VI. IMPACT OF INWARD INVESTMENT
55. NIEC drew attention to the general consensus
from economic research that inward investment is likely to be
beneficial if it involves process innovations and thus contributes
to enhancing the skills and knowledge of the indigenous work force.
It adopted a cautious view of the relevance of financial inducements,
arguing that, from a purely economic perspective, inducements
may be unnecessary since, should a location have the right competitive
conditions to attract investment, this would be attracted without
inducements. If the conditions were not right, it argued that
the cost of securing the investment may outweigh the benefits.
It also highlighted concerns that, if inward investment is attracted
by inducements rather than 'fundamentals', the kind of investment
attracted to a peripheral location is likely to be 'shallow' in
the sense that it will not integrate into the local community.
56. In 1991, NIEC had concluded that a policy of
attraction of inward investment to Northern Ireland could not
by itself secure the rate of growth an economic strategy should
seek to achieve. It cautioned against offers of assistance for
assembly or branch plant operations and argued for the attraction
of "projects which will introduce new products and technology
and will offer scope for developing higher order corporate functions."
57. The Council also drew attention to the consequences
in Northern Ireland of the historic unreliability of jobs based
on inward investment. It pointed out that, between 1973 and 1990,
the number of externally owned plans had declined markedly, with
employment in the inward investment sector falling by over 50
One factor in this had been disinvestment by British firms throughout
much of the 1980s.
Since 1990, there had been a marked improvement, with the number
of externally owned plants increasing from 207 to 232 in 1998,
with a consequent increase in employment from just over 41,000
to nearly 53,400.
58. CBI commented on the longer term benefits that
inward investment could bring and on the broader benefits that
would arise from developing a world class sub-supply base, capable
of expanding beyond the original inward investor. It drew attention
to the greater extent to which multi-national plants in Northern
Ireland make use of 'best practice'.
Mr Gillen, of ICTU, wanted to see a formal linkage mechanism set
up between foreign investment companies and local indigenous companies,
something which NIEC has also proposed.
Mr Ingram commented that a large number of service jobs had been
created on the back of inward investment, although he conceded
that some of these might have happened anyway.
Inward investment and job creation
59. NIEC considered that Northern Ireland was failing
to maximise the opportunities provided by linkage between large
externally-owned companies in the Province and indigenous suppliers.
Measured by the proportion of expenditure on material inputs sourced
in Northern Ireland, this declined significantly over the period
1986 to 1996.
60. In terms of TSN policy, NIEC pointed out that
the location of a new project in a TSN area does not necessarily
guarantee jobs for the people from that area. It therefore saw
the policy imperative as providing residents of such areas with
the means and skills necessary to apply for jobs, irrespective
of location. Besides this, development of public transport infrastructure
and the further education sector were seen as having an important
part to play and the whole process will be facilitated by continuing
peace and political stability.
It noted that the higher rate of grant payable in respect of projects
in TSN areas acted as an incentive, and that enhanced economic
activity in the most popular locations was leading companies to
61. A number of witnesses stressed the importance
of transport links generally. CBI pointed out that, although there
should be encouragement to investors to set up in, or close to,
TSN areas, this was not always appropriate. So it was important
to be able to get workers to the jobs, wherever they decided to
CBI also mentioned the importance of good communications links
into, and out of, the Province.
62. ICTU stressed the importance of attracting key
features of an inward investor, such as the corporate headquarters
and research and development facilities, and not just an assembly
operation, to create an ongoing commitment.
Adam Ingram commented that part of the Government's approach had
been to build on large inward investors and "then to try
and spin that out into the wider economy", an area which
he foresaw might be developed further.
63. CBI witnesses pointed out the need to differentiate
between requiring inward investment to locate specifically in
an area where there is social need and the investment available
to meet the needs of that area. It instanced Fujitsu, which invested
in, and secured a labour force from, West Belfast as it trained
its own work force in the assembly line skills that were needed,
rather than seek an already skilled work force.
64. One area where IDB is making considerable efforts
to attract new investment is call centres. CBI drew attention
to the targeting of this business, particularly from Great Britain,
capitalising on the English language skills of the Province.
IDB commented that "the Ulster accent comes across exceptionally
Dr Bradley, however, was less attracted to call centres as desirable
inward investment. He saw this as "a transitional arrangement
for part-time mainly female work. I should think as a long-term
proposition they are very vulnerable, not necessarily through
pure cost considerations but through technological developments."
Impact on existing employers
65. One of the adverse effects claimed for inward
investment is that it may attract skilled labour away from indigenous
employers. CBI, drawing on anecdotal evidence, commented that
there were indications of this, but there were other indications
that some companies were not unduly concerned about any such turnover
as they were training anyway.
John Simpson agreed that an incoming inward investor could derive
a competitive advantage from the assistance received,
and Bombardier Shorts drew attention to this also.
ICTU intimated that there could be displacement of employment
but could not offer any direct evidence.
123 Ev. p. 24. Back
p. 25. Back
p. 25, 27. Back
p. 27. Back
p. 27. Back
p. 49-50. Back
p. 30-31, 34 and Q 88-90. Back
p. 30-31. See also Q 88. Back
p. 35. Back
136. See also Q 139-141. Back
105, 106. Back
19. See also Q 105 and Q 181-182. Back
18, p. 187. Back