Why bother investing in Ireland?

We have Guinness. They have Harp. Does anything else need to be said?

And wasn’t Ireland’s favourable tax treatment of royalty income removed in the recently approved budget?

@MM
Absolutely right. If the NI Assembly also gets the freedom to negotiate tax treaties etc. (very doubtful) and the political scene remains peaceful NI will have competitive advantage over RoI because of better infrastucture (eg broadband) and lower cost base.
NI needs a huge increase in its private secror to become a viable economic entity and this change on Corp. Tax would be a massive step forward.

The economics of the challenge is simple: we both need a global boom and then compete for a lot of projects.

RoI employment in the FDI and indigenous internationally tradeable goods and services sectors is back to 1997 levels while the workforce has grown 25% in the interval.

Big US firms are increasingly reliant on exports to emerging economies.

There are still medium size firms seeking to establish bases in Europe, but the number of jobs per project tends to be low.

NI may be more attractive to BRIC country investors if the UK as a sales market is important to them.

The tax move is not good news but peace comes at a price.

The Republic is in the Euro, so less currency risk

Its probably easier to attract foreign staff to Dublin than Belfast (many of Google’s staff, especially with language skills, are not Irish)

Political stability/social cohesion

IDA expertise (the Northern Assembly should really consider making that a cross-border thingy)

Have we similar educational attainment?

I’d like to say the Republic has a self reliant economy, in that we are not reliant on a block grant. The North has been reliant on that since the 1920s. But I think the Republics economy will be self reliant again in 5-10 years.

Overall though, I don’t deny that the North has plenty of its own advantages.

UK with the pound seemingly on a downward trajectory might be better as the costs of ‘spillovers’ (taxes & spending by workers) from exporting industries to the local economy will be less and less (in hard currency terms) due to the reduction in value of the pound.

Might be easier to get skilled workers if the payment is in a currency that seem likely to hold its value. The euro seem to be better than the pound in that regard.

@ Michael Moore

i work for a bank, and trust me, banks still make an awful lot of money off FX. Only the really really big MNC’s typcially get anything close to a sub 5bps bid-offer on EUR/USD, and some MNC’s ignore the FX issue more than they probably should or could, and get wide pricing as a result. For practical purposes, platforms like OANDA etc still don’t offer the same level of service as a proper bank can.

Infrastructure in NI isn’t great. The motorways were built as far out of Belfast as there were sizeable populations of Protestants and no further.

There is also the issue of a deprived Protestant working class community that has university access rates half that of the Catholic equivalent.

Plus the fact that so much in NI still goes through the prism of religion.

@Michael Moore

But exchange rate risk is not negligible. Part of the reason NI has lower costs is due to the decline of sterling. That can go the other way too.

edit: Good, but Not as Well

1: English speaking population with a track record of hard work
2: Membership of the Euro
3: Low corporation tax (which could be lower)
4: Excellent road network
5: Ease of access to Europe
6: Culturally close to the US
7: Political and social stability
8: Not prone to natural disasters
9: Low crime rate
10: A good place to bring up kids
11: A stable climate
12: Best economic blogs in the world

The Republic of Ireland has one massive advantage over the UK and indeed most other European States. When it comes to corporations and wealthy individuals, the rule of law here is extremely weak.

This gives corporations and management the best of both worlds. Their property is protected from pettier theft and harm by the state, but simultaneously the state effectively grants them carte blanche to act within their own interests at all times. Witness the wholesale plundering of company funds by bankers and developers; with absolute impunity. Witness also the toothless censures issued by a succession of impotent tribunals. Note also the weak and complicit private media outlets, long acknowledged as personal demesnes of wealthy tycoons.

The kind of legal and social environment which exists in Ireland is important to the multi-national corporations that this country is seeking to attract. A weak and indeed accommodating government and legal system confers an advantage to any company whose competitors must operate to stricter standards. In this way, Ireland can be though of as the regulatory analogue of a “low wage country”.

Certainly, Ireland is ideal for high tech companies like Google, which command vast quantities of questionable data and the methods to exploit them. They benefit from the lack of laws and even willingness to implement laws governing the digital economy. But even more traditional companies can benefit from the almost total lack of regulation here, moving goods, equipment, funds and indeed personnel as they please though out ports. Less mainstream businesses such as drug-barons are in fact quite famous for using Ireland as a stepping stone to elsewhere, and even the the US military was quite cavalier in its transport of suspects to Guantanamo Bay vis Shannon Airport.

I’m sure some—perhaps older and/or professional—posters may disagree with this assessment, but I think the record speaks for itself. Ireland does not do accountability; and that’s important for people and organisations who don’t want to be held accountable, which includes any and every multinational and private corporation of any note.

Michael, you missed my point a litte. Migrants are leaving because jobs are not here. But in terms of recruitment (i.e. a job in Ireland that requires someone from abroad to fill it), the more peaceful situation in the South comes into play. For example, if a multi-national needs a high-value position in Ireland filled, will they attract the best candidates if they are situated in the North or South.

The sectarian issues in the North do not make it an attractive place to live and work in.

It is more likely that the North would take investment off the rest of the UK rather than the Republic. We have developed a real obsession with headline corporation tax rates in this Country.

@ Michael Moore

for an MNC to get a 2bps bid/offer in EUR/USD, they’ll have to have enormous volume and pricing power, and be very aggressive in their treasury policy. Most are probably getting more like 8-10bps. I’m not guessing, i know for a fact. It’s not a massive cost, but its still a cost, and it still requires someone to look after the risks which is an additional sunk cost in itself. And as you move away from large MNC’s and go to mid sized companies (not everyone locating here is Intel or IBM), the spreads will get wider again. You’d be surprised at some large companies having absolutely no real policy around FX pricing.

We should look at outsourcing a number of public sector functions to NI.

@Michael Moore – “I have been disappointed but not surprised by the lack of comment on Edgar Morgenroth’s blog about the threat to introduce a low rate of corporation tax in Northern Ireland.” – I had also expected a bit more.

JTO again:

I can see your point. Most posters on here think that Northern Ireland (or NornIron, as Lucey calls it) is a foreign country. They were very shocked when Tyrone turned up at Croke Park and won 3 All-Irelands, as they didn’t realise Gaelic football was so popular in Britain.

I don’t share these views and I have frequently posted on and welcomed the prospect of CT harmonisation north and south of the artificial border. In fact, I think I put up a link to the breaking news that it it was going to occur on one of the other threads on Wednesday. However, yesterday was a very busy day on the site, with the GDP and BOP figures coming out, so I didn’t get time to post on the CT thread.

I am totally in favour of CT harmonisation north and south. But, I see the main significance as political more than economic. It is the start of the process of re-integrating the southern and northern economies into a single economy, which will inevitably also lead to political integration. The CT harmonisation should be followed by other tax harmonisation across the board, and the setting up of single bodies to handle functions such as inward investment, tourism, waste, environment etc on an all-island basis.

Regarding the claim of a ‘dramatically lower cost base’ in the north, this is greatly exaggerated. It may be noticed that cross-border shopping has trailed off to virtually nothing. Inflation since 2007 in the north is 15%, v negative inflation in the south, which has more or less wiped out the competitive gain from the devaluation of sterling. A recent report put the average cost of land in the north at 11,000 euros per acre v 8,700 in the south. Housing is now about the same north and south, but it is cheaper in the south outside Dublin than in the north. Likwise with commercial property. It is more expensive in Dublin than in Belfast, but no more expensive in other cities in the south outside Dublin than in Belfast. We need to stop thinking of ‘north’ and ‘south’. We need to think of Dublin, Belfast, and the all the rural areas outside of these. Dublin has a higher cost base than Belfast, but the rural areas in both have a lower cost base still, and pretty similar either side of the border.

Regarding infrastructure. Thanks to the great Bertie Ahern, roads are definitely better now in the south. Not just the inter-city motorways. The roads in Donegal are far better than those in Tyrone and Fermanagh. Regarding broadband, I’m no expert. But, I use computers a lot both north and south and notice no difference in speeds etc.

Regarding sectarianism, I think this is being exaggerated. It is still bad in the inner parts of the big cities and towns in the north, but it is on the decline in the suburbs of those big cities and towns and in many rural areas. Mixed marriages are on the increase even in areas where they would have been unheard of years ago. In fact, I will be going to one in a few weeks when my niece gets married to one from the ‘other side’. This is very common now.

Both north and south are currently being very successful in attracting FDI. And I expect this to continue. New announcements are being made every day. There were a few hundred for Antrim and Belfast earlier in the week, and this morning a few hundred for Shannon. What we should really have, once CT is harmonised, is a single body to handle inward investment for the whole island.

@ JtO

I have enjoyed coming to and working in Belfast on a number of occasions. I too look forward to closer integration.

As for your comment, “We need to think of Dublin, Belfast, and the all the rural areas outside of these.” the good people of Cork will not be impressed. They inhabit the real capital of Ireland.

If you invest in ‘The North of Ireland’/’Northern Ireland’/’The 6 counties’, then you are investing in Ireland.

@JTO

I agree. It should be our national policy that there be a thriving economy in all 32 counties.

Belfast or Dublin?

Which offers better opera?

http://www.finfacts.ie/irishfinancenews/article_1021917.shtml

I think that the correct way of looking at our GNP per capita when compared to Germany is to accept that rather than having too much GNP we have too few people to share it among.

The country actually needs more people and can afford them too.

Encouraging inward migration will lead to:
1: Stabilization of property prices
2: Infusion of some much needed pragmatism
3: Increased entrepreneurship.

Maybe we already have business visas for people willing to set up companies here but if we don’t we should.

Ireland is actually a good place to live. If you saw the way the Canadians push their “communities” in the middle of the tundra you would see just how it can be done.

@ Michael & JtO

More pertinently, one of the most dynamic and valuable organisations IMO, is Culture Ireland, which is an All-Ireland body.

@the DUP

I welcome the amendment re the upcoming Test Series vs England; yes, we are agreeable – bowl in Clontarf and bat in Stormont.

@Michal Hennigan, Gavin Kostick

Opera is very popular in Belfast. There is a very famous opera in Belfast called the Grand Opera House. I was at a Dolly Parton performance in it a few years ago.

@Brian Woods II

Worse than ever IMHO. In 1972 when I was at QUB it would have been unthinkable that the IRA would have elected reps. Goddammit they are now Deputy First Minister.

JTO again:

The fact that said former IRA man and now Deputy First Minister has just been to the White House along with the leader of the DUP shows how far things have progressed since 1972.

What you say about it being unthinkable in 1972 that the IRA would have elected represenatives is probably true. Militant republicanism was at a very low ebb in the 1960s and on in to the beginning of The Troubles in the early 1970s. It was resurrected after that by various events that we need not go into on this site. However, back in the mid-1950s, an IRA man (Tom Mitchell) was elected Westminster MP for Mid-Ulster while in prison for an IRA attack on Omagh military barracks. I was too young, but some of my uncles campaigned for him. The House of Commons voted to unseat him as he was a convicted felon. A bye-election was held. He won the bye-election with an increased majority. The House of Commons voted to unseat him again. He lost the second bye-election. So, it isn’t as unusual as you think. He actually came from Dublin. Of course, that was in the days before Dublin rejoined the Empire.

@Edgar Morgenroth

That is an excellent report you have done on the Belfast-Dublin railway link. Congratulations. However, one of the problems with that link is that the terminus station in Belfast is Belfast Central, which should really be called Belfast Uncentral, as it is in the middle of nowhere, far from the city centre, and the area around it has no amenities and is usually deserted. Plus, its right on the edge of East Belfast, from where disproportionately fewer are likely to want to travel to Dublin, and to where, even today, people from West Belfast are still a bit wary about going, especially at night or during the marching season. Even in today’s more peaceful atmosphere, you’d need to be careful about arriving back at Belfast Central at 10pm on a Sunday night, displaying your GAA colours, if you were coming back from a match at Croke Park. A far better location would be Great Victoria Street, where it used to be, and which has the bus station right beside it, and lots of facilities and hotels, and is close to West Belfast, from where disproportionately more are likely to want to travel to Dublin.

Several days after Moriarty came out, and not one post about it on Irish Economy.

@EWI

DenisO’B bought the blog on monday! and da sindo, and d’examner, and detimes, and dinde’pendent, dasun damale and dastar, and tvee3, and rrrrteeE … shur it’s da talk a hartigans at the mo …. think he bought hartigans as well, an he bought thurles, at which time d’esmund the magnificent bought all the rest, including all the bondholders. Happy Days in Governance Land.

@ObsessiveMathsFreak

”But even more traditional companies can benefit from the almost total lack of regulation here, moving goods, equipment, funds and indeed personnel as they please though out ports. Less mainstream businesses such as drug-barons are in fact quite famous for using Ireland as a stepping stone to elsewhere, and even the the US military was quite cavalier in its transport of suspects to Guantanamo Bay vis Shannon Airport”

Multinational companies absolutely need strong rule of law and regulation. In my experience with dealing in the environmental and health&safety field with pharm companies their requirements go far beyond national legislation. For example they carry out extensive auditing of facilities they send waste to or source ingredients. In this way they drive up the standards with regard quality control, environmental & health and safety mgt.
Nobody with any industry experience would suggest the oppose as you have above.

Apologies
That was @ Donald Byard

@ sam

It is perfectly possible to be committed to driving up technical and regulatory standards in the real economy, while engaging in vigorous regulatory arbitrage on the finance and taxation side. They don’t call it financial engineering for nothing…….

@ DO’D

That’d be funny if he didn’t already own the Irish Independent. That newspaper group really is building up a track record in oligarch owners – first “eircom” O’Reilly, now “Esat” O’Brien. Let’s hope that they don’t start sponsoring economists to write puff-pieces for the financial benefit of the owners…?

@ EWI

“Several days after Moriarty came out, and not one post about it on Irish Economy.”

Eh, i didn’t realise it was an economic issue? Or did you get lost along the way to Politics.ie?

@ Eoin Bond

Eh, i didn’t realise it was an economic issue?

I’d refer you to the justification for nearly every post by one R. Tol that’s appeared here. Surely a matter of “reputational damage” to the counry that what certainly quacks-like-corruption has been aired nationally?

And what are we, the citizens, to make of the apparently inevitable disaster with which privatisation and liberalisation are associated?

@the Alchemist

Distinction is between public debt and private debt.

Private bank debt was socialized by Old Gov: I vehemently disagree with this on grounds too numerous to mention, and main reason I frequent this blog. Its conflation with the public/sovereign has placed Irish public debt into Default, prevented only by further EU debt at the mo … massive reputational damage to Irish citizen, and massive burden on Irish citizen.

Mortgages are private to private arrangements. Of an entirely different order, as distinct from scale.
Private citizen debt resolution mechanisms, & reform of our Dick_een_seean bankruptcy laws have been called for on this blog for many moons ……… default here is also an option …… but a very different story …….. even if both stories are interlinked. I entirely agree with you – default begins at home – you have this option. Blind Biddy has yet another 2nd hand bazooka? U interested for when the sheriff comes knockin?

@ EWI

And what are we, the citizens, to make of the apparently inevitable disaster with which privatisation and liberalisation are associated?

Life is seldom a tableau of black and white patterns.

What are we to make of an almost century old brutally failed political experiment that is heading for its dénouement in a country of over 20m people, which is surviving on food aid from its former communist neighbour, China?

If we take what is commonly viewed as corruption, it happens in state owned companies as well as in the private sector.

In the US, most forms of corruption have been legalised and you have to be pretty dumb to be caught for bribery.

A year ago, even the Supreme Court threw out a 1947 prohibition on companies directly funding advocacy campaigns during elections.

On the foreign front, the US has set a good example since the 1970’s after a bribery scandal that brought down a Japanese prime minister.

There has been progress in Europe after scandals at Siemens and BAE Systems and in some countries until recent times, bribes were tax deductable.

Even in Sweden, it wasn’t until the late 1980’s that MNCs ended the hosting in Stockholm of slush funds for foreign units.

Big procurement projects are always a risk; the Irish public sector procurement budget is worth about €16bn and the biggest single reform Brendan Howlin could make is to make the process transparent.

If you want to sell to the State, quote a price and know it will be available online – – “Sunlight is said to be the best of disinfectants,” Louis Brandeis said in 1914 – two years before he became a justice of the US Supreme Court and he wasn’t referring to a brand of soap.

@ Michael Hennigan

Just reading ‘Other Pople’s Money’ (1914) by Louis Brandeis. It is amazing what gets forgotten by the polity at large. That was the theme of Galbraith’s most entertaining book on the Great Crash.

Your points well made. Human nature is what it is, and we can only struggle for better forms of governance. I would have said more ‘civilised’ forms, but so many civilisations, including our own, are built on the bones of the conquered.

@Michael,

I did some more thinking on this and the decision would depend on a couple of more factors.

Starting with the assumptions:
Pound has fallen in value – > Exports more profitable from NI
UK is printing pounds to finance gov deficit -> Pound looks likely to fall some more in value.

Scenarios:
1. No CCCTB, higher CT in NI -> Invest in NI & set up some transfer pricing to avail of the lower CT in Ireland.

2. Same CT in NI & Ireland -> Invest in NI.

3. CCCTB in place, higher CT in NI -> Then I’d need to do some more calculations were my net profit would be the highest.

It seems unlikely that ECB will start the printing press & it seems likely that the lower CT can be introduced in NI so with no CCCTB the likely place to invest (the largest portion) would be in the NI.

@ Michael Hennigan

The Brazilian eucalyptus ad on your site – what’s the recent history of the land? Is it ex rainforest ? I’m reading Collapse by Diamond at the moment and the news from Brazil is very depressing.

@ Mickey Hickey

FG are no different. I think Fintan O’Toole put it well a few months ago

“Let’s think about what remains, collectively, within our own control: our political culture and system; our public ethics and values; our health, education and pension systems; our legal impunity for white-collar criminals; our lack of civic pride; the very passivity that makes us powerless”

What is FG going to do about white collar crime ?

However I don’t think things are significantly better elsewhere. I get all the Swiss election literature and all the parties with perhaps the exception of the Greens are chained to permagrowth. Maybe some countries are less blatantly corrupt but there is no alternative to the belief that resources are infinite and the “free market” is the only choice.

Up north the DUP have the same economic policies as the Tories, UK Labour, Irish Labour,FG, FF, the Swiss SVP, the French UMP, the US Reps/Dems and so on.

@ EWI

I’m still genuinely confused as to why you think an economics blog has a duty to talk about the outcome of the Moriarty Tribunal? It’s been going on for what, 14 years? It had nothing to do with capitalism or economics, and is purely about croneyism and corruption. Decent chance fatigue and boredom has set in to be perfectly honest. As i said before, plenty of space on politics.ie for you to have a bit of banter about it if you want.

@ EWI

well explain how it had a lot to do with capitalism then please? Remember, the Moriarty Tribunal is not about whether state assets/resources should or shouldn’t be sold off, although i’m sure you think it probably is at some level.

@ seafóid

Greenwood is a Danish company and it utilises sites that have been left infertile by historic slash and burn farming techniques. The soil is like sand and without the right corrections will not sustain life at all. The company says once it’s upgraded, 20% of the land is set aside as a native reserve on each site.

It says: “All sites are under 1,000 hectares and this unlike larger sites has a positive social and environmental benefit. The problem has been in the past that native forestry in the Cerrado regions have been cleared to make way for farming or used as charcoal and firewood; this is not our model both economically or morally.

The fact that the Brazilian government feels so strongly about the destruction of native Cerrado has led to new initiatives and laws being introduced one of these laws states that the steel industry must now only buy charcoal [for the blast furnaces] from identified exotic species [ie eucalyptus] This is because at the current rate of consumption native forest will not survive even if they are managed whereas eucalyptus grows at 10 times the rate that native Cerrado will and therefore preserves 9 hectares of native habitat for every 1 hectare of eucalyptus grown.”

I read Collapse in early 2005; Diamond quotes Percy Bysshe Shelley’s Ozymandias – – in Syria a statue of the brutal dictator father of the current president was destryoyed in a southern town; life both changes and doesn’t.

@ EWI

There are many scandals of different degrees all related to the bucks-stop-nowhere culture and the biggest scandal – – the wrecking of the economy – – was judged by a tribunal on Feb 25th.

The slow-motion system isn’t going to suddenly move into a speedier orbit because of another report.

I’m blue in the face from arguing that there isn’t a big constituency for change/reform in this conservative country — the socialists are as barnacled as the neanderthals.

We need the external enemy to fire up real outrage.

There’s another report due from the other tribunal that was set up in 1997; we knew the land rezoning system was corrupt and over 13 years later, Frank McDonald reported on Friday that NAMA has told a resident of my hometown of Bandon that most existing rezoned land in the country is unfit for building. Councillors are seeking to rezone more land in the town.
It’s the only power these people have and God help the people if they had any more.

As for what could loosely be called culture, what is more illustrative of an unfit system than tribunal lawyers becoming multimillionaires and they have been overpaid €1m as a result of a clerical error, because they did not feel that it was appropriate to refuse/pay back the extra money.

There is also a dispute about three judges involved in the Mahon tribunal claiming more than €500,000 in travel allowances, on which the Irish Times reported last October that the Department of the Environment had refused to pay.

@ Eureka

Before we fix it, we have to face it as honestly as we can. It’a not going to be a pleasant task, but it’s a very necessary one, I am afraid. This board is remarkably free of diatribes, and long may it remain so.

@Michael H

“I’m blue in the face from arguing that there isn’t a big constituency for change/reform in this conservative country — the socialists are as barnacled as the neanderthals.”

You hit the nail of head there.

During the week I read in the IT that Minister Howlin was ordering a review before setting out his stall. It will be an inter-agency all department shindig. Once more aroudn the block. We’ve been here before so often that I felt giddy reading it.

Howlin’s own bailiwick of Wexford would make an interesting study in industrial collapse and threadbare revival.

The agri-manufacturer Pierce was in slow motion free-fall from the late 60s through the early 80s. Some 1200 jobs disappeared in that collapse. Likewise a Renault car assembly plant, Smiths, departed in the same period. To this list could be added a foundry, a car spring manufacturer, a pork processor and several textile companies. I don’t have the stats to hand but I recall reading last year that Wexford was up with Louth and Leitrim in the poverty indices.

The point I am making (by the way, nothing to do with Howlin or any other politician) is that once these skills are gone they are gone almost forever (certainly the ‘forever’ of unemployment). Regrettably the establishment doesn’t value manual trade skills. The only machinists successive governments have courted are generally policy machinists.

@Michael H

Will public sector reform make Ireland a more attractive place for investment? What did one of the Bailey brothers respond in an entirely different context?

Well the ‘Smart economy’ gravy train looks set to roll on unchallenged by anyone in government.

Don’t offend nice people might be one take on the outcome.

@Eureka
I wish I could agree with you. At a very early age I had first hand experience with Irish political palm greasing. For longer than I care to remember Irish politics was rotten to the core at the town, county and national level. All that has changed is the amounts transacted have increased enormously as the favours that could be bought increased in value. All the underhanded behaviour is seen as perfectly natural (campaign contributions) by the public at large and it would never occur to anyone that it was illegal. Corruption is deeply ingrained in the culture and it would take a revolution to root it out. This is not going to happen so rest easy and carry on with business as usual.

Empirics from the DinnyO’B Press

A NEW government TD has hired his wife as an assistant in Leinster House after he was thwarted in his efforts to get her elected to his vacant council seat.
Fine Gael’s Alan Farrell has hired Emma Doyle as his parliamentary assistant in the Dail just two weeks after she was rejected by Mr Farrell’s Dublin North FG branch as his replacement on Fingal County Council.

http://www.independent.ie/national-news/fg-td-hires-wife-as-aide-after-council-bid-fails-2595413.html

FDI agglomeration effects. We got them. NI doesn’t, except to the extent that it can free ride on ours.

NATO bombs Libya – does nothing anywhere else. Nothing to do with BP influencing things, or ELF having designs on a few oil fields there!
Merkel extended the life of nuclear plants only to shut them down when Japan suffered its tsunami – nothing to do with lobbying from the nuclear lobby there!
Look at how France handled its own Anglo (Credit Lyonnais).
They are all corrupt – not just us. Sure it’s wrong but it happens.
Europe is looking for moral defects in us so as to justify it’s harsh approach. Trust us to do that job for them

@ David O’Donnell
They will be fired. But it would be much better for our psyche if an Irishman did the firing.
Here’s hoping Shatter steps up to the plate and showboats a little on this.
Growing up means taking action – not moaning and waiting for your parents to sort it out.
And re corporate corruption – just a germ of an idea but make companies declare annually what contacts they have had with politicians. Just like annual returns. Penalty for lying is being struck off. A neat little piece of legislation should suffice.

“Bond. Eoin Bond Says:
March 25th, 2011 at 11:05 am

@ Michael Moore

i work for a bank, and trust me,”

I stopped reading at this point.