FDI and embracing constant change

With a skilful workforce and a competitive,  pro-business economy, ROI retains its crown as one of the fastest growing economies in Europe. And US business investment is a particularly dynamic area and major contributor to the economy. So, what does it take to continue this success story? Drawing on his extensive experience and offering four steps for the future is Mark Gantly writing in his role as President of the American Chamber of Commerce Ireland.

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For many people, foreign direct investment (FDI) is seen as a fairly recent phenomenon. But it’s now more than a century since large American corporations looked across the Atlantic to extend their operations. In 1917, and choosing Cork as its first purpose-built base outside the US, Henry Ford & Son set up an ambitious manufacturing plant and was soon turning out tractors and Model Ts by the hundred.

Henry had a strong Irish pedigree — his father had moved to the US in the mid-19th century during the Famine. To this day, a replica Model T Ford can be found in the centre of Ballinascarthy in west Cork where the Fords farmed for more than 300 years. In the ensuing century since Ford’s return, ROI has opened its doors to dozens of US corporations from Pfizer to Facebook and Intel to Dell.

According to figures from the American Chamber of Commerce (AmCham) Ireland, there are more than 700 US companies with bases in ROI. The emphasis is toward innovation and technology in industries such as information and communications, biotechnology, pharmaceuticals, medical technologies and financial services. They directly employ more than 155,000 people in the ROI economy, and there’s at least a further 100,000 employed in support and supply chains. This accounts for around 20 per cent of all employment in ROI and, with a US$446 billion total investment, almost 70 per cent of all foreign direct investment.

What many people don’t often acknowledge is that, like the Ford story, this is a two-way street. There are more than 700 ROI companies exporting to the US, and there are 100,000 people employed by ROI affiliated entities in 50 US states.

 

The FDI story so far

My own employer, Hewlett Packard, is now close to celebrating its first half century in ROI. During this time, we have seen FDI grow significantly. Investors have benefitted from the great pool of young and well-educated talent, from the fact that ROI is an appealing place to live and provides easy access to European markets, and from the pro-business economy bolstered by a corporation tax rate of 12.5 per cent (since 2003), and tax treaties with 72 countries. To cap it all, the ROI economy grew by 7.3 per cent in 2017, with GDP expected to grow by 4.7 per cent in 2018 and 3.9 per cent in 2019 according to the Economic and Social Research Institute’s latest quarterly commentary.  

REGARDLESS OF THE SECTOR, ACCESS TO TALENT WILL BE THE MAJOR FACTOR DRIVING FUTURE INVESTMENT. Mark Gantly President of the American Chamber of Commerce Ireland

Moving with the times

But, of course, times are constantly changing and business needs to respond. Technology and innovation move ahead at a pace and there is the uncertainty around Brexit. It’s interesting to note that there was a big push around FDI in the early 70s when ROI was preparing to join what was then the European Economic Community in 1973.

We have weathered much change since then, and will surely weather more, so we know that the route to continued success is to always anticipate change, then be prepared to be flexible and adaptable. Based on my experience, here are some ideas for existing and prospective investors in navigating the way ahead.  

US Investment in ROI

FDI Ireland map 
ROI is the gateway to Europe for many US companies accessing European international markets 12% of all US investment into Europe goes to ROI
 

+700

US companies in ROI

+155,000

Direct employees of US companies in ROI

+100,000

Indirect employees supported by US companies in ROI

+$446bn

Total investment stock of the US in ROI

Statistics from the American Chamber of Commerce 2018 US-Ireland Business Report

ROI investment in the US

FDI US map 
The value of research and development 
spending by US affiliates of majority ROI owned firms in 2015 was $3.9 billion
 
 

+700

ROI companies exporting to the US
Over 400 ROI companies with operations in the US

+100,000

People employed by ROI affiliated entities

+2,000

Locations in all 50 states across the US

+$85.5bn

Total investment stock of ROI in the US in 2015

Statistics from the American Chamber of Commerce 2018 US-Ireland Business Report

The FDI long view

ROI’s track record of success in FDI is the envy of many. That success is not just in attracting new FDI, it’s also in retaining and transforming the installed base. The inclination of existing companies is to do more here, also to entrust the ROI entity with greater levels of responsibility. Regardless of the sector, the major factor that will drive investment in the future is access to talent. That talent, both homegrown and international is increasingly mobile. For them to choose ROI as their long-term base will be driven largely by lifestyle factors — quality of housing, transport infrastructure, healthcare and education. In addressing these challenges, the AmCham's view is that speed of execution, not quality of vision, will drive our future success.

Four steps towards the future

1/ Know your neighbours

FDI neighbours

Whether it’s pharma in Cork, IT in Dublin or ‘med tech’ in Galway, FDI companies have tended to form clusters. And there’s a great deal that’s positive to be said about the power of a critical mass of like-minded ventures. For existing companies there are opportunities to be found by partnering with start-ups or academic research groups that are prominent on the scene. For incoming investors, you know you’ll have a ready-made community and support network. While AmCham has traditionally been seen as the voice of the large FDI companies, it is actually the emerging FDI sector that is the fastest growing part of our membership.

2/ Love change

FDI change

It’s true of all business, but especially true of FDI — you always need to adapt to survive. Transformation is the route to absorbing change, adapting and then forging ahead. US FDI in ROI is remarkably resilient. That can be largely attributed to its ability to anticipate and adapt to change.

 

3/ Invest for growth

FDI growth

This is a message to FDI companies, infrastructure providers and particularly to government. Economic success and growth are inextricably linked to infrastructure. These range from reliable and affordable water and power to better broadband, roads and public transportation. ROI has made great progress in many of these areas, but there is a lot more to do. We have many of the right things mapped out in the Project Ireland 2040 plan, but we need to execute.

4/ Improve quality of life

FDI quality

In the past five years we have seen a significant change in the priorities  for FDI companies.  Their attention has shifted towards attracting and retaining the best talent.  To retain this talent we need to look to our cities to invest in improving quality of life — and that’s everything from new homes and better office buildings to leisure and cultural amenities. At present around 17 per cent of the total population was not born in ROI, in US multinationals that proportion rises to 27 per cent. Given the diversity of the workforce, we also need to put inclusion at  the centre of our agenda — it will be a major differentiator for attracting FDI in the future.

FOR EXISTING FDI COMPANIES THERE ARE OPPORTUNITIES TO BE FOUND BY PARTNERING WITH START-UPS OR ACADEMIC RESEARCH GROUPS. INCOMING INVESTORS KNOW THEY’LL HAVE A READY-MADE COMMUNITY AND SUPPORT NETWORK.