Foreign Direct Investment in Ireland 2019

Source publication: Foreign Direct Investment Annual 2019

Get the data: PXStat BPA34

In Figure 2.1, the United States, Bermuda and Netherlands are shown to be Ireland’s top three partner countries for inward FDI investments. With the United States having € 221.5 billion in FDI positions in Ireland. In Figure 2.2 however, when we analyse FDI on an ultimate investment basis, the United States has more than double the FDI positions in Ireland that it had on the immediate basis in Figure 2.1. This means that a portion of the investment had an origin in the US but entered Ireland from a different country. It is important to note the differences when viewing investment using the two disparate presentations: immediate partner country investment and ultimate controlling parent investment (UCP).  Notably, significant portions of investment from Netherlands and Bermuda are evident when viewed by immediate investor, but they are much smaller when analysed by the geography of the ultimate controlling parent (UCP) presentation.

Figure 2.3 describes investment from the United States on an ultimate investment basis. The share of Irish FDI by US investments has risen steadily over the period shown, while their FDI positions have grown significantly following a large increase in 2015 relating to the financing of intellectual property in Ireland.

Figure 2.4 shows that Luxembourg receives the largest amount of FDI from Ireland on an immediate investor partner country basis.

Source publication: Foreign Direct Investment Annual 2019

Get the data: PXStat BPA34

Figure 2.5 shows Irish FDI outward on the ultimate basis. Irish FDI outward on an ultimate basis predominantly comes from the Redomiciled PLCs which are firms that have headquartered in Ireland legally but have substantial investments abroad and a significant portion of their operations abroad. The Luxembourg. Dutch, Swiss or Bermudian presence in Irish FDI outward is dramatically decreased when we analyse it on an ultimate basis, it is redacted in Figure 2.5 for confidentiality purposes. Instead, Irish Outward FDI (which includes native Irish investment as well as investment owned by the Redomiciled PLCs) and Outward FDI ultimately owned by United States investors is shown. For a breakdown of Irish investment abroad between native Irish firms and the Redomiciled PLCs, see Figure 6.6.

Figure 2.6 shows Irish FDI income inflows on an immediate basis, this is income earned on Irish investment abroad. Investments in Luxembourg, Netherlands and the United Kingdom return the largest amount of FDI income on an immediate investor partner country basis.

Source publication: Foreign Direct Investment Annual 2019

Get the data: PXStat BPA37

Figure 2.7 shows Irish FDI income inflows on an ultimate basis. Income coming into Ireland from FDI is dominated by the Redomiciled PLCs; they account for the majority of the FDI income inflows.

For Irish FDI income outflows, shown in Figure 2.8, Luxembourg, Switzerland, and the United States receive the largest amounts of income from their investments in Ireland on an immediate partner country basis.

Source publication: Foreign Direct Investment Annual 2019

Get the data: PXStat BPA34

Figure 2.9 shows Irish FDI profit outflows on an ultimate controlling parent basis. This graph illustrates the significant amounts of profits accruing to the United States on their investments in Ireland. In 2019, the United States accrued €74.5 billion in FDI income from its investments in Ireland. The differences between Figure 2.8 and 2.9 show that while these investments have origin in the United States they are going through affiliates and subsidiaries in other highly globalised countries on their way back to the United States.

Figure 2.10 shows FDI income outflows to the United States over time and as a proportion of total FDI income outflows on an ultimate controlling parent basis. This graph shows a big increase in 2015 for the total amount of income accruing to the United States from investments in Ireland.

Figure 2.11 describes the distribution of FDI income outflows from Ireland. It shows that most of the profits made on FDI in Ireland are accruing to a small number of large firms; this can be seen by the high concentration of FDI income at the top of the distribution i.e. €74.9 billion in income outflows accruing to the top 25 firms in the distribution.

Figure 2.12 shows a time series of FDI income outflows by sector. The graph illustrates that the Manufacturing sector receives the highest amount of income on its FDI investments in Ireland.

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 equity income return is expressed as a percentage of the total FDI position.¹

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 considered when drawing inference from these results.

Where country breakdowns are provided, this analysis provides the return data for countries from which the largest amounts of investment into Ireland arrive. Correspondingly, it shows the country which receives the most FDI from Ireland, the United States.

Source publication: Foreign Direct Investment Annual 2019

Get the data: PXStat BPA34, PXStat BPA37

Figure 2.13 illustrates that the FDI return on investment in Ireland is higher than the Irish return on investments abroad.

Source publication: Foreign Direct Investment Annual 2019

Get the data: PXStat BPA34, PXStat BPA37

Figure 2.14 shows FDI returns by immediate partner country of investment. The most notable trend here being the significant dip that occurred with the returns on FDI in Ireland from the Netherlands in 2018. This decrease in the return on FDI for the Netherlands was caused by a €106 billion decrease that occurred in their FDI positions in Ireland on an immediate partner country basis; however, on an ultimate basis, there is no simultaneous large decrease. As seen in Figure 2.2, Dutch FDI positions in Ireland on an ultimate basis are €5.9 billion; Dutch positions on an ultimate basis have remained consistent around this level for a number of years. The increase in 2015 for Swiss returns on FDI in Ireland is due to income increasing from €3 to €6 billion (100% increase) while positions only increased from €10 to €12 billion (20%).

As shown in Figure 2.9, most of Irish FDI income outflows are accrued by the United States. Figure 2.15 illustrates the return on investment for the United States. The dip that occurs in 2015 for returns on income on an ultimate investor country basis stems from an increase in the denominator of that figure which is the United States FDI positions which experienced a large increase that year.

The persistent increase on the rate of return from 2017 on was caused by a general increase in income outflows on an immediate basis to the United States. This change coincides with tax reforms brought in by the United States for the repatriation of corporate profits.