* Irish Fin Min toasts bumper year for U.S. investment
* Ireland saw more U.S. FDI than China last year - AmCham
* Dublin faces growing European hostility to low tax
* Crisis brings down costs, but talent is limited
By Lorraine Turner
DUBLIN, Nov 22 U.S. business chiefs gathered in
the Irish capital on Thursday to give thanks for low taxes, a
cool climate and the financial crisis - three factors that have
helped produce a bumper year in their favourite corner of
But there was a hint of foreboding at the American Chamber
of Commerce's annual Thanksgiving lunch in Dublin that Ireland's
promise to maintain its low corporate tax rate, its crisis wage
cuts and its perfect weather for high-tech data farms may not be
enough to keep the relationship sweet.
A limited pool of skilled workers, the loss of lucrative
pharmaceutical patents and the threat of a fresh European attack
on its low company taxes mean Ireland will need to fight to keep
the investment flowing.
For its part, the government is thankful that
multinationals, many of them based in the United States, are
still backing Ireland as it struggles to recover from economic
crisis and an international bailout in 2010.
"I'd like to give thanks for the U.S. investment and the
enormous job creation," Finance Minister Michael Noonan told the
executives gathered for a traditional Thanksgiving feast of
turkey and pumpkin pie, saying he expected another record year
for investment this year.
"It's important that what is being offered in Ireland is as
attractive as it ever was," he said, promising to maintain a
package of incentives for companies and executives to face down
growing competition from Britain, Israel and Singapore.
U.S. firms invested $30 billion into Ireland last year, more
than in China and the rest of emerging Asia combined, according
to the American Chamber of Commerce.
Ireland has long cultivated its ties with the huge
Irish-American community, and the country is sometimes
tongue-in-cheek called the 51st state of the union.
But sentimentality does not attract U.S. business projects.
Thanks to the 12.5 percent company tax rate and transfer pricing
- in which multinationals route profits from high tax to low tax
countries - foreign firms can repatriate most of the money they
pour into Ireland, bolstering their profits.
Ireland, lying on the western edge of Europe and relatively
isolated from many of its major markets, jealously guards the
competitive advantage brought by the low tax regime.
But European hostility over this has re-emerged, with German
opposition leader Peer Steinbrueck, who hopes to oust Chancellor
Angela Merkel in elections next year, criticising it last month.
A storm over how multinationals cap their tax bills, brewing
since a Reuters investigation into the issue, is likely to put
Ireland in the spotlight, an editorial in The Irish Times noted
on Thursday. "For the government, such developments are a major
concern," the newspaper said.
At Thursday's lunch, Noonan reiterated that the corporate
tax rate was "not negotiable".
Multinationals have benefited from Ireland's economic crash
as business costs have fallen back to 2003 levels, according to
the IDA, the agency tasked with attracting foreign investment.
U.S. multinationals currently employ over 100,000 of
Ireland's 1.8 million strong workforce and a host of companies,
including PayPal and Apple, are expanding.
Dublin commercial property prices, once on a par with
Manhattan and Moscow, have more than halved. Capitalising on
this, Google spent 100 million euros last year on the
tallest commercial office building in Dublin. The U.S.
technology giant plans to kit it out with a swimming pool in the
basement for its 2,000 plus staff.
But high-tech companies are struggling to find enough talent
in Ireland, where graduates preferred to become architects or
real estate agents during the property-fuelled boom years rather
than software engineers or scientists.
Multinationals are fighting over recruits from overseas who
have brought plethora of foreign accents to the coffee shops and
sandwich bars of Dublin's trendy south docklands area, where
Google and Facebook have large offices.
In September, a senior Facebook executive said the firm
would continue investing in Ireland, where it already has over
400 staff, as long as it could find the right sort of employees.
Conscious of the problem, the government has introduced tax
breaks for overseas workers who move to Ireland.
Peter O'Neill, head of the American Chamber of Commerce in
Ireland, said Ireland can not rest on its laurels if it wants to
attract the right worker and the right companies to Ireland.
"The bar is getting higher all the time," said O'Neill, who
is chief of IBM Ireland. "Investment is mobile, people are
mobile, you've got to have the right environment at all times."
A strategy to lure drugs companies, started in the 1960s,
has made Ireland the largest net exporter of pharmaceuticals in
the world, according to Dublin-based industry group
PharmaChemicalIreland. Products such as Viagra and Botox are
manufactured in the country.
But this reliance on the life sciences sector, which employs
over 47,000 people, has become a weakness as patents lapse on a
host of drugs, allowing competitors to make cheap copies
elsewhere. These include Pfizer's Lipitor and Enbrel, although
Enbrel will go off patent later than originally scheduled.
Officials in Ireland say the "patent cliff" will be offset
by new patented drugs and products coming into production but
there will be a time lag, according to experts.
"The new products coming on-patent in the short-term will
not be able to offset the fall in exports of these blockbuster
drugs coming off-patent," said Chris Van Egeraat, lecturer at
Maynooth University. "We are going to talk about billions in a
reduction of exports".
The impact is already being felt; Irish exports fell sharply
in September from record highs the previous month.
"You've two risks for Irish exports: you've the specific
risk related to the patent cliff, and you have the risk related
to the global environment," said KBC Ireland chief economist
Austin Hughes, predicting a gentle slowdown. "But luckily a lot
of the companies that are in Ireland are doing well."
Irish officials can at least be thankful that the weather at
least is here to stay.
Ireland's temperate climate, often the bane of wind-swept
tourists, is an asset for data centre operators. Natural air can
be used to cool the rows of giant servers that act as the
world's online library without costly heavy air-conditioning.
Google recently opened a 75 million euro data centre,
housing computers that run cloud computing services, where users
store data on secure external servers rather than their own
network or computer. Microsoft also unveiled a $130
million expansion to its Dublin-based "mega" data centre earlier
Cheaper and better options exist in Europe, but Ireland is
fast becoming a cloud hub for the region because the tech giants
already installed in Ireland are opting to build out in a
country which they know and like.
"Ireland will become an increasingly important attraction
for the cloud market," said Rakesh Kumar, an analyst with
Gartner, which advises companies such as Microsoft and Cisco.
"These companies... have got facilities, they're happy with
them, they've got good skills and good languages... so when they
have a choice to either expand and build out new sites in
different regions, it makes a lot of sense to stick to what they
have," he said.