Ireland is over reliant on royalty fees booked by multinational companies that pass through the country without always creating much in the way of local jobs or productive investment, leading management consultancy McKinsey has warned. The country “has long punched above its weight” in attracting foreign direct investment (FDI), it said.
However, three-quarters of investment comes from the US and UK and not enough is coming from high growth emerging markets, according to the new report.
Our low 12.5pc corporate tax rate faces challenges from other markets and there is a need to deepen the country’s industrial appeal, it said.
“Ireland would be well-served to focus on the core issues of education, skills, infrastructure, and quality,” the report urged.
“Ireland needs to rethink its role in the global economy and capture more value from fast-growing markets.”
Rankings of international “connectedness” show Ireland depend excessively on licensing and royalty flows through the country, according to the report.
Pharmaceutical and technology companies such as Apple route so-called royalty payments – a portion of the proceeds of product sales – through companies based here and the cash counts towards the calculation of the country’s gross domestic product (GDP).
Of 28 member states only the Netherlands, Germany, Denmark and Ireland are regarded as having high and improving competitiveness, it said.