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Return on FDI

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The Profitability of FDI

The profitability of FDI is measured, as with conventional investment, as the rate of return on the investment. The definition used in this section for the return on FDI is:

return =

                   FDI income


                  FDI positions

where the income return is expressed as a percentage of the total FDI position. This differs from the definition prescribed in BMD4 by including FDI income on debt. 

This section also differs from subsequent sections in that it is compiled using the immediate parent country classification of both income and stocks. In considering this presentation, the return on FDI positions is attributed to the immediate investor.

This measure, when examined across geography and industrial sectors, can give an indication of which investors are making the most profitable foreign direct investments. It should be noted, however, that many factors (structural, cyclical, firm-specific) should be taken into account when drawing inference from these results. Where country breakdowns are provided, this analysis provides the return data for the five countries from which the largest amount of investment into Ireland arrives from. Equivalently, it shows the five countries who receive the most FDI from Ireland. 

A. Aggregate Rate of Return

Figure 2.1 displays the total rate of return on FDI stock positions in Ireland and abroad. It shows that the rate of return on investments in Ireland offers a significant premium over the investments made abroad, from Ireland. The simultaneous declines in rates of return shown in Figure 2.1, are attributable to the growth of FDI positions (Figure 1.1), in excess of the growth of FDI income flows.

X-axis labelReturn on FDI AbroadReturn on FDI in Ireland
20125.69615.348
20134.83714.368
20143.89112.712
20151.9357.504

Source Publication: Foreign Direct Investment Annual

Get the data: StatBank BPA34 StatBank BPA37

B. FDI in Ireland

By location of investor

Figure 2.2 shows the partner countries from which a large proportion of total foreign direct investment comes. It is important to notice the difference between the presentation of FDI by Immediate Partner Country, in comparison to the Ultimate Controlling Parent presentation. When Figure 2.2 is compared to Figure 1.6 (for 2015), it can be seen that the stock of investment from the US as ultimate investor at €581bn was €215bn greater than the stock of US investment presented by immediate owner (€367bn). This is to say that some of the investment had an origin in the US, but entered Ireland from a different country. Notably, significant portions of investment from the Netherlands, Luxembourg and Bermuda are evident when viewed by immediate investor, which are much smaller than those displayed by ultimate investor (Figure 1.6).

X-axis labelBermudaLuxembourgNetherlandsUnited KingdomUnited States
201225.01470.34146.44443.121.624
201318.76473.72639.91246.00728.63
201438.33970.69376.20743.06217.865
201553.1139.28687.33336.959366.764

Source Publication: Foreign Direct Investment Annual

Get the data: Statbank BPA34

The rate of return on FDI in Ireland by geographic region is shown in Figure 2.3. The figure shows that until 2015, investors from the US were earning a higher rate of return on their Irish Investments than those from Asia or Europe.

AmericaAsiaEuropeWorld
201234.91890315.3854911.247105115.3481959
201334.27981854.4588110.0598314.3677679
201425.9466823.899789.555351312.7124901
20153.860496597775043.0155912.31726337.5040433

Figure 2.4 shows the rate of return on FDI in Ireland by the country location of the investor. It shows that the return on FDI from Bermuda is driving up the return on FDI from American countries, such that it exceeds the rate which US enterprises are earning.

BermudaLuxembourgNetherlandsUnited StatesUnited KingdomWorld
201237.67735783.6118819.966402526.39330014.1539615.3481959
201354.89619724.9029718.444939516.68889393.8531114.3677679
201429.78504685.5056710.087176928.46319775.6198312.7124901
201520.29747712.6712513.62384650.8283854312309828.44183397.5040433

Source Publication: Foreign Direct Investment Annual

Get the data: Statbank BPA34 Statbank BPA37

By activity of resident enterprise

Figure 2.5 shows the NACE activities in which the enterprises in Ireland receiving significant amounts of FDI engage. The activity sectors below account for 75% of the FDI into Ireland. From Figure 2.5 we can see that the substantial increase in FDI into Ireland in 2015 arose primarily in the manufacturing sector. Significant increases were also observed in the financial and insurance activity sector. The majority of the stock in this NACE sector is attributable to financial intermediation. The wholesale and retail trade sector and the ICT sector have relatively smaller FDI holdings in Ireland. Nevertheless, the FDI holdings in these NACE sectors increased in 2014 and 2015.

X-axis labelManufacturing (C)Wholesale and retail trade (G)Information and communication (J)Financial and insurance activities (K)
201269.13611.33913.23139.217
201381.23610.12212.509138.583
201478.02416.55314.61150.544
2015341.34215.97721.552217.181

Source Publication: Foreign Direct Investment Annual

The rate of return on FDI in Ireland by activity of resident enterprise is shown in Figure 2.6. The figure shows that ICT has earned a far higher rate of return than any of the sectors, including wholesale and retail trade, which also has a similarly small FDI stock denominator (Figure 2.5). This trend continued in 2015, despite the substantial increase in the stock of manufacturing FDI.

Manufacturing (C)Wholesale and retail trade (G)Information and communication (J)Financial and insurance activities (K)All Sectors
201231.276470223.555020343.43888847.916184315.3481959
201323.634795223.558943653.94196216.974288914.3677679
201422.881644714.964081148.87208866.672504812.7124901
201510.09983479.475478731.18341164.628457.5040433

C. FDI Abroad

By location of investment

Figure 2.7 shows the counterpart countries which receive a large proportion of FDI from Ireland. In 2015 more than half of all FDI from investors in Ireland went to enterprises in Luxembourg. In addition, FDI in the US almost doubled from 2014 to 2015.

X-axis labelBermudaLuxembourgNetherlandsUnited KingdomUnited States
201234.24463.87839.67850.00137.735
201344.21194.28138.77866.24545.914
201457.923176.6645.28177.99952.045
201527.305416.48551.75489.049100.29

Source Publication: Foreign Direct Investment Annual

Get the data: Statbank BPA34

The rate of return on FDI abroad by geographic region is shown in Figure 2.8. The figure shows that investments in Asia were earned a higher rate of return on their FDI from Ireland than those investments in America or Europe. The 2015 result for Asia has been supressed for confidentiality reasons.

X-axis labelAmericaAsiaEuropeWorld
201210.20129.543.7835.696
20136.07119.954.1994.837
20144.93115.9373.5253.891
20153.9242.0831.935

Figure 2.9 shows the rate of return on FDI abroad by the country location of the investment. The rates of return for Bermuda are supressed for confidentiality reasons in 2012 and 2013. The rate of return on investments in the US exceeded the world rate of return in all years 2012-2015, while the return on investments in the UK was consistently lower.

BermudaLuxembourgNetherlandsUnited KingdomUnited StatesWorld
20125.461665.113852.169769.23135685.69638
20135.65295.346381.745486.77496784.83698
20142.793463.41425.581171.483426.43708193.89062
20152.710691.813454.278861.020693.828181.93462

Source Publication: Foreign Direct Investment Annual

Get the data:  Statbank BPA34 Statbank BPA37

By activity of resident investor

Figure 2.10 shows the same sectors as displayed in Figure 2.5. These sectors own a far lower share (20%) of the FDI out of Ireland, than of that into Ireland (75%).  The majority of the FDI out of Ireland is owned by a group of companies who Redomiciled PLCs in the Irish Balance of Payments (PDF 183KB) . Their share of FDI abroad is shown in Figure 1.4. The vast majority of FDI abroad by these companies falls into the “Activities of Head Offices” NACE category. Much like in figure 2.5, the large stock of investment by the financial and insurance sector is attributable to financial intermediation.

X-axis labelManufacturing (C)Wholesale and retail trade (G)Information and communication (J)Financial and insurance activities (K)
201233.24413.0451.03956.994
201345.413.8581.3844.358
201447.67418.6851.29337.559
201556.18814.3614.35186.442

Source Publication: Foreign Direct Investment Annual

Figure 2.11 shows returns which are lower and less variable than those in Figure 2.6. The redomiciled PLCs earned high profits on their investments from Ireland in 2012, but were closer to the average in later years. The return on FDI from the manufacturing sector is suppressed in 2015 for confidentiality reasons.

Manufacturing (C)Wholesale and retail trade (G)Information and communication (J)Financial and insurance activities (K)Redomiciled PLCsAll Sectors
20122.778025.9127922.493037810.06234077.352080175.69638
20131.814837.38433562.5482510.59476214.861771114.83698
20142.405375.041647.379945511.81156633.275149233.89062
20151.478971.228525.409722.393954571.93462

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