asked the Minister for Finance the action he intends taking to reverse the decline in investment which is having a very adverse effect on employment prospects; and if he will make a statement on the matter.
Written Answers. - Decline in Investment.
30.
The Central Bank and the Economic and Social Research Institute forecast a rise in investment next year. The expectation is confirmed by other independent forecasting institutions. This recovery is consistent with the trend in recent years showed a considerable slowing down in the rate of decline.
The adjustment policies pursued by the Government have contributed to this recovery. These involve cost efficiency measures including pay moderation as well as public expenditure measures aimed at stimulating investment leading to sustained employment. In addition, the Government industrial strategy as set out in its White Paper on Industrial Policy and the initiatives already taken are contributing to this recovery.
The Government have devoted considerable resources to the promotion of efficiency and innovation in the economy. Industrial and tourism policies have been re-orientated. Measures have been introduced, such as the enterprise allowance scheme, to bring unemployed people back to work. Venture capital is being provided through tax incentives and the newly established National Development Corporation. Education and training are vital to employment and there has been significant resources devoted to these areas in recent years.
Within the public capital programme expenditure has been reallocated to concentrate on investment which leads to sustained additional employment.
The Government recognise that high interest rates are a serious constraint on fixed investment formation. The progress in reducing inflation and the current balance of payments deficit together with the Government's policy of halting the increase in its debt have created a facourable underlying interest rate climate. When the present market pressures abate, this favourable interest rate climate should again allow domestic interest rates to fall to more normal levels. Further progress in reducing interest rates will depend on how quickly we reduce the present excessive level of Government borrowing.