Published in our International Business Update November 2011

The Eurozone has not received much positive economic publicity in the international press recently. Despite this perception of crisis, Ireland's ever increasing competitiveness, allied to its status as an international centre of excellence, is driving its recovery and ensuring that the country remains the location of choice for multinational investment.

The Irish economy has made great strides, thanks in large part to significant improvements in its competitiveness, boosting the confidence of the international business community. However, in order to maintain attractiveness, Ireland must continue to benchmark itself globally and thereby remain a competitive destination for investment.

Looking at Ireland's recent performance, the statistics are encouraging. 11,000 new jobs were created as a direct result of high profile investments by international companies establishing new operations in Ireland in 2010. The country secured 126 foreign direct investments last year, a 20% increase on the previous year. As regards 2011, the American Chamber of Commerce reported that only the UK, the Netherlands and Canada attracted more US FDI than Ireland in the first six months of the year. Over €500m investment in research, development and innovation, coupled with the Government's unwavering commitment to the 12.5% corporate tax rate, has resulted in many of the world's leading companies increasing their Irish presence. The American Chamber of Commerce also celebrated its 50th anniversary in Ireland this year, highlighting the strength of the bond that has existed between Irish and American business for the past 50 years and reiterating the confidence that large US multinationals continue to place in the Irish economy.

Coinciding with President Obama's visit in May 2011, Matheson Ormsby Prentice launched the MOP FDI Index . The first report, launched in May 2011 revealed that the most positive attributes identified by US corporations considering Ireland as a location of choice for foreign direct investment are its competitive tax regime, English-speaking and skilled workforce, ease of access and Government incentives. The latest installment of the MOP FDI Index reveals that 40% of senior US business leaders surveyed perceive Ireland as a good place to do business and confirmed that Ireland's low tax rate remains the key factor for attracting foreign direct investment from the US. However, while the survey findings show that Ireland's tax regime is seen as an increasingly important advantage over other potential FDI destinations in Europe, factors such as Ireland's skilled labour, the quality of IT infrastructure and the stable regulatory environment all remain as strong positive attributes when Ireland is compared to its European neighbours. In addition, significant improvements in competitiveness have helped make Ireland an attractive destination for foreign investment. Business costs such as energy, rents, services, construction and labour have all decreased. Office rents have been reduced by up to 40% in many places and utility costs have now dropped below the European average. The EU has forecast that between 2008 and 2012, Ireland's labour costs will have improved 13% relative to the average in the European Union.

Following the 2011 General Election earlier this year, Ireland now has political stability and clarity on economic policy which will further foster its attractiveness to the world's largest companies. The recent MOP FDI Index reflects this sentiment with an endorsement of the Irish Government initiatives and the way in which the new administration is handling the economic crisis. The MOP FDI Index reveals that positive perceptions about Ireland's stability are, in fact, almost double the average for the rest of Europe. The Irish Government is committed to making Ireland the best small country in the world in which to do business by 2016. Responding to questions on Ireland's corporate tax rate, the Irish Prime Minister recently confirmed in the Wall Street Journal that "there isn't any confusion about Ireland's corporate tax rate: it is 12.5%. End of story". Other recent, positive developments for businesses in Ireland have been the passing of the Finance Act 2011 and the establishment of Ireland as a significant location for the clean-technology industry. The Irish Government has reaffirmed its commitment to developing the clean-technology industry and positioning Ireland to become a world leader in this growing sector. Policy targets are in place such as the goal to have 40% of all electricity generated from renewable sources by 2020 and a 20% saving on current energy costs by 2020.

A recent OECD report said that Ireland's recovery was on track and that Ireland has better long-term prospects than many of the other hard-hit European countries. The OECD cited gains in competitiveness and increased exports as being the drivers for Ireland's recovery. Undoubtedly, the improvement in competitiveness is helping secure new FDI for Ireland. However, it is important that we do not rest on our laurels and that Ireland continues to demonstrate that it can control and manage its own affairs in a sensible and progressive manner, by remaining sensitive to the needs of outside investors and retaining the ability to impact change if required. We, along with other members of the business community and the Irish Government, are all aware of the importance of maintaining focus in this regard.

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