Certainty Proving The Key To Ireland's Success

Author:Mr Stanley Watson and Robert O'Shea
Profession:Matheson Ormsby Prentice

This article first appeared in the Global Legal Post (www.globallegalpost.com)

As the Eurozone debt crisis rumbles on, Spain is now in the eye of the storm, having replaced Italy in the unenviable position as the 'next Greece'.

Indeed, such is the bleakness of the media coverage – both in Europe itself and at a global level – that it could appear that business activity across the continent has simply ground to a halt.

While domestic conditions may be very difficult, when it comes to foreign direct investment (FDI), Europe remains on an upward curve. According to the United Nations Conference on Trade and Development (UNCTAD), FDI inflows into Europe grew by 23% (in value) in 2011.

This is a broadly positive top-line figure, however it hides the fact that the experience is far more positive for some than it is for others.

For example, of the three countries which received bailouts from the EU – Ireland, Greece and Portugal – data from FDI Intelligence shows that Ireland is the only one to have experienced an increase in FDI since the crisis began in 2008.

With Ireland considered to be the best of the European patients at swallowing its austerity medicine, this statistic reinforces the argument that political stability and fiscal policy certainty are increasingly important concerns for would-be investors, with this heavily influencing their investment decisions.

According to a study of global investors, carried out by the Economist Intelligence Unit (EIU), political stability is 'very significant' when it comes to FDI decisions, with 87% of those that took part in the study highlighting fiscal certainty as important in this regard.

These concerns are unsurprising. However, in the context of the European project, it is easy to see why certain countries – such as Ireland – are increasingly punching above their weight compared to what are perceived to be their more unstable neighbours.

Certainty and clarity – the facts

So what does certainty mean? Firstly, it refers to political leadership. Investors want to know that a regime change would not lead to a huge shift in how their overseas operations are taxed, or the rules that apply to employment or R&D credits.

In an Irish context, the best example of this is the 12.5% corporation tax rate, which has been successfully defended and supported by successive Irish Governments since its introduction in the 1990s.

Secondly, it refers to consistency of treatment. One only needs to look at recent...

To continue reading