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Dáil Éireann debate -
Thursday, 8 May 2003

Vol. 566 No. 2

Ceisteanna – Questions. - Competitiveness of Economy.

Phil Hogan

Question:

1 Mr. Hogan asked the Tánaiste and Minister for Enterprise, Trade and Employment if she is taking new initiatives to prevent the further deterioration of economic competitiveness; and if she will make a statement on the matter. [12535/03]

Bernard J. Durkan

Question:

81 Mr. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment the position held by this country in the area of competitiveness in 1997; the relative position currently; and if she will make a statement on the matter. [12550/03]

Bernard J. Durkan

Question:

82 Mr. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment the reason Ireland has fallen from the position of the fifth most competitive industrial country to its current position; the actions she proposes to take to address the issue; and if she will make a statement on the matter. [12551/03]

Bernard J. Durkan

Question:

83 Mr. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment the steps she has taken to improve this country's competitiveness; and if she will make a statement on the matter. [12552/03]

Bernard J. Durkan

Question:

84 Mr. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment her proposals to ensure that industry here is in a position to compete with industry located in other jurisdictions; and if she will make a statement on the matter. [12553/03]

I propose to take Priority Question No. 1 and Questions Nos. 81 to 84, inclusive, together.

The National Competitiveness Council reports to the Taoiseach and me every year on key com petitiveness issues for the Irish economy. In its most recent annual competitiveness report, in 2002, the council acknowledged that, over the last decade, the Irish economy has enjoyed significant advances, allowing convergence across key areas with many of our competitors. A virtuous circle of low inflation, moderate wage increases, lower taxes and higher productivity was maintained and, as a result, the economy has been extremely competitive in recent years.

The council does not rank countries as a whole or assign a single position on competitiveness, but rather examines their competitiveness under specific relevant headings or indicators to determine progress, or otherwise, in the areas concerned. For example, the most recent report makes clear that in the period 1997 to 2002, the five-year percentage change in total employment in Ireland was the highest recorded, at 25.3%, and ranked us first among all comparator countries.

I am aware that there are various international scoreboarding reports which rank countries regarding various aspects of competitiveness. In particular I note that the last published global competitiveness report, produced by the World Economic Forum, recorded Ireland slipping in the period 2001-02 from 11th to 24th place under growth competitiveness index rankings, while it improved from 22nd to 20th place under microeconomic competitiveness index rankings. In the period 1998 to 2002, which is the earliest starting date recorded in the report, Ireland slipped from 13th place to 20th under these microeconomic indicators.

The World Competitiveness Yearbook 2002, which is produced by the Institute for Management Development in Lausanne, ranked Ireland in tenth place, a drop of three places from its 1998 position. Looking to the future and having regard to the difficult economic conditions now prevailing, I agree that we must vigorously address the key competitiveness issues, particularly those that impact on inflation.

The Government is already taking measures to improve our competitiveness which will play a critical role in the fight against inflation. These include: strengthening competition across the economy and implementing specific measures to tackle cost pressures in key areas such as insurance; increasing investment in research, technology and innovation which will provide the basis for future productivity growth; and continuing to invest in key infrastructure such as broadband telecommunications.

My question was whether there were any new initiatives being taken by the Government regarding improving our economic competitiveness. There was a Cabinet meeting this week at which this matter was expected to be discussed. I do not know if it was discussed or not or whether the Minister emerged with any new proposals to deal with the deterioration in our economic competitiveness. Approximately 800 jobs a week are being lost, many of them as a result of employers having to meet indirect costs imposed by the Government. These include higher indirect taxation announced in the budget, the lack of progress on infrastructure, research and development issues and insurance costs.

The Minister and the Taoiseach were told what had to be done in December 2001 by the National Competitiveness Council and that we were slipping in terms of competitiveness. What are the new initiatives the Government is contemplating arising from the meeting this week?

We have developed enormously over the last six years. We cannot hanker back to the days when we had relatively low wages and could compete with the large available labour pool of unemployed people. That meant there was an employer's choice. Today it is different – it is an employer's choice in the main, notwithstanding the change in global circumstances.

Unemployment here is among the lowest in the EU at 4.5%. The EU average is 8% and it is 10% in Germany. The bar has risen and we must rise to that challenge. That is why we have made a priority of investment in research. Last year we doubled investment in research in my Department, notwithstanding a reduction of 5% in the Vote.

There are some factors which affect our competitiveness because we are so globalised – we trade 180% of our GNP – and which are beyond our control. These factors include interest rates, currency exchanges and so on. There are factors within our control, like matching wage increases to productivity increases, and it is important that that underpins the new programme which has been negotiated, as well as introducing more competition in the economy. As we do that I hope Deputy Hogan and his party will support us. Vested interests must be taken on in areas where we do not have adequate competition and where consumers are paying more than they should for products and services. I am delighted to acknowledge that inflation is on a downward turn but we must do much better, as 4.3% is still too high.

I am delighted the Minister gave me a lecture on what she has and has not been doing for the last six years. It is nice to know she is six years in office and sees no problem with the fact that our competitive position is deteriorating. The Government has put €35 a week on every job in this country since the last election in the form of indirect tax increases. If the Minister and the Government see no problem with our economic competitiveness they are living in an ivory tower. The failure to substantially improve funding for local government means local authorities are imposing additional waste charges and commercial rates far beyond what was expected and beyond the rate of inflation. Those costs are borne by consumers and businesses and are costing jobs. I hope the Minister takes new initiatives arising from this much-trumpeted Government meeting last Tuesday. Obviously nothing was discussed or decided regarding competitiveness.

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