Companies in the United States seeking global diversity would do well to consider Ireland, now that the International Financial Services Centre is proving to be a solid success.
“The sky’s the limit.” These are the words that Gay Mitchell TD used recently to describe the possibilities for Ireland’s economic growth. In a move that strengthened the Irish Government’s commitment to Dublin’s International Financial Services Centre, Mitchell, the former Lord Mayor of Dublin, was appointed Minister of State with special responsibility for the IFSC.
Mitchell’s knowledge of Dublin and its people runs deep, and the enthusiasm he displays is an attitude present throughout the city, especially èèan effort to renew the inner city dockland area and attract financial services, has brought sweeping changes to the city, including an influx of over 350 international companies and 2,500 new jobs. More importantly, 1995 is the first full year in a generation that peace has prevailed in Northern Ireland. This fact has also done much to boost the confidence of Ireland’s business community and its political leadership. Finally able to enjoy the prosperity that is possible only in peacetime, all of Ireland can safely say that the future is now.
The financial market is indeed booming in Ireland, thanks largely to the continued growth of the IFSC. In July, Ruairi Quinn TD, Minister for Finance, announced and welcomed 36 new business ventures into the IFSC. Along with the over 400 jobs that these companies will add, other promised employment for the IFSC within three years will bring the total number of people directly employed in IFSC companies to 4,300. This number “does not include the substantial indirect employment that has been created in the accounting, legal, computer and other service industries that have benefited from the IFSC,” says Mr. Quinn. The new projects hail from many countries, including Australia, Canada, Holland, Italy, Japan, Luxembourg, Norway, Spain, the U.K. and the U.S.
“Because of the Irish economy’s probusiness environment and the easy access to regulators, Dublin has been remarkably successful in promoting itself as a financial base,” says Eamonn Ryan, IDA Ireland’s chief executive in the U.S. The agency has responsibility for promoting the Centre. Indeed, the climate could hardly be more conducive to the financial services industry.
These and other reasons have drawn major banking and securities firms to Dublin. Two of the biggest newcomers to the IFSC are Brown Brothers Harriman &Co., and Merrill Lynch. BBH&Co., America’s oldest and largest private bank, opened in Dublin recently. Founded in 1818 by the sons of an Irish linen merchant, BBH&Co. is a highly regarded global investment custodian managed by 35 partners responsible for the firm’s $200 billion in investments. “We are delighted to be opening an office in Dublin,” said BBH&Co. partner Douglas A. Donahue. “As a clientdriven operation, we go where the business leads. Several of our major institutional clients have indicated that they consider Dublin to be their domicile of choice.”
Merrill Lynch, America’s largest securities firm, is establishing an International Capital Markets bank in Dublin, an operation expected to employ up to 80 people by 1998. A separate back office providing international support to Merrill Lynch will employ 120 people after that same time period. The venture is significant from several standpoints. The project itself is a pioneering effort by a major bank that will hopefully serve as a model for other, non-European banks to follow Merrill Lynch’s lead and set up shop in Dublin. The presence of Merrill Lynch will focus international attention on Dublin and enhance the stature of the IFSC. The Merrill Lynch functions to be centered in Dublin are central to a headquarters operations, and will bring a new level of sophistication to the IFSC.
As the fastest growing member nation of the EU, Ireland is deeply committed to its role within the Union, and to the Union’s growth. The integration of the Union will provide enhanced opportunities for foreign investment, particularly from the U.S. The U.S. is the largest investor in Ireland’s economy, accounting for 51 percent of all overseas manufacturing jobs and 21 percent of total manufacturing employment. In addition, employment in the telecommunications and software sectors has grown substantially in recent years.
There are several reasons for these developments. “For many companies, establishing a European market presence is no longer optional,” says Richard Greene, manager of international products for Ernst &Young International Location Advisory Services. “Any company wanting to compete in regional markets practically anywhere on the globe needs to have a local and regional production and servicing capability. Political upheaval, wars, and the èècontinu many American firms just feel more comfortable with Western Europe, particularly with its similar legal system, governmental infrastructure and with the reliability of services, power and communications systems,” says Greene.
Ireland’s competitive bottom line has not been the sole factor responsible for drawing international activity to the IFSC. In addition to the tax incentives and regulatory breaks, companies come to Ireland because of the country’s highly qualified workforce. Ireland’s workforce is skilled, enthusiastic and adaptable, and according to a survey by the Organization of Economic Cooperation and Development, one of the world’s best educated.
Ironically, the relatively high rate of unemployment in Ireland is advantageous to U.S. companies investing there, making skilled labor available at lower cost.
Improvements in the general economy and infrastructure have boosted Ireland’s profile. In the mid-1980s, with help from the European Community, Ireland upgraded its telecommunications system, a far-sighted move, considering today’s technology-dependent world economy. As well, Ireland’s economy remains robust, by most indicators; Ireland’s real gross domestic product is growing faster than those of many highly developed economies.
Clearly, the IFSC is making a substantial contribution to Ireland’s economic growth. This is all according to plan; says Mitchell, the IFSC “fulfills two very important functions in the Government’s program for economic development. It provides a very significant number of high-quality jobs at home for Irish graduates and it continues to generate major urban renewal in our capital city. It is my strategy to ensure that the Centre becomes happily wedded to Dublin and rooted in the domestic economy, and that the Centre itself is fully integrated into the commercial life of Dublin city.”
The IFSC’s contribution to the city goes beyond the economic. Indeed, Dublin is reclaiming much of its old charm as well as gathering new energy. “The urban renewal development of the 27-acre Custom House Dock site has been extended to 75 acres, and the original plan has been enlarged,” says John Curtin, IDA’s project manager in Dublin. “Six office buildings have been completed, and by year’s end, 330 apartments will be ready for occupancy. Work has also begun on restoring the original 19th-century arched entrance to the docks.” Ultimately, the project will have 1.2 million square feet of office space and 850,000 square feet of hotel accommodations. “There will be a successful financial services industry that will provide jobs for 7,000 people and a resident population of 2,400,” says Minister for the Environment, Brendan Howlin TD.
The establishment of these new businesses underscores the international recognition of the IFSC for specialized financial services. The expansion would also have not occurred without strong initiatives taken by the Irish Government. The government’s efforts to bolster investment in the IFSC were encouraged by the demonstrated growth of the IFSC in its first eight years. Clearly, the flat corporate tax rate of 10 percent is a strong incentive to businesses considering the IFSC, as well as the lower operating costs, direct operating licenses, and flexible regulation. The decision by the European Commission to extend the deadline for admission of new entrants to the IFSC by six years inspired Ireland’s new Prime Minister John Bruton to develop a strategy to get the most out of those extra years.
The hand-in-glove success of the IFSC and the Irish economy has been achieved as a direct result of close cooperation between government and industry.
Part of the Government’s strategy for maximizing the extended admission period was the appointment of Mr. Mitchell. One of his major initiatives will be the sponsoring of the Netting of Financial Contracts Bill, which has been approved by the Government. The bill will directly enable implementation of an EU directive that will recognize the riskreducing effect of netting agreements in calculating the capital adequacy of agreements, and will further enhance the attractiveness of the Centre to corporations interested in locating there.èè..TX.-In this way (and others), Mitchell’s office is charged strategy for the financial services industry well into the beginning of the next century. The strategy function will work together with the Finance Minister’s department, which has statutory responsibility for fiscal incentives, the approvals process and operating criteria for the Centre.
Since 1987, Dublin is a changed city. In eight short years, the IFSC, which began as the idea of a few people, has grown to a multi-billion-pound international center that has invigorated Dublin with a new prosperity. The possibilities for the future are limitless, as a peaceful and prosperous Ireland confidently markets a growing financial industry.
“The availability of the right people and an advanced telecommunications system are the keys to what’s been happening here,” says IDA-USA chief Eamonn Ryan. “But no industry can flourish as this one is purely because of tax or grant incentives. What companies come for is the availability of people – not just any people, but well educated, well qualified, and highly motivated people.”
Editor’s Note: This article was originally published in the September/October 1995 issue of Irish America. ♦
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