Why Asia’s investors see Ireland as a key partner in Europe

When disorder and a police crackdown of demonstrators spiralled out of control in Hong Kong earlier this year, property tycoon Ivan Ko dreamt up a solution that would help the beleaguered territory – he’d build a city for Hong Kong Chinese emigrants in Ireland.

Ko, founder of the Victoria Harbour Group (VHG) – which is an international charter city investment company – planned to look for a site between Dublin and Belfast to build the new city.

The huge urban centre would involve schools, government buildings and medical centres all within easy reach of Dublin airport. Ko told reporters that Ireland was his first choice with its strong manufacturing base and biomedical and tech firms that had set up recently,

Ko later assured Beijing the plan was not exclusive to the Hong Kong Chinese – clearly worried about Beijing’s reaction once he returned to Chinese territory. Nevertheless, Ko, like so many other Chinese and East Asian businesspeople, views Ireland as an ideal base for future European and global operations.

Chinese attraction

Despite the ongoing spat between the US and China (and with President-elect Biden in office this could change significantly), Ireland continues to attract waves of Chinese investment.

Foreign direct investment (FDI) by China increased to €128 million in the first half of 2019, a 75% rise compared with the first half of 2018, according to a report published by Baker McKenzie. Given that Chinese worldwide investment dropped by 60% in the first half of the year, the attraction of Ireland looks even more impressive and the country is one of the few in the EU to record a trade surplus with China.

Bilateral trade in goods and services between Ireland and China totalled €17 billion last year, according to Ireland’s Department of Foreign Affairs. This figure has more than doubled in the past five years. Furthermore, Brexit is proving a success in luring Chinese and Asian businesses that need an EU base with an English-speaking country. This is particularly true with financial institutions.

But it’s not just Chinese firms that have been attracted to the Emerald Isle. Ireland has geared itself up through its state agencies and private sector bodies to create ideal business and trading conditions that are now building crucial links across Asia. Indeed, FDI from Asian countries has become a cornerstone in Ireland’s economic growth plans. For Asian firms, Ireland’s emphasis on an open and highly competitive business environment is proving a huge attraction and companies as far apart as Japan, South Korea and Singapore, as well as China, are increasingly turning up to find out what’s happening on the ground. Meanwhile, Ireland is increasing the number of its trade delegations to Asia’s capitals to show potential investors opportunities in Ireland.

While there are multiple factors that attract FDI to Ireland, the country’s Corporation Tax Rate of 12.5% is considered as one of the most significant.  Ireland’s corporation tax is one of the lowest “onshore” Statutory Corporate Tax rates in the world.

Ireland also ranks first in the EU and sixth in the world for ease of paying taxes. This takes into consideration the number of hours companies spend a year dealing with tax administration along with the average number of tax payments made by companies each year.

In Ireland companies spend an average of 80 hours per annum complying with tax administration, which is a very positive result compared to Germany at 218 hours, Italy at 269 hours and the average number of hours coming in at 176 hours.

Ireland also has other favourable tax breaks, including just 6.25% for revenue from intellectual property. Further tax measures include a 25% tax credit against research and development costs and it has double taxation agreements with more than 60 countries, including every one of its major trading partners.

Together with such a favourable business culture is a mobile, talented, educated workforce that is highly sought after by multinational corporations.

Ireland has been particularly successful in attracting financial services companies and an astonishing 80% of the global top 25 financial services companies now have their operations in the Republic. In March 2017, Ireland was formally approved as one of the 13 new members to join the Asian Infrastructure Investment Bank (AIIB), an institution set up by the Chinese government to fund a range of infrastructure projects in Asia. Ireland’s membership will further strengthen the relationship between the countries in Asia. Moreover, it has a long, successful record of expertise and depth in the financial services sector, which have attracted financial companies from across Asia. Indeed, many of these businesses are some of the biggest financial services corporations in Asia including China Construction Bank, Mitsubishi UFJ, Bank of China, SMBC, and Ping An.

Elsewhere, Japan and Ireland celebrated 60 years of diplomatic relations between the two countries in 2017. This coincided with EU and Japan finalising an Economic Partnership Agreement that represents the largest trade agreement ever negotiated by the EU and came hot on the heels of the EU-South Korea Free Trade Agreement, which was formally ratified in 2015. This was the first signed between the EU and an Asian country. With the EU having commenced discussions with both China and India on investment/trade agreements, trade between Asia and Europe is set to continue to grow and Ireland is ideally placed to become a hub for investment and centre of operations for ambitious Asian firms big and small.

Examples of this increase in activity include the recent purchase of Ireland’s largest building, the Tesco distribution centre in Donabate, Co Dublin, by a South Korean investor for about €160 million late last year. The acquisition of the 73,200sqm warehouse by KTB Investments & Securities and KTB Asset Management represents the largest single-asset logistics transaction to have taken place in the Irish market.

Meanwhile, Singaporean private investors, real estate developers, asset managers and private equity firms have been looking closely at the Irish property market. This follows last year’s acquisition by Singapore’s Oxley Holdings Ltd of the North Wall Quay site in Dublin’s docklands. The €111 million commercial development was dubbed Project Wave by the National Asset Management Agency.

A team of developers from Oxley Holdings Ltd who were present at the launch of the project made it clear to everyone attending there was a big appetite in Singapore for medium- to longer-term returns on property in Ireland. And regardless of the effects of the Covid-19 pandemic, this will not have changed.

There’s no doubt that in a post-Brexit world, Ireland will have increased relevance for Asian companies seeking easy access to the EU market with its 500 million consumers. Ireland will be attractive as a European gateway for its ease of doing business, political stability, being the only native English-speaking country in the EU, talent pool and its corporate tax regime. With visits by senior heads of state and business leaders from China, India, Japan and South Korea, Ireland is becoming recognised as a business friendly country with none of the negative historic legacies often attached to other European countries.

Recent Chinese investments in Ireland

2019

• November: WuXi Vaccines announces additional $240 million (€216 million) investment with plans to build a vaccine production facility in Dundalk, leading to the creation of 200 new jobs.
• November 18: Shanghai Newbaze Industrial Group opens a new dairy formula plant in Carrickmacross, Co Monaghan, a euro20 million investment leading to the creation of 60 jobs.
 
• November 14: Bank of China confirms takeover of Goodbody Stockbrokers in a deal valued at an initial euro150 million.
• October 25; Huawei announces 100 new jobs in Ireland.
• August 27: Huawei unveils plans to invest euro70 million in R&D in Ireland over the next three years.
• April 2: Emeri Nutrition opens a $60 million (euro54 million) infant formula facility in Co Meath.

2018

• December: China Reinsurance’ acquires the Irish unit of Chaucer Insurance in a $40 million (€36 million) deal.
• May: FLI Group secures €10 million investment from China Minsheng Jiaye Investment Corporation.
• March: State-run Ireland Strategic Investment Fund (ISIF) joins forces with CIC Capital Corporation for a €150 million technology investment fund.

2016

• December: Gaelectric sells 14 Irish wind farms worth an estimated €400 million to China General Nuclear Power’s European energy arm.
• January: HNA acquires Dublin-based aircraft lessor Avolon in $2.5 billion (€2.25 billion) deal.

2013

• August: Chinese hotelier family the Kangs acquire Fota Island resort from Nama for €20 million.