of a supply chain.
There isn’t much agency staff can do to create such firms.
Then, the requirements of the pharma sector and high tech would differ and at what stage Irish firms feed their output into global chains.
The article makes is about the difference that grants made in promoting local supply linkages – not about whether the volume of local supply linkages was satisfactory.
There’s actually a lot of local supply activity, which is probably strongest in medical devices, where FDI companies even procure a significant amount of R&D locally.
While the pharma industry imports most of its inputs, it spends a lot locally on engineering consultancy.
How many tax havens throughout the world have seen trickle down effects that have generated both competitor and complementary industries? Why should the tax haven known as Ireland be any different?
Because Ireland is not primarily a tax haven, perhaps? We have significant competitor and complementary industries for all the main FDI industries – ICT, pharmachem, medical devices and internationally-focused financial services.
@ Con
How many of the competitor and complementary industries are ‘domestic’ in origin ?
@ Paul,
Most of those I am talking about are domestic in origin, although some of these have been bought out by overseas interests. The remainder are complementary businesses attracted to Ireland to service FDI businesses in areas such as automation.
As of 2009, employment in Irish-owned companies in the main FDI sectors was as follows (Forfas Employment Survey of development agency clients):
Pharmachem: 3,084
Computer, Electronic and Optical Equipment: 5,169
“Other Misc Manufactiring & Medical Devices”: 5,038
Computer Programming, Consultancy & Related Activities: 11,844
These categories are primarily made up of a combination of “competitor” and “complementary” businesses. In addition, there is a very considerable amount of “complementary” activity that is not included in these totals.
Examples include:
Engineering services (such as design and installation of automated pharmachem process installations)
Legal services, particularly to financial services businesses
Packaging, marketing collateral and other print/packaging material for a wide range of types of FDI business
Thanks very much Con for that detai.