MANAGING INTERNATIONAL BUSINESS

FOREIGN DIRECT INVESTMENT AND IRELAND 'S TIGER ECONOMY

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FOREIGN DIRECT INVESTMENT AND IRELAND 'S TIGER ECONOMY

Introduction

During the early years of its foundation as a nation , Ireland remained dependent on United Kingdom especially in the field of trading . The Civil War in the early 1970s brought significant damages on key industries of Ireland such as the agriculture and industrial sectors which stood useless and unproductive to supply the domestic consumption of Ireland , thereby forcing the infant country to rely

much on importation with the British

But with the aid of political and economic reforms pioneered by Ireland 's government , impressive economic growth was achieved in just a matter of a short period of time . Moreover , foreign investors started to influx towards the domestic market of Ireland and contributed largely for its various sectors to boom . As a result , GDP of Ireland rise robustly between the 1980s and 1990s and GDP growth rate went almost at par with the European Union and United States . In addition to this , the large number of multinational companies operating in the domestic market of Ireland gave an avenue for the Irish government to earn large amount of revenue from corporate taxes , though , Irish corporate tax is relatively cheaper compared to other countries in the European Union and in the United States

Despite of these benefits offered by the influx of foreign direct investment in Ireland , sceptics kept on stressing out that foreign direct investment offered no improvement at all on the economic growth of Ireland as employment rate plummeted and indigenous industries suffered from stagnant growth while others incurred large amount of investment losses . In addition to this , multinational companies also get resources from abroad leading to the underdevelopment of domestic sub-suppliers of resources available in Irish domestic market

The weak linkage between the foreign and domestic investors in Ireland made it hard for the sceptics to accept the idea that FDI made a significant contribution on the impressive economic growth of Ireland in the recent decades . In this regard , this aims to identify and present arguments on whether indeed foreign direct investment was the reason behind the economic growth of Ireland in the recent decades

The Role of Foreign Direct Investment

First , the influx of foreign direct investment in Ireland made the Irish government to enjoy large amount of government revenues out of corporate taxes that they levy from multinational companies operating in their market . This enabled the Irish government to incur fiscal surpluses and cut their debts leading to a more stable fiscal management . Moreover , the income generated from the corporate taxes was used by the government to maintain the stability of various sectors of the Irish domestic market , e .g . labour sector . Despite of the fact that corporate tax in Ireland was relatively lower compared to other FDI-destination-country like US and UK , the large number of multinational companies that invested in Ireland was already enough to provide the latter with enough corporate tax...