VZCZCXYZ0000
RR RUEHWEB

DE RUEHDL #0051/01 0281341
ZNR UUUUU ZZH
R 281341Z JAN 08
FM AMEMBASSY DUBLIN
TO RUEHC/SECSTATE WASHDC 8864
INFO RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC
RUEATRS/TREASURY WASHDC

UNCLAS DUBLIN 000051 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV OPIC KTDB USTR EI
SUBJECT: IRELAND -- INVESTMENT CLIMATE STATEMENT 2008 
 
REF: 07 STATE 158802 
 
¶1.  Per reftel, the following is Embassy Dublin's 2008 Investment 
Climate Statement submission. 
 
¶2.  The text of the submission follows. 
 
 
BEGIN TEXT 
---------- 
 
IRISH GOVERNMENT'S ATTITUDE TOWARDS FOREIGN INVESTMENT 
 
The Irish Government actively promotes foreign direct investment 
(FDI), a strategy that has fueled robust economic growth since the 
"Celtic Tiger" period of the late 1990s.  Ireland's pro-investment 
climate saw total FDI stock grow from euro 53 billion in 1998 to 
euro 174 billion in 2002, before moderating to euro 141 billion in 
¶2005.  Traditionally, the principal goal of investment promotion has 
been employment creation, especially in technology-intensive and 
high-skill industries.  More recently, the Government has focused on 
Ireland's international competitiveness by encouraging 
foreign-invested companies to enhance research and development (R&D) 
activities and to deliver higher-value goods and services. 
 
The Irish Government's actions have had considerable success in 
attracting U.S. investment.  In 2007, the U.S. investment stock in 
Ireland, a country of just over 4 million, was worth USD 83 billion. 
 In 2004, U.S. investment flows into Ireland reached USD 10.4 
billion, but fell to negative USD 3 billion in 2005.  This reversal 
likely reflected the response of U.S. firms to a one-time 
opportunity under the 2005 American Jobs Creation Act to repatriate 
earnings to the United States at lower tax rates.  In 2005, 
nevertheless, Ireland attracted USD 2 billion in U.S. manufacturing 
investment flow, as compared to USD 4 billion in Germany.  There are 
roughly 620 U.S. firms in Ireland, directly employing approximately 
100,000 workers and supporting work for another 250,000, out of a 
total labor force of 2 million.  U.S. firms operate primarily in the 
following sectors: chemicals; bio-pharmaceuticals and medical 
devices; computer hardware and software; electronics; and, financial 
services.  Ireland has become a magnet for U.S. internet/digital 
media investment, with industry leaders Yahoo, Google, and Amazon 
making Dublin the hub of their respective European operations. 
 
U.S. companies are attracted to Ireland as an export platform to the 
EU.  In 2006, Irish-based U.S. firms exported roughly USD 57 billion 
worth of goods and services, mostly destined for the EU market. 
Other reasons for Ireland's attractiveness as an FDI destination 
include: a 12.5 percent corporate tax rate for domestic and foreign 
firms; the quality and flexibility of the English-speaking work 
force; cooperative labor relations; political stability; 
pro-business government policies; a transparent judicial system; 
and, the pulling power of existing companies operating successfully 
in Ireland (a "clustering" effect).  Factors that negatively affect 
Ireland's ability to attract investment include: increasing labor 
costs, skilled labor shortages, inadequate infrastructure (such as 
in the transportation and internet/broadband sectors), and absolute 
price levels that are among the highest in Europe.  The Irish 
government has become more concerned about the possibility of rising 
energy costs and the reliability of energy supply undermining 
Ireland's attractiveness as an FDI destination. 
 
Four state organizations promote inward investment into Ireland by 
foreign companies: 
 
-   The Industrial Development Authority of Ireland (IDA Ireland) 
has overall responsibility for promoting and facilitating FDI in all 
areas of the country, except the Shannon Free Zone.  IDA Ireland is 
also responsible for attracting foreign companies to   Dublin's 
International Financial Services Center (IFSC).  IDA Ireland 
maintains offices in New York, Chicago, San Jose, and Atlanta, as 
well as in Europe and Asia; 
 
-   Enterprise Ireland promotes joint ventures and strategic 
alliances between indigenous and foreign companies.  The agency also 
assists foreign firms that wish to establish food and drink 
manufacturing operations in Ireland; 
 
-   Shannon Free Airport Development Co. (SFADCO), or "Shannon 
Development," handles FDI in the Shannon Free Zone (see para 61) and 
owns properties in the Shannon region as potential investment 
greenfield sites.  Under the 2006 Industrial Development Amendments 
Act, responsibility for investment by Irish firms in the Shannon 
region transferred from Shannon Development to Enterprise Ireland. 
The IDA remains responsible for FDI in the Shannon region outside 
the Shannon Free Zone; 
 
-   Udaras na Gaeltachta has responsibility for economic development 
in those areas of Ireland where Irish (Gaelic) is the predominant 
language, and works with IDA Ireland to promote overseas investment 
in these regions. 
 
Major Laws/Rules/Taxation Policy 
 
Ireland's judicial system is transparent and upholds the sanctity of 
contracts as well as laws affecting foreign investment.  These laws 
include: 
 
-  The Industrial Development Act of 1993, which outlines the 
functions of IDA Ireland; 
 
-  The Mergers, Takeovers and Monopolies Control Act of 1978, which 
sets out rules governing mergers and takeovers by foreign and 
domestic companies; 
 
- The Competition (Amendment) Act of 1996, which amends and extends 
the Competition Act of 1991 and the Mergers and Takeovers (Control) 
Acts of 1978 and 1987, and sets out the rules governing competitive 
behavior; 
 
-  The Companies Act of 1963, which contains the basic requirements 
for incorporation in Ireland (amended in 1990); and, 
 
-  The 2004 Finance Act, which introduced tax incentives to 
encourage firms to set up headquarters in Ireland and to conduct 
R&D. 
 
In addition, there are numerous laws and regulations pertaining to 
employment, social security, environmental protection and taxation, 
with many of these keyed to EU Directives. 
 
One of Ireland's most attractive features as an FDI destination is 
the low corporate tax rate.  Since January 1, 2003, the corporate 
tax rate for both foreign and domestic firms has been 12.5 percent. 
Existing foreign firms will retain their entitlement to the "old" 10 
percent rate until 2010 in the case of manufacturing and certain 
internationally traded services.  Ireland's corporate tax rate is 
among the lowest in the EU, and the Irish Government continues to 
oppose proposals not only to harmonize taxes at a single EU rate, 
but also to standardize the accounting methods used by EU Member 
States to calculate corporate taxes. 
 
All firms incorporated in Ireland are treated on an equal basis. 
With only a few exceptions, there are no constraints preventing 
foreign individuals or entities from ownership or participation in 
private firms/corporations.  The most significant of these 
exceptions is that, as with other EU countries, Irish airlines must 
be at least 50 percent-owned by EU residents in order to have full 
access to the single European aviation market.  There are also 
requirements related to the purchase of agricultural lands (see para 
9). 
 
While Ireland does not have a formal privatization program, the 
Government in September 2005 privatized the state-owned national 
airline, Aer Lingus, through a stock market flotation that valued 
the carrier at euro 1.2 billion.  The Government retains about a 
one-quarter stake in the airline.  There are no barriers to 
participation by foreign institutions in the sale of Irish 
state-owned companies, as evident in the purchase of Aer Lingus 
shares by U.S. investors.  Residents of Ireland, however, may be 
given priority in share allocations to retail investors, as was the 
case with the state-owned telecommunications company, Eircom, 
privatized in 1998. 
 
Citizens of countries other than Ireland and other EU member states 
can acquire land for private residential purposes and for industrial 
purposes.  Under Section 45 of the Land Act, 1965, all non-EU 
nationals must obtain the written consent of the Land Commission 
before acquiring an interest in agricultural land, though there are 
many stud farms and racing facilities in Ireland that are owned by 
foreign nationals.  There are no restrictions on the acquisition of 
urban land. 
 
There is no formal screening process for foreign investment in 
Ireland, though investors looking to receive Government grants or 
assistance through one of the four state agencies responsible for 
promoting foreign investment in Ireland are often required to meet 
certain employment and investment criteria (see section "D").  These 
screening mechanisms are transparent and do not impede investment, 
limit competition, or protect domestic interests.  Potential 
investors are also required to examine the environmental impact of 
the proposed project and to meet with Irish Environmental Protection 
Agency (EPA) officials. 
 
Conversion and Transfer Policies 
 
Ireland uses the Euro as its national currency and enjoys full 
current and capital account liberalization.   There are no 
restrictions or reported significant delays in the conversion or 
repatriation of investment capital, earnings, interest, or 
royalties, nor are there any plans to change remittance policies. 
Likewise, there are no limitations on the import of capital into 
Ireland.  Foreign exchange is easily obtainable at market rates. 
 
Expropriation and Compensation 
 
Private property is normally expropriated only for public purposes 
in a non-discriminatory manner and in accordance with established 
principles of international law.  State condemnations of private 
property are carried out in accordance with recognized principles of 
due process.  Where there are disputes between owners of private 
property subject to a government taking, the Irish courts provide a 
system of judicial review and appeal. 
 
The only recent case of expropriatory action involved a dispute over 
the disposition of the ownership rights to the Lusitania, the ship 
that was sunk off Ireland's southern coast in 1915 by a German 
submarine and which is owned by a U.S. citizen.  In 2001, the U.S. 
owner brought action against the Government in the Irish courts 
after his applications for a license to dive to the vessel were 
denied.  In 2005, a High Court ruling in the case noted that "the 
State simply cannot directly or indirectly expropriate this property 
from (the owner), or totally, or even substantially deny him access 
to or the use of his property or any part or parts of his property, 
even under color of merely regulating that access or use for the 
purpose of safeguarding a national asset, without paying appropriate 
compensation."  In March 2007, the Irish Supreme Court ruled in 
favor of the U.S. citizen owner. 
 
Dispute Settlement 
 
Ireland has no specific domestic laws governing investment disputes 
with foreign firms.  There is, however, a legal arbitration 
framework available to parties that opt to arbitrate a dispute, 
including investment disputes, rather than litigate the case. 
Currently, there are no disputes involving investments by U.S. firms 
either in arbitration or litigation.  In recent years, however, U.S. 
business representatives have occasionally called into question the 
transparency of government tenders, some of which have been won by 
U.S. companies.  According to some U.S. firms, lengthy budgetary 
decisions delay procurements, and the Government sometimes 
identifies preferred bidders before making a tender decision.  Some 
U.S. firms also claim that unsuccessful bidders have had difficulty 
receiving information on the rationale behind the tender outcome. 
Conversely, successful bidders have experienced delays in finalizing 
contracts, commencing work on major projects, obtaining accurate 
project data, and receiving compensation for work completed, 
including through conciliation and arbitration processes. 
Successful bidders have also subsequently found that the original 
tenders do not accurately describe conditions on the ground. 
 
The Irish legal system is based on common law, legislation and the 
Constitution.  The Companies Act 1963 (amended 1990) is the most 
important body of law dealing with commercial and bankruptcy law and 
is applied consistently by the courts.  Irish bankruptcy laws give 
creditors a strong degree of protection.  The Department of 
Enterprise, Trade and Employment is the state agency with primary 
responsibility for drafting and enforcing company law.  The 
judiciary is independent, and litigants are entitled to trial by 
jury in commercial disputes.  Ireland is a member of the 
International Center for the Settlement of Investment Disputes, and 
the Irish Government has been willing to agree to binding 
international arbitration of investment disputes between foreign 
investors and the state.  Ireland is also a party to the New York 
Convention of 1958 on the Recognition and Enforcement of Foreign 
Arbitral Awards.  There is no specific domestic body for handling 
investment disputes. 
 
Performance Requirements and Incentives 
 
The Irish Government does not maintain any measures that it has 
notified the WTO to be inconsistent with Trade-Related Investment 
Measures (TRIMs) requirements.  Moreover, there have been no 
allegations that the Government maintains measures that violate the 
WTO's TRIMs text. 
 
Three Irish organizations, SFADCO, IDA Ireland, and Udaras, have 
regulatory authority for administering grant aid to investors for 
capital equipment, land, buildings, training, R&D, etc.  Foreign and 
domestic business enterprises that seek grant aid from these 
organizations must submit investment proposals.  Typically, these 
proposals include information on fixed assets (capital), labor, and 
technology/R&D components and establish targets using criteria such 
as sales, profitability, exports, and employment.  This information 
is treated in confidence by the organizations, and each investment 
proposal is subject to an economic appraisal prior to approval for 
support.  In 2006, IDA Ireland paid out just over euro 90 million in 
grants to foreign firms, as compared to euro 87 million in 2005. 
 
 
Performance requirements are generally based on employment creation 
targets established between the state investment agencies and 
foreign investors.  Grant aid is paid out only after externally 
audited performance targets have been attained.  Generally, parent 
companies must guarantee repayment of the government grant if the 
company closes before an agreed period of time elapses, normally ten 
years after the grant has been paid.  Grant agreements generally 
have a term of five years after the date on which the last grant is 
paid.  There are no requirements that foreign investors purchase 
from local sources or allow nationals to own shares. 
 
New EU Regional Aid Guidelines (RAGs) that apply to Ireland were 
announced in 2006 and became effective on January 1, 2007.  The RAGs 
govern the amount of grant aid that the Irish Government can provide 
to companies, depending on their location.  The differences in the 
aid ceilings noted in the chart below reflect the less developed 
status of business/infrastructure in regions outside the greater 
Dublin area.  For the period 2007-2008, the following ceilings 
apply: 
 
- Location 
Maximum Grant % Allowed 
(EE = eligible expenditure) 
 
- Border, Midlands, West 
 30% on first euro 50 million of EE 
15% on next euro 50 million of EE 
10.2% of balance above euro 100 million of EE 
 
- South East, Mid West, and South West 
 10% on first euro 50 million of EE 
5% on next euro 50 million of EE 
3.4% of balance above euro 100 million of EE 
 
- East 
 NIL 
 
While investors are free, subject to planning considerations, to 
choose the location of their investment, IDA Ireland has encouraged 
investment in regions outside Dublin since the 1990s.  This linkage 
is consistent with the National Spatial Strategy, which was adopted 
in 2001 with the aim of spreading investment more evenly around the 
country (an approach that was replicated in the 2007-2013 National 
Development Plan, to be launched in early 2007).  One of the 
National Spatial Strategy's stated goals was to direct 50 percent of 
all new jobs related to greenfield investment to the border, 
midlands, and western (BMW) counties of Ireland, where the economy 
is less developed.  In 1999, roughly 25 percent of jobs related to 
greenfield investment were located in the BMW region; by 2006, this 
figure had grown to 36 percent.  (The 2007-2013 National Development 
Plan continues to favor balanced regional investment, but now 
focuses more on innovative and knowledge-based activities than on 
the number of jobs generated per region.)  In 2006, nearly 60 
percent of new greenfield projects, and 6 out of every 7 R&D 
investments, were in areas outside Dublin.  To encourage client 
firms to locate outside Dublin, IDA Ireland has developed "magnets 
of attraction," including: a Cross Border Business Park linking 
Letterkenny and Derry, a regional Data Center in Limerick, and the 
National Microelectronics Research Center in Cork.  The IDA has 
supported construction on business parks in Oranmore and Dundalk. 
 
 
There are no restrictions, de jure or de facto, on participation by 
foreign firms in government-financed and/or subsidized R&D programs 
on a national basis.  In fact, the government strongly encourages 
foreign companies to conduct R&D as part of a national strategy to 
build a more knowledge-intensive, innovation-based economy.  Science 
Foundation Ireland (SFI), the state science agency, has been 
responsible for administering a euro 365 million R&D fund under the 
2000-2006 National Development Plan.  The 2007-2013 National 
Development Plan envisions a significant ramp-up in such funding. 
The fund has targeted leading researchers in Ireland and overseas to 
promote within Ireland the development of biotechnology and 
information/communications technology, as well as complementary 
worker skills.  Under the 2004 Finance Act, moreover, a credit of 20 
percent of the incremental expenditure on revenue items, royalties, 
plant, and machinery related to R&D can be offset against a 
company's corporation tax liability in the year in which it is 
incurred.  In 2007, IDA Ireland supported 45 R&D investment 
projects, involving a total investment of euro 310 million. 
GlaxoSmithKline initiated a research and development collaboration 
on Alzheimer's disease with the Institute of Neuroscience and Intel 
established the Technology Research for Independent Living (TRIL) 
Centre focused on the use of technology to support independent 
living for the elderly.  Genzyme invested in new process development 
facilities in Waterford and 2007 also saw new R&D investments for 
Galway by Nortel and a new R&D centre proposed by Fidelity 
Investments. 
 
In addition to the new RAGs, a new EU framework for research, 
development, and innovation (RD&I) for the 2007-2013 period has also 
come into force.  The framework is geared toward achieving the 
objectives of the Lisbon Agenda, and grant support is available 
throughout all regions of Ireland.  The table below shows grant 
rates for each category of eligible RD&I. 
 
Type of Research                          Grant % 
 
-"Fundamental" (activity designed    100 
to broaden scientific and 
technical knowledge not linked 
to industrial or commercial objectives) 
 
-"Industrial" (planned research     50 
of critical investigation aimed 
at the acquisition of new knowledge, 
the objective being that such knowledge 
may be useful in developing new products, 
processes or services or in bringing 
about a significant improvement in existing 
products, processes or services) 
 
-"Experimental" (shaping of the results            25 
of industrial research into a plan of 
design for new, altered or improved 
products, processes or services, whether 
they are intended to be sold or used, 
including the creation of an initial 
prototype which could not be used 
commercially) 
 
Visa, residence, and work permit procedures for foreign investors 
are non-discriminatory and, for U.S. investors, generally liberal. 
There are no restrictions on the numbers and duration of employment 
of foreign managers brought in to supervise foreign investment 
projects, though their work permits must be renewed yearly.  There 
are no discriminatory export policies or import policies affecting 
foreign investors. 
 
Right to Private Ownership and Establishment 
 
The most common form of business organization in Ireland is the 
incorporated company, limited by shares, registered under the 
Companies Act, 1963, or previous legislation.  Irish law does not 
prevent foreign corporations from carrying on business in Ireland. 
Any company incorporated abroad that establishes a branch must, 
however, file certain papers with the Registrar of Companies.  A 
foreign corporation with a branch in Ireland will have the same 
standing in Irish law for purposes of contracts, etc., as a company 
incorporated in Ireland.  Private businesses are not at a 
competitive disadvantage to public enterprises with respect to 
access to markets, credit, and other business operations. 
 
Before 1999, Irish company law differed from international norms by 
allowing, for tax purposes, the registration of companies in Ireland 
that were not actually resident in Ireland (so-called Irish 
Registered Non-Resident companies (IRNRs)).  In response to concern 
that a large number of the estimated 40,000 IRNRs were engaged in 
fraud, tax evasion, money laundering, and other illegal activities, 
the 1999 Finance Act equated registration in Ireland with tax 
residence and liability for all companies except in limited 
circumstances.  Exceptions include cases where the Irish company, or 
a related parent company, is carrying on trade in Ireland, and the 
company is ultimately controlled either by residents of an EU member 
state or by residents of a country with which Ireland has a tax 
treaty (including the United States).  Nonetheless, all Irish-based 
companies, including U.S. firms, claiming non-residence in Ireland 
because of tax treaty provisions must identify the beneficial owners 
of the company. 
 
Similarly, the "Companies (Amendment) (No. 2) Act 1999" requires 
that every application for company registration in Ireland show the 
manner in which the proposed company will carry out activities in 
Ireland.  Section 43 of the legislation stipulates that a company 
must either have a director resident in the State or provide a bond 
of euro 25,400 in the event that the company commits an offense 
under the Companies Act or tax legislation.  Section 44 states that 
these requirements may be waived when the Company obtains a 
certificate from the Companies Office stating that the company has a 
real and continuous link with one or more economic activities in 
Ireland.  Like the 1999 Finance Act, the Companies Act is designed 
to prevent the use of IRNRs for exclusively foreign activities 
without any connection to Ireland. 
 
Protection of Property Rights 
(I) Real Property 
 
Secured interests in property, both chattel and real estate, are 
recognized and enforced.  The Department of Justice administers a 
reliable system of recording such security interests through the 
Land Registry and Registry of Deeds.  An efficient, 
non-discriminatory legal system is accessible to foreign investors 
to protect and facilitate acquisition and disposition of all 
property rights. 
 
(II) Intellectual Property Rights 
 
Ireland is a member of the World Intellectual Property Organization 
and a party to the International Convention for the Protection of 
Intellectual Property.  In July 2000, Irish President Mary McAleese 
signed legislation bringing Irish intellectual property rights (IPR) 
law into compliance with Ireland's obligations under the WTO 
Trade-Related Intellectual Property Treaty (TRIPs).  The legislation 
came into force on January 1, 2001, and gives Ireland one of the 
most comprehensive legal frameworks for IPR protection in Europe. 
 
This legislation addressed several TRIPs inconsistencies in previous 
Irish IPR law that had concerned foreign investors, including the 
absence of a rental right for sound recordings, the lack of an 
"anti-bootlegging" provision, and low criminal penalties that failed 
to deter piracy.  The legislation provides for stronger penalties on 
both the civil and criminal sides, but does not include minimum 
mandatory sentencing for IPR violations. 
 
As part of this comprehensive copyright legislation, changes were 
also made to revise the non-TRIPs conforming sections of Irish 
patent law.  Specifically, the IPR legislation addresses two 
concerns of many foreign investors in the previous legislation: 
 
- the compulsory licensing provisions of the previous 1992 Patent 
Law were inconsistent with the "working" requirement prohibition of 
TRIPs Articles 27.1 and the general compulsory licensing provisions 
of Article 31; and, 
 
- applications processed after December 20, 1991, did not conform to 
the non-discrimination requirement of TRIPs Article 27.1. 
 
DVD and CD piracy, however, continues to be a problem.  Industry 
representatives claim that the counterfeit DVD market is 1.5 times 
the size of the legitimate market and that DVD pirates earn roughly 
euro 60 million annually, at a cost of euro 115 million to the 
legitimate DVD industry.  Industry groups also believe that light 
penalties given to counterfeiters in DVD piracy court cases hamper 
police enforcement efforts.  In mid-2006, the Government responded 
to piracy problems by forming an inter-agency task force, which has 
begun a consultation process with industry on potential 
countermeasures.  In addition to DVD and CD counterfeiting, industry 
sources estimate that up to 37 percent of PC software used in 
Ireland is pirated.  The Business Software Alliance in Ireland 
estimates that reducing this rate by ten percentage points would 
help the USD 2.6 billion domestic IT industry to grow to USD 4 
billion by 2009. 
 
Transparency of Regulatory System 
 
The Irish Government generally employs a transparent and effective 
policy framework that fosters competition between private businesses 
in a non-discriminatory fashion.  While ongoing Irish judicial 
"Tribunals" are investigating possible links between indigenous 
Irish companies' political donations in the late 1980s and favorable 
government decisions, U.S. businesses can, in general, expect to 
receive national treatment in their dealings with the Government. 
There is no report of any U.S. firm or investor having being 
required or forced to make payments during that period. 
 
In recent years, independent bodies have taken over regulatory 
powers from Cabinet Departments in key economic sectors.  The 
Commission for Communications Regulation and the Commission for 
Energy Regulation are responsible for regulating the communications 
and energy sectors, respectively.  Both are independent bodies with 
institutional links to the Department of Communications, the Marine 
and Natural Resources.  The Commission for Aviation Regulation is an 
independent body that regulates the aviation sector.  It is 
institutionally linked to the Department of Transport, which has 
direct regulatory powers over other segments of the transportation 
sector. 
 
The Competition (Amendment) Act 1996 amends and extends the 
Competition Act 1991, strengthens the enforcement power of the 
Competition Authority, introduces criminal liability, increases 
corporate liability, and outlines available defenses.  Most tax, 
labor, environment, health and safety, and other laws are compatible 
with European Union regulations, and they do not adversely affect 
investment.  Proposed laws and regulations are published in draft 
form for public comment, including by foreign firms and their 
representative associations.  Bureaucratic procedures are 
transparent and reasonably efficient, in line with a general 
pro-business climate espoused by the Government. 
 
Efficient Capital Markets and Portfolio Investment 
 
Capital markets and portfolio investments operate freely, and there 
is no discrimination between Irish and foreign firms.  In some 
instances, development authorities and banks are able to facilitate 
loan packages to foreign firms with favorable credit terms.  Credit 
is allocated on market terms, although the Irish Competition 
Authority found in 2004 that the banking sector's lack of 
competition limited the amount of credit available to small and 
medium-sized firms.  Irish legal, regulatory, and accounting systems 
are transparent and consistent with international norms and provide 
a secure environment for portfolio investment.  The capital gains 
tax rate is 20 percent. 
 
The Irish banking system is sound.  The estimated total assets of 
all licensed credit institutions at the end of November 2007 was 
approximately euro 1.3 trillion, with the Bank of Ireland and Allied 
Irish Banks holding a combined 25 percent of total assets.  U.S. 
banks operating in Ireland include Citigroup and Chase Manhattan. 
 
As of November 2007, total market capitalization in the Irish Stock 
Exchange (ISE) was euro 96.6 billion.  In terms of market weight, 
the stocks of four companies are predominant: Allied Irish Bank, 
Bank of Ireland, CRH (a construction industry supplier), and Elan (a 
pharmaceuticals firm).  In September 2006, shares in the national 
airline, Aer Lingus, began trading on the Irish stock exchange in 
conjunction with the carrier's privatization.  Until 2007, the Irish 
stock market had seen a steady recovery since plummeting in 2002 
following the global economic slowdown and management problems at 
several major Irish companies.  From 2002 to 2006, ISE delivered 
returns of between 19 and 28 percent each year.  However, driven in 
part by concerns over possible spillover from the sub-prime crisis 
in the United States, the market capitalization fell by almost nine 
percent through the first 11 months of 2007.  In 2005, ISEQ opened 
up a secondary market, the Irish Enterprise Exchange (IEX), which 
caters to smaller firms with a minimum market cap of euro 5 million. 
 
 
In May 2003, the Central Bank of Ireland was reorganized into the 
Central Bank and Financial Services Authority of Ireland (CBFSAI), 
in accord with the Central Bank and Financial Services Authority of 
Ireland Act 2003.  Under the legislation, the Governor of the CBFSAI 
has responsibility for the overall stability of the Irish financial 
system.  The legislation also established the Irish Financial 
Services Regulatory Authority (IFSRA), which is an autonomous but 
constituent part of CBFSAI that regulates financial services 
institutions in Ireland and, since 2006, the Irish Stock Exchange. 
IFSRA took over this responsibility from a mix of government bodies, 
including: the Central Bank, the Department of Trade, Enterprise, 
and Employment (DETE), the Office of Director of Consumer Affairs, 
and Registrar of Friendly Societies.  The legislation also enhanced 
the regulatory powers given to IFSRA, particularly in consumer 
protection. 
 
The Central Bank is a member of the European System of Central Banks 
(ESCB), whose primary objective is to maintain price stability in 
the euro area.  Ireland no longer operates an independent monetary 
policy.  Rather, ESCB formulates and implements monetary policy for 
the euro-zone, and the Central Bank implements that policy at the 
national level.  The Governor of the Central Bank is one of 18 
members of the Governing Council for the ECB and has an equal say in 
the formulation of monetary and interest rate policy.  The other 
main tasks of the Central Bank include: issuing euro currency in 
Ireland; acting as manager of the official external reserves of gold 
and foreign currency; conducting research and analysis on economic 
and financial matters; overseeing the domestic payment and 
settlement systems; and, managing investment assets on behalf of the 
State. 
 
The Irish Takeover Panel Act of 1997 governs company takeovers. 
Under the Act, the "Takeover Panel" issues guidelines, or "Takeover 
Rules," which aim to regulate commercial behaviour in the context of 
mergers and takeovers.  According to minority squeeze-out provisions 
in the legislation, a bidder who holds 80 percent of the shares of 
the target company can compel the remaining minority shareholders to 
sell their shares.  There are no reports that the legislation has 
been used to prevent foreign takeovers specifically, and, in fact, 
there have been several high-profile foreign takeovers of Irish 
companies in the banking and telecommunications sectors in recent 
years.  In 2006, for example, the Australian investment group, 
Babcock & Brown, acquired the former national telephone company, 
Eircom.  The EU Directive on Takeovers provides a framework of 
common principles for cross-border takeover bids, creates a level 
playing field for shareholders, and establishes disclosure 
obligations throughout the EU.  The Directive was implemented 
through Irish legislation in May 2006, though many of its principles 
had already been enacted in the Irish Takeover Panel Act 1997. 
Political Violence 
 
(I) Impact of Northern Ireland Instability 
 
Ireland has not experienced significant spillover of violence or 
instability from Northern Ireland, especially since the late 1970s 
and after the cease-fires of 1994.  The growth of business 
investment and confidence in Northern Ireland following the 
cessation of widespread violence has benefited the Republic of 
Ireland, with cross-border trade reaching roughly euro 2.5 billion 
in 2005.  In 2006, the Irish and British Governments launched a 
report on potential areas for cross-border economic cooperation, 
such as R&D collaboration, energy and transportation infrastructure 
linkages, and joint trade missions.  The 2007-2013 National 
Development Plan earmarks funding to develop these linkages.  No 
violence related to the situation in Northern Ireland has been 
specifically directed at U.S. citizens or firms located in the 
South. 
 
The 1998 ratification of the Good Friday Agreement by large 
majorities in both Ireland and Northern Ireland further diminished 
the potential for violence.  Although groups in Northern Ireland 
opposed to the peace process have continued to commit infrequent 
acts of criminality, there have been no serious incidents in the 
Republic of Ireland.  In May 2007, the Northern Ireland Assembly was 
restored and local government resumed; a key landmark in the 
successful peace process in Northern Ireland that commenced with the 
Good Friday Agreement in 1998. 
 
(II) Other Acts of Political Violence 
 
There have been no recent incidents involving politically motivated 
damage to foreign investment projects and/or installations in the 
Republic of Ireland.  In 2003, several Irish citizens opposed to the 
Iraq War damaged U.S. military assets at Shannon Airport.  In 2004, 
one of these citizens was convicted in an Irish court and given a 
suspended sentence.  In late 2005, a group of opposition and 
independent Irish parliamentarians said publicly that they would not 
oppose further attacks on U.S. military aircraft transiting Ireland. 
 In 2006, five other Irish citizens involved in the damage of U.S. 
military assets in 2003 were acquitted by a jury decision in an 
Irish court.  The jury accepted arguments by the defendants, the 
so-called "Shannon Five," that they had acted to prevent loss of 
life and property damage in Iraq. 
 
Corruption 
 
Corruption is not a serious problem for foreign investors in 
Ireland.  The principal Irish legislation relating to anti-bribery 
and corruption includes the Public Bodies Corrupt Practices Act 
1889, the Prevention of Corruption Act 1906, the Prevention of 
Corruption Act 1916, and the Prevention of Corruption (Amendment) 
Act 2001.  This body of law makes it illegal for Irish public 
servants to accept bribes.  The Ethics in Public Office Act 1995 
provides for the written annual disclosure of interests of people 
holding public office or employment. 
 
Ireland signed the UN Convention on Corruption in December 2003, and 
ratification is pending a review of the legal measures required for 
implementation.  In January 2000, the GOI introduced to Parliament 
the "Prevention of Corruption (Amendment) Act, 2001," to ratify and 
implement the OECD Convention on Bribery.  The legislation, which 
enabled Ireland to ratify a number of conventions dealing with 
corruption drawn up by the European Union, the Council of Europe, 
and the OECD, came fully into force as law in November 2002. 
Ireland formally ratified the OECD Convention in September 2003. 
Ireland is also a member of the OECD Working Group on Bribery and 
the Group of States Against Corruption (GRECO).  Under the 
Prevention of Corruption Act, the bribery of foreign officials is a 
criminal offense.  Bribery of foreign officials may also invalidate 
a contract that a party is seeking to enforce in Ireland. 
 
A number of ongoing judicial "Tribunals" are seeking to establish 
whether political donations by certain Irish companies in the late 
1980s and early 1990s can be linked to favorable government 
decisions, mostly at the local level, in zoning and tax matters. 
There is also media and public concern that business interests may 
have compromised Irish politics in the late 1980s and early 1990s. 
Despite these reports of payments to political parties and figures 
in the 1980s and early 1990s, there remains no indication that 
foreign businesses or investors have had to make such payments or 
been approached to make such payments to conduct business during the 
period in question or in years since. 
 
In 2006, the Irish media disclosed information leaked from the Mahon 
Tribunal that Prime Minister (Taoiseach) Bertie Ahern had, as 
Finance Minister in the 1990s, accepted the equivalent of roughly 
euro 50,000 in loans from associates.  Following the disclosure, the 
Prime Minister made public statements about the incident, noting 
that his actions had not been illegal and that political favors had 
been neither sought nor granted in connection with the loans.  The 
Mahon Tribunal continued to meet on occasion in 2007 without 
reaching any determination.  Its deliberations will continue in 
¶2008.  Also in 2006, the Moriarty Tribunal found that former Prime 
Minister Charles Haughey had accepted the equivalent of roughly euro 
12 million in payments between 1979 and 1996 in return for political 
favors, such as tax reductions for associates and the procurement of 
a passport. 
 
The Irish police investigate allegations of corruption.  If 
sufficient evidence of criminal activity is found, the Director of 
Public Prosecutions prepares a file for prosecution.  A small number 
of public officials have been convicted of corruption and/or bribery 
in the past, although it is not a common occurrence. 
 
Bilateral Investment Agreements 
 
Ireland's only bilateral investment protection agreement is with the 
Czech Republic.  In addition, Ireland has bilateral tax treaties 
with the following countries: Australia, Austria, Belgium, Bulgaria, 
Canada, Chile, China, Croatia, Cyprus, the Czech Republic, Denmark, 
Estonia, Finland, France, Germany, Greece, Hungary, Iceland, India, 
Italy, Israel, Japan, Korea (Rep. of), Latvia, Lithuania, 
Luxembourg, Malaysia, Mexico, Netherlands, New Zealand, Norway, 
Pakistan, Poland, Portugal, Romania, Russia, Slovak Republic, 
Slovenia, South Africa, Spain, Sweden, Switzerland, UK, the United 
States, and Zambia.  In 2007, new treaties with Georgia, Macedonia, 
Moldova and Vietnam and a Protocol to the existing treaty with South 
Africa were agreed.  Parliamentary procedures to bring into force a 
new treaty with Chile and a protocol amending the existing treaty 
with Portugal were completed by Ireland in December 2005.  Existing 
treaties with Cyprus, France, Italy, and Korea are in the process of 
re-negotiation.  These agreements serve to promote trade and 
investment between Ireland and the partner countries that would 
otherwise be discouraged by the possibility of double taxation.  In 
the absence of a bilateral tax treaty, provisions within the Irish 
Taxes Act allow unilateral credit relief against Irish tax for tax 
paid in the other country in respect of certain types of income, 
e.g., dividends and interest. 
 
OPIC and Other Investment Insurance Programs 
 
Since 1986 the U.S. Overseas Private Investment Corporation (OPIC) 
has been authorized to operate in Ireland as part of the U.S. effort 
to support the process of peace and reconciliation in Northern 
Ireland.  There is some potential in Ireland for OPIC's credit 
guarantee programs, such as in regard to aircraft purchases.  No 
other countries have an investment insurance program in Ireland. 
Ireland is a member of the Multilateral Investment Guarantee Agency 
(MIGA). 
 
The estimated annual U.S. dollar value of local currency likely to 
be used by the U.S. Embassy in Ireland during 2007 is approximately 
USD 11 million.  The Embassy purchases local currency through 
centralized bulk purchasing arrangements at a competitive market 
rate.  Prospects for euro-zone economic growth and for the U.S. 
trade and budget deficit positions will likely determine USD and 
euro currency movements through 2007. 
 
Labor 
 
In 2007, employment levels in Ireland reached historical highs, the 
result of continued strong economic growth.  As of May 2007, the 
number of persons employed was roughly 2.1 million, an increase of 
about 75,000 from a year earlier.  Since 1994, employment growth has 
averaged over 4.0 percent, with lower rates recorded in 2002 and 
2003 following the post 9/11 global economic slowdown.  Employment 
in production industries, including manufacturing, grew by about 
3,000 in the period from May 2006 to May 2007, reversing a trend 
over recent years in which the number of manufacturing jobs had 
decreased. 
 
In contrast to 15.6 percent unemployment in 1993, Ireland registered 
4.6 percent unemployment in November 2007.  This was among the 
lowest unemployment rates among EU Member States and roughly half 
the EU average.  The number of unemployed people in May 2007 was 
about 98,000.  Local economists believe that the Irish economy is as 
close to full employment as possible, with employers reporting 
difficulties in recruiting workers.  Whereas Ireland's primary 
policy goal was once job creation, the focus of government strategy 
has shifted to upgrading skills and increasing the number of workers 
in technology-intensive, high-value sectors. 
 
Irish labor force regulation is less restrictive compared with most 
continental EU countries.  The Irish workforce is characterized by a 
high degree of flexibility, mobility, and education.  There is a 
relative gender balance in the workforce, with 1.162 million males 
and 850,700 females employed as of end 2007.  This gender balance 
reflects a change in social mores that has facilitated a surge in 
female employment since the mid-1980s 
 
With the tightening of the labor market, wages remain on an upward 
growth curve.  As of September 2006, average industrial earnings per 
worker were euro 601 per week, a 3.5 percent increase over September 
¶2005.  Between 1998 and 2003, compensation per employee increased by 
37.1 percent, compared to an increase of 8.7 percent in Germany over 
the same period.  The minimum wage was euro 5.20 when it was first 
introduced in 2000 and rose to euro 8.65 in July 2007.  Employees 
earning the minimum wage will not have to pay personal income tax in 
¶2008. 
 
Unprecedented inward migration levels, particularly from Eastern 
Europe, have added a new dynamic to the Irish labor market.  Of the 
83,000 new workers added to the labor force between the third 
quarters of 2005 and 2006, roughly 40,500 were non-Irish nationals, 
working mostly in the construction and lower-end services sectors. 
According to Ireland's Central Statistical Office (CSO), the number 
of non-nationals residing in Ireland has doubled since 2002 to 
roughly 400,000, or roughly 9 percent of the total population. 
Irish labor unions and Labor Party politicians have expressed 
concern over the possibility of displacement of Irish workers by 
non-nationals.  Economists observe, however, that yearly job 
creation in Ireland has been sufficient to accommodate both Irish 
and non-Irish workers and that there is no evidence of downward 
pressure on wages.  However, the possibility of a slowdown in the 
global economy will undoubtedly lead to slower job creation in 
Ireland.  Economists also hold that that Ireland will require 50,000 
immigrants a year over the short term to sustain high rates of 
economic growth. 
 
The Irish system of industrial relations is a voluntary one.  Pay 
levels and conditions of employment are generally agreed through 
collective bargaining between employers and employees.  Since 1987, 
collective bargaining has taken place under the framework of a 
series of national economic programs, negotiated by representatives 
of employers, trade unions, farmers, and the government.  Over the 
years, employers have generally implemented the benchmarks for pay 
and employee benefits established by the national economic programs, 
even thought the benchmarks do not have legal force.  This 
consensual "Social Partnership" approach has been a major factor in 
improving the industrial relations climate since the mid-1980s.  In 
2006, the number of working days lost as a result of industrial 
disputes was 7,352, as compared to 130,000 in 1995. 
 
In September 2006, Ireland's major unions and the employers' 
representative body agreed to the latest national economic program, 
"Toward 2016," under the Social Partnership framework.  The 
agreement followed a 9-month negotiation that centered on the 
increasingly significant role of foreign workers in the Irish 
economy.  The national economic program sets out consensus positions 
on wide-ranging social policies over a 10-year period and includes a 
10-percent pay increase for workers over the first 3 years.  The 
package encompasses measures to protect employment standards, such 
as the establishment of a new agency (the Office of the Director of 
Employment Rights Compliance), a tripling of the Labor Inspectorate, 
and tougher penalties for employers who exploit foreign workers. 
The deal also calls on the Government to engage with unions and 
employers in drawing up a comprehensive policy on pensions. 
 
Employers typically resist trade union demands for mandatory trade 
union recognition in the workplace.  While the Irish constitution 
guarantees the right of citizens to form associations and unions, 
Irish law also affirms the right of employers not to recognize 
unions and to deal with employees on an individual basis. 
Currently, roughly 33 percent of workers in the private sector are 
unionized, compared to 95 percent in the public sector.  Among 
foreign-owned firms, roughly 80 percent of workers do not belong to 
unions, although pay and benefits are usually more attractive 
compared with domestic firms. 
 
Foreign-Trade Zones/Free Ports 
 
The Shannon duty-free Processing Zone (SDFPZ) was established by 
legislation in 1957.  Under the legislation, eligible companies 
operating in the Shannon Free Zone are entitled to the following 
benefits: goods imported from non-EU countries for storage, handling 
or processing are duty-free; no duty on goods exported from Shannon 
to non-EU countries; no time limit on disposal of goods held 
duty-free; minimum customs documentation and formalities; no Value 
Added Tax (VAT) on imported goods, including capital equipment; 
choice of having import duty on non-EU product calculated on its 
landing value or selling-out  price.  Qualifying criteria for 
eligible companies include employment creation and 
export-orientation.  Foreign-owned firms in the Shannon Free Zone 
have the same investment opportunities as indigenous Irish 
companies.  As of 2007, there were over 110 foreign manufacturing 
and service companies established in the Shannon Free Zone, 
employing roughly 7,500 workers.  Also in 2007, trade from the 
Shannon Free Zone amounted to euro 2.5 billion.  U.S. companies, 
which make up 57 percent of the firms operating out of Shannon, 
include GE Capital, Bristol Myers Squibb, UPS, FedEx, Pfizer, Intel, 
and Symantec.  The Shannon Free Zone is technically an asset of 
Shannon Development. 
 
Duty-free exemptions are available also to companies operating in 
Ireland's major deep-water port at Ringaskiddy in County Cork, 
although these have been used infrequently in recent years. 
 
Foreign Direct Investment Statistics 
 
According to Ireland's Central Statistical Office (CSO), the stock 
of FDI in Ireland for end-year 2005 stood at euro 141 billion, or 
roughly 88 percent of nominal 2005 GDP and a euro 13 billion drop 
from 2004.  Ireland had negative FDI flows of euro 25 billion in 
2005, which the CSO attributed primarily to loans by Ireland-based 
firms to affiliates abroad.  A portion of these loans likely went to 
overseas affiliates that sought to repatriate earnings to the United 
States under a one-time lower tax rate afforded by the 2005 American 
Jobs Creation Act.  (Note: The most recent FDI available from the 
CSO is 2005.  In the past, CSO and U.S. Commerce Department figures 
for U.S. FDI in Ireland have differed, due to different calculation 
methods.) 
 
In 2006, the roughly 1,000 companies supported by IDA Ireland spent 
almost euro 16 billion in the Irish economy from their annual sales 
of euro 95 billion (exports of euro 91 billion).  During 2007, IDA 
Ireland negotiated 114 new business projects with new and existing 
clients, which involved a total investment commitment of euro 2.3 
billion over the coming years.  Also in 2007, IDA-assisted firms had 
a net loss of 147 jobs, and over 60 percent of new jobs in 
IDA-supported projects had wage and salary levels in excess of euro 
40,000 annually. 
 
IDA Ireland announced 78 new and expansion projects with U.S. 
companies during 2007.  Roughly two-thirds of FDI projects that came 
to Ireland in 2006 were of U.S. origin.  Forfas, a quasi-state 
economic think tank under the purview of Ireland's Department of 
Enterprise, Trade, and Employment, estimated that U.S. companies' 
average yearly return on investment (ROI) in Ireland between 2000 
and 2004 was 16 percent. 
 
Major U.S. Investments in Ireland 
 
Company     Location 
 
Apple Computers               Cork 
 
AIG Europe                    Dublin 
 
Amazon     Dublin 
 
Bausch & Lomb                 Waterford 
 
Berlitz                       Dublin 
 
BISYS         Waterford 
 
Boston Scientific             Galway, Cork, Wexford 
 
Bristol Myers Squib   Limerick, Dublin 
 
HP-Compaq Computers          Galway, Dublin 
 
Citigroup                     Dublin 
 
Dell Computers                Limerick, Dublin 
 
Eastman Kodak                 Limerick, Cork 
 
eBay                      Dublin 
 
Fidelity                      Dublin 
 
Gartner Group                 Limerick 
 
 
Google                 Dublin 
 
Hertz               Dublin 
 
Hewlett-Packard   Leixlip, Kildare 
 
IBM Ireland                   Dublin 
 
Intel Ireland                 Dublin, Leixlip 
 
Johnson & Johnson             Dublin 
 
Millipore Ireland BV          Cork 
 
Motorola                      Cork 
 
Netscape Communications       Dublin 
 
Novartis                      Cork 
 
Pfizer     Cork 
 
PFPC      Navan, Wexford 
 
Prudential Insurance      Letterkenny 
 
3Com                  Dublin 
 
United Airlines               Dublin 
 
US Robotics                   Dublin 
 
Woodchester Investments      Dublin 
 
Wyeth Biopharma               Dublin 
 
Yahoo     Dublin 
 
END TEXT 
-------- 
 
FOLEY