Foreign Direct Investment And Irelands Tiger Economy A & B Case Solution

2. The Irish Magic Trick

Irish have utilized two natural factors to its advantage. First, its geographic contiguity toEurope and secondly, its cultural ties with the United States (US). US companies have invested a large amount of money in Ireland, and the reason is the strategic advantages that US has over Ireland. These strategic advantages include Ireland’s tax and its regulatory incentives, Irish workforce and the EU integration. These factors or strategic advantages have been extremely effective in attracting FDI in the past. Some important characteristics about the Irish people that played a crucial role include its English speaking work force, and in addition to this language compatibility, there is a cultural compatibility between the two countries that played an important role. Most importantly Irish education system is ranked as one of the best in the world. Hence, it also strengthened the qualities of the Irish work force.

3. Ties with US    

If, we analyze the situation critically, then we will realize that the Government of Ireland has also held a friendly attitude towards business with US during the past twenty years or so. They got high level technology from US. According to Cassidy IDA (The Industrial Development Agency), which is a national association responsible for acquiring investment from foreign countries, was given funding for projects that targeted development of industries like tech etc. This particularly focused on attracting investment from the U.S. The policies were softened for US and the government lowered the tax rate to 10% for international manufacturers. Politically looking at Ireland, one easily notices the biases towards US. Currently, Ireland has two tax rates. This dual corporate tax arrangement has led to criticisms of unfair tax favoritism by other EU countries and domestic companies that do not qualify. So, due to these political reasons and the attractiveness of a qualified and skilled work force, Ireland seems like an attractive place for US.

In addition to these low tax rates, Ireland has also developed a non-financial incentive for businesses, reducing red tape. The government has placed a duty on each department to amalgamate, or revise frivolous laws within their jurisdiction, especially the ones that hamper market entry, or increase burden on small businesses.

This attractiveness has led to so much Foreign Direct Investment (FDI) which has led to economic growth of Ireland and has provided them with the title Celtic Tigers. The Irish government is very committed to attracting business and making overseas companies as much at ease as possible by keeping regulations and taxes at a bare minimum point. This political strategy has worked for them, and they have managed things well and has reached a point, where they see their economy booming.

4. Global Financial Crisis

Let’s talk about the global financial crisis of 2007-10. This financial crisis was a major political and economic crisis in Ireland. It was also responsible for the recession, and it was for the first time since the late 1980s that the Irish economy went into a slump. According to the sources, Ireland was the first European country to fall into recession as a result of this financial crisis. Unemployment shot up significantly, and the Irish Government officially announced that they have entered into a recession period. During the recession period, the collapse of the banking system caused a huge amount of loss to the country. The property market also got a hit and a lot of losses were incurred here also. During this recession period, the residential and commercial property market also fell into a severe slump. Sales went down significantly, and property value dropped big time. Just to give a brief idea how bad things got the following figures reflect the scenario.