Oireachtas Joint and Select Committees
Tuesday, 15 December 2015
Joint Oireachtas Committee on Jobs, Enterprise and Innovation
IDA Ireland Annual Report 2014: Discussion
I remind members, visitors and those in the Public Gallery to ensure their mobile phones are switched off or put in airplane mode for the duration of this meeting as they interfere with the broadcasting equipment even when in silent mode. We now move to a discussion of IDA Ireland's annual report for 2014. I welcome Mr. Martin Shanahan, chief executive of IDA Ireland and his colleagues, Ms Mary Buckley, head of regional development, Ms Regina Gannon, chief financial officer, and Mr. Kieran Donoghue, head of international financial services.
I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. I remind our guests that the presentation should no longer than ten minutes in duration as members have been provided with the presentation submitted. I invite Mr. Shanahan to give his presentation to the committee.
Mr. Martin Shanahan:
I thank the committee for the opportunity to present to it. I am accompanied by Ms Mary Buckley, executive director, Mr. Kieran Donoghue, head of global financial services and strategic policy, and Ms Regina Gannon, chief financial officer. The committee has indicated that the focus of this session is on the 2014 IDA annual report. I will make some brief introductory remarks on this and will provide the committee with some up to date information on 2015 and current activity.
The committee is obviously aware that IDA Ireland is the Government agency responsible for attracting foreign direct investment, FDI. In 2014, the year under review, we reported a very positive year from an FDI perspective. Just over 15,000 new jobs were created by IDA client companies during 2014. When job losses were taken into account, the net increase in employment was just over 7,000. A total of 197 investments were won in 2014, equating to a 20% increase on 2013. There was a notable rise in greenfield investment, with 88 new name investors coming to Ireland in 2014, equating to a 13% increase on the previous year. There were 174,488 people employed in IDA client companies at the end of 2014, the highest level in the history to date of IDA Ireland. Among the leading investments secured during 2014 were Amazon, Bristol Myers Squibb, Fidelity, LinkedIn, Survey Monkey, Airbnb, PayPal, Ericsson, SAP, Johnson & Johnson, West Pharmaceuticals, Zendesk, Adroll and New Relic. Some of those investments are regional investments and I will elaborate on some regional announcements in 2014. They included Jazz Pharmaceuticals in County Roscommon, Becton Dickinson in Drogheda, NuVasive in Waterford, Teleflex in Athlone and ClearStream Technologies in Enniscorthy. Particularly strong performances were posted by several regions, notably the north east and south west.
While the results in the 2014 report relate to direct employment, IDA Ireland estimates that an additional 122,000 jobs are supported indirectly by IDA client companies, widening the economic spin-off. This is based on a multiplier of 0.7. It is also estimated that approximately 10,000 people were employed on construction projects under way with IDA client companies in 2014, providing a considerable economic boost to the areas in which that construction activity was undertaken.
In February 2015, IDA Ireland announced its new strategy for the next five years entitled, Winning: Foreign Direct Investment 2015-2019. The target of this strategy is to increase investment by 40%. IDA Ireland aims to win 900 individual projects, creating 80,000 new jobs in the economy over the next five years. This will be based on an ability to respond to clients' needs efficiently, effectively and ahead of the competition. These are ambitious targets and if they are delivered, they will bring total direct employment by overseas companies in Ireland to 209,000 people by 2019. This will obviously deliver wide-ranging economic benefits for the people of Ireland.
IDA Ireland is targeting a 20% increase in spending by overseas firms within Ireland during the life of the next strategy. In particular, IDA Ireland is committed to showcasing the capabilities of Irish industry to its client companies as a source of products, services, technology and innovation. A 20% increase in cumulative spend on research and development is also being targeted. This would mean a €3 billion spend on research and development over the life of the strategy. We view this as feasible as overseas companies place additional high-value added activity and research into Ireland. A key element of the IDA Ireland strategy over the next five years is a focus on increasing investment in regional locations outside of Dublin. IDA Ireland has set a target to increase investments in all regions outside of Dublin by 30% to 40%. This target is extremely challenging given that the global trend is towards FDI locating in large urban areas of scale. IDA Ireland is implementing a range of measures to achieve this objective.
Increasing globalisation, technological developments and geopolitical influences have resulted in a worldwide FDI portfolio that is in a constant state of flux and transformation. New sectors will emerge, some existing sectors will thrive and others will decline. The past ten years alone have witnessed many such changes. We have seen global business services develop into a key driver of FDI. Meanwhile, the manufacturing sector has been transformed with the reduction in lower value-add activities and a new focus on high value-add manufacturing and research and development. The manufacturing sector remains very strong with 23% of Ireland's GDP attributable to manufacturing activity. This figure is high in a European context. Ireland is particularly strong in high-value and highly-regulated zero-defect manufacturing. Ireland's future FDI success will require bolstering existing sectors, exploiting new opportunities and replacing declining activities. A critical element of IDA Ireland's new strategy will be a continued strong focus on the traditional key sectors of technology, encompassing everything from hardware through to software and the Internet; life sciences, which includes pharma, bio-pharma and medical devices; international financial services; media and content; engineering; business services; and food. IDA Ireland will continue to help support these sectors to thrive by winning new investors as well as partnering with clients to explore development opportunities.
While IDA Ireland will maintain its current sector focus supported by detailed sectoral strategies, it will also look towards new sources of FDI. Many exciting opportunities exist at the point where the sectors in which we have existing strengths converge and intersect. Given Ireland's scale and the strength in these sectors, IDA Ireland believes there is significant scope to capitalise on these opportunities. The rapid growth of technology is seeing a wave of new opportunities which Ireland is perfectly positioned to exploit. Trends towards cloud, social, mobile and data analytics are having a profound impact across a range of sectors.
We will seek to exploit those opportunities in future.
IDA Ireland is looking to other sectors to widen the flow of investment into Ireland as the foreign direct investment, FDI, sector changes, expands and develops over the next five years. Key targets over this time period will be the marine economy, investments linked to infrastructure, property, arts and culture and energy services. Long-term investments made by the Government in areas such as infrastructure, education and technology have underpinned the attraction of FDI to date. These investments created the environment within which we are marketing to companies and we need that level of investment to continue in order to remain competitive. We need a continued focus on investment in skills, property and infrastructure in order to replicate past successes.
The US continues to be the key source market, with 70% of FDI coming from there. Europe is our second-largest market, with 20% of FDI originating there. The US economy is performing strongly now but Europe is not performing as strongly and it is much more subdued. Approximately 10% of investments come from the remainder, which is what we term emerging or growth markets. That includes the Asia-Pacific area, Brazil and Russia.
The strong performance in 2014 has continued into 2015. Final results for 2015 will not be available until January next year but we published some interim results mid-year, which demonstrated that 110 investment projects were approved, with 9,000 jobs associated with them in the first six months of the year. This compares with 100 investments for the same period in 2014 and 8,000 direct jobs. The flow of investments is ahead and I can confirm that the performance has continued into the second half of the year. A notable feature of announcements in the first half of 2015 were the large number of investments, particularly with a capital-intensive element, going to locations outside Dublin. Currently, 59% of employment in the FDI portfolio is outside Dublin. Approximately half of the investments to the mid-year point were new-name investments into Ireland. A long list of companies have announced investments, although not all companies do so. They include the Johnson & Johnson Vistakon plant in Limerick, which is investing €100 million into expansion; DePuy Synthes of Johnson & Johnson, investing €53 million, with 80 new jobs; Northern Trust, with 300 jobs in Limerick; Facebook, seeking planning for a new data centre in Clonee in Meath; Agora Publishing setting up with 100 jobs in Portlaw in Waterford; Viagogo, expanding in Limerick with 200 jobs; Zimmer investing €51 million in Oranmore, creating 250 jobs; ABEC Inc going into Fermoy, north Cork, with 100 jobs associated with the project initially; Apple going into Athenry, announcing what will be one of the largest data centres in Europe when it is finished, with €850 million invested; Alexion Pharmaceuticals announcing that it will build its first biologics plant outside the US in Blanchardstown, west Dublin; Zalando, a Berlin company, setting up in Dublin, creating 200 jobs; and Slack, one of the many information technology companies from San Francisco - a high-growth company - setting up its European headquarters in Dublin, creating 100 jobs.
The Comptroller and Auditor General signed off on the annual accounts on 29 May 2015. The total funding for 2014 was €130.8 million. Our employment control framework number of 272 staff in 2014 was operated within during the year.
The immediate pipeline is encouraging across a range of sectors but we take nothing for granted. Every single job created in Ireland by overseas companies is hard-fought both by us and the subsidiaries of the companies based here already. They are won against ever-increasing competition from a growing range of overseas locations that are becoming more sophisticated in their offerings and marketing activity. We need to be vigilant and avoid complacency, particularly in the area of cost competitiveness, which is one of the key metrics that companies consider when they are coming to Ireland. A poor growth outlook for Europe will also be a challenge. I mentioned the importance of investment in education and training, as a supply of talented graduates will be an element on which we will either win or lose investment. Despite a challenging environment, IDA Ireland is confident the out-turn for 2015 will be reasonably strong and we have a very clear strategy for 2015 to 2019. The performance to date and the strong announcements this year are based on the work of the IDA Ireland team across the globe, both here in Dublin and in 19 other locations. They are the people who go out and win the investments.
I welcome the IDA Ireland delegation. To start with the point on which Mr. Shanahan finished, I pay tribute to him and his team on this island and across the world for the work they do. There is no doubt they continue to break records everywhere and they will manage to keep ahead of the competition. Approximately 15,000 jobs have been created and nearly 8,000 have been lost so how does that compare with other international agencies? We nearly create two new jobs for each one we lose. Are any specific sectors losing jobs in particular?
The witness mentioned a number of large-scale capital projects and some of those were delayed in planning. Is our planning system fit for purpose of the kinds of companies that IDA Ireland is trying to entice, particularly with regard to the likes of data centres and other buildings that take up much space? There has again been a negative focus on our corporation tax while the quality of our labour force and research and development, for example, is ignored. Is that an ongoing negative issue with clients? Is it on the radar? Cost competitiveness was mentioned, as well as the need to keep on top of it, so what are the specific cost areas that you are concerned about?
The witness will not be surprised when I mention the regions. There were six regional action plans published and they commit to 427 new investment projects outside Dublin between now and 2019. The IDA strategy commits to 900 individual investments. With some plans yet to be published, the various regional jobs action plans are committing to nearly half of those plans being outside Dublin, with each area getting an increase of approximately 30% or 40%. Given that IDA Ireland has not yet broken 40% in terms of investments, how will it be done, given the pressures mentioned in terms of urbanisation? Do the regional jobs action plans dovetail into the IDA Ireland plan? What specific new strategies are to be engaged to ensure that kind of investment can be achieved in the regions?
Mr. Martin Shanahan:
I thank the Deputy. The net figure arising from jobs created and lost compares reasonably favourably to international norms. In the period from 2008 to 2013 or 2014, the number of job losses as a function of the global economic downturn increased. Our job is essentially maintain job losses at their lowest possible point.
We work with companies in order to help them to transform and develop. There will always be a level of churn within the base which is the same all over and is not just a feature in Ireland - it is a feature of international economies in terms of their structure. I do not think there is anything particular out of order in that regard. We look at what is done in other jurisdictions. In particular, we examine at what is done in other jurisdictions which we believe are equally engaged in attracting foreign direct investment. Last week, I met my counterpart who is the head of the Economic Development Board, EDB, which is the Singaporean development agency, to discuss its outlook for foreign direct investment and to share our outlook for foreign direct investment with it. Obviously, we compete in the marketplace on a lot of matters. There are also areas on which two small economies such as ours can share experiences. We are satisfied that we are doing as well as anybody else in terms of what we do to create jobs, to market Ireland and to sustain existing jobs.
The level of investment in capital projects is very encouraging because, essentially, it makes the jobs "sticky". In other words, if companies are going to invest a significant amount of money in buildings, in the kitting them out and in the case of pharma, biopharma and medical devices, in particular, in very sophisticated equipment, all of which is not easily transported and means that the companies are here for longer periods. These projects are complex in nature and, therefore, the planning processes tend to be more complex.
To answer a point made by a member, we are happy with the planning processes. We engage heavily, we have our own property portfolio and we help clients through this process. The quicker the process is, the better from our perspective. We compete internationally so having certainty about the timeframes for the process is really important. The quicker a process can be expedited the better, while ensuring that the planning process is robust. Obviously, we would not want it to be anything less than robust. The more certainty there is about the process rather than the outcome is desirable from IDA Ireland's perspective and from the point of view of winning foreign direct investment.
There is a continued and disproportionate focus on the part of the media, both nationally and internationally, on taxation in Ireland. We have a very transparent, consistent and competitive taxation regime. We should be unapologetic about the fact that we compete in the area of tax. All jurisdictions compete on tax. Ireland has been a full participant in the OECD process in respect of base erosion and profit shifting. Ireland has made changes to its taxation regime over the past two budgetary cycles. It has addressed the issue of stateless companies. It has also addressed the residency rules, which means that if one is registered in Ireland, one is now also tax resident here. There is a grandfather period for a number of companies. In the most recent budget, the Minister for Finance announced that Ireland would be one of the first countries to introduce country-by-country reporting. Independent studies show that Ireland's effective tax rate is very close to its headline rate. Therefore, we have nothing to be concerned about.
Companies are interested in taxation but they are interested in what the Irish offering is and what our plans are. They are interested in understanding the features of the Irish taxation system. Companies want to know that the 12.5% rate, which has been constant for some time, will remain. They are interested in the new developments over the past two budgetary cycles where we have improved the research and development tax credit. The knowledge development box has been introduced, which means income associated with intellectual property, as a result of research and development in Ireland, will now attract a 6.25% rate and companies are interested in same. The rules around amortisation of IP are attractive. All of those aspects add up to a fairly competitive offering.
Two companies were mentioned that have been involved in mergers and acquisitions activity recently - Pfizer and Allergan. Companies make decisions for commercial reasons. Often when they engage in mergers and acquisitions activity, the first order of business is deciding whether they are a good fit. They have to make a commercial decision. I suspect the second aspect is analysing location from a tax perspective. I am not saying that is always the case but when two big companies come together, there has to be more to it than just proceeding for tax reasons. Both of the companies in question have had a long engagement with Ireland - in Pfizer's case since the late 1960s and in Allergan's case since the late 1970s. Collectively, they have multiple plants in Ireland and employ over 4,000 people. We work with both companies individually at present. When the merger happens, we will work with them jointly. We view the merger as an opportunity to increase substance even further as they transfer their international headquarters to Ireland.
In terms of costs and cost competitiveness, I shall outline the areas that we continually need to consider but first I wish to point out that Ireland is cost competitive. There has been a lot of negative impacts from the economic downturn. However, one of the positive impacts, if one can call it that, is that Ireland became more competitive in terms of property prices and rents and in the context of wage levels remaining constant. There has been an upturn in the economy so we need to ensure that we do not lose our competitiveness and keep it relative to everybody else. That is the bar for us. We are competing with other countries so we must be relative to everybody else not relative to what happens here over time whether it is good, bad or indifferent. That is what we must keep an eye on.
In terms of regional strategies, IDA Ireland has been heavily involved in the development of regional strategies and the regional Action Plan for Jobs, together with our colleagues in Enterprise Ireland and a number of other agencies. We very much welcome the development of regional strategies. It puts a focus on job creation and enterprise development at a regional level. It brings together stakeholders that can make a difference at a regional level and develop plans for a region. Job creation is obviously not just about foreign direct investment, it is about what is being done by Enterprise Ireland, local enterprise offices, Bord Fáilte, local authorities, IDA Ireland and everybody else.
The numbers announced for the targeted projects are consistent with what has been published on pages 35 and 36 of IDA Ireland's strategy. In our strategy, we set out the number of investments we are targeting. As Deputy Calleary pointed out, they are of the order of between 30% and 40% over the five-year period. There is nothing easy about the challenge we have set out in our strategy. It going to be very difficult but everything we do is done with a view to increasing investment in regional areas. Let me outline some of things that we are doing in that regard. First, the development of regional action plans will be of assistance. Different regions will come together to identify what can be targeted and what areas to focus on. We have increased our teams at regional level. We have appointed new regional managers in a number of regions which did not have them previously. We have aligned marketing activity internationally through the operations division in Dublin with different regions. Therefore, we have targeted specific activity at certain regions. That focus will continue. The Government has provided us with €150 million over the five years to develop new property solutions at regional level.
Again, one of the features of the economic downturn was that developers stopped developing. Private sector developers have been very slow to come back into the market, particularly at regional level. The IDA has set out a programme of building advance buildings in a number of regions and that process is now under way. We also must acquire some strategic sites over the coming period as existing strategic sites come to the end of use because they are let to multinationals. We also plan to upgrade our business and technology parks around the country, of which there are approximately 33.
All of that is the focus. There is no mistaking that it will be a huge challenge against the backdrop I set out in my opening statement, which is that the international trend is towards investments moving towards urban areas of scale. Again, I remind the members that we are competing not just within Ireland - it is not just between different urban areas, regions, towns or parishes within Ireland - but also in an international game. We are competing with 190 cities in China that have a population of over 1 million people, 36 cities in Europe with a population of over 1 million as well as 50 metropolitan areas in the US with over 1 million people. They are all potential targets for the type of investment we are chasing. That is the reason our approach is a regional one, where we can show scale by aggregating up regions rather than at a lower level.
Gabhaim buíochas mar gheall ar an cur i lathair iontach. First, I congratulate the witnesses on the level of job creation in which they have been involved. From our perspective, we sometimes like to see what types of things can be fixed within a process to make it even better for the country, and the IDA can be coy about discussing those because it does not wish to send out a negative message and so forth.
However, a couple of matters have caused people concern with regard to our competitive advantage. The witness mentioned different competitive advantages. Our rating in the International Institute for Management Development, IMD, talent report has dropped ten places as regards talent. There are also major pinch points at present with residential rents and availability, commercial rents and availability and infrastructure, with capacity levels being reached. What effect is that having on the IDA's role and what do the witnesses believe should be changed there? There is an example in America where multinationals decamp from places such as Silicon Valley to satellite locations. If a similar culture can be developed in this country, it could be quite useful for the companies and for the country's spatial strategy.
Also, with regard to spatial strategy, the national spatial strategy was developed in 2002 and is now largely defunct. We are awaiting the next national planning framework. What is the IDA's guiding role with regard to the delivery of locations?
Taxation is a sore point in many respects. The chief economist of the Department of Finance, in an appearance before the finance committee, stated that he did not know for sure what was leading to such volatility with corporation taxation. There is also the fact that 140 FDI firms account for 70% of corporation tax. It is a very narrow corporation tax base. What are the witnesses' views on the volatility in that area?
How can we link better with SMEs? The witness said there is some work on linking SMEs with FDI but in international terms, and I am aware that Ireland is an outlier because it is smaller than Germany and so forth, the linkage between SMEs and FDI is a little lower here than it should be. Some people say that FDI operates as an island to a certain extent, as it imports a sizeable chunk of its inputs.
The witness spoke about regional development, so I will not go back over that. He outlined what the project is, to resolve the lopsided economy that currently exists. Interestingly, the north-east Border region appears to be quite successful. There was a 51% increase in IDA supported jobs there in the four year period of 2010 to 2014, which is fantastic. Perhaps we could discuss the key success factors in that and how that has worked. My native county is Meath. Unfortunately, I am criticised when I mention this but it is still a poor relation when it comes to the IDA. When jobs are created in Dublin, there is one job for every 17 people. In Kildare, there is one job for every 50 people but in Meath there is one job for every 147. Meath is way down on the list in the mid-east circle around Dublin in that regard.
Finally, Mr. Shanahan mentioned the IDA's standing in the context of key performance indicators internationally with regard to the level of jobs it has created and saved. However, as far as euro per job is concerned, is there any mapping of key performance indicators among some of its competitor agencies? I realise they are not all directly comparable. The Scottish competitor looks after indigenous and external development, but it would be interesting to hear about the per euro issue.
Mr. Martin Shanahan:
I will take the matters in the order in which the Deputy put them. The competitiveness factors the Deputy mentioned are all a concern for the IDA, and will continue to be a concern. We will never resolve them because there will always be somebody else doing other things.
To return to something I said in response to Deputy Calleary, the talent availability will determine Ireland's success in attracting, or not attracting, foreign direct investment into the future. That is where investors are focused. They want to be able to set up in a jurisdiction, attract talent quickly and be able to scale up and add to that talent quickly. Focusing on education and skills, ensuring that we perform in the rankings and ensuring that we have the right match between skills availability and the demands of our client base are really important. We spend much time articulating what those demands are. We liaise with the Department of Education and Skills, SOLAS, and the Higher Education Authority, HEA, on a regular basis to try to ensure that matching. Obviously, the performance of our universities internationally is important in that regard.
However, what comes through our university or institute of technology systems or through the apprenticeship system is not the only source of talent. Another source of talent is the fact that we have access to a European labour market of 200 million people who are free to come and work in Ireland. More important than the fact that they can come and work here without impediment is the fact that they want to come and work here. Ensuring that Ireland remains attractive and open and is marketing itself to those talents and skills, including returning Irish people who may have left for economic or other reasons over the recent past, is hugely important.
We have seen some increases in commercial rents. However, there is variability in the market, so the significant increases are largely isolated to particular areas of Dublin, for example, and close to what is termed the silicon docks, where there have been increases. There is still very good value to be had in Ireland and in Dublin, outside of that area, and, indeed, outside Dublin. The same can be said about residential rents. Residential rents within the city centre and close to the central business district, if one can term it that way, have risen, but there is really good value still available outside that area and outside Dublin.
Essentially, that speaks to why we set out the strategy we outlined back in February. We intend to target the same high level of investment into Dublin, but we want all of the increase in investment to happen outside of Dublin.
There are good social and economic reasons for doing that. The social reason is to spread wealth creation and the availability of employment into the regions. The economic reason is that if we keep putting all the increased investment into Dublin we will meet some of the constraints the Deputy mentioned, with higher prices on the residential and commercial sides. Our strategy is to try to push that investment out of Dublin. We want Dublin to be successful and are achieving a high level of investment into Dublin, and the flows this year show that. It is not a competition between Dublin and the rest of the country. We could achieve high levels of investment into Dublin and into the rest of the country. That is the objective. The more we spread it, the more we will achieve value for investors, who will reinvest if they receive a return on investment.
We use a somewhat similar approach to the one the Deputy outlined of companies decamping from Silicon Valley. We call it a second-site approach. Companies may have invested, or be planning to invest, in Dublin because there is activity they wish, or need, to undertake in Dublin but there may also be activities they can carry out in a regional location. That is what we seek to do.
The national spatial strategy is in the past and there are plans for a new approach. We had an opportunity in our strategy to set out our plans and had some regard to the previous spatial strategy, but our approach is to achieve a 30% to 40% increase in each of the regions. In the regional Action Plan for Jobs we have set out in more detail some of the things that need to happen in order to develop the regions.
I am not sure about volatility, but there is an increase in the corporation tax take.
Mr. Martin Shanahan:
Over the course of the year, which is not finished yet, we have observed an increase in corporation tax. The Revenue Commissioners are best placed to comment directly on what they observe coming in. I do not have access to that information. I do not think it will look incongruent when the IDA publishes its results next January. The flow of investments in 2015 is strong, as it was in 2014. We are seeing an increased amount of investment, which is substantiated by the numbers employed. There is a congruence between those results.
In respect of SMEs and the international experience, the IDA and Enterprise Ireland, EI, work extremely closely together on a range of matters. I regularly meet my counterpart in EI, Julie Sinnamon, to see how we can co-operate across many sectors we have in common to ensure there is synergy and complementarity in our work with multinationals, how the indigenous base can benefit from the presence of multinationals, and how we can use our strong cadre of Irish firms in several sectors to attract foreign direct investment, FDI, in the sense that multinationals can partner with them, use their technology or use them as sub-suppliers and do joint ventures together. That might ultimately lead to acquisition, although that is not what we set out to achieve. We want to see Irish firms grow and prosper and make independent public offerings, IPOs, if that is to be. There is a great deal of co-operation. Under the new strategy we will focus on that area and have outlined some of the things I have spoken about to achieve those ends. We have put in place some very practical measures to expedite these synergies. We share with EI details of every new IDA client that comes on board, with its blessing, saying who it is and what business it is in. That gives EI the opportunity to put together lists of sub-suppliers which might pitch to this new client. We do this particularly where there is substantial capital investment, and there may be Irish companies which can play a part in that investment. We have had that streamlined process in place since the start of this year. We are going back over the existing portfolio to see what opportunities exist to make those connections. We have introduced, together with EI, new initiatives, such as trade missions to Ireland. In the same way as EI brings Irish companies abroad to expose them to multinationals, which might acquire and procure from them. We bring Irish companies around Ireland to pitch to existing multinationals so that they may get access to the global supply chain of those companies. This is the second year we have done that and it has proved very successful.
We are studying other areas where we may work with EI around mobile entrepreneurship. We pitch to emerging companies that have already set up; they may be small and they may be going international for the first time. EI does similar work with entrepreneurs who do not have any presence but have a good idea and seek funding. We are working on how we might do that in a more cohesive way. There is a lot of activity.
The Deputy mentioned how we compare with others in this regard. That is difficult to assess, given that the presence of FDI is much more concentrated in Ireland than in any other country. That makes it much more difficult to judge how we are doing. At a macro level, Ireland has achieved between three and four times the amount of FDI one might expect given our size, based on GDP or size of population. There are no neat comparisons. I meet with my colleagues from other investment promotion agencies. They are typically judged by slightly different metrics and count slightly different things, so it is difficult to get a universal comparator.
I welcome Mr. Shanahan and the team to the committee and commend them on the work they have done over the past few years. I was delighted to be in Galway for the announcement of jobs in Phenox, which is very welcome. I acknowledge the level of job growth in the west since 2010, from 14,614 supported by IDA and associated companies up to 18,652 in 2014, which equates to some 4,040 extra jobs, or a 27.6% increase, one of the largest increases outside the Dublin area.
I understand the cost of jobs supported by the IDA has decreased from over €14,500 between 2004 and 2010 to €11,800 between 2008 and 2014. Does that reflect the downturn in the economy or improving competition? Does Mr. Shanahan have any comment on that?
I would like to repeat a question that I put to representatives of Enterprise Ireland when they were in here recently. To what extent can the increase in projects be influenced by the new approach to embassies and consulates in places like the United States and elsewhere? I refer to the sort of Ireland House initiative in conjunction with Enterprise Ireland, IDA Ireland and the embassies and consulates.
I would like to ask about IDA Ireland's regional facilities in the context of the allocation of an extra €21 million to the authority from the supplementary budget of the Department of Jobs, Enterprise and Innovation. An advanced facility in Galway is earmarked for 2017. I was surprised to hear the managing director of Phenox highlight at yesterday's announcement that it took over a year to find a suitable building in Galway. These facilities need to be expedited, certainly in my area.
I missed Deputy Calleary's comments, but I understand he touched on certain planning issues. Do the witnesses think we have unnecessary planning delays in this country, by comparison with our European counterparts? Have the companies with which they deal mentioned that they find it difficult to secure planning?
I am aware that IDA Ireland has notified Ministers about certain problems in Galway, such as the traffic issues at the Parkmore site. I understand there is a possibility of getting financing for that site. Certainly, IDA Ireland is looking for financing at that location. Has it had any consultation or engagement with the National Transport Authority regarding bus solutions at this location? Believe it or not, there is no east-west bus route that does not go through Eyre Square. It seems rather basic that there would be such a route, but it has not been delivered. What level of engagement has IDA Ireland had with the National Transport Authority? Have companies based at the Parkmore site highlighted this problem with IDA Ireland?
Mr. Martin Shanahan:
To be fair to Deputy Tóibín, he asked me about the cost per job and I probably did not respond to him. As Deputy Kyne pointed out, the cost per job has been declining. The cost per sustainable job currently stands at €11,817. It is calculated on the basis of jobs that are sustained over a seven-year period. My role and that of my colleagues is to try to win jobs at the lowest possible cost to the State. We try to win investments that have no grant support, or the lowest level of grant support, attached to them. The cost per job has declined over recent years. We would hope to maintain a very competitive cost per job. It is not necessarily a reflection of the economic downturn. The cost per job is based on the number of jobs we are getting in. Regardless of whether it is large or small, the cost remains the same.
The types of supports have changed over time. Regional aid guidelines have placed greater constraints on what we can support. That is not necessarily an issue when we are competing with other European countries, but of course it can be constraining when we are competing with the rest of the world. Our ultimate target is to get in as much investment as possible at the least possible cost to the State.
We have very good relations with the Department of Foreign Affairs and Trade. We have 19 offices across the globe. Where possible, we have engaged in an Ireland House solution, which involves representatives of IDA Ireland being co-located with officials from the Department of Foreign Affairs and Trade, Enterprise Ireland and other agencies. In some areas, such an approach has not yet been possible but it will be possible as different organisations exit their leases, etc. In some cases, we have slightly different business models, we are targeting different cohorts or we are in slightly different locations within a country. For the most part, we work very well together as part of the Ireland House approach. I was in Japan, Korea and Singapore early last week and the previous week. The ambassadors and embassy teams in each location offer substantial supports to IDA Ireland's operations locally, which are one-man operations for the most part. We need that backup. Given the small footprints we have, we need the Irish agencies on the ground - Enterprise Ireland, IDA Ireland and the embassy staff - to work closely together to achieve our collective objectives. I meet my counterpart, the Secretary General of the Department of Foreign Affairs and Trade, and many other colleagues in that Department on a regular basis. We have annual engagement on our plans. I think that approach is working quite well. In the past two years, we have engaged with the Department of Foreign Affairs and Trade and other agencies on local market plans to ensure all of the players know what the other players are doing. We make sure we are not tripping over one another in the market and we are identifying any opportunities that may exist. I think that is working quite well.
The advanced technology building in Galway will start in 2016. It may not be completed until 2017, but it is scheduled to commence in 2016. We have completed two advanced technology buildings, in Waterford and Athlone, and a further three buildings are now in the pipeline, in Sligo, Castlebar and Tralee. We have three more planned for next year. As I outlined in response to Deputies Tóibín and Calleary, we have stepped in to provide property because we would ideally like to see the private sector come in and respond to the undoubted need for more commercial property - advanced office and advanced technology buildings - in these areas, but this has not happened to date. The availability of property, particularly office buildings, is quite tight in a number of locations. IDA Ireland's property team, working with clients, is heavily involved in making the significant effort that is required to identify suitable property solutions. We are currently advancing to build these solutions as quickly as our internal resources and financial resources allow.
I assure Deputy Kyne that we are engaging with the National Transport Authority to try to identify a solution to the difficulties at Parkmore. One solution may involve greater use of public transport. There may also be a requirement for an infrastructural solution in the form of a slip road or something. We are currently engaged with the National Transport Authority and the council in relation to that. It is high on our agenda. We have engaged with all of the clients in Parkmore on it.
I welcome Mr. Shanahan to this afternoon's meeting. It is good to see such a buoyant report. I note that over the last couple of years, IDA Ireland-supported companies in my own county, which has not received many visitations, have increased the number of jobs they provide. That sort of news is always good.
I have a number of questions, the first of which relates to IDA Ireland's links with other funding agencies within the State, such as Science Foundation Ireland. I suggest that such agencies could be used as a source of finance to attract investment in our research and development and knowledge box package. What links are associated with such agencies?
Mr. Shanahan mentioned in his report that Ireland has an above-average number of manufacturing firms, by comparison with Europe as a whole. Does he see the high number of such companies as a problem as we go forward? Does he think there is a skills shortage in this area? I am thinking particularly of apprenticeships. Does IDA Ireland have links with the Apprenticeship Council in this regard? Is it able to issue directions in this respect?
Many Irish entrepreneurs have set up companies overseas. Does IDA Ireland keep a database of them so that it might be able to entice them to come back?
I know we are not going to get the Intels or similar into the country but the smaller companies. Has IDA Ireland a database of Irish entrepreneurs involved in such overseas companies?
Has the agency identified constraints in the economy? I am referring to infrastructural constraints. There is much argument about whether we are spending enough on infrastructure, be it roads, broadband or the rail network. Has the IDA spoken out about it? The agency must be getting indications as to reasons companies are not coming here. Is one of these reasons concerns about infrastructure? Yesterday, IBEC said that more money, particularly the recent corporation tax windfall, needed to be invested in infrastructure. Some may call it a windfall but companies are paying corporation tax because they are making profits.
On my earlier point about IDA site visits, is Kildare not a sexy county? Does the IDA go to other counties rather than Kildare? As Deputy Peadar Tóibín said, it is the counties on the periphery of Dublin that do not seem to be as attractive?
What are the consequences of the recent Supreme Court judgment on a compulsory purchase order, CPO, of lands in Maynooth? What are the costs associated with that? We are all talking about regional development and acquiring landbanks. The case in question and the judgment has caused problems for IDA Ireland and local authorities. I saw the consequences of such a judgment on CPOs affect local authorities because of the McHugh case in County Kildare many years ago.
Mr. Martin Shanahan:
There are 24 companies employing more than 10,000 people in County Kildare. It has some of the largest employers in the country, including Intel and HP. We continue to market Kildare. Tying in with Deputy Lawlor’s final question, our interest in Kildare remains because we believe there is development potential and that is why we were trying to acquire a landbank there. Several years ago, we started trying to acquire the landbank in question, which was the subject of a recent Supreme Court judgment. We did that because we believed the land in question was well suited and had significant development potential, given the activity we have already secured in that area. It was a prime location to secure further development. The Supreme Court has made its decision. We have no intention of revisiting those particular lands.
On the costs of both the High Court and Supreme Court cases, the IDA indemnified itself through insurance for the costs of the judicial review of the case in question. The costs are limited to €200,000, which is the excess on the policy. We still require a landbank in the mid-east to win more investment for Kildare and other counties. We will go back to the drawing board now to see what our next step will be to progress a strategic site for development in the mid-east.
Enterprise Ireland is probably closer to Irish companies which have internationalised. If there are Irish companies which have solely set up abroad and never had a presence in Ireland, there are a number of processes where we can capture this diaspora. The Global Irish Network would be one of those. Many of the individuals involved were present at the Global Irish Economic Forum recently in Dublin. Trying to identify people abroad who have a business or some clout in a business is very much the way the IDA works. We are plugged in in those locations where we have a presence, whether that is the US or in Asia, to understand who we might be able to influence. That includes Irish people who are operating at senior levels in those businesses or who have businesses themselves whom we might attract back.
Mr. Kieran Donoghue:
Infrastructure is fundamental to our business. In recognition of its importance and as part of our new strategy, we have set up a corporate strategy and public policy group. We have assigned two executives responsibility for all forms of infrastructure, whether it is broadband, energy, waste and water, transport, property or anything else. We want to get on top of what the needs of our clients are and get a handle on the current carrying capacity of the economy regarding those infrastructure items.
What we detected in recent times is that the economy is moving from a phase in which it had excess infrastructure capacity as a consequence of the downturn and the economic recession to a phase now in which we need to think strategically about what infrastructure we need to put in place to elevate the carrying capacity of the economy, which will allow us to deliver more foreign direct investment into it. That is an exercise that we are undertaking with our clients. We will be feeding our proposals for where there needs to be infrastructural investment, both nationally and regionally, to the relevant Departments next year. We would like to recognise and acknowledge the Government's capital programme and decision to involve NAMA, the National Asset Management Agency, in the provision of commercial real estate, housing, etc. This is recognition of the need to now begin to invest in infrastructure for the next phase of growth in the economy.
I welcome Mr. Shanahan and his team and congratulate them on completing an excellent five-year tenure. I am glad to see their ambitions for the next five years are equally exciting. There is much talk about competitiveness as the economy grows. What are the challenges in this area?
Mr. Martin Shanahan:
We have probably traversed a few of them already. To my mind, we need to continue ensuring costs are maintained at a reasonable level. That does not mean that there cannot be inflation in costs. However, it means we cannot outpace our competitors in terms of cost increases. That is probably a significant issue now, as the economy is experiencing increased levels of growth.
Mr. Martin Shanahan:
All of them. Let us take this back a step and look at the example of an international manufacturing company coming into Ireland. I am using manufacturing as an example because it remains significantly important to Ireland as it comprises 23% of gross domestic product, GDP. Our nearest neighbour, the UK, is at 10% or 11% in this regard. Deputy Lawlor earlier asked whether we should be concerned about manufacturing representing this percentage of GDP. No; we should try to increase it. We are really good at high-value, highly regulated, zero-defect manufacturing. However, there are significant inputs in this sector.
On the point made by Deputy Collins regarding costs, there are costs for labour, energy, water, wastewater and construction. When international companies are making a decision, they have an Excel spreadsheet with columns for each of these costs and they compare different jurisdictions from a cost, productivity and availability of labour perspective and so on. We need as many of the cells in the spreadsheet to be green for Ireland so as to put us ahead of competitors in all of those areas. I do not suggest we have significant competitiveness issues currently, but that we need to ensure these issues do not arise. Some of our strategy in terms of spreading investment throughout the country is an effort to ameliorate cost pressures in any one location.
The main issue is not competitiveness but the availability of talent. This is the biggest issue. Throughout the US, Asia and Europe, companies talk about the availability of people to undertake the work they want done. If we are to compare Dublin to international locations in terms of the availability of talent, we compare well currently. Much of the talent required is available here, but we need to ensure we continue to produce as many people as possible for the sectors that need them through our education system if we are to continue to remain attractive to people from Europe and further afield. We need to continue to train highly skilled, talented people who will contribute in terms of productivity and our potential to attract investment. From the competitiveness perspective, this is the most important issue on our agenda.
On a light note, I did not get a chance to commend Mr. Shanahan on his appearance on the American business channel where he had to go to great lengths to explain that Ireland does not use sterling and we are not part of Great Britain. Well done to him on maintaining a professional approach on the day. I do not know how he managed it.
In his report, Mr. Shanahan alluded to the fact that any kind of regional balance beyond the urban areas is a challenge when it comes to foreign direct investment. I agree and have felt this is the case for some time. I am the only Dublin Deputy here today, but I respect the fact that people outside Dublin find it hard to ensure jobs are delivered in their areas. Given that 70% of jobs of foreign direct investment originates within the US, the main challenge lies there. Mr. Donoghue mentioned capacity issues that are coming down for all regions and said the IDA would feed in to the various bodies to ensure these can be addressed as far as possible. From the Dublin perspective, are there ways our local authorities - the four regional authorities within Dublin - could do more to ensure we continue to remain as good as we can be in driving what is, whether one likes it or not, the energy hub of the country. Dublin is the powerhouse that drives the economy and it and the regions around it will remain its main driver. Are there areas our four local authorities could improve?
Mention was made of the challenge to achieve a regional balance and of the regional plans in place to create pathways for foreign direct investment to get to other areas. This is a great idea and I hope it works as well as hoped. Now we need that balance, is it possible that the situation may arise whereby IDA Ireland will tell a company that we have reached our target for Dublin for a particular year, but it can offer the foreign company region X? Has that ever happened or will it ever happen? I am obviously concerned about the interests of the greater Dublin area.
Mr. Martin Shanahan:
I appreciate that and I thank Deputy Lyons for his earlier comments. Dublin is the only international city of scale we have. It has proven very attractive to international investors and we continue to win investment. It is not an either-or situation. Many of the companies that select Dublin will never move to a regional location. No matter what we offer them or how we present our offer, they will come to Dublin only. Dublin is attractive, vibrant and cosmopolitan and has been able to attract in much of the talent available. This brings me back to the comment I made earlier about the availability of talent. The fact companies can get multilingual, technology-savvy people in Dublin is much of the reason for this, because much of the business is technology based. Manufacturing remains important, but it is more likely to be regionally based and even if it is based in Dublin, it is on the outskirts or in Meath or Kildare, not the city centre.
The flow of investment into Dublin this year continues to be extremely strong and just as we have developed an action plan, with other stakeholders, for the regions, we are developing one for Dublin. We are in the process, with the local authorities, our sister agencies and other stakeholders, of developing a plan from the point of view of enterprise and jobs for Dublin. Deputy Lyons is right that Dublin remains the engine of growth and will remain so for some time. One of the issues facing us in Dublin is the pressure on commercial property availability. That said, in the central business district, the area between the two canals and the Barrow Street area, we have 1.82 million sq. ft. of grade A office buildings due to come on stream in the next 18 to 24 months. This will alleviate much of the pressure. We welcome the announcement by NAMA that it will invest in residential property because we see that lack as a potential constraint. The presence of a number of universities and institutes of technology in the Dublin region make Dublin very attractive in terms of talent availability, but also in terms of research an development. We continue to market Ireland as a research and development location and work closely with Science Foundation Ireland on that.
My assessment is that Dublin is very attractive as an international location. It is particularly attractive as an international location for technology and that reputation has travelled far and wide, given the global brand names we have based here.
Mr. Martin Shanahan:
A number of cross-cutting technological developments are having a profound impact on all sectors. These are areas such as the Internet of things, big data, cloud, social, mobile and security.
IDA Ireland's perspective is to identify and connect with what these new opportunities might look like and target companies that will use these technologies in the future. That is where Science Foundation Ireland and Enterprise Ireland come in and we work together to develop technology centres. We have some really good centres in a number of areas - insight is important in data analytics - which because they are developing talent and, in some instances, also IP, they can act as anchors to attract particular companies with needs in these areas. Part of our remit is to follow the technological development and ensure true dialogue with Science Foundation Ireland and our sister agency Enterprise Ireland with which we work on technology to ensure we keep pace with what is happening in the various sectors. Apart from the two mentioned, new areas in manufacturing include additive manufacturing and industry 4.0 - the Internet of things. These will have a significant impact. We must try to keep pace and develop solutions in Ireland as anchors to attract companies.
In the first half of 2015 it was announced that 59% of IDA Ireland employment companies were located outside Dublin, which is very welcome. However, when one looks through the list, it is apparent to me as a person from the midlands that there is not much activity in Laois-Offaly or Tipperary or Longford. I do not think, however, that it can be said of Westmeath. Public representatives in the midlands region are most anxious to find out what can be done, or if there is something wrong, as these areas are not getting the attention they wish to receive from IDA Ireland and IDA Ireland companies.
Mr. Martin Shanahan:
There has been investment in the midlands. The Chairman is correct in pointing out that Athlone has been particularly successful to date, but there have been other investments outside it. In the first half of the year Nexvet Biopharma moved into Tullamore and there have been some very strong existing clients such as Medtronic Covidien and so on.
The number of site visits to the counties mentioned by the Chairman has increased to date as a result of IDA Ireland's focus on the regions. I understand that if one is in Laois or Offaly, progress in Westmeath may not be relevant, but progress in Westmeath and Athlone means that a cluster is being built and that we can use it as a reference point to sell, which is important. As an agency, IDA Ireland's single biggest tool is being able to point to existing investment, people who have already made investments and are operating successfully and building out. I assure the Chairman that IDA Ireland will focus on Laois-Offaly, as we do on other counties. We are at the start of a five year strategy and this is the first time IDA Ireland has set regional targets. I have outlined the list of activities undertaken to underpin the regional strategy and as they take effect, I am sure we will see success in the counties mentioned.
One of the startling successes outside Dublin has been the Belfast to Dublin corridor. It offers opportunities to create critical mass outside Dublin.
On the comments made about Meath and the levels of IDA Ireland jobs, I know that all of the Deputies are obviously engaged and fired up about the issue and I do not wish to have the poor mouth too much, but Kildare has about seven times more IDA Ireland jobs than Meath, Wicklow has three times more and Louth about four times. These are the actual figures extrapolated from IDA Ireland's data. IDA Ireland will typically state - there is some logic to it - that a job in Maynooth is available to people from Meath and that a job in Mullingar is available to people from Tullamore, etc. but counties like Meath-----
-----have the highest levels of commuters in the country, with the furthest distance to commute. It is important for the health of the county, economic and socially, to have this type of enterprise developed locally. Will Mr. Shanahan clarify what spatial guide IDA Ireland uses for location choices for these companies? Rather than blame IDA Ireland, what can counties such as Meath proactively do to attract these companies? Mr. Shanahan made reference to IDA Ireland looking for a land bank in the mid-eastern area. Is there something Meath proactively could do to change these stats to being more favourable?
Mr. Martin Shanahan:
The Deputy has asked some reasonable questions. He has said there are "IDA Ireland jobs" in particular counties. They are company jobs. The ultimate arbiter on where jobs are to be located is where companies want to locate. That is the bare fact. IDA Ireland's job is to make Ireland as attractive as possible and then try to ensure all regions can compete. That is the purpose of the Action Plan for Jobs at regional level; to to try to outline what else can be done to make regions attractive. An action plan for the mid-east is in development and Meath should engage fully in that process and outline what it has to offer and see what else could be done or targeted for the region to make it attractive.
Travel to work times or to work zones does come into it. On the one hand, a company could locate in Meath as it could in Dublin because the workforce would be commuting to and from Dublin. However, companies see that if they locate in Dublin, they will have a huge array of amenities and a vast workforce from which to draw. Why would it not do this in the first instance? It is often the case. IDA Ireland will revisit all options regarding decisions on securing strategic sites.
I wish to broaden the discussion a little. Will Mr. Shanahan explain what IDA Ireland is doing on the potential implications of a Brexit in the context of the Dublin-Belfast corridor and how it might impact on IDA Ireland's plans? Are there contingency plans in place? It was not mentioned once in the Border region jobs action plan, but it is, presumably, on everybody's radar.
Mr. Martin Shanahan:
Yes, it is very much on our radar. Regarding the Dublin-Belfast corridor, a lot of the success achieved in the north east has been in Dundalk which is well located on the corridor, with access to Belfast, Dublin and the airports. It has an institute of technology which also makes it attractive and there are a number of large tech companies which have located there. Brexit is, therefore, very much on IDA Ireland's radar. The Deputy is aware that our position is similar to that of the Government; that it would be better, for many reasons, if the United Kingdom stayed within the European Union. It is our nearest neighbour, largest trading partner and closest political ally on any business related issue within Europe. An ESRI study shows that if the United Kingdom was to leave the European Union, while there might be some benefits for Ireland in foreign direct investment, the impact on trade would far outweigh the benefits. As our nearest trading partner, the impact would be judged to be about a 20% drop in trade worth €3 billion. The United Kingdom wins significant foreign direct investment, some of which is in companies which will service the UK domestic market, while some locate in the United Kingdom to service a European market. Between now and the actual holding of a referendum, investments to service the UK domestic market will continue.
However, it might give those who are making decisions about setting up headquarter locations to potentially service Europe, the Middle East or the rest of the world from the UK some cause to think about that potential location. For those companies and some of the existing companies in the UK, as they scenario-plan for the "what if" of a UK exit, Ireland features as the next possible location. This does not mean we will win all that investment but it means we are in the mix.
I thank the Chairman for indulging me with the opportunity to raise a few questions given that I am not a member of the committee. It is great to have the opportunity. I will be very parochial in terms of my constituency of Longford-Westmeath. Mr. Shanahan is right when he says the decision on where a company will locate ultimately rests with the company. However, to use a simplistic comparison, if a person were to ask an auctioneer to sell a house in the morning and realised it was not being marketed or shown to buyers but an alternative house was being shown at every opportunity, he or she would not be too long telling the auctioneer he was not doing his job well and giving the house to a competing auctioneer to sell.
In my constituency, there have been two IDA Ireland visits to Longford. How can Mr. Shanahan expect anyone to locate to a place if it is not advertised and potential clients are not brought to see all it has to offer? We can compare Longford to Westmeath, and I acknowledge that Athlone is thriving. Yesterday, we had the announcement of 200 new jobs associated with the expansion of DPD Ireland. This is fantastic news. However, do we have a capacity issue? Do we have sufficient IDA Ireland lands for future expansion of the IDA Ireland park in Athlone?
Seven or eight years ago IDA Ireland purchased a 68 acre site in Mullingar, which is closer to Dublin and presumably an easier sell. It kitted out the site to the last and put in the necessary roads and infrastructure, including broadband, but the site has not been marketed. Has IDA Ireland considered the need for a purpose-built innovation centre in the park? If an innovation centre was in place, a person with a good idea would not have to wait for the planning and tendering processes to complete and for the development to go out to construction. I am sure Mr. Shanahan will agree that someone who is looking to locate will not wait for 12 or 18 months while we get our house in order to provide a facility. Will IDA Ireland consider the park in Mullingar as an appropriate location for an innovation centre?
Mr. Shanahan referred to the figure of 23% when speaking about manufacturing. Is it that 23% of GDP is from manufacturing or that 23% of our employment is created in the manufacturing industry? Is Mr. Shanahan concerned about the increase in labour and energy costs and development levies? Are we retaining our competitiveness in terms of manufacturing? My understanding is that many manufacturing jobs are leaving Ireland and relocating to countries where labour and energy costs are much lower than they are here.
Mr. Martin Shanahan:
IDA Ireland engages with clients on their needs and wants but clients come with their own preconceptions about where they want to be located. Some come with definitive views, some less so. We present as wide an array as possible of location options to client companies. There are extremely aggressive targets in the new IDA Ireland strategy for all regions. The Deputy can be assured that we are exploiting every opportunity for all counties in terms of showing client companies the opportunities available, where client companies are open to such suggestions. In some cases, they are not open to these suggestions.
It is in the agency's best interest, for reasons outlined earlier, to spread investments as far and wide as possible and that is what we have committed to do over the next five years. We have committed to grow investments in all regions by 30% to 40%. As I stated at the outset, this will not be easy. There are no easy answers. We have set about a programme of work to try to increase investments in regional location. I have already mentioned that we have strengthened the regional team and we recently appointed a new regional manager for the midlands. This is just one step along the way. The regional action plan for the midlands was the first to be launched and it recognises that there is a lot of work to be done in this area. I hope that there will be an increase in the number of site visits to Longford and Westmeath by year end. This is my expectation based on what I see coming through, but it will take time.
I am happy to consider and engage with Deputy Troy, bilaterally and separately, on what he imagines an innovation centre in Mullingar might look like and what it would add. We are happy to engage on the matter and are open to all suggestions.
Manufacturing makes up 23% of GDP. It was not a reference to employment figures. However, that 23% and the employment associated with it is very important for the reasons I outlined at the beginning of the session. There is very significant capital investment associated with that manufacturing and we are manufacturing. Some of it is in tech, where there is manufacturing of hardware, but much of it is in medical devices and the pharma and biopharma industries. It makes the jobs associated with those investments sticky. They remain here because significant capital investment is associated with them. They also tend to be high value jobs. The type of manufacturing undertaken in Ireland is high value, zero defect and highly regulated manufacturing. There is major international competition for this type of manufacturing but it is a space we can play in unlike low value added manufacturing.
Labour, energy and development costs all remain a concern. This is not to say we are uncompetitive. We are competitive but we need to keep check on all of these issues. Energy costs is an area where we have struggled to be competitive. Labour costs have become competitive but we need to ensure we do not become uncompetitive. The lower the costs and the lower the development charges, the easier it is to win investments. This applies in all locations and not just the midlands.
I thank Mr. Shanahan and his colleagues for engaging with the committee today. The session was very interesting and informative. Mr. Shanahan has been tremendously successful and I congratulate him in that regard. He has set himself some very ambitious targets and I hope he will achieve them in no time. For those of us representing regional constituencies, we are delighted IDA Ireland has, for the first time, set regional targets. We look forward to it achieving them very soon.