Investor Presentaiton
Contract manufacturing (CM) overstates the extent of
goods export growth in the last two years
CM occurs where a company in Ireland engages
another abroad to manufacture products on its
behalf.
Crucially, the foreign contract manufacturer
supplies a manufacturing service to the Irish
entity but the overseas contractor never takes
ownership of the product. When the product is
sold abroad, a change of economic ownership
takes place between Ireland and the country
where the product is sold.
This export is recorded in Ireland's statistics even
though it was never produced in Ireland.
Previously, contract manufacturing did not have a
significant net impact on GDP as the company.
would send royalties back to where the
intellectual property (IP) was "owned" — it was a
royalty import. Now that the IP is here, Ireland's
GDP is artificially inflated.
200
180
Contract
manufacturing
160
proxy*
C.
€70
bn
140
120
100
80
60
40
40
20
0
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Trade data exports
National accounts exports
Source: CSO, NTMA Calculations
Gníomhaireacht Bainistíochta an Chisteáin Náisiúnta
National Treasury Management Agency
*Contract manufacturing proxy is calculated by taking the difference between the monthly International trade exports statistics
and the National Accounts/BOP measure for goods exports. The monthly data is based on the actual volume of goods flowing
through Ireland's various ports/airports whereas the national accounts/BOP makes adjustments for, among other items,
contract manufacturing.
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