The Glasgow Herald / March 5 1985

New factory costs Irish taxpayers £37 per head

The back story to this tale of another day in the life of the Celtic Tiger, as Ireland’s newfound economic wunderkind was dubbed, was the bitter turf war being fought out in the field by the two government agencies tasked with bringing US inward investment, as it was known, back to Europe. In the blue corner, fighting from a superb office atop San Francisco’s distinctive Transamerica Pyramid building, was the Scottish Development Agency, staffed by happy sons and daughters of Caledonia who like me couldn’t believe their luck at pitching up in San Francisco at such a time. In the green corner were the charmingly ruthless fighters from the Irish Development Agency who began every round with an extra little something – a 12.5% corporate income tax rate and whopping 5 year corporate tax holidays, courtesy of the Irish taxpayer. The Scots, being good UK civil servants, might now and then have suggested to me that Mrs Thatcher was a ruthless Jock-baiting harpie for her porridge-brained opposition to matching the Irish deal. In the words of a 1989 National Audit Office report, The United Kingdom has no schemes of financial assistance designed specifically for inward investors. Successive rounds of UK government infighting finally produced a further weakened inward investment vehicle, Scottish Development International. The government of Ireland now adjusts its GDP to account for the disproportionate flow of tax-favored foreign capital into, and out of, the Republic.

(Click for full size image)

IRISH TAXPAYERS may have paid £20m more than they need have to attract a major American electronics company to Ireland.

Sources in Dublin say Ireland’s Industrial Development Authority has promised a capital grant estimated at f35m to Advanced Micro Devices of Sunnyvale, California for a factory in a Dublin suburb which will provide 650 Jobs within the next four years.

The unconfirmed figure is said to represent a quarter of the IDA’s total grants allocation for the year. It is further understood that authority to spend the money carne from the Cabinet of Prime Minister Garret Fieraki.

But the sum is believed to be at least £20m more than Ireland’s closest competitors for the project, the Scottish Development Agency, were able to offer.

The Irish made the offer without knowing how drastically last year’s sweeping cuts in UK regional grant aid would restrict the lengths to which any British regional development authority can go to land even such an attractive industrial project from overseas.

By contrast the IDA continues to enjoy the greatest independence from central government control of any European development agency.

AMD enjoyed worldwide sales last year of $922m. With more than 15,000 employees It is seen as one of the Strongest companies in the electronics business, swimming against the current tide of lay-offs and cutbacks.

There is no doubt that Ireland scored a major coup by landing the prestigious European expansion project. Ironically Interviews with a company representative and an executive of IDA Ireland confirm that the amount of capital grant played only a minor _ role in AMD’s decision to come to Ireland.

I don’t think the issue was &tided At grant level,” said Declaim Collins, leader of the MA’s highly successful two man mission to secure jobs from California.

`Two things were in our favour. First was the reduction of companies’ ability to write off capital Investment in the UIC. The difference In corporation tax between the two countries will still be around 15% even after the British tax is reduced to 35%.

“Secondly, AMD don’t think they can get the people they need in Scotland. They feel that the pool of labour Is oversubscribed there we have an oversupply of, engineering talent.”

For further proof Mr Collins pointed to a scheme the Irish government has sponsored to get qualified but jobless electrical engineers to leave Ireland and go to work for American companies.

He also cited advertisements placed in Irish newspapers by American companies In Scotland and elsewhere looking for graduate engineers with experience in silicon chips. A collection of them, entitled “In Search of Excellence” is now passed out to American companies as a further inducement’ to come to Ireland.

Detractors say Scottish based companies have given up placing the advertisements because of the lack of response from applicants with the experience they require.

AMD agrees that the decision was based In large Fart on manpower. “A large and well educated workforce* and “an abundant supply of engineers” were the first two reasons given by AIVID’s spokesman Andrew Rothman in Justifying expansion to Ireland.

“The package of financial assistance for construction and training was important, but not decisive,” Rothman said. If they said they were not going to give us anything that might have made a difference

The new AMD factory at Greystones, a seaside suburb of Dublin, should eventually produce enough silicon wafers to generate annual sales of $250m.

Published details of the attractive package put together for the company by IDA include the 80-acre factory site where the company promises to employ 1000 people by the early 1990s. The is also a training facility for engineers, cost to be borne entirely by the Irish government which plans to take it over when AMD’s training programme is completed.

There is a penalty clams& “If a company should close their doors within 10 years of start-up, then theoretically all grants are repayable,* said COMM “Even here an additional formula would operate to soften the blow. IDA will take a look at the value that was given by that company to Ireland and make a judgement u to how valuable that was.”

AMD does not intend to invoke it. “We don’t have any intention of pulling out,” said Rothman. We’re here for the long haul.”

American companies which did not pull through for the long haul In Ireland include Trilogy, brainchild of computer legend Gene Amdahl which announced last June that it was giving up on attempts to build the world’s fastest computer in Ireland. IDA reportedly sank £15m into a Dublin factory which never entered production.

Beehive, a small personal computer maker, left Ireland u did the American management of another personal computer company Northstar – Northstar’s.. Irish factory remains in production as an independent concern.

On Christmas Eve Ireland suffered a severe setback when the American maverick Sack Trammiel closed his Limerick factory making party for Atari personal computers. Less than four weeks ago Warner Brothers.

Atari closed their video game factory in Tipperary –a total loss of 500 jobs.

Within the same week in_ the west of Ireland the American medical supplies company Baxter-Travanagh announced it would cease production at its County Mayo factory with the Ices of CCO jots. The loss was offset slightly by the addition of another 100 jobs at the company’s other Irish plant.

In such a climate of disappointment AMD’s January announcement was a major political and economic triumph. We certainly wanted to land AMD,” Collins agreed. But we didn’t add incentives because we a wanted to get them in and compensate for the closures.

AMD says the Dublin factory will eventually cost $186m But observers say it is customary for a company entering a start-up to allow an extra 30% or even 4096 for inflation. Accordingly the cast of the facility in I prices is closer to $1,410m.

If this Is the case it means the Irish taxpayer may be asked to bear almost one-third of the venture’s total cost ca a country where indirect taxation at 47% is among the highest in Europe._

As an individual tax, if a grant of £35m had to be raised now from Irish taxpayers each would have to write a cheque to their government for a little under £37.

- - - - - - - - - - - - - - - - - -

Share this article: