Wednesday, 20 April 2005
Dáil Eireann Debate
71. Mr. Durkan asked the Minister for Enterprise, Trade and Employment if he has identified procedures or issues which tend to make the Irish economy less competitive; if he proposes to take remedial action in this regard; and if he will make a statement on the matter. [12169/05]
239. Mr. Durkan asked the Minister for Enterprise, Trade and Employment the extent to which he has identified the main factors leading to a lack of competitiveness in the context of the economy vis-à-vis the Euro-zone countries; and if he will make a statement on the matter. [12495/05]
Each year the National Competitiveness Council undertakes a comprehensive analysis of Ireland’s competitiveness performance and publishes its results in its annual competitiveness report. The council benchmarks Ireland’s performance relative to competitor countries, including Euro-zone countries. Based on this analysis the council also publishes its competitiveness challenge report, which offers a list of policy recommendations aimed at enhancing Ireland’s competitive position. These recommendations, presented to both the Taoiseach and the Minister for Enterprise, Trade and Employment, make a significant contribution to policy development in all areas affecting competitiveness.
The most recent reports by the National Competitiveness Council were published in October 2004. Both reports found the economic environment for 2004 encouraging. The economy experienced significant improvements in the growth of GNP, employment and a reduction in the unemployment rate. According to ESRI’s spring 2005 quarterly economic commentary, the economy will continue its robust performance with rates of 5.7% in real GDP and 5.0% for real GNP forecast for 2005, followed by rates of 5.5% and 5.8%, respectively, in 2006. Following an exceptional strong employment growth of 3% last year labour market conditions are expected to remain strong in both 2005 and 2006. It is forecast that the unemployment rate will stabilise to average 4.3% in both 2005 and 2006.
However, the council’s analysis discovered several constraints and threats to future competitiveness. Chief among these was the increasing cost base relative to our trading partners. The 2004 competitiveness challenge report stated there is a need to make wage setting, governmental spending and taxation more responsive to changing competitiveness developments. We must address our increasing cost base to protect our competitiveness. This continues to be a high priority for the Government.
The Government has taken several steps to address the issue of prices and costs in Ireland. In budget 2005, by not increasing indirect taxes, the Government demonstrated its commitment to ensuring that the progress made on reducing consumer price inflation last year continues this year. The most recent consumer price index figures from the CSO show that inflation fell to 2.1% in March. That was the fourth consecutive month that Ireland’s rate of inflation decreased.
If we wish to improve our competitiveness, Ireland cannot afford to have sheltered sectors of the economy immune from competition. The key to reducing prices and maintaining them at optimal levels in the long term is to ensure that vibrant competition is present in all sectors of the Irish economy. That is why the Government has strengthened the powers and resources of the Competition Authority, which is charged with combating anti-competitive practice in the economy.
The NCC also found that there remains an inconsistency between our image as a high technology economy and our underlying knowledge base. The Government recognises that the research agenda is one of the most important elements in terms of our drive to increase both competitiveness and quality employment now and in the future. A group involving representatives from industry, venture capitalists, the universities and institutes of technology, Departments and agencies has developed Ireland’s research and development action plan under the aegis of my Department. The plan was published in August 2004. It sets a target of spend on research and development of 2.5% of GNP by 2010 and makes a range of high level recommendations in pursuit of this. These recommendations are ambitious but represent the type of actions Ireland needs to take if it is to continue to be competitive in a fast changing globalised economy.
The NCC also made a number of other recommendations in the areas of entrepreneurship, enterprise development, innovation and creativity. These and other recommendations are being considered by an interdepartmental group of senior officials, which is chaired by my Department. The interdepartmental group is currently preparing a report on the NCC’s recommendations, which will be submitted to Government before the summer.
Mr. Hogan: We should breathe a collective sigh of relief that the Government did not increase indirect taxes in the last budget, given that it has imposed 27 stealth taxes since the last general election. We should be pleased. Will the Minister accept that important recommendations have been highlighted to him and to the Department of the Taoiseach over a long period of time but no action has been taken on them? This is particularly true with regard to the regulatory burden faced by businesses.
Does the Minister intend to make changes to the Companies (Auditing and Accounting) Act, which was enacted some time ago, particularly with regard to the compliance statement? Does the Minister accept that the regulatory burden imposes considerable additional costs on businesses and consumers? The Taoiseach’s publication, Better Regulation, highlighted this in January 2004 but, regrettably, no action was taken. Will the Minister make an attempt to implement the recommendations in that document? It recommended that any legislation introduced which affected business or consumers should be necessary, sustainable, accountable and transparent, without imposing an additional cost burden on business.
Mr. Martin: With regard to the Bill mentioned by the Deputy, my colleague, the Minister of State, Deputy Michael Ahern, commented in the Seanad last week that certain aspects of the legislation would be reviewed and that the CLRG group would examine it. The Minister of State and I have heard a range of submissions and presentations from interested parties in various sectors who have concerns about over-regulation and some elements of the Act being too exacting.
Mr. Martin: We listened to those views and have responded to them. However, the experience of many major companies that locate in Ireland — I have met many of them through IDA Ireland — is that Ireland is probably the best place to locate and do business in Europe. The structures of governance in Ireland are more responsive and agile in meeting the needs of enterprise and in removing barriers or obstacles that could inhibit the growth or establishment of a business.
With regard to the competitiveness report, an early decision taken by the Government was on the planning guidelines. It is interesting that on the one hand the Government is attacked for not responding to recommendations from bodies such as the competitiveness council but when it does respond, it is immediately attacked on all sides.
Mr. Martin: That is the major vehicle for dealing with the competitiveness issue. We get an independent body, the competitiveness council, to assess the competitive challenges and to make recommendations to Government. When that happens, however, the Government is damned regardless of whether it implements the recommendations.
Research and development is a key competitiveness issue. We have invested significantly in this over recent years and we have work on hand to increase both the level and quality of investment in future.
Mr. Hogan: What is the Minister’s opinion of the cost of waste management and disposal and the contribution it makes to additional costs for business and consumers? What does he believe should be done about the waste management issue to ensure lower costs for disposal of waste so it will not be a huge burden on business and consumers in the future and to maintain our competitiveness?
Mr. Martin: Waste disposal and energy costs are two significant areas of concern for industry and competitiveness. I support the broad strategic approach being pursued by my colleague, the Minister for the Environment, Heritage and Local Government, which involves——
Mr. Martin: The catch up phase of the past seven or eight years has, by definition, resulted in far greater costs for local authorities in providing, for example, better landfills than were provided in the 1970s and 1980s. We did not deal well with waste over many decades. The availability of resources was a key issue. There was also a lack of knowledge and so forth.
Mr. Timmins: The lack of competitiveness mentioned by my colleague, in addition to the failure of a product to evolve, has had a devastating effect on Wicklow in the past couple of weeks. The Minister says we are in top place in Europe but that is little consolation when jobs can be moved to other countries. A total of 140 jobs at AO Smith Corporation in Bray were lost last week while 94 jobs will be lost at Veha in Wicklow town at the end of the month. Will the Minister use his Department’s agencies to involve the workers concerned in a reskilling or retraining programme?
Mr. Martin: I have great sympathy for the workers concerned. In such circumstances we ask the State agencies to get involved quickly. FÁS offers services such as alternative job opportunities and training programmes which workers can undertake to enhance their skills and secure alternative employment. Enterprise Ireland works in an area which has suffered job losses through adding jobs in indigenous enterprises or through creating new indigenous start-up enterprises with the help of the county enterprise board. IDA Ireland seeks to attract investment into the region.
One must consider this in the context of the region. If one looks at single towns in isolation, one will encounter similar stories. However, there have been substantial increases in investment and jobs in Wicklow and south Dublin in recent years.
Mr. Eamon Ryan: A total of 87% of our energy needs are met by importing fossil fuels. Since the National Competitiveness Council’s report was published last October there has been another spike in oil prices. The price is $55 per barrel today. Does the Minister agree that this is a major threat to our competitiveness? We are uniquely exposed. What analysis has the Minister carried out in that regard and what remedial action can the Department take to tackle what I believe will be the biggest crisis for our economy and society in the next ten years?
Mr. Martin: My reach does not extend that far. I accept the strategic points raised by the Deputy. We can support alternative energy sources by the provision of investment across Departments. Other Departments have greater responsibility on this issue.
I am interested in supporting research into energy conservation and the development of products and services, in the workplace and elsewhere, that would reduce dependency on fossil fuels. I do not have a great depth of knowledge about Japan but it appears to be forging ahead in terms of technology and is investing in products and services that focus on energy conservation and reducing its dependency on certain types of energy. That should happen here.
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