Foreign Direct Investment in Ireland 2022

FDI can be broken down by certain characteristics into further components which allow for additional analysis. A distinction is often drawn between greenfield FDI and other types of FDI transactions (mergers & acquisitions, extension of capital and financial restructuring). The rationale behind drawing this distinction is that the transfer of ownership (merger & acquisition investment) will usually have a significantly different economic impact than the purchase or sale of new shares (greenfield investment), the extension of capital or financial restructuring.

Greenfield FDI can be described as ex nihilo investment: the establishment of a subsidiary “out of nothing”. As recommended by Eurostat, greenfield statistics in this chapter are compiled using FDI transactions data; recognizing that the intent of an FDI transaction relates more closely with greenfield investment than FDI stock data. Specifically, transactions of FDI equity other than reinvestment of earnings have been used to compute the figures for greenfield FDI in this new method. Furthermore, under the transactions approach, an enterprise would also be classified as “greenfield” for 3 years after the initial investment to reflect the average time involved in establishing new functioning fixed capital in the host economy.

In Figure 5.1 greenfield FDI transactions are shown between 2014 and 2022. There is a spike in 2015 which coincides with a significant increase in Irish FDI inward. The negative figure in 2017 is as a result of disinvestment of funds from some firms that began operating in 2015 and 2016. The spike in 2020 is seen mostly in pharmaceuticals and medical equipment.

Broader Definition

A broader definition of greenfield FDI proposed by Eurostat[1] would be to say that greenfield FDI is both investment in new FDI enterprises and new capital injections into existing enterprises. The rationale for including extension of capital into the greenfield definition is that a capital injection which is used to extend the capacity of an existing direct investment enterprise would have a similar effect on the host economy as a traditional greenfield investment would have.

The figure for “broad greenfield” is comprised of:

• FDI equity transactions in enterprises that are no more than 3 years old.

• Any follow-up direct investment transactions in existing foreign direct enterprises that are used to acquire fixed assets.

Figure 5.3 shows the components of greenfield FDI under the broader definition applied to our data for years 2014 to 2022. In 2022, greenfield FDI was €34.3 billion, of which -€1.61 billion was made of FDI flows in foreign multinationals no more than 3 years old and €36 billion was comprised of follow-up investments within existing enterprises that were used to acquire fixed assets. The extension of capital component is large in several years due to the onshoring of IP and aircraft.

Due to an internal classification issue in earlier years specific to firms in the aircraft leasing sector, it was imprecise to maintain the assumption that all tangible fixed assets for firms in this sector were financed by their reported FDI. Therefore, a significant amount of tangible fixed assets in the aircraft leasing sector were excluded from the analysis. From 2020, this issue has been resolved.