It may take more than the famed luck of the Irish to reach the ambitious new FDI goal that Ireland has set for itself. The target is to attract 80,000 new jobs through FDI over the next five years, a 40% increase on current levels. In practical terms, that means reeling in 900 individual projects.

To add to the challenge, the government aims to boost FDI in each region of the country by 30% to 40%, a task that requires overcoming the historical appeal of Dublin as the location of choice and raising the profile of smaller towns.

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Foreign firms already in Ireland will be nudged to increase investment by 20%, to a total of €26.8bn per year. They will also be encouraged to boost their R&D activity in the country, and to enhance their partnerships and collaboration with innovative Irish companies.

The task of accomplishing these feats has been assigned to IDA Ireland, the country's investment promotion authority, which already has an enviable record of success in enticing foreign investment. However, in attaining these goals it will have its work cut out given the increasingly fierce competition from other countries.

Beyond the US

Still, Ireland appears to be holding its own. In the first half of 2015, IDA created 9000 direct jobs by approving 110 projects by foreign investors, almost half from first-time investors such as Uber and Amneal Pharmaceuticals, and the rest from expansions and transformations of existing companies. This followed a strong 2014, which saw a 20% increase in IDA-approved FDI investments to 197, including 88 greenfield projects.

The new strategy also calls for Ireland to diversify its sources of FDI beyond the US – which in 2014 accounted for 72% of all foreign investment – in favour of a tighter focus on Asia-Pacific and Europe. IDA has recruited 35 additional staff to boost this effort.

Ireland’s success relies on targeting specific sectors and countries in a campaign that emphasises Ireland’s 'value proposition'. The proposition stresses nine elements: Ireland’s FDI track record, its skilled and young talent pool, a favourable tax regime, the ease of doing business, its education level, access to Europe as a member of the EU, its cities and clusters, its connected research, and an abundance of cutting-edge companies.

Flight from the city

Previous attempts to divert development from the country’s major city, Dublin, into more remote areas experienced limited success, with only Cork in the south and Galway mi the west benefiting.

This time, says Frank Conlon, executive vice-president of IDA’s strategic property division, IDA has dedicated €150m over five years to support its goal of spreading FDI into “urban gateways”, one in each of six regions. The funds will be used to upgrade business and technology parks, build advanced technology facilities in each region, and invest in strategic utility-intensive sites.

In the latter category, Mr Conlon cites Apple’s recent announcement that it will build an €850m data centre in Athenry, a small town in County Galway. The centre will be powered entirely by renewable energy, such as wind or potentially wave power, and the company has pledged to work with local partners to develop other sources of renewable energy. Facebook also plans to open an energy-efficient €200m data centre in a rural town, Clonee in County Meath in the east of the country. Each company already has a well-established presence in Ireland.

The country's urban gateways have been designated partly on the basis of an existing nucleus of foreign and Irish companies, says Mr Conlon. The goal is to create clusters of similar industries and support services that offer a self-reinforcing ecosystem for growth.

The designated urban gateways also offer a skilled workforce, a third-level educational institution, and cultural and social amenities. Other necessary elements include technology and infrastructure support, R&D activities, and key business and service links. “We have been working aggressively to build that over the years,” says Mr Conlon.

Tax breaks

The collapse of the Irish property market as a result of the failure of many domestic banks in 2008 left the country with an oversupply of empty commercial buildings and real estate. In addition to its own properties, IDA takes the lead role in marketing properties owned by the National Asset Management Agency, the 'bad bank' established by the Irish government in 2009 to assume the 12,000 defaulted loans held by failed financial institutions and dispose of the 60,000 properties that had served as security for the loans.“You have to have a ready-to-go property solution [to offer IDA clients],” says Mr Conlon.

The Irish government also intends to introduce a 'knowledge development box' to encourage FDI. Working in a similar way to 'patent boxes' in the UK and elsewhere, it will tax intellectual property income at less than the normal corporate tax rate to attract high-value jobs associated with the development of intellectual property. “It will be an extremely useful tool for companies that are doing R&D in Ireland,” says Mark O’Sullivan, a US-based partner with Dublin law firm Matheson. The scheme is expected to be in place by January 1, 2016.

The lower tax rate will supplement an existing 25% tax credit for certain expenditure on R&D activities, plants and machinery and buildings. 

Legislation enacted earlier this year is intended to further boost FDI in Ireland’s booming international financial services sector. Half of the 430 companies operating in the sector are foreign owned, according to government statistics. They employ 75% of the 35,000 workers in the industry, including front-, middle- and back-office services.

European leader

According to industry association Irish Funds, net assets in Irish-domiciled funds have risen sharply to almost €2000bn. The country is the leading domicile for hedge funds and other alternative investment funds in Europe, according to Mr O’Sullivan.

To further strengthen the sector, in February this year Ireland enacted the Irish Collective Asset Management Vehicle (ICAV), which came about because existing law relating to public limited corporations was not appropriate for the Irish funds industry. “The ICAV is a separate regime with its own legislation, and no longer subject to the vagaries of year-to-year changes in the Companies Act,” says Mr O’Sullivan. The ICAV also has tax implications that make it friendlier for US-owned investment funds, he adds. By July 31, 2015, 38 funds had already registered as ICAVs.

Ireland has endured a tumultuous few years. Once celebrated for its rapid economic growth, its prospects were seemingly blighted overnight by economic mismanagement that necessitated a European bailout and made it notable for altogether different reasons. Today, Ireland has become a poster child again, this time for its people’s stoic acceptance of harsh terms of the bailout that enable them to envision prosperity at the end of the rainbow. Where the government was once forced to accept the loss of some of its most educated citizens to overseas markets, it is now summoning them home to fill the positions that are being created by its foreign investment drive. FDI has played a major role in Ireland’s growth, and will continue to do so.