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The Vacuum Issue 5 spacer Issue 5
Foreign Investors
by Liam O'Rourke
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One of the particularities of the Northern Ireland economy is that it is heavily dependent on foreign direct investment (FDI). There are currently 243 foreign owned companies employing over 53 000 people in the North.
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Why do foreign companies invest here ? It is certainly not for the 'craic' or because they particularly like the natives. They invest over here because it is profitable to do so. If they find somewhere else more profitable, they will have no qualms about leaving Belfast to go to Bengalore for example. It is only if they are really convinced that it will add value to their operations and turnover that foreign companies will invest in Northern Ireland.
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The vast majority of foreign investment comes form the USA. American investment over here is larger than twice the size of European and Asian investments combined. Investments from the Britain and the Republic of Ireland are also very important.
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Foreign investors rarely consider Northern Ireland as an investment location spontaneously. Northern Ireland is not a country, but a peripheral region of the British and Irish states on the western margins of Europe. In the British Isles, the Province has to compete with Scotland, Wales, England and the Republic of Ireland. Selling Northern Ireland as an investment location is generally made more difficult by the fact that is has a bad image. Invest Northern Ireland, the semi-governmental body whose task is to attract foreign investment into the region, has a hard time trying to convince international companies to consider the North as a potential investment location.
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What arguments does Invest Northern Ireland put forward to convince potential investors that Northern Ireland is the right place to invest ? The main argument is that the province has 'the right people', that is a young, English speaking, flexible and skilled workforce. Secondly, property and operating costs are relatively lower than in the rest of the UK and the Republic of Ireland, and thirdly there are interesting financial incentives for investors. Whatever the value of those arguments in the absolute, these indicators will always be judged by potential investors relatively to other locations. To convince foreign investors, Invest Northern Ireland will put strong emphasis upon reports (whether they are reliable or not is another question) that conclude that Northern Ireland is the best place to invest. For example, the MITAL report concluded that Belfast was the best city in the British Isles to open a call centre.
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Invest Northern Ireland seeks to attract foreign investment from specific sectors. Those strategic sectors are software development, call centres, biotechnology, and more recently shared services centres. It is not an easy job to convince foreign companies to invest in the North. Why is it difficult to do so? And why is it difficult to attract them beyond the greater Belfast area? Some of it has to do with the global economic downturn, since 2001, every country has found it difficult to attract mobile foreign investment projects. But the main reasons are local obstacles. For example, software companies require often very specific skills (knowledge of java, cobol, html, c++ etc), and there are not enough people with those particular skills. The further out you go from Belfast, the more true this is. Unless they are hiding somewhere behind hedges, it is difficult to find 25 cobol engineers in Fivemiletown! Or if a potential investor was considering opening a call centre, Moyle District Council could hardly provide this company with 200 French speakers. The idea of a shared services centre is even more utopian. Where are we going to find 80 German accountants and their 200 legal secretaries for example? Another problem is the abscence of a proper infrastructure (for example buildings fit to host a call centre), and the fact that the province is not in the Euro zone and has a tax regime less attractive than the South.
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Foreign investment can have a more sinister side. Invest Northern Ireland, and its predecessor, the Industrial Development Board, have been sometimes harshly criticised for giving huge financial grants to companies that later fail to deliver their promises, like the famous De Lorean case, or the dodgy Huanlon company. There is always the danger that some foreign companies come not to invest, but to take the grants and then 'fly by night'. Unethical investments is another problem. Raytheon is an American ICT company that set up an operation in Derry. It was hailed for creating jobs and thus boosting the peace process. Raytheon is presented as a 'model company'. But Raytheon manufactures military material, deadly weapons used today in Iraq by US and British troops. So, paradoxally the war in Iraq is supported in order to help the peace over here!
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Perhaps less newsworthly, is the fact that flexible labour legislation and lower wages are sold as intrinsic qualities of the 'Northern Ireland business solution'. As opposed to countries like France, Belgium or Germany for example, people can be easily fired from their jobs. Weak trade unions are also an advantage, especially in places like call centres, sometimes called the 'sweatshops of the 21st century'. Basically foreign investors are implicity told that over here they can get away with 'flexible work practices' - an euphemism for exploiting the work force.
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For those foreign investors present in the North, their experience has generally been satisfying. Nearly three-quarters of companies that have invested in the past are gearing up to invest more. Are the people of Northern Ireland happy with existing foreign investors? They certainly have created jobs. But as the major strike at the Montupet factory in Dunmurry showed a few years ago, their fundamental interests can clash. The relation between foreign investors and the people of the North is one of economic cooperation, but with latent conflicts waiting to explode.
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