Identifier
Created
Classification
Origin
05DUBLIN47
2005-01-14 16:58:00
UNCLASSIFIED
Embassy Dublin
Cable title:  

IRELAND - 2005 INVESTMENT CLIMATE STATEMENT

Tags:  EINV EFIN ETRD ELAB KTDB PGOV 
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UNCLAS SECTION 01 OF 12 DUBLIN 000047 

SIPDIS

STATE FOR EB/IFD/OIA
PASS TO USTR

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV
SUBJECT: IRELAND - 2005 INVESTMENT CLIMATE STATEMENT

REF: 04 STATE 250356

A1. OPENNESS TO FOREIGN INVESTMENT
----------------------------------

IRISH GOVERNMENT'S ATTITUDE TOWARDS FOREIGN INVESTMENT

UNCLAS SECTION 01 OF 12 DUBLIN 000047

SIPDIS

STATE FOR EB/IFD/OIA
PASS TO USTR

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV
SUBJECT: IRELAND - 2005 INVESTMENT CLIMATE STATEMENT

REF: 04 STATE 250356

A1. OPENNESS TO FOREIGN INVESTMENT
--------------

IRISH GOVERNMENT'S ATTITUDE TOWARDS FOREIGN INVESTMENT


1. Over the past twenty years, Irish governments have
actively promoted foreign direct investment (FDI),a strategy
that has helped Ireland to achieve unprecedented economic
growth during this "Celtic Tiger" period. FDI flows into
Ireland increased from an annual average of USD 140 million
in the mid-1980s to USD 2.7 billion per year in the second
half of the 1990s, yielding a total FDI stock of USD 223
billion by 2003. Traditionally, the principal goal of
investment promotion has been employment creation, especially
in technology-intensive and high-skill industries. In recent
years, the Irish government has also sought to assist
established foreign companies to sustain their international
competitiveness through R&D enhancements and the
marketing/sales of higher-value goods and services.


2. The Irish Government's efforts have had particular
success in attracting U.S. foreign investment. According to
the American Chamber of Commerce, Ireland, with one percent
of the EU's population, attracted twenty-five percent of all
new U.S. investment in the EU over the last decade. In 2003,
U.S. investment flow into Ireland was roughly USD 9.1
billion, two-and-a-half times the amount of U.S. investment
flow into China. There are about 580 U.S. firms in Ireland,
employing over 90,000 workers, primarily in the following
sectors: chemicals; bio-pharmaceuticals and healthcare;
computer hardware and software; electronics; and, financial
services. In the bio-pharmaceutical and computer sectors,
U.S. firms operate some of the world's most advanced
manufacturing and research facilities. For example,
Ireland's flagship FDI project in 2004 was the Intel Fab 24
plant, which will produce the company's next generation of
microchips.


3. The American Chamber of Commerce reports that U.S.
companies are attracted to Ireland for the following reasons:
access to the EU market; a 12.5 percent rate of corporation
tax; the quality and flexibility of the English-speaking

workforce (of all OECD countries, only the Japanese workforce
has a higher proportion of trained engineers and scientists);
and, the pulling power of existing companies operating
successfully in Ireland (a "bandwagon" effect).


4. Factors that may negatively affect Ireland's ability to
attract foreign direct investment include: increasing costs
of skilled and unskilled labor (especially when compared to
low-cost countries such as China and India),inadequate
infrastructure (particularly in the transportation,
internet/broadband, energy and social services sectors),and
rising domestic costs due to euro appreciation and inflation
rates that have consistently exceeded the EU average.
Nonetheless, the attractive corporate tax regime, the
pro-business policy environment, and the access to the single
European market should ensure continued relatively high
levels of foreign investment in Ireland into the medium-term.


5. Four state organizations promote inward investment into
Ireland by foreign companies:

- The Industrial Development Agency of Ireland (IDA
Ireland) has overall responsibility for promoting and
facilitating foreign direct investment in all areas of the
country, except the Shannon Free Zone. IDA Ireland also has
responsibility for attracting foreign companies to Dublin's
International Financial Services Center (IFSC). IDA Ireland
maintains offices in New York, Boston, Chicago, Los Angeles,
San Jose, and Atlanta, as well as at locations in Europe and
Asia;

- Enterprise Ireland promotes joint ventures and strategic
alliances between indigenous and foreign companies;

- Shannon Free Airport Development Co. (SFADCO) handles
investment in the Shannon Free Zone and is generally
responsible for economic development in the Shannon region.
The Irish Government is considering a proposal from the
Enterprise Strategy Group, a quasi-official body focusing on
national competitiveness, to fold SFADCO into IDA;

- Udaras na Gaeltachta has responsibility for economic
development in those areas of Ireland where Irish (Gaelic) is
the predominant language, and works with IDA Ireland to
promote overseas investment in these regions.


6. Major Laws/Rules/Taxation Policy
Ireland's judicial system is transparent and upholds the
sanctity of contracts as well as laws affecting foreign
investment. These laws include:

- The Industrial Development Act of 1993 outlines the
functions of IDA Ireland, the state agency responsible for
attracting overseas investment to Ireland;

- The Mergers, Takeovers and Monopolies Control Act of 1978
sets out rules governing mergers and takeovers by foreign and
domestic companies; the Competition (Amendment) Act of 1996
amends and extends the Competition Act of 1991 and the
Mergers and Takeovers (Control) Acts of 1978 and 1987, and
sets out the rules governing competitive behavior;

- The Companies Act of 1963 contains the basic requirements
for incorporation in Ireland (amended in 1990); and,

- The 2004 Finance Act, which introduced tax incentives to
encourage firms to set up headquarters in Ireland and to
conduct research and development.

In addition, there are numerous laws and regulations
pertaining to employment, social security, environmental
protection and taxation, with many of these determined at the
EU level.


7. One of Ireland's most obvious attractions as a location
for international investment is the low rate of corporate
tax. Since January 1, 2003, the corporate tax rate for both
foreign and domestic firms has been 12.5 percent. Existing
foreign firms will retain their entitlement to the "old" 10
percent rate until 2010 in the case of manufacturing and
certain internationally traded services. Ireland's corporate
tax rate is among the lowest in the EU, and the Irish
Government has resolutely resisted efforts to harmonize taxes
at a single EU rate.


8. All firms incorporated in Ireland are treated on an equal
basis. With only a few exceptions, there are no constraints
preventing foreign individuals or entities from ownership or
participation in private firms/corporations. The most
significant of these exceptions is that, as with other EU
countries, Irish airlines must be at least 50 percent-owned
by EU residents in order to have full access to the single
European aviation market. There are also requirements
related to the purchase of agriculture lands (see below).
There is no formal screening process for foreign investment
in Ireland, though investors looking to receive Government
grants or assistance through one of the four state agencies
responsible for promoting foreign investment in Ireland are
often required to meet certain employment and investment
criteria (see section "D" below).


9. While Ireland does not have a formal privatization
program, there is likely to be at least partial privatization
of some state-owned companies in the aviation and energy
sectors over the coming years. There are no barriers to
participation by foreign institutions in the sale of Irish
state-owned companies. Residents of Ireland, however, may be
given priority access in share allocations to retail
investors, as was the case with the state-owned
telecommunications company, Eircom, privatized in 1998.


10. Citizens of countries other than Ireland and other EU
member states can acquire land for private residential
purposes and for industrial purposes. Under Section 45 of
the Land Act, 1965, all non-EU nationals must get the written
consent of the Land Commission before acquiring an interest
in agricultural land, though there are many stud farms and
racing facilities in Ireland that are owned by foreign
nationals. There are no restrictions on the acquisition of
urban land.


11. IDA Ireland assesses potential investment projects for
eligibility for grant aid. Grant aid is largely tied to job
creation and linkages with the local economy. Screening
mechanisms for grant aid purposes are transparent and do not
impede investment, limit competition, or protect domestic
interests. Potential investors are also required to examine
the environmental impact of the proposed project and to meet
with Irish Environmental Protection Agency (EPA) officials.


12. While investors are free, subject to planning
considerations, to choose the location of their investment,
IDA Ireland has since the late 1990s differentiated grant aid
levels in favor of regions outside Dublin. This linkage is
consistent with the National Spatial Strategy, which was
adopted in 2001 with the aim of spreading investment more
evenly around the country. One of the strategy's stated
goals was to direct 50 percent of all new jobs related to
greenfield investment to the border, midlands, and western
(BMW) counties of Ireland, where the economy is less
developed. In 1999, roughly 25 percent of jobs related to
greenfield investment were located in the BMW region; by
2003, this figure had grown to 46 percent. To encourage
client firms to locate outside Dublin, IDA Ireland has
developed "magnets of attraction," including: a Cross Border
Business Park linking Letterkenny and Derry, a regional Data
Center in Limerick, and the National Microelectronics
Research Center in Cork.

A.2. Conversion and Transfer Policies
--------------


13. Ireland enjoys full current and capital account
liberalization. There are no restrictions or reported
significant delays in the conversion or repatriation of
investment capital, earnings, interest, or royalties, nor are
there any plans to change remittance policies. Likewise,
there are no limitations on the import of capital into
Ireland. Foreign exchange is easily obtainable at market
rates. In 2004, the Irish Financial Services Regulatory
Authority (IFSRA) reported that the Allied Irish Bank (AIB)
had knowingly overcharged on foreign exchange transactions
for several years. AIB has repaid the overcharged amount and
begun an internal disciplinary process. The euro is
Ireland's national currency.

A.3. Expropriation and Compensation
--------------


14. Private property is expropriated only for public
purposes in a non-discriminatory manner and in accordance
with established principles of international law. State
condemnations of private property are carried out in
accordance with recognized principles of due process. Where
there are disputes between owners of private property subject
to a government taking, the Irish courts provide a system of
judicial review and appeal. In 2004, there were no reported
expropriatory actions involving the property/facilities of
U.S. investors.

A.4. Dispute Settlement
--------------


15. Ireland has no specific domestic laws governing
investment disputes with foreign firms. There is, however, a
legal arbitration framework available to parties that opt to
arbitrate a dispute, including investment disputes, rather
than litigate the case. Although there are no disputes over
current U.S. investments in Ireland, U.S. firms in recent
years have occasionally called into question the transparency
of government tenders, some of which have been won by U.S.
companies.


16. The Irish legal system is based on common law,
legislation and the constitution. The Companies Act 1963
(amended 1990) is the most important body of law dealing with
commercial and bankruptcy law and is consistently applied by
the courts. Irish bankruptcy laws give creditors a strong
degree of protection. The Department of Enterprise, Trade
and Employment is the state agency with primary
responsibility for drafting and enforcing company law. The
judiciary is independent and litigants are entitled to trial
by jury in commercial disputes. Ireland is a member of the
International Center for the Settlement of Investment
Disputes, and the Irish Government has been willing to agree
to binding international arbitration of investment disputes
between foreign investors and the state. Ireland is also a
party to the New York Convention of 1958 on the Recognition
and Enforcement of Foreign Arbitral Awards. There is no
specific domestic body for handling investment disputes.

A.5. Performance Requirements/Incentives
--------------


17. The Irish Government does not maintain any measures that
it has notified the WTO to be inconsistent with Trade-Related
Investment Measures (TRIMs) requirements. Moreover, there
have been no allegations that the Government maintains
measures that violate the WTO's TRIMs text.


18. Three Irish organizations, SFADCO, IDA Ireland, and
Udaras, have regulatory authority for administering grant aid
to investors for capital equipment, land, buildings,
training, research and development, etc. Business
enterprises in Ireland, including overseas companies, which
seek grant aid from these organizations must submit
investment proposals. Typically, these proposals include
information on fixed assets (capital),labor, and
technology/R&D components and establish targets using
criteria such as sales, profitability, exports, and
employment. This information is treated in confidence by the
organizations, and each investment proposal is subject to an
economic appraisal prior to approval for support.


19. Performance requirements are generally based on
employment creation targets established between the state
investment agencies and foreign investors. Grant aid is paid
out only after externally audited performance targets have
been attained. Generally, parent companies must guarantee
repayment of the government grant if the company closes
before an agreed period of time elapses, normally ten years
after the grant has been paid. Grant agreements generally
have a term of five years after the date on which the last
grant is paid. There are no requirements that foreign
investors purchase from local sources or allow nationals to
own shares.

20. As a result of "Agenda 2000" EU budgetary reforms,
since 2000 Ireland has been treated as two regions for the
purpose of EU structural funding and maximum "regional aid."
Under the new rules, maximum grant aid assistance (40 percent
of capital investment) is only available to companies
locating in the 13 "Objective 1" border, midland and western
(BMW) counties of Ireland, where infrastructure is less
developed. Companies locating in the remaining 15 counties
in the more prosperous south and east are entitled to
restricted grant aid up to a maximum of 17.5 percent to 20
percent of their capital investment, depending on location.
For the period 2004-2006, the following ceilings apply:

Transition Regions Percent of Capital Investment

-- Southeast 20
-- Mid-West 20
-- Southwest 20
-- Mid-East 18
-- Dublin 17.5

Objective 1 Region
-- Border, Midlands, West 40

The current Regional Aid Guidelines (RAGs) will cease to
operate at the end of 2006, and the EU Commission is now
developing new RAGs for the period 2007-2013. It is expected
that these new rates will be lower than the current rates.


21. There are no restrictions, de jure or de facto, on
participation by foreign firms in government-financed and/or
subsidized research and development programs on a national
basis. On the contrary, the government encourages
multinational companies to undertake more research and
development in Ireland. Science Foundation Ireland (SFI),
the State Science Agency, is responsible for administering a
euro 365 million R&D fund under the 2000-2006 National
Development Plan. The fund targets leading researchers in
Ireland and overseas to promote within Ireland the
development of information/communications technology and
biotechnology, as well as complementary worker skills. Under
the 2004 Finance Act, moreover, a credit of 20 percent of the
incremental expenditure on revenue items, royalties, plant,
and machinery related to R&D can be offset against a
company's corporation tax liability in the year in which it
is incurred.


22. Visa, residence and work permit procedures for foreign
investors are non-discriminatory and, for U.S. investors,
generally liberal. There are no restrictions on the numbers
and duration of employment of foreign managers brought in to
supervise foreign investment projects, though their work
permits must be renewed yearly. There are no discriminatory
export policies or import policies affecting foreign
investors.

A.6. Right to Private Ownership and Establishment
-------------- --------------


23. The most common form of business organization in Ireland
is the incorporated company, limited by shares, registered
under the Companies Act, 1963, or previous legislation.
Irish law does not prevent foreign corporations from carrying
on business in Ireland. Any company incorporated abroad that
establishes a branch must, however, file certain papers with
the Registrar of Companies. A foreign corporation with a
branch in Ireland will have the same standing in Irish law
for purposes of contracts, etc., as a company incorporated in
Ireland. Private businesses are not at a competitive
disadvantage to public enterprises with respect to access to
markets, credit, and other business operations.


24. Before 1999, Irish company law differed from
international norms by allowing, for tax purposes, the
registration of companies in Ireland that were not actually
resident in Ireland (so-called Irish Registered Non-Resident
companies (IRNRs)). In response to concern that a large
number of the estimated 40,000 IRNRs were engaged in fraud,
tax evasion, money laundering, and other illegal activities,
the 1999 Finance Act equated registration in Ireland with tax
residence and liability for all companies except in limited
circumstances. Exceptions include cases where the Irish
company, or a related parent company, is carrying on trade in
Ireland, and the company is ultimately controlled either by
residents of an EU member state or by residents of a country
with which Ireland has a tax treaty (including the United
States). Nonetheless, all Irish-based companies, including
U.S. firms, claiming non-residence in Ireland because of tax
treaty provisions must identify the beneficial owners of the
company.


25. Similarly, the "Companies (Amendment) (No. 2) Act 1999"
requires that every application for company registration in
Ireland show the manner in which the proposed company will
carry out activities in Ireland. Section 43 of the
legislation stipulates that a company must either have a
director resident in the State or provide a bond of euro
25,400 in the event that the company commits an offense under
the Companies Act or tax legislation. Section 44 states that
these requirements may be waived when the Company obtains a
certificate from the Companies Office stating that the
company has a real and continuous link with one or more
economic activities in Ireland. Like the 1999 Finance Act,
the Companies Act is designed to prevent the use of IRNRs for
exclusively foreign activities without any connection to
Ireland.


A.7. Protection of Property Rights
--------------

(I) Real Property


26. Secured interests in property, both chattel and real
estate, are recognized and enforced. The Department of
Justice administers a reliable system of recording such
security interests through the Land Registry and Registry of
Deeds. An efficient, non-discriminatory legal system is
accessible to foreign investors to protect and facilitate
acquisition and disposition of all property rights.

(II) Intellectual Property Rights


27. Ireland is a member of the World Intellectual Property
Organization and a party to the International Convention for
the Protection of Intellectual Property. In July 2000, Irish
President McAleese signed legislation bringing Irish
intellectual property rights (IPR) law into compliance with
Ireland's obligations under the WTO Trade-Related
Intellectual Property Treaty (TRIPS). The legislation came
into force on January 1, 2001, and gives Ireland one of the
most comprehensive systems of IPR protection in Europe.


28. This legislation addressed several TRIPs inconsistencies
in previous Irish IPR law that had concerned foreign
investors, including the absence of a rental right for sound
recordings, the lack of an "anti-bootlegging" provision, and
low criminal penalties that failed to deter piracy. The new
legislation has, by improving enforcement and penalties on
both the civil and criminal sides, helped reduce the high
levels of software and video piracy in Ireland.


29. As part of this comprehensive copyright legislation,
changes were also made to revise the non-TRIPs conforming
sections of Irish patent law. Specifically, the new IPR
legislation addresses two concerns of many foreign investors
in the previous legislation:

- the compulsory licensing provisions of the previous 1992
Patent Law were inconsistent with the "working" requirement
prohibition of TRIPs Articles 27.1 and the general compulsory
licensing provisions of Article 31; and,

- applications processed after December 20, 1991, did not
conform to the non-discrimination requirement of TRIPs
Article 27.1.


30. Piracy, however, continues to be a problem, as indicated
by police seizures of counterfeit DVDs and CDs. In August
2003, police in Dundalk seized several thousand DVDs and CDs,
worth approximately euro 500,000, which were intended for
sale in open-air markets in the Republic of Ireland and
Northern Ireland. In December 2004, police in Cork recovered
roughly euro 50,000 worth of counterfeit DVDs, CDs, sports
clothing, and perfume ) the fourth such raid in the Cork
area during the year. It is widely believed that the Irish
Republican Army (IRA) is involved in the manufacture and sale
of DVDs and CDs on both sides of the border. Moreover,
industry sources estimate that up to 41 percent of PC
software used in Ireland is pirated.


A.8. Transparency of the Regulatory System
--------------


31. The Irish Government generally employs a transparent and
effective policy framework that fosters competition between
private businesses in a non-discriminatory fashion. While
ongoing Irish judicial "Tribunals" are investigating possible
links between indigenous Irish companies' political donations
in the late 1980s and favorable government decisions, U.S.
businesses can, in general, expect to receive national
treatment in their dealings with the Government. There is no
report of any U.S. firm or investor having being required or
forced to make payments during that period.


32. In recent years, independent bodies have taken over
regulatory powers in key economic sectors from Cabinet
Departments. The Commission for Communications Regulation
and the Commission for Energy Regulation are responsible for
regulating the communications and energy sectors,
respectively. Both are independent bodies with institutional
links to the Department of Communications, the Marine and
Natural Resources. The Commission for Aviation Regulation is
an independent body that regulates the aviation sector. It
is institutionally linked to the Department of Transport,
which has direct regulatory powers over other segments of the
transportation sector.


33. The Competition (Amendment) Act 1996 amends and extends
the Competition Act 1991 and strengthens the enforcement
power of the Competition Authority, introduces criminal
liability, increases corporate liability, and outlines
available defenses. Most tax, labor, environment, health and
safety, and other laws are compatible with European Union
regulations, and they do not adversely affect investment.
Bureaucratic procedures generally are transparent and
reasonably efficient.

A.9. Efficient Capital Markets and Portfolio Investment
-------------- --------------


34. Capital markets and portfolio investments operate
freely, and there is no discrimination between Irish and
foreign firms. In some instances, development authorities
and banks are able to facilitate loan packages to foreign
firms with favorable credit terms. Credit is allocated on
market terms, although the Irish Competition Authority found
in 2004 that the banking sector's lack of competition limited
the amount of credit available to small and medium-sized
firms. Irish legal, regulatory, and accounting systems are
transparent and consistent with international norms and
provide a secure environment for portfolio investment. The
Capital Gains Tax rate is 20 percent. The Irish banking
system is sound. The estimated total assets of all licensed
credit institutions as of January 2005 equaled euro 702.8
billion. According to the Central Bank, non-performing loans
comprised roughly one percent of total assets. U.S. banks
operating in Ireland include Citibank and Chase Manhattan.


35. Total market capitalization in the Irish Stock Exchange
(ISEQ) is currently euro 82.9 billion, roughly 57 percent of
projected 2004 nominal GDP (euro 144.8 billion). In terms of
market weight, the stocks of four companies are predominant:
Allied Irish Bank, Bank of Ireland, CRH (a construction
industry supplier),and Elan (a pharmaceuticals firm). The
Irish stock market has recovered steadily since plummeting in
2002 following the global economic slowdown and
well-publicized management problems at several major Irish
companies. Since 2003, ISEQ has been up 23 percent and,
between January and October 2004, was up 14.5 percent. This
is one of the strongest performances in the developed world
and has pushed ISEQ close to its mid-2001 high. Economists
attribute ISEQ's robust showing to Ireland's broad-based
economic growth and a likely under-valuing of Irish stocks
earlier in the decade. A proposal to establish a secondary
stock exchange in 2005 focusing on small and medium-sized
enterprises (SMEs) is also under consideration.


36. In May 2003, the Central Bank of Ireland was reorganized
into the Central Bank and Financial Services Authority of
Ireland (CBFSAI),in accord with the Central Bank and
Financial Services Authority of Ireland Act 2003. Under the
legislation, the Governor of the CBFSAI has responsibility
for the overall stability of the Irish financial system. The
legislation also established the Irish Financial Services
Regulatory Authority (IFSRA),which is an autonomous but
constituent part of CBFSAI that regulates financial services
institutions in Ireland. IFSRA took over this responsibility
from a mix of government bodies, including: the Central Bank,
the Department of Trade, Enterprise, and Employment (DETE),
the Office of Director of Consumer Affairs, and Registrar of
Friendly Societies. The legislation also enhanced the
regulatory powers given to IFSRA, particularly in consumer
protection.


37. With the advent of Economic and Monetary Union (EMU),
the Central Bank is now a member of the European System of
Central Banks (ESCB) whose primary objective is to maintain
price stability in the euro area. Ireland no longer operates
an independent monetary policy. Rather, ESCB formulates and
implements monetary policy for the euro area, and the Central
Bank implements that policy at the national level. The
Governor of the Central Bank is one of 18 members of the
Governing Council for the ECB and has an equal say in the
formulation of monetary and interest rate policy. The other
main tasks of the Central Bank include: issuing euro currency
in Ireland; acting as manager of the official external
reserves of gold and foreign currency; conducting research
and analysis on economic and financial matters; overseeing
the domestic payment and settlement systems; and, managing
investment assets on behalf of the State.



A. 10. Political Violence
--------------

(I) Impact of Northern Ireland Instability


38. In the past, political instability and violence in
Northern Ireland were thought to affect the Republic of
Ireland. In reality, however, there has been little spill
over of violence or instability, especially since the late
1970s and particularly after the cease-fires of 1994. The
growth of business investment and confidence in Northern
Ireland since the cessation of widespread violence has
benefited the Republic of Ireland, with cross-border trade
reaching euro 2.5 billion in 2003. No violence related to
the situation in Northern Ireland has been specifically
directed at U.S. citizens or firms located in the South.


39. The 1998 ratification of the Good Friday Agreement by
large majorities in both Ireland and Northern Ireland has
further diminished the potential for violence. Since then,
however, groups opposed to the peace process have continued
to commit acts of criminality and terror in Northern Ireland
and on mainland Britain. There have been no serious
incidents in the Republic of Ireland. Through the second
half of 2004, the Irish and British Governments conducted
intensive mediation efforts among the Northern Ireland
political parties in pursuit of a final peace agreement.
These efforts were set to continue into 2005.

(II) Other Acts of Political Violence


40. In 1997 and Spring 1998, an Irish environmental group
vandalized two separate Irish crop trial sites, involving
agricultural biotechnology crops. The trials were conducted
by the U.S. firm Monsanto. Irish police investigated both
incidents and criminal charges were filed in both cases.
There have been no further incidents involving subsequent GMO
plant trials in Ireland.


41. There have been no other recent incidents involving
politically motivated damage to foreign investment projects
and/or installations in the Republic of Ireland. In 2003, an
Irish citizen opposed to the Iraq War damaged a U.S. military
plane at Shannon Airport. In 2004, she was convicted in an
Irish court and given a suspended sentence.


A. 11. Corruption
--------------


42. Corruption is not a serious problem for foreign
investors in Ireland. The principal Irish legislation
relating to anti-bribery and corruption includes the Public
Bodies Corrupt Practices Act 1889, the Prevention of
Corruption Act 1906, the Prevention of Corruption Act 1916
and the Prevention of Corruption (Amendment) Act 2001. This
body of law makes it illegal for Irish public servants to
accept bribes. The Ethics in Public Office Act 1995 provides
for the written annual disclosure of interests of people
holding public office or employment.


43. Ireland signed the UN Convention on Corruption in
December 2003, and ratification is pending a review of the
legal measures required for implementation. In January 2000,
the GOI introduced to Parliament the "Prevention of
Corruption (Amendment) Act, 2001," to ratify and implement
the OECD Convention on Bribery. The legislation, which
enabled Ireland to ratify a number of conventions dealing
with corruption drawn up by the European Union, the Council
of Europe, and the OECD, came fully into force as law in
November 2002. Ireland formally ratified the OECD Convention
in September 2003. Ireland is also a member of the OECD
Working Group on Bribery and the Group of States Against
Corruption (GRECO). Under the Prevention of Corruption Act,
the bribery of foreign officials is a criminal offense.
Bribery of foreign officials may also invalidate a contract
that a party is seeking to enforce in Ireland.


44. A number of ongoing judicial "Tribunals" are seeking to
establish whether political donations by certain Irish
companies in the late 1980s and early 1990s can be linked to
favorable government decisions, mostly at the local level, in
zoning and tax matters. There is also growing media and
public concern that business interests may have compromised
Irish politics in the late 1980s and early 1990s. These
developments have led to calls for the establishment of a
permanent commission to investigate allegations of corruption
against politicians. Despite these reports of payments to
political parties and figures in the 1980s and early 1990s,
there remains no indication that foreign businesses or
investors have had to make such payments or been approached
to make such payments to conduct business during the period
in question or in years since.


45. In late 2004, the Government launched an inquiry into
allegations that a Cabinet Minister approved for his former
Department a no-bid public relations contract worth euro
300,000 for a political associate. This inquiry continued
into 2005.


46. The Irish police (Garda Siochana) investigate
allegations of corruption. If sufficient evidence of
criminal activity is found, the Director of Public
Prosecutions prepares a file for prosecution. A small
number of public officials have been convicted of corruption
and/or bribery in the past, although it is not a common
occurrence.

A.12.B. Bilateral Investment Agreements
--------------


47. Ireland's only bilateral investment protection
agreement is with the Czech Republic. In addition, Ireland
has bilateral tax treaties with the following countries:
Australia, Austria, Belgium, Bulgaria, Canada, China,
Croatia, Cyprus, the Czech Republic, Denmark, Estonia,
Finland, France, Germany, Hungary, India, Italy, Israel,
Japan, Korea (Rep. of),Latvia, Lithuania, Luxembourg,
Malaysia, Mexico, Netherlands, New Zealand, Norway, Pakistan,
Poland, Portugal, Romania, Russia, Slovak Republic, Slovenia,
South Africa, Spain, Sweden, Switzerland, UK, the United
States, and Zambia. Treaties with Greece and Iceland were
signed in November and December 2003, respectively. The
treaty with Iceland was ratified on January 1, 2005. A
treaty replacing the existing treaty with Canada was signed
in October 2003. These agreements serve to promote trade and
investment between Ireland and the partner countries that
would otherwise be discouraged by the possibility of double
taxation. New treaties with Argentina, Chile, Egypt, Kuwait,
Malta, Morocco, Singapore, Tunisia, Turkey, and Ukraine are
currently being negotiated. Existing treaties with Cyprus
and France are in the process of renegotiation.


C. OPIC and Other Investment Insurance Programs
-------------- ---


48. Since 1986 the U.S. Overseas Private Investment
Corporation (OPIC) has been authorized to operate in Ireland
as part of the U.S. effort to support the process of peace
and reconciliation in Northern Ireland. There is some
potential in Ireland for OPIC's credit guarantee programs.
No other countries have an investment insurance program in
Ireland. Ireland is a member of the Multilateral Investment
Guarantee Agency (MIGA).


49. The estimated annual U.S. dollar value of local
currency likely to be used by the U.S. Embassy in Ireland
during 2005 is approximately USD 11.8 million. The Embassy
purchases local currency through centralized bulk purchasing
arrangements at a competitive market rate.


D. Labor
--------------


50. The Irish economy created roughly 1,000 new jobs per
week in 2004, paralleling strong economic growth during the
year. As of the third quarter of 2004, there were 1.89
million people in employment in Ireland, an increase of
57,200, or 3.1 percent, compared to the third quarter of

2003. This is the highest level of annual employment growth
recorded since the first quarter of 2001, when the increase
was 3.8 percent. Since 1994, employment growth has averaged
just below 4.0 percent, with lower rates recorded in 2002 and
2003 following the post 9-11 global economic slowdown.
Comparing the third quarters of 2003 and 2004, the largest
increase in employment was in the construction sector, which
added 21,600 jobs. There were also gains in financial
services, wholesale and retail trade, and health. Hotels and
restaurants saw the largest drop in employment, with a
decrease of 7,600 jobs.


51. In contrast to 15.6 percent unemployment in 1993,
Ireland registered 4.3 percent unemployment in the third
quarter of 2004. This latest figure was the lowest
unemployment rate among European Member states and roughly
half the eurozone average. The number of unemployed people
in the third quarter was 93,900, representing a decrease of
4,900 compared to the third quarter of 2003. Moreover,
Ireland's jobless rate among people under 25 was roughly 8
percent, as compared to the eurozone average of 17.3 percent.
Local economists believe that the Irish economy is as close
to full employment as possible, with employers reporting
difficulties in recruiting workers. Whereas once Ireland's
number one policy goal was job creation, employment growth
has shifted the focus to increasing the labor force and
upgrading skills and qualifications.


52. Irish labor force regulation is less restrictive
compared with most continental EU countries. The Irish
workforce is characterized by a high degree of flexibility,
mobility, and education. There is a relative gender balance
in the workforce, with 1.15 million males and 830,000 females
currently employed. This gender balance reflects a change in
social mores that has facilitated a surge in female
employment since the mid-1980s


53. With the tightening of the labor market, wages remain on
an upward growth curve. Average annual compensation in
Ireland in 2004 grew by over 4 percent to euro 38,140,
compared to euro 34,630, the average wage in the original 15
EU Member States. Between 1998 and 2003, compensation per
employee increased by 37.1 percent, compared with 8.7 percent
in Germany over the same period. The minimum wage was euro
5.20 when it was first introduced in 2000 and has risen to
euro 7.00 as of 2005. Employees earning the minimum wage
currently do not have to pay personal income tax, although
scheduled increases in the minimum wage in the coming years
may place minimum-wage earners back in the tax net.


54. During the 1990s, average labor productivity growth in
the manufacturing sector exceeded average earnings growth.
As a result of a steady decline in average unit costs, Irish
competitiveness improved. These competitive gains were
further enhanced by the nominal depreciation of the euro
relative to the dollar and sterling. Given increasing wages
and the recent appreciation in the value of the euro, Irish
competitiveness, relative to its main trading partners, is
falling. Despite these negative factors, Ireland still
maintains a below average relative wage cost when compared to
its major trading partners.


55. The Irish system of industrial relations is a voluntary
one. Pay levels and conditions of employment are generally
agreed through collective bargaining between employers and
employees. Since 1987, collective bargaining has taken place
under the framework of a series of national economic
programs, negotiated by representatives of employers, trade
unions, farmers, and the government. This consensual "Social
Partnership" approach has been accompanied by a marked
improvement in the industrial relations climate since the
mid-1980s. Working days lost as a result of industrial
disputes amounted to 21,257 in 2002 and roughly 34,000 in
2003 (a fraction of the total days lost through industrial
action in the 1980s and early 1990s).


56. The latest national economic program, "Sustaining
Progress", was agreed under the Social Partnership framework
in February 2003 and approved by Ireland's major unions in
August 2004. The 18-month agreement exchanges a 7 percent
wage increase for industrial relations stability. While the
package will cost the GOI - Ireland's largest employer - an
estimated euro 2.5 billion, private industries unable to pay
the full 7 percent due to competitive pressures will be
permitted to pay lesser increases or none at all. As part of
the package, the GOI committed to provide an increased supply
of "affordable housing" and to amend legislation and
statutory codes to strengthen the procedures by which unions
can represent their members' interests. In addition, the GOI
enhanced statutory redundancy terms to provide released
employees with two weeks' compensation for each year of
service.


57. In recent years, increases in the cost of living have
mitigated the benefits of pay increases. The Irish inflation
rate is currently 2.2 percent, just slightly above the
eurozone average of 2.0 percent. Between 2000 and 2003,
however, Ireland's annual inflation rate was 2 to 3 times the
eurozone average. Irish Government studies show that Ireland
is now the most expensive country in the EU (or at least tied
with Finland for that distinction). Annual growth rates in
housing prices, for example, have been in the double-digit
range since the late 1990s, causing disillusionment among
aspiring homeowners. Even though Ireland in 2004 recorded
its tenth consecutive year for housing starts, with 80,000
homes built, demand continues to exceed supply. The
alternative to home ownership is rental housing, which is
also expensive and insufficiently regulated for compliance
with structural stability standards. These trends have made
the provision of affordable housing a major issue for the
government.


58. Trade union demands for mandatory trade union
recognition in the workplace are strongly resisted by
employers. While the Irish constitution guarantees the right
of citizens to form associations and unions, Irish law also
affirms the right of employers not to recognize unions and to
deal with employees on an individual basis. Currently,
roughly 33 percent of workers in the private sector are
unionized, compared to 95 percent in the public sector.
Among foreign-owned firms, roughly 80 percent of workers do
not belong to unions. Employers also strongly oppose trade
union demands for greater "partnership" between employees and
employers at the enterprise level, including worker
participation in managerial decisions through German-style
"work councils." Some progress has been made, however, with
regard to increased profit-sharing.


E. Foreign Trade Zones/Free Ports
--------------


59. The Shannon duty-free Processing Zone (SDFPZ) was
established by legislation in 1957. Under the legislation,
eligible companies operating in the Shannon Free Zone are
entitled to the following benefits: goods imported from
non-EU countries for storage, handling or processing are duty
free; no duty on goods exported from Shannon to non-EU
countries; no time limit on disposal of goods held duty-free;
minimum customs documentation and formalities; no Value Added
Tax (VAT) on imported goods, including capital equipment;
choice of having import duty on non-EU product calculated on
its landing value or selling-out price. Qualifying criteria
for eligible companies include employment creation and
export-orientation. Foreign-owned firms in the Shannon Free
Zone have the same investment opportunities as indigenous
Irish companies. As of 2004, there were 110 internationally
traded manufacturing and service companies employing 7,472
workers. U.S. companies operating out of Shannon include GE
Capital, Bristol Myers Squibb, DHL, UPS, Pfizer, and
Cabletron. The Shannon Free Zone is technically an asset of
SFADCO, although the Government is currently reviewing a
proposal to place the zone under the authority of Shannon
Airport as a means of airport funding.


60. Duty free exemptions are available also to companies
operating in Ireland's major deep-water port at Ringaskiddy
in County Cork, although these have been used infrequently in
recent years.


F. Foreign Direct Investment Statistics
--------------


61. According to Ireland's Central Statistical Office (CSO),
Ireland received FDI flows worth euro 23.3 billion in 2003,
or 0.18 percent of nominal 2003 GDP (euro 134.8 billion).
For end-year 2003, the stock of FDI in Ireland stood at to
euro 171.9 billion, or 127 percent of nominal 2003 GDP.
According to the 2003 United Nations Conference for Trade and
Development (UNCTAD) World Investment Report, Ireland (with a
population of 4 million) ranked seventh among FDI recipient
countries, behind Luxembourg, China, France, the United
States, Belgium, and Spain.

62. In 2004, the 1,055 companies supported by IDA Ireland
spent euro 15.5 billion in the Irish economy from their
annual sales of euro 72 billion and exports of euro 68
billion and paid over euro 2.7 billion in corporate tax.
During the year, IDA negotiated 70 new business projects with
new and existing clients, which involved a total investment
commitment of over euro 5 billion for the coming years. IDA
also supported 36 R&D investment projects involving a total
investment by business in excess of euro 140 million.


63. At end-2004, 490 IDA-assisted U.S. companies were
operating in Ireland, employing 89,158 workers, representing
roughly 75 percent of the total number of workers employed by
IDA-supported foreign firms and 5 percent of total Irish
employment. In 2003, Ireland secured 64 foreign direct
investment (FDI) projects, and, of these, 65 percent were by
U.S. firms, including: Google, Overture, Ebay, PayPal,
Centorcor, and Altera. The following U.S. firms are engaged
in major expansion projects: Intel, Symantec, Wyeth, MBNA,
Abbott, Cenzyme, Medtronic, Xilinx, Pepsi, Guidant, Merit
Medical, Cook, and Pfizer. There are 120 companies with R&D
investment plans in Ireland for the 2003-2005 period, and of
these, 70 percent are U.S. firms, including, notably, IBM,
HP, and Bell Labs. The U.S. Department of Commerce estimates
that U.S. companies' average return on investment (ROI) in
Ireland is 24 percent.


Table 7.1: Stock of U.S. Investment in Ireland
(Millions of dollars; historical cost basis)

2001 2002 2003

All Industries 39,541 46,617 55,463
Manufacturing 10,635 13,427 15,002
Food 146 157 193
Chemicals 4,632 6,207 6,089
Metal 118 22 33
Industrial machinery 18 23 24
Computers/Electronic 1,944 3,241 3,992
Transportation Equipment 176 unavailable unavailable
Wholesale trade 2,483 2,680 2,998
Information 8,765 10,362 14,048
Finance/Insurance 5,240 7,520 8,681
Depositary Institutions 155 145 445
Prof. Services 1,259 1,459 1,655
Source: U.S. Department of Commerce, Survey of Current
Business

Table 7.2: Investment Flows into Ireland by Country Origin,
2002
(in euro millions)

Total 25,895
UK 2,520
Belgium/Luxembourg 3,194
France -758
Germany 3,388
Italy -380
Netherlands 10,734
Canada 222
United States 7,859
Japan -3,335
Source: Ireland Central Statistical Office (CSO) website

(Note: 2002 is the last year for which Ireland has
country-origin investment flow and stock statistics. Ireland
does not have investment data by sector destination. Also,
investment by U.S. companies in Ireland is often effected
through intermediary subsidiaries located outside the United
States. According to the CSO, a sizeable proportion of the
Dutch investment cited above originated in the United
States.)

Table 7.3: Investment Stock in Ireland by Country Origin, 2002
(in euro millions)

Total 176,124
UK 16,810
Belgium/Luxembourg 12,099
France -487
Germany 10,317
Italy 3,945
Netherlands 59,940
Canada 6,587
United States 37,422
Source: Ireland Central Statistical Office (CSO) website

Table 7.4: Total Employment by Sector in IDA-Supported
Companies


2001 2002 2003
Information/Communications
Technologies 46,513 43,660 41,459

Pharmaceuticals/Healthcare 18,587 18,996 19,463

Engineering 17,699 16,662 15,435

Miscellaneous Industry 10,633 9,964 9,242

International and Financial
Services 42,845 42,762 43,394

Total 136,277 132,004 128,993
Source: IDA Ireland Annual Report, 2003


Table 7.5: Origins of IDA-Supported Companies, End-2003


Country Number of Firms Employment

United States 490 89,158
United Kingdom 118 8,086
Germany 149 11,394
Rest of Europe 214 15,602
Asia/Pacific 44 2,937
Rest of World 40 1,816
Total 1,055 128,993
Source: IDA Ireland Annual Report, 2003


Table 7.6: Major U.S. Investments in Ireland

Company Location

Apple Computers Cork
AIG Europe Dublin
Bausch & Lomb Waterford
Berlitz Dublin
Boston Scientific Galway, Cork, Wexford
HP-Compaq Computers Galway, Dublin
Citibank Dublin
Dell Computers Limerick, Dublin
Eastman Kodak Limerick, Cork
Fidelity Dublin
Gartner Group Limerick
Hertz Dublin
IBM Ireland Dublin
Intel Ireland Dublin, Leixlip
Johnson & Johnson Dublin
Millipore Ireland BV Cork
Motorola Cork
Netscape Communications Dublin
Novartis Cork
Prudential Insurance of America Letterkenny
3Com Dublin
United Airlines Dublin
US Robotics Dublin
Woodchester Investments Dublin
Wyeth Biopharma Dublin
Source: IDA Ireland Annual Report, 2003
KENNY