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Illustrate how foreign transnationals (i.e - Leaving Cert Business - Question B - 2011
Question B
Illustrate how foreign transnationals (i.e. foreign direct investment (FDI) companies) have impacted on the Irish Economy.
Worked Solution & Example Answer:Illustrate how foreign transnationals (i.e - Leaving Cert Business - Question B - 2011
Step 1
Direct employment
Answer
Foreign transnationals have directly employed approximately 150,000 people in Ireland. This figure considerably underrepresents the total employment impact, as it is estimated that FDI companies generate indirect employment for twice that amount. Many of these jobs are filled by skilled graduates, some reaching up to PhD level, although this creates concerns around a potential 'brain drain' from Ireland.
Step 2
Tax revenue for the Government
Answer
FDI companies contribute significantly to tax revenues, paying a low corporate tax rate of 12.5%. This taxation policy is part of the Irish Government's strategy to attract foreign investment, providing essential funding for public services and infrastructure.
Step 3
Positive spillover effects for local economies
Answer
FDI companies positively impact local economies by sourcing suppliers from domestic businesses whenever possible. Such practices not only enhance local businesses' revenues but also foster cooperation among firms, strengthening the overall economic environment.
Step 4
Enhancing Ireland's reputation
Answer
Foreign transnationals enhance Ireland's global reputation, making the country an attractive destination for further foreign direct investment. Companies like Intel and Google have set up operations here, serving both as anchors for future investors and as catalysts for local development.
Step 5
Step 6
Transfer of skills and technologies
Answer
The presence of foreign multinational corporations facilitates the transfer of advanced business practices and technologies to local employees. This not only raises the skill levels of the Irish labor force but also encourages an entrepreneurial spirit among natives.
Step 7
Repatriation of profits
Answer
Foreign companies often repatriate profits back to their home countries, which can result in significant capital leaving Ireland. While this can create concerns regarding local investment, it also reflects the success and profitability of these enterprises within the Irish economy.
Step 8
Positive impact on the Balance of Trade
Answer
FDI firms contribute positively to the balance of trade by generating substantial exports. These companies often account for a significant portion of the country's export activity, which has historically compensated for substantial trade deficits, helping maintain a balanced payments position for years.