The Republic must shift its priorities on foreign direct investment in the "post-Celtic Tiger environment", placing more emphasis on winning value-added projects and on spreading investment around the regions, IDA Ireland chief executive officer, Mr Seán Dorgan, said last night.
Mr Dorgan said the extent of economic development seen over the last decade meant that projects brought to the Republic should in the future focus on high skills and, as far as possible, be innovation rather than production-oriented.
Such investment would, he said, integrate more successfully with the domestic economy. "Only economic activities with these characteristics can justify high wage levels and so allow us to maintain economic growth in the absence of the strong labour surplus we had until recently," said Mr Dorgan, addressing an audience at the annual Dublin Economic Workshop in Kenmare, Co Kerry.
He said that the "critical mass" of foreign direct investment operations already active in the Republic should be further exploited, with the greatest potential contribution to future investment likely to come from existing IDA client companies. "This means not only increasing value-added in their manufacturing operations, but also adding corporate-level innovation such as R&D and service, logistics and supply chain management functions alongside manufacturing," said Mr Dorgan.
"The objective is to create more rounded and strategically-important operations within the overall corporation." Supporting this strategy, the IDA has adopted a strategic economic model identifying the path a multinational might typically follow as its roots in an economy deepen. Incentive schemes designed to encourage clients to establish R&D centres represent one aspect of this policy.
A second requirement for foreign direct investment in coming years will be to "redress regional imbalances", Mr Dorgan said. He noted that growth through the 1990s had been heavily concentrated in the Dublin region, with most of the remainder falling to urban centres such as Galway and Cork, which have inherent advantages for investments.
"For this reason, the adoption of a national spatial strategy that recognises the need for growth centres in regions is critical to their development," he said, warning that, without such a policy move, "regions face the prospect of long-run decline".
Where foreign direct investment is won, Mr Dorgan said, it should move away from a historical focus on one project and towards the development of "clusters of excellence" in which a range of different companies establish a network and create a climate of innovation. He questioned the divisibility of foreign and indigenous investment in achieving this goal, arguing that Irish and overseas firms would benefit from greater linkages.
Responding former IDA member Mr Brendan Dowling said that, while foreign direct investment would continue to be a feature of the Republic's economic development, the IDA should take care not to target high skills projects just so that salary growth over recent years could be justified He also cautioned that developmental problems seen in the regions would not be eliminated simply through the injection of foreign direct investment.
