The COVID-19 crisis has already had a serious impact on Ireland’s economy and will continue to do so in 2021. Since March 2020, the Irish government has implemented varying degrees of lockdown measures in response to the COVID-19 pandemic, including restrictions to close non-essential businesses and services for extended periods of time. Ireland’s official unemployment rate has remained around five percent (currently at 5.8 percent as of January 2021) due to the unprecedented pandemic related assistance programs to businesses and workers furloughed due to COVID-19. Due to the high number of individuals receiving pandemic wage subsidies, the official unemployment rate is still roughly five percent, much lower than what the Irish government expects without these programs. Including workers furloughed by the pandemic, the real unemployment rate has fluctuated in line with the three separate nationwide lockdowns in 2020 and 2021, increasing the unofficial unemployment rate to average at an estimated high of 20 percent. Despite the prolonged difficulties, Ireland’s economic projections remain positive and the strongest among the Eurozone countries with three percent economic growth in 2020. This is due to continued growth in exports by technology, pharmaceutical, and other large multinational companies headquartered in Ireland. The government is hopeful its emergency measures will help businesses and its once-sound economy to quickly return from its COVID-19 enforced hibernation.
The Irish government actively promotes foreign direct investment (FDI) and has had considerable success in attracting U.S. investment, in particular. There are over 900 U.S. subsidiaries in Ireland operating primarily in the following sectors: chemicals, bio-pharmaceuticals and medical devices, computer hardware and software, internet and digital media; electronics, and financial services.
One of Ireland’s many attractive features as an FDI destination is its 12.5 percent corporate tax (in place since 2003). Firms also choose Ireland for the quality and flexibility of the English-speaking workforce; the availability of a multilingual labor force; cooperative labor relations; political stability; and pro-business government policies and regulators. Additional positive features include a transparent judicial system; transportation links; proximity to the United States and Europe; and Ireland’s geographic location making it well placed in time zones to support investment in Asia and the Americas. Ireland benefits from its membership of the European Union (EU) and a barrier-free access to a market of almost 500 million consumers. In addition, the clustering of existing successful industries has created an ecosystem attractive to new firms. The United Kingdom’s (UK) departure from the EU, or Brexit, on January 1, 2021, leaves Ireland as the only remaining English-speaking country in the EU and may make Ireland even more attractive as a destination for FDI.
The Irish government treats all firms incorporated in Ireland on an equal basis. Ireland’s judicial system is transparent and upholds the sanctity of contracts, as well as laws affecting foreign investment. Conversely, Ireland’s ability to attract investment are often marred by: relatively high labor and operating costs (such as for energy); skilled-labor shortages; Eurozone-risk; a sometimes-deficient infrastructure (such as in transportation, housing, energy and broadband Internet); uncertainty in EU policies on some regulatory matters; and absolute price levels among the highest in Europe.
A formal national security screening process for foreign investment in line with the EU framework is still being developed. At present, investors looking to receive government grants or assistance through one of the four state agencies responsible for promoting foreign investment in Ireland are often required to meet certain employment and investment criteria.
Ireland uses the euro as its national currency and enjoys full current and capital account liberalization.
The government recognizes and enforces secured interests in property, both chattel and real estate. Ireland is a member of the World Intellectual Property Organization (WIPO) and a party to the International Convention for the Protection of Intellectual Property.
Several state-owned enterprises (SOEs) operate in Ireland in the energy, broadcasting, and transportation sectors. All of Ireland’s SOEs are open to competition for market share.
While Ireland has no bilateral investment treaties, the United States and Ireland have shared a Friendship, Commerce, and Navigation Treaty since 1950 that provides for national treatment of U.S. investors. The two countries have also shared a Tax Treaty since 1998, supplemented in December 2012 with an agreement to improve international tax compliance and to implement the U.S. Foreign Account Tax Compliance Act (FATCA).
|TI Corruption Perceptions Index||2020||20 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2020||24 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||15 of 131||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||$354,940||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||$64,000||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The Irish government actively promotes FDI, a strategy that has fueled economic growth since the mid-1990s. The principal goal of Ireland’s investment promotion has been employment creation, especially in technology-intensive and high-skill industries. More recently, the government has focused on Ireland’s international competitiveness by encouraging foreign-owned companies to enhance research and development (R&D) activities and to deliver higher-value goods and services.
U.S. companies in particular are attracted to Ireland as an exporting sales and support platform to the EU market of almost 500 million consumers and other global markets. Ireland is a successful FDI destination for many reasons, including a low corporate tax rate of 12.5 percent for all domestic and foreign firms; a well-educated, English-speaking workforce; the availability of a multilingual labor force; cooperative labor relations; political stability; and pro-business government policies and regulators. Ireland also benefits from a transparent judicial system; good transportation links; proximity to the United States and Europe, and the drawing power of existing companies operating successfully in Ireland (a so-called “clustering” effect).
The stock of American FDI in Ireland stood at USD 355 billion in 2019, more than the U.S. total for China, India, Russia, Brazil, and South Africa (the so-called BRICS countries) combined. There are approximately 900 U.S. subsidiaries currently in Ireland employing roughly 180,000 people and supporting work for another 128,000. This figure represents a significant proportion of the 2.31 million people employed in Ireland. U.S. firms operate primarily in the following sectors: chemicals, bio-pharmaceuticals and medical devices, computer hardware and software, internet and digital media; electronics, and financial services.
U.S. investment has been particularly important to the growth and modernization of Irish industry over the past thirty years, providing new technology, export capabilities, management and manufacturing best practices, and employment opportunities. Ireland has more recently become an important R&D center for U.S. firms in Europe, and a magnet for U.S. internet and digital media investment. Industry leaders like Google, Amazon, eBay, PayPal, Facebook, Twitter, LinkedIn, Electronic Arts and cybersecurity firms like Tenable, Forcepoint, AT&T Cybersecurity, McAfee use Ireland as the hub or important part of their respective European, and sometimes Middle Eastern, African, and/or Indian operations.
Factors that challenge Ireland’s ability to attract investment include relatively high labor and operating costs (such as for energy); sporadic skilled-labor shortages; the fall-out from the COVID-19 pandemic; and sometimes-deficient infrastructure (such as in transportation, energy and broadband quality). Ireland also suffers from housing and high-quality office space shortages; and absolute price levels that are among the highest in Europe. The American Chamber of Commerce in Ireland has called for greater attention to a “skills gap” in the supply of Irish graduates to the high technology sector. It also has asserted that relatively high personal income tax rates can make attracting talent from abroad difficult.
In 2013, Ireland became the first country in the Eurozone to exit a financial bailout program from the EU, European Central Bank, and International Monetary Fund (EU/ECB/IMF, or so-called Troika). Compliance with the terms of the Troika program came at a substantial economic cost with gross domestic product (GDP) stagnation and austerity measures, while dealing with high unemployment (which hit 15 percent). Strong economic progress followed through government-backed initiatives to attract investment and stimulate job creation and employment. This helped economic recovery and Ireland’s economy was the one of the fastest growing economies in the Eurozone area annually to 2019. As a result, unemployment levels fell dramatically and by the end of 2019 reached 4.7 percent. In addition, the Irish government has successfully returned to international sovereign debt markets and successful treasury bonds sales, at low interest rates, exemplify renewed international confidence in Ireland’s economic progress. Despite the prolonged difficulties caused by the COVID-19 pandemic, Ireland’s economic performance continued to be the best in the Eurozone in 2020 with an estimated three percent growth, achieved on the back of strong exports from the food, pharmaceutical and med-tech sectors.
Brexit and its Implications for Ireland
The UK’s exit from the EU (Brexit) on January 1, 2021, leaves Ireland as the only remaining English-speaking country in the bloc. The UK is now a non-EU member that shares a land border with Ireland. . The December 2020 agreement dictates the future trading relationship between the UK and the EU and will likely have an affect on Ireland’s economic performance. The agreement allows for tariff-free Ireland – Great Britain (England, Scotland and Wales) trade but comes with increased customs procedures. Existing Ireland – Northern Ireland trade continues unimpeded. While some disruption has been noticed in the supply chain of retail and agricultural sectors (due to their traditional use of the UK “land-bridge” to move products to and from the EU), Irish companies have generally been able to find alternate routes (i.e., using ferries from Ireland directly to continental Europe, though this has raised costs in some sectors.
With Brexit, Ireland has lost a close EU ally on policy matters, particularly free trade and business friendly open markets. Ireland continues to be heavily dependent on the UK as an export market and source especially for food products, and the full effect of Brexit may yet hit sectors such as food and agri-business with disruptions to supply chains and increased red-tape. Irish trade with its EU colleagues has already seen a dramatic switch to direct shipping rather than using Great Britain as a land-bridge for trucking products. A number of UK-based firms (including U.S. firms) have moved headquarters or opened subsidiary offices in Ireland to facilitate ease of business with other EU countries. The Irish Department of Finance and the Central Bank of Ireland (CBI) have estimated Brexit will cut Ireland’s economic growth modestly in the near term but such models are complicated with the ongoing COVID-19 pandemic.
Six government departments and organizations have responsibility to promote investment into Ireland by foreign companies:
- The Industrial Development Authority of Ireland (IDA Ireland) has overall responsibility for promoting and facilitating FDI in all areas of the country. IDA Ireland is also responsible for attracting foreign financial and insurance firms to Dublin’s International Financial Services Center (IFSC). IDA Ireland maintains seven U.S. offices (in New York, NY; Boston, MA; Chicago, IL; Mountain View, CA; Irvine, CA; Atlanta, GA; and Austin, TX), as well as offices throughout Europe and Asia.
- Enterprise Ireland (EI) promotes joint ventures and strategic alliances between indigenous and foreign companies. The agency assists entrepreneurs establish in Ireland and also assists foreign firms that wish to establish food and drink manufacturing operations in Ireland. EI has six existing offices in the United States (Austin, TX; Boston, MA; Chicago, IL; New York, NY; San Francisco, CA; and Seattle, WA and has offices in Europe, South America, the Middle East, and Asia.
- Shannon Group (formerly the Shannon Free Airport Development Company) promotes FDI in the Shannon Free Zone (SFZ) and owns properties in the Shannon region as potential green-field investment sites. Since 2006, the responsibility for investment by Irish firms in the Shannon region has passed to Enterprise Ireland while IDA Ireland remains responsible for FDI in the region.
- Udaras na Gaeltachta (Udaras) has responsibility for economic development in those areas of Ireland where the predominant language is Irish, and works with IDA Ireland to promote overseas investment in these regions.
- Department of Foreign Affairs (DFA) has responsibility for economic messaging and supporting the country’s trade promotion agenda as well as diaspora engagement to attract investment.
- Department of Enterprise, Trade and Employment (DETE) supports the creation of jobs by promoting the development of a competitive business environment where enterprises can operate with high standards and grow in sustainable markets.
Limits on Foreign Control and Right to Private Ownership and Establishment
Irish law allows foreign corporations (registered under the Companies Act 2014 or previous legislation and known locally as a public limited company, or plc for short) to conduct business in Ireland. Any company incorporated abroad that establishes a branch in Ireland must file certain papers with the Companies Registration Office (CRO). A foreign corporation with a branch in Ireland has the same standing in Irish law for purposes of contracts, etc., as a domestic company incorporated in Ireland. Private businesses are not competitively disadvantaged to public enterprises with respect to access to markets, credit, and other business operations.
No barriers exist to participation by foreign entities in the purchase of state-owned Irish companies. Residents of Ireland may, however, be given priority in share allocations over all other investors. There are no recent example of this, but Irish residents received priority in share allocations in the 1998-sale of the state-owned telecommunications company Eircom. The government privatized the national airline Aer Lingus through a stock market flotation in 2005, but chose to retain about a one-quarter stake. At that time, U.S. investors purchased shares in the sale. The International Airlines Group (IAG) purchased the government’s remaining stake in the airline in 2015, and subsequently took an overall controlling interest which it continues to hold.
Citizens of countries other than Ireland and EU member states can acquire land for private residential or industrial purposes. In the past, all non-EU nationals needed written consent from the Department of Agriculture, Food and the Marine before acquiring an interest in land zoned for agricultural use but these limitations no longer exist. There are many equine stud farms and racing facilities owned by foreign nationals. No restrictions exist on the acquisition of urban land.
Ireland does not yet have formal investment screening legislation in place but is in the process of drafting the legislation which is expected to be enacted in 2021. (The bill was delayed due to the government’s efforts to respond to the COVID-19 pandemic.) As a member of the EU, Ireland is required to implement any common EU investment screening regulations or directives such as the EU Framework.
Other Investment Policy Reviews
The Economist Intelligence Unit and World Bank’s Doing Business 2020 provide current information on Ireland’s investment policies.
All firms must register with the Companies Registration Office (CRO online at www.cro.ie). The CRO, as well as registering companies, can also register a business/trading name, a non-Ireland based foreign company (external company), or a limited partnership. Any firm or company registered under the Companies Act 2014 becomes a body corporate as and from the date mentioned in its certificate of incorporation. The CRO website permits online data submission. Firms must submit a signed paper copy of this online application to the CRO, unless the applicant company has already registered with www.revenue.ie (the website of Ireland’s tax collecting authority, the Office of the Revenue Commissioners).
The Ireland pages in the following links gives the most up-to-date information:
Enterprise Ireland assists Irish firms in developing partnerships with foreign firms mainly to develop and grow indigenous firms.
Corruption is not a serious problem for foreign investors in Ireland. The principal Irish legislation relating to anti-bribery and corruption is the Criminal Justice (Corruption Offences) Act of 2018. The Act consolidates all previous legislation for the prevention of corruption. The legislation makes it illegal for Irish public servants to accept bribes. The Ethics in Public Office Act, 1995, provides for the written annual disclosure of interests of people holding public office or employment.
The law on corruption in Ireland gives effect in domestic law to the OECD Anti-Bribery Convention and other conventions concerning criminal corruption and corruption involving officials of the European Union and officials of EU member states. Irish legislation ensures there are strong penalties in place with prison terms of up to ten years and an ‘unlimited’ fine, for those found guilty of offenses under the Act, including convictions of bribery of foreign public officials by Irish nationals and companies that takes place outside of Ireland.
Irish police (An Garda Siochana, or Garda) investigate all allegations of corruption. The Director of Public Prosecutions is responsible for preparing files for prosecution, on detection of sufficient evidence of criminal activity. The government has, in the past, convicted a small number of public officials for corruption and/or bribery. In 1996, Ireland established the Criminal Asset Bureau (CAB), an independent body responsible for seizing illegally acquired assets. CAB has the powers to focus on the illegally acquired assets of criminals involved in organized crime by identifying criminally acquired assets of persons, and taking the appropriate action to deny such people of these assets. Any CAB action is primarily taken through the application of the Proceeds of Crime Act, 1996 legislation. Ireland is a member of the Camden Asset Recovery Inter-Agency Network (CARIN).
UN Anticorruption Convention, OECD Convention on Combatting Bribery
Ireland signed the UN Convention on Corruption in December 2003 and ratified it in 2011. Ireland is also a participating member of the OECD Working Group on Bribery.
Resources to Report Corruption
Government agency responsible for combating corruption:
Contact at Transparency International:
11. Labor Policies and Practices
Ireland’s population reached 4.98 million in April 2020 an increase of 55,900 on 2019 levels. Net migration in the year to April 2020 was 28,900 persons. The total number of persons employed at the end of 2019 was 2.36 million but this contracted to 2.31 by the end of 2020 following the onset of the COVID-19 pandemic. Employment opportunities continue to attract inward migrations particularly for employees with language skills. Ireland’s unemployment rate peaked at 15.1 percent in early 2012 following the 2008 collapse of Ireland’s construction industry. In the following years employment levels rebounded, the unemployment rate improved and by February 2020 had fallen to 5.0 percent (which for Ireland is considered near full-employment levels).
The onset of the COVID-19 pandemic brought with it three lockdowns of the economy (in April, October and December 2020) with maximum restrictions on movements and a sharp rise in the numbers receiving temporary government employment supports. Temporary government unemployment supports (pandemic unemployment payments) were put in place to keep employees linked to their employers to assist in a rapid return to operations following the lockdowns. The COVID-19 adjusted unemployment rate for Ireland stood at 24.8 percent (with an underlying unemployment rate of 5.8 percent) in February 2021. The Central Bank of Ireland forecasts Ireland’s unemployment rate will average of 9.3 percent in 2021 before declining to 7.8 percent in 2022 contingent on the full re-opening of the economy and a successful vaccination roll-out.
Average hourly labor costs in Ireland increased by 5.5 percent in 2020. During 2020, average industrial earnings increased by 5.4 percent to 964 euro (USD 1,101) per week. The government mandated minimum wage rate was increased by 0.10 euro to 10.20 euro ($12.50) per hour from January 2021, with lower rates set for younger and less experienced workers.
The government regulates the Irish labor force less than governments in most continental EU countries. The workforce has a high degree of flexibility, mobility, and education. There is relative gender balance in the workforce, with 1,245,200 males and 1,061,000 females employed in 2020. The gender balance reflects a societal change and government support that facilitated a surge in female employment from the mid-1980s. There are no restrictions on the hiring of non-national labor, and many firms, especially in the technology sector, hire young professionals with a diverse range of language and technology skills.
Ireland, since the mid-1990’s, is an attractive destination for foreign investment due to the availability of a young, highly educated workforce. The removal of tuition fees for third-level (university) education in 1995 resulted in a rapid increase of third-level qualified graduates. While tuition fees are paid by the government, students must still pay registration fees, currently capped at 3,000 euro ($ 3,675) per academic year. The availability of highly educated and qualified potential employees in Ireland is an attractive feature for employers looking to locate in the EU and has been a significant factor in attracting the already large number of multinational companies located in Ireland. Over 60 percent of new third-level students in Ireland undertake business, engineering, computer science, or science courses. The focus of government strategy has shifted to upgrading skills and increasing the number of workers in technology-intensive, high-value sectors to ensure the availability of an educated workforce.
The onset of the COVID-19 pandemic introduced mass teleworking to Ireland. The huge change in work practice came almost overnight and despite the immense change, workers and their employers seem to have adapted well. Key to Ireland’s teleworking success was the access to good broadband services. Adequate broadband is already available in most urban areas while the government’s national broadband plan to bring high speed broadband to all areas is still rolling out. It is likely that these plans may be accelerated to get earlier delivery of broadband services in more rural parts of the island.
The Irish system of industrial relations is voluntary. Employers and employees generally agree on pay levels and conditions of employment through collective bargaining. There are generally good industrial relationships and very few industrial disputes. There were just seven labor disputes in 2020 down from nine in 2019. (Note: Pandemic measure are likely to have affected the number of disputes in 2020. End note). A series of agreements between the government and public service labor unions in place since 2010 have in general reduced public service labor disputes.
Employers typically resist trade union demands for mandatory trade/labor union recognition in the workplace. While the Irish Constitution guarantees the right of citizens to form associations and unions, Irish law also affirms the right of employers to withhold union recognition and to deal with employees on an individual basis. One quarter of all workers are unionized but there is much higher participation by public sector workers in unions. The government estimates up to 80 percent of workers in foreign-owned firms do not belong to unions. This may reflect more attractive pay, benefits, and conditions by these employers compared with domestic firms. DBEI explicitly addressed the country’s collective bargaining rights through an amendment of existing legislation in the Industrial Relations (Amendment) Act 2015.