Speech by Minister for Enterprise, Trade and Innovation Batt O’Keeffe TD at IDA Ireland Business Development Dinner

Irish Embassy in London, 15 November, 2010

Good evening Excellency, Ladies and Gentlemen. I’m delighted, on behalf of the Irish Government and IDA Ireland, to have the opportunity to meet and talk to you this evening.

I want to start by dealing with the recent speculation in the national and international media in relation to Ireland and a possible “bailout” from Europe.

Ireland has not made an application for external support. The Irish Exchequer has ample cash reserves and is fully funded through to the middle of 2011. In addition, Ireland has nearly €25 billion of assets in the sovereign-wealth-fund-style National Pensions Reserve Fund.

Given what’s going on in the markets, I think it’s quite normal that there has been ongoing contact at official level with our international partners. Indeed, my colleague the Minister for Finance is attending Eurogroup and Ecofin meetings tomorrow and Wednesday and I’m sure these issues will be discussed further.

There has also been speculation that the ECB is buying bonds to support Ireland. I understand that total ECB buying across all sovereign bonds since July has been just under €4 billion – the ECB does not disclose details of the breakdown of its holdings of sovereign debt but the €4 billion includes Irish sovereign debt.

It is true that the cost of servicing Ireland’s national debt as a share of revenue is projected to rise to 16% in 2014, but this is substantially less than the interest burden of 26% that Ireland bore in the 1980s and is only back to mid-1990s levels.

There is no doubt the budgetary challenges in meeting the commitment to reduce the deficit to 3% of GDP are daunting but we are determined to achieve our target. Importantly, there is broad political consensus that the 3% target is the right target.

Ireland has already delivered €14.5 billion worth of adjustments in a period of just over two years. Though the scale of the remaining challenge is now higher than previously anticipated, Ireland is half-way through and has four years to complete the process.

The Irish Government is focused on the preparation of our Four Year Budgetary Plan and the Budget for next year. The plan will set out the actions to be taken in order to make €15 billion in adjustments over the period of which €6 billion will be made in the upcoming December budget.

As well as dealing with our financial problems, we are also driving improvements in the competitiveness of the economy in terms of reducing costs, increasing productivity growth and innovation across all sectors. Growing exports and improving our competitiveness are key to Ireland’s economic recovery.

Irish exports continue to perform very strongly increasing by a total of 3.5% from Quarter 1 up to the end of Quarter 3 of 2010.

Given global market conditions, I think it’s fair to say that this is a tremendous performance from our key export sectors of Pharmaceuticals, Biotech, Medical Devices, Information Communications Technology, Digital Content and Consumer and Business Services.

It underlines our strength in both manufacturing and the internationally trading services sector; Irish exports are now split about 50:50 between products and services.

Our export performance shows Ireland’s enterprise sector, combining multinational and indigenous companies, in a far more sophisticated light which international media commentary too frequently overlooks.

And I’m delighted to say that the outlook for 2011 is also very positive.

Despite the period of global recession over the past 2 years, Ireland’s value proposition to multinationals operating from Ireland has not changed; in fact it has been enhanced.

There have been significant improvements in Ireland’s competitiveness. Business costs including energy, private rents, office rents, services, construction and labour have all become more competitive and continue to do so.

For investors in Ireland we now offer a greatly enhanced competitive position.

• The cost of industrial electricity decreased by 24% between 2008 and 2009.

• Gas prices decreased by 25.9% in 2009.

• Benchmark salaries for new employees in Irish companies are down between 5% and 22%

Combined with these improvements in competitiveness Ireland’s value proposition to multinationals is also strongly based on what I refer to as the 4 T’s – Track Record, Talent, Technology and Tax Regime, and our reputation for excellence in all these areas continues to attract a strong flow of companies to Ireland.

Ireland’s track record can be seen in the range and quality of multinational companies many of whom have had operations in Ireland for many years. It is also reflected in the high level of expansions by these companies and in the fact that 80% of our exports are now from the multinational sector.

We possess a highly talented and skilled, multilingual workforce. Our flexible and agile workforce and our global outlook ensure we have an appetite to embrace and exploit the opportunities presented by technology developments.

The Irish Government is fully committed to continued investment in education to ensure we continue to meet the employment needs of both our existing multinationals and those considering investing in Ireland for the first time.

On the subject of the 4th ‘T’ which is our rate of corporate tax, coverage in international media has speculated that this rate of 12.5% corporate tax may experience an adjustment. I would like to state categorically that a change in Ireland’s rate of corporate tax is simply not on the agenda.

As Minister for Enterprise, Trade and Innovation I can re-affirm Ireland’s long-term commitment to the 12.5% corporate tax rate which is, and will remain, a cornerstone of Irish industrial policy.

So what is the international business market place saying of Ireland and its proposition for multinational companies?

Put simply Foreign Direct Investment into Ireland is now back at investment levels not seen since 2005/2006. The combined influence of Ireland’s increased competitiveness and strong value proposition, commitment to our 12.5% corporate tax rate and quick and decisive measures taken by the Government to combat the challenging economic situation has resulted in this excellent flow of FDI – despite the reputational challenges.

These pre-crisis levels of investment hail from both our traditional markets of North America, mainland Europe and, of course, the UK along with growth markets.

On this point, IDA has recently opened offices in Brazil, India, China, Russia and Singapore in order to increase the flow of investment from these growth markets.

The UK is our closest neighbour and a very significant trading partner with excellent economic relations existing between our two nations. The importance of UK Foreign Direct Investment to Ireland cannot be underestimated. The UK is the second largest single source of FDI in Ireland with over 100 IDA-supported companies employing almost 10,000 people. Last year, over 30% of direct investment flows into Ireland came from the UK.

Leading multinational UK companies with significant operations in Ireland include such well-known brands as Vodafone, GlaxoSmithkline, Talk Talk, BT, Capita, and Experian. Many of the leading UK financial services companies have also chosen Ireland as a location for overseas operations. These include HSBC and Barclays. I would particularly like to extend my thanks to the representatives of these, and a number of other IDA client companies, who have joined us here this evening, for their continued investment in Ireland and commitment to their Irish operations.

In conclusion, the return on investment for UK multinational companies who are in Ireland, or who are considering investing in Ireland, has not been diminished by recent global events.

In fact it has been enhanced due to recent improvements in our competitive position.

I would like to reiterate that the Irish Government is fully committed to Ireland’s substance based corporate tax rate of 12.5% - this rate will not change.

I would like to thank you all for attending this evening and hope this event highlights to you that Ireland is very much open for business.

Thank you.

ENDS

Bernard Mallee, Press Adviser to Minister Batt O'Keeffe, Department of Enterprise, Trade and Innovation, on Tel: +353 1 631 3944, Mobile: +353 87 9173022, Email: bernard.mallee@deti.ie