The 2012 World Competitiveness Yearbook, published recently by Swiss business school IMD, indicates the growing attractiveness of Ireland for foreign direct investment.
The IMD rankings measure how well countries manage their economic and human resources to increase their prosperity, and are used by global companies, location consultants and professional firms. The rankings analyse 59 countries worldwide and list their attractiveness for investment according to 329 different criteria.
The overall situation that the study presents is that the USA continues to lead the world economy in terms of investment attractiveness. Furthermore, the ranking shows that globalisation and economic reform are viewed more and more sceptically.
The most attractive countries according to the study are Hong Kong(1), the USA(2) and Switzerland(3).
Despite all the setbacks concerning the US economy in recent years, the USA “remains at the centre of world competitiveness because of its unique economic power, the dynamism of its enterprises, and its capacity for innovation,” according to an IMD press release explaining the ranking.
Professor Stephane Garelli, Director of IMD’s World Competitiveness Centre, said: “US competitiveness has a deep impact on the rest of the world because it is uniquely interacting with every economy, advanced or emerging. No other nation can exercise such a strong ‘pull effect’ on the world. Europe is burdened with austerity and fragmented political leadership and is hardly a credible substitute, while a South-South bloc of emerging markets is still a work in progress. In the end, if the US competes, the world succeeds!”
Emerging countries have yet to provide an alternative. The big emerging economies of China(23), Brazil(46) and India(35) have all slipped in their rankings. Only Russia climbed one place, but still brought up the rear with a ranking of 48th out of 59.
The situation in Europe
The most attractive European countries - Switzerland, Sweden and Germany - rank 3rd, 5th and 9th respectively. Those countries have export-oriented economies and exercise fiscal discipline. The outlook for the financially troubled countries in Europe appears to be dependent on how well they are prepared to bounce back, IMD explains. Ireland(20), Iceland(26) and Italy(40) seem better off in that respect than Portugal(41), Spain(39) and Greece(58), who still scare investors.
Globalisation and Economic Reform
One part of the global ranking was an exclusive IMD survey of more than 4,200 international executives. This revealed growing scepticism towards globalisation and economic reform in some parts of the world.
The study found that globalisation was viewed most negatively in France, but the attitude is also rather negative in Greece, Russia, most of Eastern Europe, and a growing part of Latin America. It is, however, still perceived as a positive phenomenon in Ireland, Scandinavia, Chile, the UAE and many Asian economies.
Furthermore, the opinion towards reform is divided. Whereas fiscal reform is seen in a positive light in Ireland, emerging Asia, Qatar, the UAE, Switzerland and Sweden, other countries view austerity as a cure worse than the disease. Leading such views again is France, followed by Argentina, the Czech Republic and Spain, according to the ranking.
“The recession has made the world economy more fragmented and diverse than ever, forcing companies to operate several parallel business models,” said Professor Garelli. “Emerging economies are relying on domestic demand and national champion companies to insulate themselves from economic turmoil, while the ’submerging' developed economies are turning to re-industrialisation. In both cases, economic nationalism is back and protectionism is tempting.”
Ireland Climbing up the Attractiveness Ladder
Ireland’s ranking was a rather positive one. “This survey reveals that Ireland continues to improve its competition rankings, jumping from 53rd in 2008 to 20th in 2012, a remarkable achievement,” according to Regina Doherty, Fine Geal TD for Meath East.
Ireland was ranked first in four categories, and is thus the world leader in terms of the availability of skilled labour, the flexibility and adaptability of our workforce, investment incentives, and attitudes towards globalisation.
Furthermore, Ireland received second place for business legislation, openness to foreign investors, for large corporations that are efficient by international standards, and for adaptability of companies.
It was ranked 4th for Corporate Tax rate on profit as well as real corporate taxes.
Furthermore, the latest International Construction Intelligence Report, issued by Faithful and Gould, shows that the index construction cost in Ireland, at 91.3, is less than Singapore (94.8), US/Chicago (100), the UK (109.5), and Switzerland (155.2), IDA Ireland (the Industrial Development Agency) reported.
Additionally, Ireland’s excellence in the availability of skilled labour was confirmed by the 2012 Talent Shortage Survey published by the Manpower Group, which ranked Ireland as the global leader for the availability of skills and the least difficult location, globally, in which to fill talent.
According to Ms Doherty, those excellent Irish results “will be scrutinised very closely by some of our EU peers.”
Barry O'Leary, CEO of IDA Ireland (the Industrial Development Agency), also welcomed the positive outcome. According to him, “competition for Foreign Direct Investment is significantly increasing and the availability of skilled labour is, amongst other things, one of the main deciding factors when companies are choosing a location for their overseas investments”.
This is one of the reasons Ireland is continually climbing up the ladder of attractiveness, said Mr O'Leary. “For example, greater availability of computer and software personnel will be a key feature for investors in Ireland over the coming years. This is due to the increase in the numbers enrolling in computer software courses and conversion courses in Universities and Institutes of Technology across the country. Uptake of undergraduate computer courses has experienced a 40 per cent increase in the last four years, with the first of these additional students, at honours degree level, coming into the employment market this summer,” he said.
Speaking from Brussels where he attended the Competitiveness and Trade EU Council of Ministers meeting, the Minister for Jobs, Enterprise and Innovation, Richard Bruton TD, also welcomed the results for Ireland. When commenting on the results, however, he also addressed weaknesses that became apparent in the ranking. First among those weaknesses is access to credit for businesses: Ireland was only ranked at 53rd, a drop from 14th in 2008. However, that is a slight increase when compared to 57th in 2011.
“The Taoiseach has set the ambition that, by 2016, Ireland will be the best small country in the world in which to do business, and the government has started to implement our plan to deliver on this. Today’s results show that, while there has been a noticeable improvement since 2011, we have a long way to go if we are to deliver on this ambition. I will be working hard, together with my Cabinet colleagues, to deliver real reform across the economy, improve our competitiveness, and ensure that we can get jobs and growth back into the economy again,” he said.
The reforms, amongst other measures, shall include changes to reduce costs to business, improve access to finance, and encourage greater innovation, Minister Bruton said.
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