Mr. Martin Shanahan:

I thank the committee for the opportunity to present here this evening. The committee has indicated that the focus of this session is competitiveness threats to Irish foreign direct investment and jobs growth. Despite increasing international competition, Ireland has maintained a strong performance in terms of per capitaFDI levels and is number one in terms of the value of investment projects. The contribution of inward investment to employment, innovation activity, expenditure in the wider economy and taxation revenue remains vital.

2016 marked the second year of record growth from an FDI perspective. There were 19,000 jobs on the ground. The level of FDI employment at the moment in IDA supported companies is currently just under 200,000, which is the highest level in the history of the State. In addition to direct employment, it is estimated that an additional 170,000 jobs depend on those FDI companies. In 2016, 52% of all jobs created by IDA clients were based outside of Dublin. Overall, 59% of all IDA-supported employment is located outside of Dublin. Final full-year employment results for this year will not be available until January 2018. However, IDA Ireland has witnessed a strong pipeline of projects in the first half of the year. We reported in July that job approvals were up 22% at 11,000, against a figure of 9,100 for the first half of the previous year. The investment figure of 114 was on a par with the previous year's record.

Ireland is and continues to be a highly competitive location for inward investment. This is best illustrated by our results in the year to date and our progress in delivering against the targets set out in our five year strategy, "Winning: Foreign Direct Investment 2015-2019". However, this strong performance cannot be taken for granted. There are a number of international developments that have the potential to negatively impact the Irish economy, but they are largely outside of our control.

We must focus on those issues which we can influence.

Ireland’s value proposition is based on offering investors a safe and stable investment location with access to an EU market, an educated and skilled workforce and an attractive environment where people want to live and work, a competitive, consistent and transparent corporate tax regime and an excellent return on investment. This value proposition remains valid, but we must re-emphasise different elements and work to improve others in order to remain relevant in the changing global environment.

From a competitiveness perspective, other areas requiring attention include prioritising capital investment in infrastructure. Increasing levels of industrial unrest and uncertainty in the planning process also impact on Ireland’s international reputation for stability and consistency. Vigilance in public finances is needed to protect the hard won gains already made, as well as continuing to address the entire enterprise cost base, and to deepen and broaden productivity growth. The National Competitiveness Council has outlined the key areas in which action is required to safeguard Ireland’s competitiveness. Addressing these issues is central not just to winning FDI but making the country an attractive place to live and work for all citizens.

Ireland has areas which require attention and improvement, however, competitiveness is relative and there are competing jurisdictions which have similar challenges in these areas in addition to other challenges.

On residential property, the most pressing capacity issue in Ireland is that of residential property supply. The current availability and cost issues associated with the residential housing market are raised by our clients, through different channels, and they do factor into the ultimate location decision made by our client companies as well as Ireland’s competitiveness. However, it should be noted that these are among a long list of factors that influence decision making. The attraction and retention of skilled workers and graduates is fundamental to the winning of foreign direct investment and these employees need housing, so its provision and affordability are critical. As the American Chamber of Commerce report that the committee has referred to in its invitation points out, labour costs make up a significant element of the cost base of the typical FDI service-based operations and with housing costs accounting for a significant component of disposable income, there are clear implications for Ireland’s future competitiveness as a result of escalating housing costs. Therefore, the effective and speedy implementation of the Government’s action plan for housing coupled with a sustainable long-term policy for housing are critical to the delivery of IDA Ireland's strategy and Ireland’s attractiveness for FDI.

On the planning permission process as it relates to residential housing, we note the strong take-up by developers of the fast track planning process that allows strategic housing developments to be brought straight to An Bord Pleanála since the related legislation was introduced by the Government in July. We also note the Minister for Housing, Planning and Local Government, Deputy Eoghan Murphy’s commitment to publish revised guidelines which will facilitate the building of greater numbers of apartments, higher density development in urban cores and the setting of building heights. IDA Ireland notes that planning permissions and completions are increasing annually and communicate this to clients.

Overall, Ireland’s planning system has met the needs of FDI client companies over many years. In its invitation letter, the committee referred to the “the long-running saga to get planning approval for the €850 million Apple data centre in Athenry”.

Ireland’s status as a global technology hub has underpinned much of its success in attracting FDI in recent years and is a major contributor to Irish economic growth. Data centres play a key part in the infrastructure and ecosystem of technology hubs. Data centre investment in Ireland has grown significantly over the past decade against stiff international competition, with large global multinationals making very welcome investments in capital goods and services during the construction and operation of these data centres, creating significant numbers of direct and indirect jobs. The vast majority of these investments have proceeded successfully without issue.

In February 2015, Apple announced a significant €850 million data centre investment for Athenry, County Galway, projected to provide 300 jobs during its multiple phases, including construction and employment on site. The matter is still before the courts and the subject of an appeal. Apple has stated that it will continue to consider Athenry in the context of its future business plans, however the company has not made a definitive commitment to proceeding with the project. As the Minister has outlined, the Government has asked relevant Departments and agencies to consider issues related to data centres and related major infrastructure developments. Several actions are under way as part of that including amendments in the classification of data centres as strategic infrastructure developments, officials from relevant Departments are considering issues related to judicial review of major infrastructure projects and will bring back proposals to Government in due course, and officials are preparing a policy paper on data centres for consideration by Government.

IDA Ireland will continue to proactively engage with all clients both at corporate level and in Ireland on the execution and extension of their mandates and on Ireland’s competitiveness.

My colleagues and I welcome any questions on these issues.