Competition Takes Many Forms
It may surprise some readers to know that we recently compiled an overtly positive review of the Irish economy. In the course of this review, we noted that despite the severe problems that the country had encountered a few years ago, the Irish economy was now facing what we described as a chronic balance of payments surplus. This has been, in part, the result of a stronger trade balance but primarily the result of some extremely strong inflows that are notionally termed as being 'direct investment flows'. In theory, direct investment flows are investments made by foreign companies in real assets such as plant and equipment but also included in this category are intra-company transfers. Almost amusingly, some of the recent direct investment flows into Ireland have rather implausibly been larger than Ireland’s entire GDP and this has of course occurred as a result of the significant number of (prominent) multi-nationals that are using Irish domiciled subsidiaries as tax efficient vehicles.
Download the full commentary from Nikko.