Ireland: A platform for expansion into Europe
Presentation at the31st Annual New York Cash Exchange 201329 May 2013
2
Introductions
David EvansVice President
First Names Group
Denise MagyerSenior Vice President
Allied Irish Bank
3Ireland: A Platform for Expansion into Europe 3
Ireland: The Economy
What happened?
2008 market disruption prompted Irish government to guarantee bank deposits Property bubble left Irish banks exposedRise in Irish public debt Agreed a funding plan with EU/IMF/ECB2010 marked Ireland’s re-entry to capital marketsSince then, Irish bond yields have fallen sharplyDeposit guarantee program eliminated March 2013 due to stability of Irish financial marketsIreland looks on course to exit the EU/IMF bailout programme on schedule at end 2013
Ireland (in 2010) was one of the few European countries to show an increase in FDI projects
American Chamber of Commerce September 2011
Irish Benchmark Yields
0
3
6
9
12
15
18
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-130
3
6
9
12
15
18
10 Year 5 Year
% %
Source: Thomson Reuters
5Ireland: A Platform for Expansion into Europe
Positive Economic TrendsIrish economy continues modest expansion for second straight year, outperforming fiscal targets
Irish GDP rose by 1.4% in 2011 and 0.9% in 2012 2012 GNP was up by a strong 3.4%
Export growth remained resilient in 2012, despite weak trading partner demand; Ireland’s forecast GDP growth is among highest in euro area
Bank de-leveraging plan has continued apace and other contingent liabilities reduced sharply
Lower deficit and funding needs for Ireland in short and medium-term; reduction in Government debt in longer-term.
Irish Growth Rates (% yoy)
-10
-8
-6-4
-2
0
2
46
8
10
Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012Source: CSO
GNP
GDP
GDP Contributions (2008-2015)
-12
-9
-6
-3
0
3
6
2008 2009 2010 2011 2012 2013(f) 2014(f) 2015(f)
Personal Spending Govt Spending Fixed Investment Net Exports Other
%
Source: CSO and AIB ERU forecasts
GDP GROWTH FORECAST
2013 2014 2015
1.5% 2.5% 2.9%
6Ireland: A Platform for Expansion into Europe
Economic Advantages
13.7% cumulative fall in Irish unit labor costs from 2009 to 2013 (projected)
Major gains in Irish competitiveness helping the traded sector of the economy & to boost Foreign Direct Investment (FDI)
Exports, driven by huge FDI, equate to 108% of GDP. Exports provided Ireland with way out of the recession – exports rose by 6.2% in 2010, and 5% in 2011, although slowing in 2012 due to downturn in EU economy
Unit Labour Costs 2009-2013 (% Change)
-15 -12 -9 -6 -3 0 3 6 9 12 15
Germany
France
Italy
Eurozone
UK
Ireland
Spain
Portugal
Source: EU Commission November 2012
Exports as % of GDP 2011
0 10 20 30 40 50 60 70 80 90 100 110
Spain
Portugal
Ireland
Italy
Greece
France
Germany
UK
Source: Thomson Datastream
*
7Ireland: A Platform for Expansion into Europe
Housing & Employment TrendsHousing
New stock overhang is limited and being slowly eroded given low level of new supply
House prices declined sharply – fell by over 50% from their peak in late 2007
Housing affordability back to best levels since 1996, i.e. before the boom
Rents have troughed – up 7% from lows
House prices show signs of bottoming out, especially in Dublin, though still quite volatile
UnemploymentEasing in the pace of job losses since early 2010 as economy stabilized and then improvedUnemployment rate leveling off at 14.7%at YE12 on fall in redundancies and pick up in emigration
National House Price Inflation
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13-30
-25
-20
-15
-10
-5
0
5
10
15
20
Month-on-Month : LHS Year-on-Year : RHS Source: CSO
% %
Unemployment Rate (%)
8
9
10
11
12
13
14
15
16
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13Source: Thomson Datastream
8Ireland: A Platform for Expansion into Europe
To Summarize…
Ireland has done an admirable job of differentiating itself. It is coping better than most of its European partners.
“This has not gone unnoticed by US multinationals.”
American Chamber of CommerceThe Irish-US Economic Relationship 2012
9Ireland: A Platform for Expansion into Europe
Evolution of FDI in Ireland
Source: IDA Ireland Strategy, Horizon 2020
A range of services and incentives, including funding and grants, are available to those considering foreign direct investment in Ireland. These are offered by IDA Ireland, Ireland’s inward investment promotion agency, to both new and existing clients. www.idaireland.us
10Ireland: A Platform for Expansion into Europe
Why FDI?
Access to the 500m people in EuropeUS affiliate sales of goods and services
in Ireland totaled $247 billion in 2009
Greater than affiliate sales in China ($148bn)
and in Japan ($220bn).
Within Europe, only US affiliate sales in Germany, Switzerland and the United Kingdom are larger than Ireland’s
The reason: export-propensity. About 25% of foreign affiliate sales are for the local market, while the rest is bound for the transatlantic economy of the European Union and the US
Source: Bureau of Economic Analysis
11Ireland: A Platform for Expansion into Europe
How are Companies using Ireland?
Global Business Service Centers
Headquarters & IP Management
High Value Manufacturing
Research, Development & Innovation
Supply Chain Management
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A Platform for Expansion into Europe
Why is Ireland so popular with US companies?
15Ireland: A Platform for Expansion into Europe
A Platform for Expansion into Europe
5TsTrack recordTalentTime zoneTechnology & infrastructureTaxation policy Weather!
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Track Record: Who’s in Ireland
Nine of the top 10 pharmaceutical companies
Eight of the top 10 technology companies
11 of the top 13 medical device companies
Three of the top five games companies
The top 10 “Born on the Internet” companies
Source: IDA Ireland website
17Ireland: A Platform for Expansion into Europe
Track Record: Who’s in Ireland
50% of the world’s fleet of leased aircraft
More than 50% of the top financial services companies
Largest exporter of software in the world
Source: Investing in Ireland: Always Open for Business, Deloitte
18Ireland: A Platform for Expansion into Europe
Irish-US Relationship: Built to Last
US firms have invested more capital in Ireland since 1990
than the four BRIC nations combined
(c. $189 bn on a cumulative basis vs. $159 bn)
IDA Ireland
19Ireland: A Platform for Expansion into Europe
What US Executives are Saying
“We are very excited about our expansion into the European market and Dublin will be at the very center of our new business generation and support. We are impressed by the quality and depth of the talent pool and the strength of the software industry in Ireland, which coupled with the partnership of IDA Ireland, made the decision to locate our European Operations Hub here, the right one for the future of the company.”
Chris HickeyPresident of Total Defense
Source: IDA Ireland website
20Ireland: A Platform for Expansion into Europe
Talent in Ireland
FirstIn availability of skilled labor1
In Europe for completion of third level education2
In Eurozone for best countries for business3
In flexibility and adaptability of workforce1
SecondIn future availability of workforce4
ThirdIn labor productivity1
Source: 1 IMD World Competitiveness Yearbook 2012 | 2Central Statistics Office | 3Forbes.com; October 42011, Population Division of the Department of Economics & Social Affairs of the United Nations Secretariat, World Population Prospects: The 2010 Revision
Ireland is the only English speaking workforce in the Eurozone
21Ireland: A Platform for Expansion into Europe
What US Executives are Saying
“After considering a number of global locations for this strategically important R&D center, we decided that Limerick was the perfect fit for our company due to the research expertise in the University of Limerick, the availability of engineering skills, the cluster of many leading players in electronics in the region and the support of IDA Ireland.”
Bernhard HuberZMDI’s Business Line Manager
Source: IDA Ireland Website
22Ireland: A Platform for Expansion into Europe
What US Executives are Saying
“Ireland also has proven to be a valuable location for Mylan, providing the company with access to a skilled and highly educated workforce that shares our strong work ethic and commitment to excellence.”
Heather BreschMylan Chief Executive
Source: Irish Independent
24Ireland: A Platform for Expansion into Europe
What US Executives are Saying
“Ireland has established a solid track record as the ideal location for many of the world’s leading pharmaceutical businesses. We see our Dublin base as important to the evolution of our business, both in our European markets and globally. We look forward to building a substantial biopharmaceutical business, based in Ireland, with the goal of bringing innovative medicines to the patients we serve.”
Richard PopsCEO Alkermes plc
Source: IDA Ireland website
25Ireland: A Platform for Expansion into Europe
What US Executives are Saying
“The technical acumen and competency of the people in Galway, as well as their attention to detail and commitment to quality, their passion, this is what makes it special. They get it right the first time.”
William H. KuchemanCEO Boston Scientific
Source: IDA Ireland website
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Technology & InfrastructureDublin Airport Terminal 2 opened in 2011
Motorway network completed in 2010
Data centers and connectivity
27Ireland: A Platform for Expansion into Europe
Taxation Policy
Attractive for US outbound investment
Expansion into EMEA markets
Intellectual property exploitation
Captive treasury function
Securitization – special rules
28Ireland: A Platform for Expansion into Europe
Expansion into EMEA Markets
Tax efficient supply chain management
Arm’s length pricing and transfer pricing
Operational substance in Ireland
Corporate restructuring and inversions into
Ireland
29Ireland: A Platform for Expansion into Europe
Intellectual Property Exploitation
Why choose Ireland for IP?
Legal framework for IP protection
Taxation at 12.5% on trading profits of an
active brand management trade
Effective tax rate can be as low as 2.5%
Amortization for tax purposes
R&D credits: close to 40% on the dollar for qualifying R&D
spend
30Ireland: A Platform for Expansion into Europe
Example: IP Exploitation
Before After
Profit 100 100
Tax (40) (12.5)
Retained Earnings 60 87.5
Net Cash Tax Saving per annum 27.5
31Ireland: A Platform for Expansion into Europe
Captive Treasury Function
Global treasury functions housed in Ireland
Margin business
Taxed at 12.5% as an active trade
Attractive withholding tax (WHT) legislation
and exemptions
32Ireland: A Platform for Expansion into Europe
Securitization: Special Rules
Popular for acquisition of specific assetsMargin taxable at 25%
Hedge funds often use special purpose
vehicles (SPVs) for European acquisitions
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ContactsDavid EvansVice PresidentFirst Names Group
100 Park AvenueSuite 1600New YorkNY 10017
T: 203-428-7883E: [email protected]
Denise MagyerSenior Vice PresidentAllied Irish Bank
1166 Avenue of the Americas18th FloorNew YorkNY 10036
T: 212-339-8170E: [email protected]