Michael Lohan is the CEO of IDA Ireland, which is the body responsible for bringing foreign direct investment into the country
Ireland is renowned for its stable and predictable tax environment, which has attracted multinational companies over the years. However, are you concerned that the prolonged resolution of the Apple tax case could potentially jeopardise this reputation?
Michael Lohan: In short, my answer is no, I don’t believe it will change Ireland’s reputation. There are two main reasons for this. Firstly, the Apple case was determined under state aid rules and is historical in nature. Secondly, there have been significant changes in global taxation with the OECD’s (Organisation for Economic Cooperation and Development) Base Erosion and Profit Shifting (BEPS) process. Ireland is a contributor to and signatory of the OECD BEPS process, and we fundamentally agree with having clarity and certainty in our global taxation policy.
From my discussions with business and global leaders, while taxation is an important topic, it is just one aspect of the decision-making process for investment. A comprehensive suite of pro-enterprise policies, activities supporting innovation, and talent development are also crucial. In Ireland, we pride ourselves on the clarity and certainty of our policies, and we will continue to uphold these standards.
Based on what you’re saying, it seems that the tax case has actually enhanced Ireland’s reputation. This newfound clarity could potentially attract even more multinational companies to invest in Ireland. Would you agree that this increased transparency is a positive development?
ML: Certainly, there is clarity, and we welcome this clarity in the BEPS process. As we look towards the future of global taxation, it is crucial to ensure that the principles of OECD BEPS are upheld. The risk lies in different nations potentially deviating from these principles, and we may already be seeing some signs of this at the international level. However, we firmly believe that maintaining stability and certainty in global taxation is fair and beneficial, both from an enterprise perspective and a societal perspective.
This conversation comes at a time when Ireland has just announced its latest budget. I’d like to discuss specific measures within this budget that you believe will support continued foreign direct investment. What are these measures, and which ones stand out as particularly attractive to multinational companies?
ML: We were fortunate to have a strong budget surplus, reflecting the robust fundamentals of our economy, including financial returns, demographics, and growth sectors. The recent budget allocated an additional €3 million to key infrastructure elements that support enterprise and FDI, such as water, energy, and housing. This is crucial as Ireland’s population has increased by 10% in the last decade, necessitating matching infrastructure to support our growing economy.
The budget also introduced several changes and amendments aimed at fostering innovation, particularly for entrepreneurs and SMEs. It’s essential to nurture both indigenous innovation and FDI to sustain a dynamic and resilient economy.
Ireland’s economic success is a positive story, but it unfolds against a backdrop of significant geopolitical turbulence. Given these circumstances, can Ireland sufficiently insulate itself from these external forces to ensure that the flow of foreign investment into the economy remains unaffected?
ML: Ireland has greatly benefited from being an open economy with a global outlook. Initially, our development was inward-looking, but our economy truly flourished when we began to embrace global opportunities. In this dynamic environment, it’s crucial for us to remain nimble and agile, aligning ourselves with growth areas in the global economy. These growth areas include Technology, International Financial Services, Life Sciences, High Value Engineering and Manufacturing . We believe these sectors are where Ireland can differentiate itself and add significant value to the global economy, attracting investment both from new companies and those with an established presence here.
As the economic and geopolitical landscape continues to evolve, it’s essential for Ireland to stay focused on these key areas where we can contribute meaningfully.
Those are important aspirations, but playing devil’s advocate, other economies have similar goals. Given this, how can you retain or enhance your competitiveness in a changing world while also attracting more FDI?
ML: The competition for Foreign Direct Investment (FDI) has never been as intense as it is now, especially over the last 12 to 18 months. Internationally, while the total number of FDI flows is decreasing, the scale of investments is actually increasing. This means we are seeing larger-scale investments from a smaller pool.
For Ireland, this has several implications. Firstly, it’s crucial to align with growth areas in the global economy and related key sectors. Secondly, strengthening our innovation capabilities is essential, which includes ensuring we have the right skill set and availability of talent. Additionally, having a supportive ecosystem is vital. Ireland excels in this regard, with proven capability, capacity, and competitiveness.
Ireland has already demonstrated its strengths. We have 1,800 client companies in IDA’s portfolio, employing over 300,000 people. The productivity from these investments sets us apart. For example, R&D expenditure in FDI has increased by over 500% in the last decade, placing us at the forefront of innovation in next-generation products and services.
To continue to prosper, we must maintain our focus on growth areas, uphold pro-enterprise policies, and leverage our skilled workforce and supportive ecosystem.
Let’s focus on the United States, especially in light of the recent presidential election. One of the key talking points in Trump’s campaign was the imposition of tariffs. How do you think these tariffs could impact Ireland’s open economy? Additionally, as a member of the European Union, any tariffs imposed on the EU would also affect Ireland. How do you see this playing out?
ML: Regarding tariffs, there’s a lot of discussion around them at the moment. If tariffs are imposed, they will likely be on a European or pan-territorial basis rather than targeting individual countries. My view on tariffs is that while they may serve a purpose in certain situations, they are generally prohibitive to global trade. Tariffs can hinder innovation and growth at both an enterprise and economic level. If we restrict trade and innovation through tariffs, the consequences will be felt not just in the Irish economy, but globally.
As companies increasingly look to internationalise, having global trade agreements and common laws is critically important. My hope is that we will move towards greater collaboration and dialogue on international trade, particularly from a European Commission perspective. This approach is essential not just for Ireland, but for Europe, North America, and the Asia-Pacific region.
The impression I’m getting from your answer is that there are significant dangers associated with tariffs, not just for those on the receiving end, but also for those imposing them. It seems that the reality of these dangers could potentially temper the rhetoric surrounding tariffs.
ML: My sense is that supply chains are highly integrated globally. Disrupting these supply chains, as we saw during the COVID-19 pandemic, can lead to significant issues such as inflation and delivery delays worldwide. I can’t see how any nation or bloc would intentionally disrupt supply chains, as it would result in similar negative impacts, including inflationary pressures and supply shortages, which would pose further challenges for economies.
I hope that when considering these issues, a balance will be struck between building competitive advantages and protecting certain business areas versus promoting open trade and innovation. The benefits of open trade and innovation are clear, and it’s crucial to maintain these to ensure global economic stability.
At the end of the day, many promises are made during election campaigns, but quite a few tend to be quietly forgotten once the reality of governing sets in. We’ve covered a lot of ground, but I’d like to focus on specific themes, particularly infrastructure, which you mentioned earlier.
Infrastructure is a hot-button issue for many governments, not just in the United Kingdom, but also in Ireland. There is growing demand for housing, good transport services, and energy. My question is, how does IDA Ireland work with the government to ensure that infrastructure projects align with the needs of incoming multinational companies? These projects must not only serve the existing population but also act as an advertisement to attract multinationals, encouraging them to establish permanent roots rather than just staying for a few years.
ML: Absolutely. This is at the core of what IDA Ireland has been doing for the past 75 years. We have a cohort of 1,800 companies, many of which have been in Ireland for 20, 30, 40, or even 50 years. While some elements of FDI can be transient, many are deeply rooted and highly engaged, as we see here in Ireland.
Regarding infrastructure, as a state agency, we report directly to the government and the Minister for Enterprise, Trade, and Employment. This direct line allows us to provide insights into both the current and future needs of enterprise, particularly in terms of infrastructure. For example, we have developed pre-planned sites and solutions for clients in the technology and life sciences sectors, a practice we’ve maintained for decades.
IDA Ireland plays a crucial role not only in policy and planning but also in the physical delivery of infrastructure at the enterprise level. This supports broader economic and social infrastructure within the economy. Our involvement ensures that we provide the certainty and clarity investors seek, which is vital for attracting and retaining investment.
While housing is outside IDA Ireland remit, we contribute to policies and support the implementation of new technologies for housing infrastructure. This collaboration helps the government achieve its broader ambitions, ensuring that Ireland remains an attractive destination for multinational companies to establish long-term roots.
Are you satisfied with the pace of infrastructure development? Governments often discuss infrastructure, but achieving these projects within expected timeframes can be challenging due to planning regulations and the risk of cost overruns. These issues can lead to changes in decision-making, questioning the project’s value, and potentially causing political scandals. What do you think is a reasonable development framework to ensure timely and cost-effective infrastructure projects?
ML: Delivering infrastructure is always a multi-year, and sometimes multi-generational, endeavor depending on the scale. From Ireland’s perspective, we have emerged from a period of strong and growing economic performance. However, we recognise that our infrastructure development has not kept pace with our economic growth. This is particularly evident in areas like housing, energy, and water services, challenges shared by many growing economies. The positive aspect is that we have identified these gaps and are actively addressing them. For instance, our “Housing for All” strategy is delivering 30,000 to 35,000 houses per year, making Ireland one of the leaders in housing delivery in Europe. We must maintain and even accelerate this pace to catch up and stay ahead.
We are starting to close the gap and have built significant momentum. We are now delivering over 30,000 houses annually, as I mentioned, and we must continue this momentum. While there may be debates about the ultimate target number, the key is to build capacity within our system and deliver high-quality, mixed-use developments and homes for various purposes.
In terms of energy, we are heavily investing in offshore renewables and bringing them onshore. We are currently in the development phase of these projects. The government has recognised the need for clarity and speed in large projects, which is why they recently endorsed the second-largest bill in the state’s history to refresh planning legislation and laws. This new planning act, coming into force next year, will provide the necessary certainty and clarity, especially regarding judicial reviews and legislative timeframes. These measures are crucial to ensure that important delivery milestones are achieved.
There is significant pressure to meet infrastructure development targets to bridge the gap. However, it’s crucial to avoid a situation where companies are deterred from investing in Ireland due to slow progress on infrastructure projects. You don’t want potential investors to hesitate because development isn’t moving as quickly as they would prefer. This creates an incredible pressure point, doesn’t it?
ML: It is indeed a pressure point, and you’ve rightly identified that. However, in my experience, when investors look to invest, they value a clear plan and proven delivery capability. Ireland has demonstrated its ability to deliver, which builds trust and allows companies to align their timelines with ours.
Remember, companies also have to go through planning, procurement, construction, and operation phases, each with its own timeframes. The key is to ensure alignment and timely delivery. Ireland has a proven track record as a reliable location for delivery and a trusted partner. We must continue to strive for this as we grow our economy from both an enterprise and population perspective.
With so much innovation happening in the business landscape, regulation becomes a critical issue. Within the context of the EU and US Chips Act and the recent AI Act from the European Union, do you fear that over-regulation could potentially disadvantage not just Ireland but the entire EU? It’s a recurring question: how much regulation is sufficient? Isn’t there a danger of over-regulating and deterring investment?
ML: I believe there is a role for regulation, and we must acknowledge that the key is to strike the right balance. Regulation for the sake of regulation is unnecessary; what is required is regulation that mitigates risk and ensures the protection of the general population. This is critically important across all areas.
However, we must be careful not to lean too far towards over-regulation, which can stifle innovation and reduce the flow of finance, particularly for startups and early-stage companies. It’s about finding the right balance.
Regarding incentives like the European Chips Act and the US Chips Act, incentivisation has significantly evolved in recent years. While there is a role for incentives, they should not be overused to the point of distorting markets or creating unfair advantages for one country over another. We need to maintain a balanced approach both in regulation and incentivisation. Ireland is advocating for this balanced perspective within our partnerships in Europe.
When discussing multinational corporations working in Ireland, we must also recognise the importance of academic and research institutions within this nexus. How does your organisation encourage collaboration between these parties?
ML: In our foreign direct investment portfolio, we are fortunate to have a strong cohort of companies at the cutting edge of innovation, conducting significant levels of R&D in Ireland. These companies actively engage with our academic centers from both research and skills perspectives.
Ireland has taken the lead in several areas. For example, we have invested in research institutions such as the National Institute for Bioprocessing Research and Training, which supports the biologics and pharmaceutical industries. Established over a decade ago, this centre is now globally recognised as a leader in research for biopharmaceutical manufacturing processes and related skills development including for new modalities.
Our model in Ireland ensures that our academic centers align with enterprise needs. This alignment is where the strength of IDA and our ecosystem truly shines. We anticipate the future needs of our clients and industry sectors, integrating these with the work programs within our academic and research centres. This synergy provides collective benefits from academic, innovation, research, and commercial perspectives, as these advancements are commercialised through both foreign direct and indigenous Irish enterprises.
I appreciate the optimism in your story, and it’s indeed encouraging. However, to consider another perspective, while we have significant investment and multinational collaboration with research institutes, there’s a risk that the benefits may not be evenly distributed across the country. How can we ensure that these advantages aren’t confined to major urban centers? We don’t want to create a division similar to the one in the United Kingdom between the north and south, where investments and companies are concentrated in one area, leading to perceptions of inequality and breeding resentment.
ML: That’s an excellent question and observation. You’re correct that in Ireland, and particularly within IDA, we have been very focused and deliberate in ensuring balanced regional development. What does this look like? We have a target to deliver a number of investments each year, and through our five-year strategy, 50% of those investments are committed outside the Dublin region. Dublin, being our major city and international hub, naturally attracts significant attention, but we are committed to spreading the benefits more widely.
We have made balanced regional development a core part of our organisation and government policy. As a result, over 50% of our investments are outside Dublin, spanning all sectors. For instance, we have developed an incredible medical device cluster in the West of Ireland, a pharmaceutical cluster in the South and Midwest, and a financial services cluster in Dublin that also supports the entire country. This approach has spread economic prosperity and opportunity across Ireland.
Currently, over 300,000 people are employed in FDI companies, with more than 50% of our investments and employment located outside Ireland. Promoting balanced regional development is inherent in IDA’s DNA, and we continuously strive to maintain this balance. Ensuring counterbalances from the East Coast to the West Coast and building clusters of excellence along the Western seaboard is a key priority for us.
However, it’s crucial to strike a balance between attracting foreign multinationals and promoting growth among indigenous Irish companies. We don’t want local companies to feel sidelined just because they might not have the same allure as giants like Apple. How do you manage this balance?
ML: It all comes down to balance, but it’s also about understanding the overall benefits of enterprise, whether it’s indigenous or FDI. In Ireland, we are fortunate to have a society that values enterprise highly. People see the value of both FDI and local businesses, and they experience firsthand how interconnected these sectors are.
Many indigenous companies have grown through partnerships and supply chain connections with foreign direct investments. For example, the data centre industry has been a significant growth area in Ireland over the past decade. Indigenous companies in the digital economy and data centre sectors have expanded their expertise, supporting not only Irish data centers but also those globally. This demonstrates how we’ve successfully integrated our FDI supply chain with our local enterprise base, fostering reciprocal growth for both FDI and indigenous businesses.
The real advantage of this integration is that it ensures regional balance becomes deeper and more ingrained. There are multiple benefits to this approach that go beyond economics. There are significant societal and geographical benefits as well.
Is your organisation also under pressure to encourage green and sustainable investments? Twenty to thirty years ago, this might have seemed like a fringe interest, but now it’s very much at the forefront. Green issues are significantly influencing boardroom behavior, as organisations strive to prove their green credentials. This comes at a time when both governments and companies are under increasing pressure to reduce their carbon footprints.
ML: Absolutely, you’re correct. Companies today are focused on two main areas: sustainability and digitalisation. These twin priorities are at the core of every conversation we have with our existing companies and those we aim to attract.
In recent years, we’ve seen a significant increase in capital investment by our client companies in sustainable solutions and decarbonisation. Ireland has made legally binding commitments to reduce CO2 emissions by 35% by 2040. As of now, we are already nearly 40% of the way towards our 2030 targets, helping companies decarbonise through investments in alternative energy sources and improved processes, such as implementing heat pumps.
This physical transition is evident in production plants and facilities across Ireland, as they work to reduce their carbon footprints. This progress highlights our commitment to fostering a green and digital economy.
This is all happening at a time when the foreign direct investment landscape is very crowded. With so many players, how can you maintain and even increase your competitive edge against lower-cost emerging markets that might offer more because they’re starting from a lower base?
ML: As I mentioned, the competition for FDI has never been more intense. In Ireland, we have a 75-year history of evolving from a low-cost location to a high-value, innovative economy. We now offer significant value, enabling companies to build and support global businesses through Ireland.
We compete in the high-value innovation space, which is critically important. One indicator of this shift in the Irish economy is the R&D expenditure across our companies. Over the last decade, this expenditure has exceeded €5 billion annually, marking a 500% increase. This demonstrates how Ireland contributes to global supply chains and supports the ambitions of various organisations.
Our success is based on having the right talent, enabling infrastructure, and supportive industrial policies that foster innovation and growth.
Let’s project into the future. If we were having a conversation in five years, what vision would you describe for IDA Ireland, and how would that fit into Ireland’s role in the evolving global economy? Ireland has a fantastic diplomatic reputation, which is clearly reflected in its economy. But in five years, what type of economy will we be discussing? And what about IDA Ireland? How central will its role have been in fulfilling that vision?
ML: In five years, the vision for IDA Ireland and the Irish economy are intrinsically linked. The vision for IDA is essentially a vision for the Irish economy from an enterprise perspective. We aim to have an economy underpinned by sustainable, reliable, and cost-effective energy, delivered through offshore sources.
We envision an economy that has deepened its R&D and innovation, leading the way in new products and services. Additionally, we foresee an economy equipped with the necessary skills to succeed in the digital age.
The key focus for the next five years will be on competitiveness, sustainability and digitalisation, ensuring that our economy delivers the policies, infrastructure and skills needed to support these goals.
Political stability is crucial, especially with the 2024 Irish general election on the horizon and its perception by international investors. As part of your strategising, you need to understand the mindset of these investors. What are you seeing through their perspective regarding the general election, Ireland’s current position, and its future amidst this volatile political backdrop and the intense competition in the FDI arena?
ML:In the past month alone, I’ve had the opportunity to meet with several international leaders. Each of these conversations has underscored the critical importance of stability in government and policy. When they think of Ireland, they recognise and appreciate the stability and certainty we offer.
In my discussions, it’s clear that while we can never take anything for granted, Ireland enjoys a strong political consensus on the necessity of economic performance, growth, and supportive industrial policies. Our success thus far is largely due to this unified approach across the political spectrum, and this will continue to be our strength.
Leaders and investors familiar with Ireland know that we are fortunate to be in this position. I believe we will continue to be seen as a stable location in a world marked by turmoil and transformation. While Ireland will also need to adapt and transform, we will do so from a foundation of stability, ensuring certainty and collaboration. This approach will keep companies, individuals, and investors well-informed about Ireland’s trajectory over the next decade.
Following on from your comments, Ireland’s Minister for Finance recently announced the first transfer into what has been described as the Future Ireland Fund. Do you see this initiative as beneficial for both your organisation and enterprise development in the county?
ML: Absolutely, yes. It’s incredibly important to have a sovereign fund, and in fact, we have two. One is focused on infrastructure, which we’ve discussed as essential for consistent investment. These funds provide the state with the ability to continue investing, even in challenging times, without placing a burden on the public or the current budget.
The second fund is dedicated to sustainable change, which is equally critical. Our goal in Ireland is to invest in both infrastructure and sustainable transition for future generations. These two funds give us the flexibility to achieve that.
Further information
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