Dáil Éireann debate -
Wednesday, 31 Jan 2001

Vol. 529 No. 2

Written Answers. - Multinational Investment.

Thomas P. Broughan

Question:

93 Mr. Broughan asked the Tánaiste and Minister for Enterprise, Trade and Employment her views on reports of job cutbacks at US high-tech firms (details supplied) and at the prospect of a predicted downturn in the US economy under the current Administration. [2612/01]

Tánaiste and Minister for Enterprise, Trade and Employment (Ms Harney)

While the US economy has slowed down over recent months, it is not clear at this stage how severe or protracted the slowdown will prove to be. Obviously a very sharp and prolonged slowdown could have significant effects on Ireland, particularly if it substantially reduced the inflow of foreign direct investment.

Nevertheless, there are a range of factors at work which would help to ameliorate the effects of any slowdown in the US economy. These include the following.

Economic conditions within the EU are, in contrast to the US, improving. Since this is the main market for the output of US owned companies in Ireland, they are somewhat less likely to be affected by any slowdown than those in the US. Much of the recent foreign investment into Ireland from the US have been strategic investments designed to operate under new management structures which achieve better efficiencies and margins than their US plants. Such operations would probably be one of the least likely to experience job cuts. Several major US companies which have made such investments in Ireland in recent years have recently made clear their intention to continue to grow their Irish operations despite a weakening in general market conditions. Most of the recent weakness in the US economy has been confined to the IT sector. While this is important to Ireland, it is by no means the only significant sector in terms of US owned investment in Ireland.

In the event of a major slowdown in the US economy the most vulnerable jobs in US multinationals in Ireland are those in relatively low skill areas where Ireland is becoming an uncompetitive location for manufacturing. These jobs are at risk anyway in the long-term whether or not the US has a recession. In this respect, a primary element of current IDA Ireland policy is to assist client companies to "go up the value chain" into higher tech jobs requiring higher skilled and better paid employees. Companies are also being encouraged to put in new higher order functions such as research and development. The overall objective is to raise the strategic importance of the Irish operation within client corporations thereby embedding companies more firmly in the economy. This will help to secure employment levels into the future.

The current strength of the Irish economy with very low unemployment and strong demand for labour in most sectors means that Ireland is in a better position than it has been to weather the effects of any economic slowdown in the US economy. The impact of any slowdown in the US on Ireland will in large part be determined by how successful we are at maintaining a cost effective and efficient environment for foreign investment and business generally. Therefore, the recent signs of weakness in the US economy should, if anything, spur us on to progress a range of critical issues, including infrastructure provision, controlling inflation, deregulation and addressing the future skill needs of the economy.

In relation to the company cited by the Deputy, a world wide review is being undertaken by the company at the moment. It is expected that the review will be completed in February 2001. It is anticipated that the reduction in employment in Ireland will be in line with the 10% reduction that is expected for the company as a whole. There are approximately 1,600 employed by the company in Ireland.