Ireland’s economy has felt the impact of coronavirus, with overall gross domestic product contracting by 6.1% in the second quarter of 2020, compared with a year earlier.
Yet Ireland’s multinational-dominated industry sector grew by 1.5% in the same period, helped in part by inward investment in sectors such as pharmaceuticals and medical devices.
Martin Shanahan, the CEO of IDA Ireland – the country’s investment promotion agency (IPA) which turns 71 years old this year – tells fDi that IPAs need to strengthen their proposition and engagement with investors in an increasingly competitive market.
Q: How has IDA Ireland been affected by Covid-19 disruption?
A: This pandemic first affected us in January, when we saw the impact in China, where we have offices in Beijing, Shanghai and Shenzhen.
Since March 13, Ireland instigated its own restrictions, which was around the time most of Europe started seriously putting restrictions in place. From that point onwards, most of our offices across the globe – we have 24 outside of Ireland – have been shut and we have been operating remotely.
Q: How have you found working remotely?
It’s definitely different dealing with clients via phone calls and video conferencing. I have often said that attracting foreign direct investment is a contact sport, but there is a lot you can do remotely and virtually – certainly the initial due diligence can be done.
But I think there comes a point where the client wants to meet us and we want to meet them. Building that understanding, trust and confidence is best done face-to-face.
Having said that, even before the current global pandemic it was clear that more and more of that process was going to be done virtually. Before this period, we developed the concept of a virtual itinerary where we put together a lot of content for investors.
Obviously that has come to the fore during this period and the fact that we have a lot of that content, and structure set up to do so, was very helpful.
Q: Do you think there are types of FDI projects where a face-to-face meeting could never be replaced?
A: I think the scale of the investment and the capital intensity are certainly factors. With very capital intensive projects – such as large pharmaceutical, microelectronics and manufacturing projects – there is a requirement to come look at locations and sites where the investment is proposed.
This is also true where there is a bespoke property solution. The ability of a client to come and visit, meet face-to-face and discuss is important. I think it’s probably true for all investments, but to varying levels.
Q: Have you changed strategically as a result of the Covid crisis?
A: We had developed a new strategy and planned to launch it in early 2020, but have postponed the publication of that strategy, partly to do with Covid and to see how it unfolds.
In truth, a lot of what we had in that strategy – which we will publish later in the year – is not going to change fundamentally. The underpinning rationale for investing in Ireland remains constant and what FDI clients are looking for hasn’t changed fundamentally.
Over the past few months, our focus has been on two things: working with existing clients and focusing on companies coming through the pipeline.
We’ve built a reasonable cadre of FDI firms here. Looking after that initial base of investment has been key by reaching out to the leadership of those investing companies here in Ireland, and also at the corporate level.
We have quite a strong pipeline of companies which were coming through and have tried to shepherd them through to closure. In the first half of 2020 we saw just a 6% drop in investment numbers on the previous year.
Our strategy has been to attract what we believe are the sectors which are the fundamental building blocks of a modern economy, and they have proven quite robust for the most part. That isn’t to say there won’t be impacts – and we can certainly see some, particularly in business services connected to aviation and tourism, as well as engineering-related sectors.
The next 24 months are going to be challenging for everyone, and our job is to make sure that it is less challenging for Ireland than for anybody else.
Q: What can IPAs do to compete in this increasingly challenging landscape?
A: We’re in unusual times, but, when we strip it away, the fundamentals remain constant. You need a strong proposition, and countries, including Ireland, have to be as competitive as they can be across the most salient criteria investors are looking for – namely talent, innovation and a pro-business environment.
Stability as a criterion has certainly moved up the ranks in recent years. Companies want to know what they’re investing into is going to remain constant and policies are not going to chop and change.
Many people will point particularly to our consistency around our corporate tax rates at 12.5%. But it’s way beyond that, it is about having consistent pro-enterprise policies.
Our model is based on high touch, and, as I said, I believe it is a contact sport – you have to be engaged with your clients and prospective investors. Showing up every now and then when there is an investment project is probably not where it is at.
We see it as being there consistently – understanding investors, businesses and how we can add value is hugely important. That’s what we try to do and why we have invested in a network across the globe.
We’ve opened new offices and increased our presence in new markets – Turkey and South Africa being the most recent ones. We are diversifying our source markets like any business will do in order to mitigate risk – you don’t want to be over reliant on any one market.
Martin Shanahan is the CEO of IDA Ireland, the national investment promotion agency of Ireland.
If you are a member of the economic development and investment promotion community and would like to be part of the next iteration of the fDi Diaries series, please reach out to fDi@ft.com.