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The Investment and Development Agency of Ireland (IDA)

One of the great driving forces for the Irish success story is IDA Ireland. First established in 1949, and originally named the Industrial Development Authority, it was given the authority to attract new industrial investment in Ireland in the capacity of a civil service body. Under the statute , the IDA had a dual function to advise the minister on industrial development and to promote greater investment in Irish industry.

In 1969 the IDA transitioned from being limited to having full autonomy. The IDA became a non-civil-service, state-sponsored agency and was renamed Industrial Development Agency. Legislative measures covered IDA promotion, capital grants, the development of industrial estates, and advance factories. This gave the IDA greater license to become entrepreneurial in its mission.

Through IDA's efforts, Ireland is promoted as the ideal location for foreign companies to undertake global expansion to the EU market and beyond. And indeed, international companies play an important role in the growth of the economy in Ireland, which has become the ideal export base to penetrate the European market. Its earlier objective of job creation was met with considerable success. But the globalization of business means that, in order to respond to the global trends, the features of Ireland's competitive advantage must also change to meet the needs and challenges of the international companies operating in Ireland. In 2001, IDA became the Investment and Development Agency of Ireland.

Tax Incentives

The core IDA tax incentive principle has always been that Ireland should offer any foreign investor the longest possible time horizon. To attract foreign direct investment, the Irish government has committed to a 20-year tax benefit package. For many years , Ireland had a maximum of 10% corporate tax rate for manufacturing and data processing companies that are allowed to keep that benefit until 2010. However, beginning in 2003, a new tax rate of 12.5% will be introduced for all companies. Despite the low tax rate, corporations in Ireland contribute about 12% of the tax take, as compared with 5% in other European countries that have higher corporate tax structures.

With a longer time horizon, the investors can forecast their tax liability with confidence and can estimate net return on their Irish investment some 10 or 20 years into the future. Furthermore, reinvestment and expansion can be planned with greater assurance. The productive base of the economy has been transformed by long- term investments. This is part of the reason that about 23% of all new mobile investment into Europe locates in Ireland, which has only 1% of the EU population.

Transforming the Economy in Ireland

About 75% of total exports comes from the foreign sector, creating a huge percentage of wealth in the region. Today, the FDI comprises more than 1,200 companies, employing more than 140,000 workers. To a large extent, it is the foundation of the whole economy.

Table 6-2. IDA Highlights, 1998 “2000

	1998	1999	2000
Total new jobs filled	15,996	18,079	24,717
First-time jobs out of total new jobs	14,436	16,277	20,257
Total full-time employment	115,981	124,664	141,258
Change in full-time employment	8,810	8,687	16,415
Total number of IDA -supported companies	1,140	1,279	1,278
Projects fully agreed	243	186	96
Source: IDA Annual Reports, 1998, 1999, 2000.

But the benefits extend far beyond the numbers . One of the huge advantages derived from the FDI sector is in developing the expertise of the indigenous population. Many people in Ireland have gained enormous experience either working directly in some of these world-class companies or by supplying these companies domestically. It has, in a very unique way, helped to grow a new indigenous Irish high-tech sector.

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Saperstein J., Rouach D.

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