Assessing the role of the international financial services centre in Irish regional development

Abstract

This paper examines the manner and extent to which the International Financial Services Centre (IFSC) in Dublin contributes to regional development in Ireland. Since its 1987 launch, the IFSC created over 10,000 jobs and promoted urban renewal in a previously derelict section of Dublin. Although it stands as one of Ireland's most prominent development projects, empirical examination of the IFSC remains limited. This study looks specifically at issues such as the kinds of activities and employment created at the IFSC, as well as local linkage formation. Based on published data and research interviews, this paper shows that the IFSC contributed to Ireland's economic development at a time when industrial policy focused primarily on employment creation. To date the IFSC has proven to be a successful policy intervention, the routine nature of many IFSC-related activities raises questions about the IFSC's ability to become something more than a centre for back-office financial services.

Acknowledgements

The author would like to thank Richard Grant, Laura Martinez-Solano, Konstanze Höchtberger and Seamus Grimes and the two anonymous reviewers for their comments on earlier drafts of this paper. This research was made possible by a doctoral dissertation improvement grant from the Geography and Regional Science Division of the National Science Foundation (BCS-0082487).

Notes

1. This area on the River Liffey, located very close to the city centre, once served as the main docking location for ships arriving in Dublin. With the development of containerization however, larger ocean-going vessels required deeper harbours. Ships could no longer make it this far up the River Liffey because it was too shallow. The main docking area moved further down the river to an area closer to the ocean and the Custom House Docks became a derelict and even dangerous part of the city.

2. Industries that previously did not qualify for the 10% corporation tax saw their tax rate lowered accordingly—24% in 2000, 20% in 2001, 16% in 2002 and 12.5% from 2003 on (PriceWaterhouse Coopers, 1999).

3. Overall, the financial services industry in Ireland employs approximately 50,000 people, although almost 80% of those are involved in the domestic financial services industry and are not directly involved in activities taking place at the IFSC.

4. These data are only available through 1999, because they are based on the number of Certification Advisory Committee (CAC) approvals. The CAC was designed to screen companies seeking to invest in the IFSC and consisted of representatives from the IDA, the Department of Finance, the Department of Enterprise, Trade and Employment, and the Irish Central Bank. Under the new regulatory regime, firms no longer require CAC approval and consequently firms associated directly with the IFSC are no longer as readily identified (IDA Financial Services, Research Interview, 19 March 2003).

5. The number of firms providing accounting and auditing services will become even more concentrated as KPMG intended to absorb most of Arthur Anderson's Dublin operations.