With a low corporate tax rate (12.5%) and English-speaking workforce, Ireland has been a popular destination for foreign investment. The country's Industrial Development Authority (IDA) has long been the envy of investment agencies worldwide for its ability to secure prized foreign direct investments, particularly greenfield investments by American IT and software giants like Dell,
Google and Intel which have long based their European operations in Ireland. Now the IDA is turning its focus to China, encouraging local corporations to use Ireland as a gateway to the EU market. Brian Conroy, who runs the IDA office here, says Ireland is learning how to pitch to Chinese investors. Because while investment project proposals coming in from USA end to be very neatly packagedthe typical Chinese investor seeks to edge into overseas markets via M&A or local partners.
Ireland has one of the most open and free markets in the EU.
Q: What areas or industries are you targeting in China?
A:ICT [information and telecom-munications technology] and software for example. Wee currently focused on Guangdong province, on Shenzhen, because that where most of those firms like Huawei and Foxconn are based. We have just appointed a trade representative down there. We target bigger companies because theye already done something in Europe and may want to go over. Many firms have sales in Europe but don have resources yet to establish there beyond one person rep offices. Thus we go after the big firms.
Q: Obviously there competition from other countries so what are the key attractions of Ireland for would-be Chinese investors?
A: Yes there are a lot of agencies after them. But our consistent R&D spending means there increased capability in ICT in Ireland. Wee also selling Ireland as a location for European headquarters, a control centre, or as a European base from a treasury point of view. This is the way US corporations have also tended to function in Ireland.
Q: What have the successes so far been?
A: Some of the Chinese investors into Ireland are in financial services, and aviation leasing. Bank of China for example has an aviation leasing business in Ireland. Then in the ICT sphere we have Satir, a game-developing firm doing localization of its products in Ireland. We also see interest in life sciences such as CIRS which tests Chinese exports to meet product safety regulations in the EU market. We have a few Chinese companies now, it takes time. This reflects where they are in terms of their development trajectory. While 21% of Chinese exports go to the EU only 2% of the country ODI goes to the EU. A lot of China ODI is going into energy but wee starting to see sales offices and small R&D operations being set up overseas. Chinese companies may not be doing it right now, but we expect to see this evolve more over the coming five years.
Q: Why is Ireland such a big player in aviation?
A: Ireland is a world centre for aviation, people forget that 50% of commercial planes worldwide are leased out of Dublin. There is a very specific set of deal-making skills involved here involving aircraft companies lawyers, banking, and a lot of those skills and expertise have been built up in Dublin over the past decades since pioneers like Tony Ryan [founder of Europe leading low fares airline Ryanair] saw the opportunities in the leasing area.
Q: What the break down (by geography, industry) of investors from Asia which have invested in Ireland?
A: The biggest country market is Japan from which 70% of our investment from Asia is coming, but remember wee had offices there for 30 years. China, India and Korea each represent about 10% of our investment from Asia. These figures will change. Wee had an office in China for only five years but we definitely see China and India rising in importance.
Q: What the difference in the kind of investment youe getting from India compared to China?
A: India is different, some of it is in M&A such as Ranbaxy, Wockhardt and Reliance [three Indian pharma companies] in the life sciences area. Ireland has a great reputation for life sciences. These firms see Ireland as having a great track record on compliance with the [US] Food and Drug Administration and EU standards for example and so do R&D and product testing in Ireland. India has expanded into Europe faster. But consolidation is happening fast in China and that will drive companies here overseas. Indian companies have also looked to Ireland as a good EU base for their BPO [Business Process Outsourcing] contracts. Ireland has a big pool of multilingual workers, for example of the 2000 workers at Google Ireland speak 40 languages and about 60% are non-Irish.
Q: How do you expect Chinese investment to evolve compared to the success youe had with US firms?
A: These Chinese companies have many western investment agencies chasing them. While the bulk of Chinese ODI [overseas direct investment] is in energy and resources a cluster of these companies do a decent business in Europe. Huawei has 15 people in Ireland servicing the local market. Theye risen so fast but still at evolutionary stage. There many more firms coming after them. But this won be a wave of greenfield investments like the US firms. Chinese firms have a different style, theye seeking M&A and local partners. Also these [Chinese] firms are hungry for technology. And Ireland has a great reputation in software, and in industry collaboration with universities.
Q: Do you expect Ireland to emerge as a base for Chinese Internet companies in the way it has for the likes of Google?
A: Firms like AliBaba and Taobao are growing so fast but theye concentrating on China, and then theyl look to Asia. Also theyl be going from a low cost to a high cost business environment. It tougher for Chinese firms going to Europe than it is for European companies coming to a low cost market like China.
Q: Are there examples of Asian Internet firms apart from Satir which are using Ireland as a European base?
A: Yes, a Japanese Internet gaming company called Gala does it localization in Dublin where it has 100 people.
Q: How come the corporate and political sphere in China seems very aware of Ireland strength in software?
A: It the exports of software [from Ireland to China]. Theyl have their homework done and will have looked at the trade figures and noticed when picking off the trade figures how much of Ireland trade to China is in software.
Q: The financial services sector is obviously a strength for Ireland, how will you appeal to China on that front?
A: The main four Chinese banks are going oversease have been developing relationships with them and expect business from them. But they do 95% of their business in China and that will change slowly. We see them coming to Ireland for funds administration, leasing and aviation leasing. We have a record of getting more business from investors once we get them into Ireland.
Q: Is the IDA and its reputation for attracting FDI into Ireland known in China among officials and businesspeople?
A: No, the awareness wouldn be the same as in the US or Europe. We are building our brand. But we are not seeking brand recognition through the mass market. We use the [Irish] ambassador and visiting ministers, that gives comfort factor to companies.
Q: Is the IDA well known in other Asian states I imagine nations like Singapore, Malaysia have studied your and Ireland success on FDI?
A: Singapore yes, wee well known there, over the years wee been tracking each other. Our local equivalent in Singapore, the EDB, has visited us and we visit them. We want to collaborate and with them as we have much in common and they are very strong in digital media for example. Investment goes to Singpaore [from China] because of the time zone and the common language.
Q: How have recent events the banking crisis and EU/IMF bailout - affected Ireland reputation among potential investors youe talking to in China?
A: It comes up in meetings. We deal with it matter of factly, explaining that it [banking crisis, real estate bubble] was to do with the Irish market and not our FDI. And we point out the positives, like falling costs of doing business. People take the information, in most cases they simply want to understand a bit more what happened.
Q: What the current status on the big Chinese exhibition centre project that been floated for Athlone [town in the centre of Ireland]?
A: It still live, the planning application will be lodged in the coming month. The investors, from Zheijiang were waiting till after the recent elections to lodge the planning application.
Q: How will this site differ from the Chinese commercial centres built in other European cities, which are effectively just wholesaling centres?
A: These would be exhibition halls to exhibit goods. Companies that currently exhibit in China could then do it in Europe, with European clients flying to Ireland to see the goods. The idea is to bring Chinese companies closer to the market.
Q: Why would they look at Ireland rather than continental Europe?
A: They looked at France and the Benelux and had looked at a site one hour from Paris but the lack of English speakers was a factor. They needed a certain parcel of land which was available in Athlone, and they felt the business environment in Ireland was conducive to make it work.