I spent last week going through the Census of Industrial Production reports, 1983 to 2006, in order to find out just how many jobs in Ireland are provided directly by foreign investment.
This graph is what I got.
Notice how there is virtually no change in foreign-based industrial employment from the early 1980s onwards – in fact, as a percentage of the workforce it has steadily declined since 1981.
The real growth in foreign investment in Ireland in the past twenty years has been in foreign-based equity firms setting up shop in the IFSC. It is Ireland as a tax haven for finance – the only tax haven of its kind within the eurozone – which the government is desperately trying to protect with its defence of corporation tax.
It has almost nothing to do with industrial growth and the national economy.
[Note: The figures above are taken from the Census of Industrial Production series, which is published by the Central Statistics Office. The series, in various guises, goes back to 1926. The numbers for foreign-owned industry, however, start in 1983. The National Library call numbers are : OPIE I/77 (yrs 1926 - 1978) ; OPIE U/112 (yrs 1979 to date).]
Latest posts by Conor McCabe (see all)
- Padriac White and the Establishment of the IFSC - April 8, 2013
- Video: Selma James- Defending Caring and Welfare in Careless Times - March 14, 2013
- Prof. Terrence McDonough on the Irish Promissory Note Deal – Galway 12 Feb 2013 - February 13, 2013
- Selections from Finance Dublin Magazine, 1988 - February 11, 2013
- Ireland & the Shadow Banking System: Audio & Slides from 18th Oct 12 Dublin Talk - October 22, 2012
August 22, 2011 10:33 pm
Conor, Much of the recent growth in multi-national employment has not been in the either the new or old manufacturing sectors, rather it has been in services.
The manufacturing jobs on the multi national side are almost exclusively in capital intensive sectors where the productivity per worker has grown substantially because of the level of capital invested.
Also companies such as IBM, which previously manufactured here are not almost exclusively involved in services. The remaining DELL employees likewise.
There is a particular problem in disentangling the figures for a number of reasons as the definition of “manufacturing” covers computer software, which is also covered by internationally traded services. However looking at perhaps some of the top MNEs (my est.) here by employment gives you an idea
1) Pfizer/Wyeth approx 5,000 employees manf. pharma, baby food & R & D.
2) Boston Scientific 4,000 manuf of medical devices.
3) IBM 3,500 – Computer software/R & D & international traded services though they did have about a substantial no of employees manuf. bespoke servers in the years in question
3) Abbott 3,000 approx. manuf medical devices & baby food
4) Intel 3,000 approx. manuf of computer chips.
5) E Bay/Paypal etc. – 3,000 trade services
6) Citibank 2,000 traded services
7) Ingersoll Rand 2,000 manufacturing & traded services
8) Apple – 2,000 Manufacturing & services
9) Google 1,700 traded sevices
10) Oracle 1,500 computer software traded services
11) Microsoft 1,250 computer software, R & D, international licensing
You also have Accenture, Facebook, Amazon, Bank of America/MBNA, Yahoo/Overture, etc.
In relation to the volume of cash investments, the IFSC does skew the figures out. As around two thirds of the world’s aircraft leasing is done in Ireland, then of course it will throw the figures out. Other purely financial transactions such as IP and brand management again will account for large movements of capital in and out of Ireland, even if remaining within the one MNE group.
However when talking about MNE investment in Ireland to separate MNE manufacturing employment without also looking at international traded services is at best disingenuous and at worst dishonest.
August 23, 2011 12:31 am
“However when talking about MNE investment in Ireland to separate MNE manufacturing employment without also looking at international traded services is at best disingenuous and at worst dishonest.”
Huh?
Are you talking about me or the government here?
Going by your tone, it appears to be me.
Well please let me apologize by way of updating the graph to take account of the figures you seem to suggest will change my disingenuous and dishonest post into, well, maybe a generous and honest one?
employment in foreign-owned companies engaged in internationally traded services in Ireland in 2008 was 58,177 – or 2.7 per cent of the workforce.
when that figure is added to employment levels in foreign-owned manufacturing companies, as listed above, the overall total for direct employment by foreign direct investment in Ireland is 152,267 – or 7.25 per cent of the workforce in Ireland in 2007.
Here’s a graph showing direct FDI employment in Ireland, in industry and services, from 1990 to 2008 – The figures are from forfas, the 1998 and 2008 annual reports:
I could have used your figures I suppose, your estimates which you listed, even if you declined to state where they came from – but I decided to go with Forfas because, well, they have the breakdown, you know?
Again, sorry for misleading you with my graph in the post above – the one provided here includes both FDI manufacturing and internationally traded services employment.
I hope it will serve to correct the original graph you called disingenuous and dishonest, no?
I didn’t include FDI internationally traded exports in my original figures as they are not listed in the census of industrial production and I wanted a yr-on-yr comparison.
Just on your point here:
“There is a particular problem in disentangling the figures for a number of reasons as the definition of “manufacturing” covers computer software, which is also covered by internationally traded services.”
May I suggest that you familiarize yourself with the NACE REV.2? After all, it’s what the cso and eurostat use.
And have a quick look for computer software publishing, it might help to clarify your mind a little. You seem a tad confused on the definition.
http://ec.europa.eu/eurostat/ramon/nomenclatures/index.cfm?TargetUrl=LST_NOM_DTL&StrNom=NACE_REV2&StrLanguageCode=EN&IntPcKey=&StrLayoutCode=HIERARCHIC
August 23, 2011 11:00 am
Conor
I am well aware of the NACE codes. The problem with the figures in fact works both ways. From my own experience the CSO draws heavily off the Revenue Commissioners’ records, there are CSO staff permanently based permanently in the Revenue offices dealing with multi-nationals. Therefore a company which had moved from manufacturing such as IBM may still be included under manufacturing because it still had the 10% “manufacturing” rate. I have no doubt that the number of MNE “industrial” jobs includes many which are not.
The delivery of software in a box makes it a “good” whereas its delivery electronically makes it a “service”.
One of my points was that you cannot easily differentiate manufacturing & traded services in many cases.
On investment flows, historically most of the subsidiaries or branches of MNEs operating in Ireland did so as “toll manufacturers”. They were paid by the parent company on a “cost plus” basis, allowing for a reasonable profit, which reflected the low level of risk involved. This for example is the normal model for the pharma industry, though not Pfizer or Wyeth, I understand. (Viagra is Irish, for tax purposes anyway.)
Capital for the building of those factories was in most cases sourced locally, (remember Section 84 loans) or alternatively by inter company loans. There was no buy in as the manufacturing operation was guaranteed a minimum profit level by the parent.
Internationally traded services generally operate on a different model. Firstly, the capital normally seen in plant and machinery is used to buy in patents & other IP. This is done by capitalising the Irish sub or alternatively providing a loan and then using the money to buy the rights to exploit the IP from the parent. This is done to ensure an arm’s length transaction for transfer pricing purposes. The purchase of IP rights will naturally see huge movements of capital.
Foreign industrial investment in Ireland has been in decline in Ireland for a very long time. The last major green field investment was the Wyeth plant in Clondalkin which was completed about nine years ago. Heavy capital investment in existing plants does not lead to increased industrial employment rather the opposite.
Ironically this R & D plant foretold the effective end of new MNE manufacturing in Ireland.
If you take the largest recent physical FDI capital investment I could find in Ireland, which was Microsoft’s Clondalkin server farm. Here is a $500M dollar investment, which added I gather less than 20 people to the company’s workforce. However this is not for the purposes of manufacturing anything rather for the delivery of traded services, which in the past would have been sold as a product.
Finally, the devolved structure of many multi-nationals hides a large number of employees working in the business, but not directly as employees of the MNE. Jobs previously seen as core , such as internal accounting functions are now contracted out. The process of contracting out has also accelerated in recent years as local management have used it to get around hiring bans (similar to the use of Agency staff by the HSE). I have seen large sites where 50% or less of the permanent jobs are held by direct employees. Contracting has influenced the headline numbers of employees.
The actual CT rate is to a degree a distraction. Rather it is all of the other going with it. The many provisions introduced by Finance Act 2010 are a good example of the doomed attempts to continue using taxation policy as a tool of economic development.
The recent arrival of the likes of this company is a good example of that, http://www.intellectualventures.com
The IFSC is an issue, but to see it as the main recipient of foreign investment over the last twenty years is a wild exaggeration.
The CSO has also recently suggested that the movement of Head Offices of some large companies to Ireland may also distort GNP figures as well as the traditionally skewed GDP numbers. Large movements of cash by way of royalties and dividends from trading subsidiaries will arrive here inflating GNP figures. Centralised treasury management services are also an issue.
I apologise for the curtness of my initial comments. Your fleshing out of your original comments was helpful. I now appreciate where you are coming from.
August 24, 2011 1:39 am
Niall,
all you’ve given here is a stream of anecdotes, tales of people you’ve met and figures which you admit youself are nothing more than your own estimations.
where’s the credibility in that? If i’m giving a paper at a conference and if someone asks me where I’m getting my figures and information from, do you expect me to say : ‘Well there’s this guy niall – I don’t know his surname – but he leaves comments on the web and that’s where I get it from.”
Can you give me anything a bit more substantive than stories of people you know in the civil service and figures of at least 50 per cent of people working on site but not working for the company.
Just on this:
“From my own experience the CSO draws heavily off the Revenue Commissioners’ records, there are CSO staff permanently based permanently in the Revenue offices dealing with multi-nationals… a company which had moved from manufacturing such as IBM may still be included under manufacturing because it still had the 10% “manufacturing” rate. ”
The figures for forfás are based on a postal survey and an extensive telephone follow-up.
similarly, the Census of Industrial Production is conducted by post, from a register which is compiled from ‘the Central Business Register, administrative and public utility records, announcements in the press, business journals, field personnel contacts, etc.”
Now, this is how those involved in the Census of Industrial Production explain how they compile the list of businesses engaged in industrial production – i.e. the central business register, administrative records, public utility records, press announcements, business journals, field personnel – yet according to you all they do is ring up revenue and ask them what tax band are they in.
Are the authors of the Census of Industrial Production lying to us? If you have some evidence, not just an anecdote, that would be great.
I ask for the evidence and not just anecdotes because I remember holiday homes – I remember being told that ‘you have to understand’ that the apparent glut in housing is actually accounted for by holiday homes and that talk of a mortgage bubble and oversupply is simply wild exaggeration.
From what I can make out from your latest comment – you’re saying that employment in foreign-owned companies in Ireland is far higher than I’m showing here because :
A) you know the people who work at compiling the figures and there have problems with defining ‘manufacturing’ and ‘services’ as they take the definition from the tax bands the companies are on
B) up to 50 per cent of people on sites you have visited are not included in the official full-time employment figures for that site.
It seems to me that you are saying that employment in foreign-owned companies in Ireland is far higher than appears above because manufacturing and services overlap – even though the second graph is an amalgamation of those figures – and you’ve seen with your own eyes the people who are missing from the official figures.
It might be no harm to pass on your findings and figures to Forfás, IDA Ireland and Enterprise Ireland, especially if the figures they are putting forward as direct employment as a result of foreign direct investment is out in some cases by 50 per cent. (by the way , how long has it been out by 50 per cent as the census of industrial production figures start compiling separate tables for FDI employment in 1983, with Forfas doing the same from at least 1990 – I haven’t looked back further with forfás than 1990 yet.)
It’s 2,30 in the morning and I’m ready for bed but I’d appreciate if you could show me actual data to back up the claims you are making here as having gone through three years of hearing about fictional holiday homes I have no intention of spending even three minutes going through fictional employment levels.
And as for playing down the role of the IFSC in Irish political and economic life in the past 25 years, oh I simply don’t have the energy to engage with that level of naivete right now.
May 7, 2012 5:12 pm
Tota Fraud FG and LB, Liars greedy And Corrupt Cheater, Would sell their own Granny for a deal with EU and USA and China