Friday, September 16, 2022

Fairy tales of Irish economy obscure truth

This is my sequel to the article 'Leprechaun economics continue to distort Ireland's statistics' which documents the continuing multinational distortions in Ireland's National Accounts.

The focus here is on propaganda and ignorance in particular from government enterprise agencies and the media, which give a false image of the Irish economy. The national statistics office has also sowed confusion with the terms "Irish-owned" and "Native Irish" firms.

In 2019 the Organisation for Economic Cooperation and Development (OECD) reported that Ireland's SME firms (micro 1-9 employees, small 10-49 and medium 50-249) size companies dominated by domestic firms, had the lowest rate of exporters in the European Union, along with Greece.

Also in 2019 Enterprise Ireland, an Irish government agency, forecast that Irish-owned firms in the United States had created 180,000 jobs in 2017 and 2018.

This was a fairy tale!

Last June the Central Statistics Office (CSO) in a report said that in 2020 Irish-owned enterprises accounted for 27% of innovation expenditure in Ireland, while foreign-owned enterprises accounted for 73%. In October 2021 the CSO confirmed to me that Irish ownership includes mainly American Redomiciled PLC firms! They typically become Irish for tax avoidance purposes and control remains in the United States.

In the Statistical Yearbook of Ireland 2018, the CSO stated: "In 2015, Irish multinationals abroad had a turnover in excess of €168bn, with US and UK affiliates accounting for almost 61% of this. There were nearly 774,000 persons employed in Irish multinationals abroad, 35% of whom were in the US and the UK."

Asia had 256,000 jobs in Irish affiliates and there were almost 9,000 in Oceania and Polar regions (the region of Oceania includes Australia, the Pacific Islands, and the polar regions of the Arctic and the Antarctic.)

This was a monumental fairy tale.

In August of 2022, the CSO reported on "the activities of Irish multinationals abroad." In 2020 there were over 1.2mn employees in "Irish-owned foreign affiliates."

The number employed overseas had apparently risen to over 400,000 persons from 2015-2020.

Asia apparently had the highest number of persons employed in Irish multinationals abroad in 2020.

"In terms of employment in Irish multinationals abroad by continent in 2020, Asia (401,786), the Americas (400,732), and Europe (including Russia) (373,759) each accounted for around a third of total persons engaged. Employment in the Oceania and Polar regions and Africa combined accounted for the remaining 2.0%."

The CSO said, "An enterprise is deemed to be Irish owned if more than 50% of its controlling interest is in Ireland." However, most of these companies are American firms that become Irish for tax purposes.

These firms are called Redomiciled PLCs (public limited companies.)

The notion that these foreign firms are controlled from Ireland is absolute fiction. Jetting into Dublin a few times a year for board meetings is not control.

Ireland's Department of Finance noted in its June 2022 update of the report 'The Dual Structure Of The Irish Economy – Evidence from the sectoral accounts' "Whilst technically headquartered in Ireland, redomiciled publically listed companies (PLCs) are owned and operated from abroad, and conduct little, if any, real economic activity in Ireland ...The data show that redomiciled firms made no contribution to corporation tax payments."

Other CSO data show that in 2018 these firms employed 11,400 in Ireland.

Devin Zibulsky of the CSO said in a message "We cannot provide estimates for Redomiciled PLCs within the OFATS (Outward Foreign Affiliates Statistics) because they are not officially identified in the data and for confidentiality reasons."

Patents and R&D

Innovation means doing something new which improves or invents a product, process or service. Patents give protection to inventions, generally 20 years from the filing of an application.

The first recorded patent for an industrial invention was granted in 1421 in Florence to the renowned Renaissance architect and engineer, Filippo Brunelleschi (1377-1446 AD). The patent gave him a 3-year monopoly on the manufacture of a barge with hoisting gear used to transport marble.

Chart 2: The College of the Holy and Undivided Trinity of Queen Elizabeth near Dublin was founded in 1592 and is commonly called Trinity College today.

The World Intellectual Property Organization (WIPO) based in Geneva is an agency of the United Nations. The PCT (Patent Cooperation Treaty) is administered by WIPO and it has 156 contracting countries. The PCT makes it possible to seek patent protection in a large number of countries by filing a single “international” patent application instead of filing several separate national or regional patent applications. The granting of patents remains under the control of the national or regional patent offices in what is called the “national phase.”

Patent filings around the world exceeded 3.3mn in 2020 while PCT patent applications were about 277,500 in 2021.

Chart 2 shows that seven of the top 10 PCT applications for Ireland in 2020 were from Redomiciled PLCs. Two of the firms are units of Johnson & Johnson Inc. The remaining 3 were from local Irish universities.

The total Irish PCT applications in 2020 were 756 and the top 10 accounted for 38%. There are high country rates for withdrawals and rejections.

It is likely that the foreign-owned companies account for most of the rest of the applications. Accenture, the large consultancy, was spun out of Arthur Andersen, the former American accounting firm, as a Bermuda company, in 2009 became Irish. Its peak application year was 2014 at 14.

Kerry Group, the highest indigenous R&D spender, has had 14 transactions since 1999, according to the Intellectual Property Office of Ireland.

According to WIPO "Among 10 selected offices, Brazil, Germany and the US granted patents for less than 42% of applications processed in 2020. Rejected applications as a share of the total were highest in China (35.5%), the Republic of Korea (26.7%) and the US (45.2%). In absolute numbers, China and the US each rejected more than 380,000 applications, while the Republic of Korea rejected around 47,000 applications."

More than a quarter of a million PCT patent applications published worldwide in 2019 were in the field of computer technology.

The Joint Research Centre (JRC) is the European Commission's science and knowledge service and it produces a Global 2500 R&D ranking and an EU 1000 ranking.

The chart above shows that Ireland has 27 companies on the Global 2500. However, most of these firms, led by Medtronic Medical Devices of the US, are foreign-owned.

The minimum R&D spend for the Global 2500 is €36.5m.

There are 4 Irish industrial firms among the 2,500: Kerry at the 467 rankings had a spend of €299m; Fineos at 2,356 spent €46.7; GlenDimplex at 2,119 spent €46m; Glanbia at 2,298 had a spend of €41m.

The R&D can be located in one or several countries.

Ireland's two top domestic banks Bank of Ireland and Allied Irish Banks, have rankings of 589 and 595.

The minimum R&D spend for the EU 1000 is €2m.

Kerry had a rank of 99 in the 2022 rankings and excluding the banks, the other Irish firms are Fineos; GlenDimplex; Glanbia; Kingspan; Trinity Biotech; Smurfit Kappa, and Greencore, which mainly operates in the UK, had a spend of €2.8m.

The total number of "Irish" firms is 40. However, real Irish companies in the EU 1000 including the 2 banks are just 10 compared with 63 Danish firms, which have a strong home presence.

The Global Innovation Index 2021 which is produced annually by Cornell University, INSEAD, the French business school, and WIPO, has a ranking of 19 for Ireland among 132 countries. However, the real level is lower as the Irish data are dominated by foreign multinationals linked to tax avoidance.

US and Chinese ICT and health firms lead global R&D

In 2021 Switzerland, which is a member of the European Economic Area (EEA) and not the EU, was again selected by the European Commission as the most innovative country in Europe. Sweden, Finland, Denmark and Belgium were the EU's innovation leaders. Ireland had an 11th ranking based on foreign-owned and Irish-owned firms.

The Financial Times's FT 1000 2022: Big 4 countries account for 73% of Europe’s fastest-growing firms

Ireland has 4 firms among the 1,000: Bio Marine (118) produces fishery ingredients; Bevcraft (165) manufactures beer cans; (182) is involved in e-commerce and Snigel (820) is a technology firm.

There are no Irish-born tech firms on the list: was founded by a French entrepreneur and Snigel was founded by two Austrian nationals who had worked at Google.

Irish Examiner 2019

Propaganda and exaggeration

In the article 'Leprechaun economics continue to distort Ireland's statistics' I wrote that Daniel Mulhall, Irish ambassador to the United States and Enterprise Ireland, the Irish government's agency for the promotion of indigenous exporters, had promoted the fiction that investments by Irish companies in the United States are among the top foreign investors there. In 2021 it seems that Irish-owned companies "by country of ultimate beneficial owner" had investments of $353bn in the US — even bigger than France.

Ireland was the ninth largest foreign direct investor in the US, according to acting US ambassador to Ireland, Reece Smyth in 2019.

“Enterprise Ireland statistics show 80,000 jobs were created by Irish companies in 2017 in the US. In 2018 they’re talking about 100,000. That is huge. What is changing is the investment into Ireland from the US is now becoming a two-way street. It is to the mutual benefit of both countries,” he said.

Again the fantasy Irish jobs even in the Polar Regions of the Southern Hemisphere, are in so-called Redomiciled PLCs.

It's risible that with apparently so many Irish-owned companies across the world, Enterprise Ireland could only report global exports by Irish-based firms in 2021 at €25.5bn: €4.5bn to North America and €5.9bn to the other 18 member countries of the Eurozone — an external market of 437mn people. The UK was the biggest market at €7.5bn.

The Irish-owned exports were 4.5% of the €568bn total exports value in 2021 which again was distorted by foreign-owned firms such as Apple.

In December 2021 The Irish Times reported "Ireland ranked second in the world for quality of life, beating Sweden, Germany and UK Ireland now in the ‘very high’ camp, ranked joint second with Switzerland and behind only Norway in the ranking"

Naomi O’Leary, the Europe Correspondent of The Irish Times reported that in 1990 "Ireland was outranked by Spain, Belgium, Italy, New Zealand, Germany, Finland, the UK, Denmark, France, Australia, Norway, Canada, the Netherlands, Switzerland, Sweden and Japan in the Human Development Report."

The Human Development Index (HDI) measures each country's social and economic development using four factors: mean years of schooling, expected years of schooling, life expectancy at birth, and gross national income (GNI) per capita.

Apart from the United States among advanced economies, the first 3 factors have similar levels. Ireland fell to 8 ranking in 2022 which was published this month.

Again there is a distortion as Ireland's gross national income (GNI) per capita at $76,169 was massively exaggerated. Switzerland's GNI was at $66,933 and Norway's was at $64,660.


The foreign-owned sector is crucial for the Irish economy. However, there should be transparency from politicians, statisticians and journalists on the performance of the indigenous exporting sector.

It's bad enough to have unreliable National Accounts but when multinational distortions are used for bragging purposes, it gives a false narrative of the indigenous exporting sector.

Even the venture capital data that are issued in the private sector are polluted by Redomiciled PLCs which have their main operations in the United States.

Besides having the lowest rate of SME firm exporters in the European Union, along with Greece, the OECD also reported in 2019 that Denmark with a population of 5.8mn had 26,400 goods and services exporters (foreign controlled enterprises account for about 33% of exporters). Ireland with a population of 5.1mn had 10,880 (including foreign firms).

Denmark had 613 big firms with a workforce of 250+ and Ireland's level was 320.

In July 2022 Ireland's average stock exchange's market capitalisation was valued at €124bn while the value of the Copenhagen exchange was €587bn.

The CSO has data for the foreign affiliates of "Native Irish" firms: employment in 2020 in thousands was: UK 96.4; US 87.5; Mexico 31.5; 20 Germany; 15.0 France; Poland 14; 10.3 Spain; 10.0 Netherlands; 9.6 Canada; and 8.0 in Brazil. The top 10 countries have total employment of 302,000.

Born in Ireland firms: total employment CRH 77,400 employees; Smurfit Kappa 48,000 (merger); ICON 38,000 (merger); Kerry Group 22,000; Kingspan 19,000; Ryanair 15,000; DCC 14,000; Greencore 12,000; GlenDimplex 8500; Flutter 8,000 (merger); Glanbia 6,000. Total 268,000.

While Primark (71,000) was launched in Dublin in 1969, it was always owned by a British company. Ardagh (former Irish Glass Bottle Company) (20,000) is headquartered in Luxembourg.

Home truths for the braggers

1) Low employer entrepreneurship and business dynamism

OECD: Lowest for Birth rate of employer enterprises, Ireland (2018) 3.9% and Belgium 3.9% (2019). Other countries for 2019: Denmark at 11.8%; Finland 11.3%; France 11.6%; Germany 10.40%; Netherlands 10.8%.

Even when the death rate is high, that's an indicator of dynamism or churn of enterprises.

Share of employer start-ups (0-2-year-old enterprises) among active employer enterprises: Ireland 11.2% (2018); All 2019- Denmark and Finland 25.28%; Sweden 27.1%; France 29.2%; Germany 21.5%; Netherlands 25.2%.

In the important 'Information and communication' NACE category, Ireland was at 16.1% (2018); All 2019- Denmark 35.1%; Finland 32.6%; France 37.4%; Germany 27.8%; Netherlands 32.8%.

2) There is no significant knowledge economy in the indigenous sector

This year a government survey found that in Computer Programming - a NACE sub-category - foreign tech firms mainly American, employed 38,700 in Ireland and domestic firms had 2,500.

So software development is insignificant among Irish-owned firms. Coupled with low significant R&D and patenting, the evidence should be obvious.

3) Dublin as a significant tech hub?

Not really!!

Ireland will continue to have some home-grown tech stars but the typical route for a venture capital-backed startup will continue to be an acquisition by a bigger foreign firm before a significant scaleup.

4) Ireland has too few exporters.

5) Per capita income is about 18th among advanced OECD countries.

Ireland was again below the EU average for Actual individual consumption per capita in 2021.

Leprechaun economics continue to distort Ireland's statistics

Ireland's low number of multinational firms and poor exporting record

Irish digital economy firms account for 1.4% of employment

Big 4 countries account for 73% of Europe’s fastest-growing firms