How good a country is Ireland to do business in?

Very good for multinationals but less so for SMEs

Taoiseach Enda Kenny’s assertion to be making Ireland the best small country in the world in which to do business may not be total nonsense after all. If you’re a multinational that is.
Two studies – the World Bank’s Doing Business report and IBM’s annual Global Locations Trend report – rank Ireland highly for its business environment and show that, when it comes to competitiveness, we’re outperforming many of our international rivals.The first piece of research shows Ireland is now 13th in the world for ease of doing business, four places higher than last year. Perhaps just as noteworthy is the second study from tech giant IBM, which shows that Ireland has retained its position as the best country in the world for the quality of its foreign direct investment (FDI).Ireland is ranked in first place in IBM’s Global Locations report due to its success in attracting high quality research and development activities in life sciences and IT, coupled with high-value investment in financial services.Not surprisingly, IDA Ireland and various cabinet ministers rushed to capitalise on the findings of both reports, which they said, offer further proof that Ireland is back in business.

That it was all so simple. First, it’s worth noting that, while Ireland climbed four places in the World Bank’s rankings, this was due partly to a change in methodology called the Distance to Frontier score. Using the old scoring system, Ireland’s ranking rose by just two places compared to last year. Moreover, our ranking is also somewhat less impressive when you consider that we were in eighth place for ease of doing business in 2008.

What both reports also miss is the fact that, while Ireland might be great if you’re a multinational, it’s less so if you’re not.

While multinationals may be called upon to advise the Government on what should be in the proposed “knowledge box” tax scheme, smaller indigenous firms feel that they are continually discriminated against. Take the most recent budget, which introduced tougher income tax measures for the self-employed and a higher USC rate for those earning over €100,000 annually.

The reality for small business owners and the self-employed here is that there’s little in the way of encouragement for them, despite the fact that most people working in Ireland are employed by them, rather than by big multinationals.

The failure to provide proper supports to entrepreneurs here sends out the wrong message in promoting an enterprise culture and also downplays the significant contribution of these individuals to the Irish economy. Until this situation is reversed then Ireland may continue to aspire to be the best small country in the world in which to do business, but will never really be.

B.J. Dennehy & Company, Accountants & Registered Auditors, Ireland.