'Ireland's attraction is not only about low tax, it's about talent and technology'

Ireland's Investment Development Agency (IDA) is the counterpart of the Department of Industrial Policy and Promotion (DIPP) of India. The key mandate of both the organisations is to attract foreign direct investments (FDI). In an interview days before the Brexit referendum, John Conlon, head of IDA's Asia Pacific team, tells Business Today about the rigid manner in which IDA defines FDI, and the growing interest of Indian companies to invest in that country, and more.
Edited excerpts:

Will Britain exiting EU help neighbouring Ireland attract more investments?
Our official position is that we don't want the UK to leave EU. We think it is bad for Ireland, bad for UK and bad for the EU. We are in favour of free trade. That's the UKs position also. From Ireland's point of view they are our biggest trading partner in the world, they are our closest neighbour. We compete for investments all the time. Hence, one result (of the UK leaving EU) might be more investments to Ireland as companies might want to be within the EU. However, we think the overall benefits of our relationship with UK completely outweigh this possibility (of additional investments).

You have US companies becoming Irish companies now...
The Pfizer deal has been called off. These are financial decisions. It is not something that we chase, not something that we seek. It is something that is caused by the US tax system, rather than our tax system. Our government and our organisation, try to attract FDI that results in economic activity.

Isn't low taxation a reason for companies choosing to invest in Ireland?
It is only one of the attractions. There are lower taxes in Switzerland and in Singapore. So, low tax rate is good only if you make money. Nine of the world's top 10 pharmaceutical companies are in Ireland. 15 out of top 20 medical companies are here and we have half of the biggest banks in the world operating out of Ireland. Most of the major software companies also have a presence. Ireland is one of the best places in the world to attract managers, to attract talent. That is why lot of companies are setting up their operations in Ireland. It is to address the European market. If you cannot provide the engineers, or other facilities, low taxes alone will not help. We have had low taxation for a long time. We are proud of that and we will continue to do it. However, it is completely OECD complaint. We don't have a zero tax rate, it is proper rate. Strategically we believe we can make better money for the country than charge higher rates. If imitation is flattery, the UK has reduced their taxes. So it is a worldwide phenomenon. We compete on tax, on talent, on technology. Ireland has been building its basic competency for 50 years. So it's not just tax.

Indian pharmaceutical companies like Sun (Ranbaxy) and Wockhardt are known to have struggled to make their Ireland acquisitions work. How do you see this?
When companies acquire other firms, they sometimes end up with excess manufacturing. That is the time when they assess whether they need all the 40 manufacturing plants across the world or 20. They keep the ones in the growth segments and sell others. The results of such amalgamations have thus been more investment oriented. On certain occasions we get into such situations where some of the Irish (production) facilities, get impacted. That does not mean Irish plants are up for sale. In fact we are constantly asked if there are any pharmaceutical companies for sale in Ireland, and we don't have one. Vast majority of companies don't get sold. But in general, our pharmaceutical sector is growing. And we would want more companies joining there. The world's leading biotechnology investors are already present in Ireland.

EU itself is not out of recession. Can you make money from a market that is not growing?
The Western Europe has not grown as anybody would like see it grow. However, the Irish economy is growing 6-7 percent a year and is the fastest growing economy in the region. I believe that companies enter Europe for market share. There are 1,250 overseas companies in Ireland. So, lot of companies are coming despite economic slowdown in Europe.

Which are the Indian companies that have a presence in Ireland?
NIIT has set up a centre for corporate training. Infosys has a delivery centre and an R&D centre. We had HCL and TCS expanding its presence. We also have smaller companies across sectors and are expecting some manufacturing companies to announce their investment plans soon.

Every mode of foreign currency inflow is clubbed as FDI by India's DIPP. How does IDA define FDI?
FDI includes capital investment, and capital investment includes acquisition costs. Economists might look at it differently than we do. We are talking about how IDA looks at it. There can be acquisitions only to acquire technology. There can be acquisitions that will result in more job creation also. So not all acquisitions are good, and not all acquisitions are bad. Most of the FDI agencies in Western countries do not consider acquisitions in their definition. We try to grow the employment, we try to grow the number of companies, and we try to grow the investment in those companies. That's what we focus on. We don't focus on acquisitions at all.