In the 8th annual Ernst & Young European Attractiveness Survey, Ireland’s attractive position for foreign direct investment (FDI) in Europe has felt to 10th in 2009. However, Ireland still attracts FDI that bases on political economic perspective. This essay will discuss factors that help Ireland to create a center of FDI attention such as political stability, low taxes rates, economic growth, a transparent judicial system, the workforce, cooperative labour relations.
Ireland from a failure to a success
Inefficient institutions and a mixture of poor policy choices were causes that Ireland was underperformance from the 1950’s to the late 1980’s (Honohan, 2004). Since the late 1980s economic fortunes of Ireland have been transformed by the fiscal stabilisation, the improvement in telecommunications, the promotion of competition, education, wage moderation and EU Structural Funds, Ireland has been succeeded (O'Connor, Mangan, & Cullen, 2006).
Political stability also attracts FDI because it helps to predict the country’s business environment in long term. Moreover, the investments are more guaranteed steady returns and low risks. The Irish government is overtly committed to attracting FDI by keeping low taxes and minimum regulations. Low tax rate policies attract FDI inflow because the firms can reduce the cost of capital. A correlation between corporate tax rates and FDI inflow was found in a study that FDI might decrease by 1% as corporate tax rate increase 1% (Agostini, 2007). Also, the tax rate is lower other countries that they are competing will have an effective tax incentives which results in a study by the Foreign Investment Advisory Service (2006) 3.
Ireland’s GDP attracts FDI because it is almost highest comparing to other Organisation for Economic Co-operation and Development (OECD) countries (OECD Economic Outlook, 2002). These are due to Ireland have a stable economic environment which is created by...
Please join StudyMode to read the full document