I thank the Seanad for giving me the opportunity to introduce this debate. Anyone looking at Ireland's performance in recent years would be anxious that we start to look ahead to see what we can achieve over the next 15 years. That is what Forfás has done in this report. It has set out an ambitious yet realistic set of targets which will stretch us but which will deliver tangible results. It sets out objectives to create employment, to halve our rate of unemployment and to increase our standard of living from 65 per cent up to European standards.
It also shows what we can achieve as a society if we get consensus on a set of targets and we are willing to accept the challenges necessary to deliver them. Anyone looking at our performance and the transformation wrought in the past ten years will equally recognise that social consensus on certain objectives is a huge part of that success. We now have the fastest growing employment rate in Europe — we are regarded as the Celtic tiger by many commentators — because we have been willing to take a long-term view. That is what this report is saying, but we can achieve more. We must address some difficult challenges in the future but we will be able to overcome them and to meet the opportunities if we achieve social consensus on what must be done. These challenges will be more difficult to deal with if we do not have social consensus on what we can achieve as a society. That is what makes this report worthwhile and important.
This report is stretching the planning horizon well beyond the life of any Government or social partnership agreement. It is saying we need to move to a new Ireland 15 years from now which offers benefits in terms of the quality of life, the standard of living and support for disadvantaged groups in our community. This report is important, not as an A to Z of where we must go and what decisions we must make but because it sets the challenges we must meet along the way. This report is the first of its kind to map out a clear set of objectives with a long-term horizon. It is important that we begin to think beyond the planning horizon of any one Government.
At this stage in our development there is a need to take stock, to look at what has been achieved in social and economic development, to identify those who have been excluded from the prosperity achieved and the underlying reasons for their exclusion, to assess the forces of change at work, both local and international in shaping our economy and society at present and how they are likely to evolve in future years, to set ambitious but realistic targets for future growth and to establish the broad direction of the policies needed.
The report can make a major contribution to the debate which is needed on these issues. It outlines the contribution which the enterprise sector can make to the achievement of wider national, social and economic objectives, including the area of employment creation in particular and public policies needed to support this. The work and analyses undertaken by Forfás will make a significant input into developing and implementing the policies required to raise performance in employment creation even above the very good results achieved in recent years. I hope the report initiates a serious examination of these issues.
The long-term view is the key contribution of Forfás's work. It gives us a structure and a platform to consider the long-term impact of critical choices facing us and it helps to shape our agenda. It maps out the potential rewards on offer from adopting a radical, coherent and challenging action plan. Shaping Our Future is not intended to be the last word on, or the A to Z of, enhancing our society. No work with a longer term horizon can promise to anticipate all the range of choices we will face in the future. This is recognised by Forfás and the wide range of people who contibuted to this valuable work. What it does, however, is identify the most likely scenarios facing us and bring forward for clear analysis the starker choices we must make. It also paints for us a future that is attainable and which I would like to see realised.
We could choose not to shape our future in a strategic way. The alternative is to adopt short-term horizons, be reactive and bob about like a cork in a globalised sea of international competition. I reject that type of thinking and approach. Ireland can and must adopt new and more sophisticated strategic directions to secure a better future. If we really believe in transforming our society for the better, then we need to develop a revised consensus on the way forward. We need to marshal our strengths against the obvious threats, to make some sacrifice in favour of the overall good and to seize opportunities. If we do so, we will build on the already strong economic foundations.
The outcomes in 15 years of appropriate policy choices are laid before us in the Forfás document. These include halving the present rate of unemployment to 6 per cent, reducing long-term unemployment to no more than 50,000, increasing living standards in terms of GNP per capita to average EU levels, compared to 65 per cent at present and raising the quality of life for all our people. Shaping Our Future maps out an agenda for change through, for example, harnessing the growth potential of the services sector where 300,000 jobs can be achieved in the next 15 years, transforming Irish owned manufacturing industry which can realise 12,000 jobs, doubling the profitability of Irish owned companies to 8 per cent and strengthening foreign direct investment which could yield 33,000 extra jobs. It identifies critical support policies needed for enterprise development — taxation and public finances, skills, telecommunications, transport and logistics, science and technology and finance for development among others.
We must envisage a new society which is characterised by higher living standards, greater equity in outcomes and an economy which is renowned for its competitiveness. There have been many critics of our 75 year history who said that we had an insufficient strategic vision of where we were heading or no strategic direction at all. While I do not necessarily agree with everything they said, it is now time to chart the path for the future in a more mature and systematic way.
There are many forces of change at work in the world economy which are increasingly impacting on Ireland. These forces are in such areas as the globalisation of trade and competition. That is followed by the reduction of trade barriers in the Internal Market and on the broader GATT rounds. Technology development is growing at an increasing pace and diffusing more rapidly across national boundaries. There are dramatic changes in the workplace where team work is becoming a feature of high productivity environments. There is greater emphasis on human resources versus fixed capital. The recent EU White Paper on the Year of Learning indicated that human capital should appear on the balance sheet as an asset in the same way as fixed capital. However, we are a long way from adopting such a radical view of accounting policies. Human resources will be a major determinant of the competitiveness of a company in the future. European Monetary Union will impose strict disciplines upon us if we want to exploit the opportunities it offers.
World trade is growing rapidly and barriers to trade are diminishing. Increasingly, taking advantage of the new and more liberal order for international trade, foreign direct investment in the manufacturing sector but also to a growing extent in the services sector, is bringing about new patterns of industrial production. We have benefited from these tendencies. We have seen many foreign companies choose to invest in Ireland attracted by the conditions here and the skills we can offer but also by direct access to the European market.
Technological change is also fuelling this process. New technologies make it possible to locate different parts of the production process in different areas of the world. Telecommunications is of particular importance in encouraging this tendency to global market, and it is also assisted by the growth of advanced manufacturing techniques in industrial automation. In general, our society is characterised by a high level of technological know-how. Technology is the driving force behind economic growth. Technological innovations dominate the everyday lives of individuals, enterprises and the economy.
Our competitors are making huge investments in strengthening their technological capability. Technology policies and strategies are now a key component of economic development efforts in all countries. In Ireland, however, we have been slow to accept this message. Industrial policy and State funds have been focused significantly on the attraction of inward investment and not sufficiently on encouraging research, development and innovation in local industry and on building up the scientific and technological infrastructure.
These points have been forcefully made recently in the report of the Science, Technology and Innovation Council — STIAC — chaired by Dan Tierney. The Government has accepted the principle of this report. There is also the increasing importance of innovation to enterprise development. It points out in the report that innovation is wider than technological innovation alone. Marketing and management innovations are also important. Technological changes are behind many of the innovations in marketing and management which are regularly cited; for instance tele-marketing would not be possible without digital telephony or the developments in personal computers. Mobile telephony is still in its infancy, with the potential for a fundamental impact on the way our lives and businesses are organised and run.
A further aspect of the changes under way in the world economy is the way in which economic strength is shifting to new regions. In particular, the rise of the Asian economies over the last 20-30 years has been the most striking phenomenon. Some of these have managed to sustain high growth rates and high investment rates for decades. As a result, although they have started from a low base, major transformations have occurred in their economies and major investments in infrastructure, in technology and, most significantly, in human resource development. Fundamental economic reform in Latin America may lead to another group of countries joining the Asian economies in the future as examples of dynamic growth.
Nearer home, the countries of Eastern Europe, having transformed their economic and social systems following the collapse of Communism, are now poised to become important exporters as well as attractive locations for foreign direct investment. Within the European Union, we are now on course for Economic and Monetary Union, which represents a logical completion of the Single Market. However, it is not a strategic decision that can be taken in isolation. It has to be part of a commitment to transform the Irish economy to one of high efficiency, responsiveness and flexibility if we are to be sufficiently competitive to exploit the opportunities that trading in the new environment will create.
Ireland in many ways is at a turning point in its economic and social development. Over the last few years we have seen a fundamental change in the characteristics of the economy and a significant departure from the practices and disappointments of previous years. Growth is continuing at a sustained level, with rates significantly above those of our European partners and with good prospects for their continuance in the years immediately ahead. For the first time, this growth appears to be broadly based and is not accompanied by any renewal of upward inflationary pressures.
Moreover, especially recently, it has been accompanied by a significant net employment creation, with a total of 88,000 jobs created in the last two years, an unprecedentedly high number compared with the achievements of earlier years. We are at present one of only three countries to satisfy the Maastricht criteria. Those criteria, as Members know, cover inflation, interest rates, exchange rate stability and debt targets among others.
Looking ahead, the demographic situation is also favourable. Changes in the population structure mean that declining numbers will enter the labour force. At present, we have a much higher youth dependency ratio than the rest of Europe but the trends in the future will take us towards the EU average. These trends will make it easier for us to meet our economic and employment goals. It will be easier to raise living standards and it will be easier for people to find jobs. With the right policies in place, ambitious economic and social goals appear within our reach.
However, the achievements to date must not lull us into a sense of complacency. Unemployment remains unacceptably high. Moreover, the problem is exacerbated by the extremely high share of long-term unemployed in the total of unemployed. It is clear that we face a problem of major dimensions, one which has serious implications for our social cohesion and one which will require sustained action on all fronts if it is to be fully addressed and solutions found.
In this sphere, much work has already been done in analysis and identification of appropriate policies. Senators will be aware of the task force on long-term unemployment and the NESF report on unemployment. My Department has drawn together many of these strands in the form of the recently published Government approved strategy for the labour market entitled Growing and Sharing our Employment.
However, it is a significant virtue of the Forfás document that it has placed this problem of unemployment, and long-term unemployment in particular, in a wider context. The challenge is to sustain the recent economic performance and to adopt policies that ensure future prosperity can fully address the intractable problems of unemployment and its most distressing manifestations in terms of youth unemployment and long-term unemployment.
There is also concern as to whether the transformation has yet run deep enough to withstand external challenges in the future. The long run competitive capabilities of our businesses and the development of our human resources will be the determinants of Ireland's success in a changing world. We need a long-term framework for enterprise policy if we are to build upon the recent success we have achieved and respond adequately to the challenges we now face internally and externally. Innovation will be the only successful response to rapid change in the world economy; the emergence of new challenges and opportunities means that the range of goods and services we offer to the world market has to be updated and developed continuously.
The Forfás report stresses that we need to improve our national innovation performances if we are to succeed. Industrial competitiveness has two parallel but equally important components: increasing revenues through a constant stream of new ideas and product innovations and increasing profits through unceasing improvements in productivity. As far as Irish manufacturing industry is concerned, we are lagging far behind our competitors in terms of product introductions. A Forfás survey has shown that between 1990 and 1992 only one third of Irish firms introduced new or improved products compared with a rate of around 50 per cent for some other EU states. There are some grounds for cautious optimism in the strong growth in business sector research and development, admittedly from a low base, between 1988 and 1993. A new survey later this year will indicate whether this has translated into a better performance in product and process innovation.
The ambitious overall objectives in Shaping Our Future have been translated by Forfás into a set of second level targets that will provide the focus for policy action in the future. Targets are established in the report in the fields of innovation, investment, exports, skills, telecommunications, transport, tax and finance and employment. It is the intent of the Forfás document to set out principles to be followed in determining the details of action in particular cases, and not to attempt to anticipate actions the Government may need to take in any one year or period in the light of prevailing circumstances.
With these objectives and targets set out, the Forfás document defines a strategy for enterprise. In the first place, the role of the services sector has been too long neglected. As I mentioned in the figures I quoted earlier, clearly 85 per cent of the additional jobs that Forfás projects as being achieved in the next 15 years with correct policies will be in the services sector. I do not think anyone could say that our industrial policies and our general economic policies have sufficiently reflected the importance of the services sector in creating employment and competitive advantage. The report calls for a new emphasis on this sector, to place it with manufacturing at the heart of enterprise strategy. The report shows the potential for a major expansion in services employment, not only in internationally traded services, which would be significantly dependent on a rapid improvement in our telecommunications system, but also in local services. Here a considerable expansion is possible, based on increased use of services by the manufacturing sector, on an expansion of tourism and the growth of personal services as a result of increasing incomes. I am currently developing a strategy for services that I will bring to Government in the near future. In my period in the Department I feel I would add value if I start some new thinking about how to tackle the opportunities on offer in the services sector.
The manufacturing sector outlined in the report distinguishes between Irish owned and foreign owned firms. There are difficulties in both groups, but they are different. For foreign investment, the problems are increased international competition for location and the need to maintain the attractiveness of the package offered by Ireland to companies considering locating here. The problems of Irish owned enterprises often relate to strategic market positioning and innovation. The report outlines a broad based strategy of enhancing scale and profitability and assisting Irish companies to reposition into new areas and positions in the value chain.
Anyone looking at the industrial value chain in recent years will see that manufacturing and assembly are declining in relative importance. The real core value added elements in the industrial chain are moving at the early stage to product development and design, and in the later stages to marketing, customer service and selling. Those are trends to which Irish business has to respond. We will not survive as a country if we find ourselves located in low value added manufacturing assembly. We have to migrate to the higher added value segments. The big challenge for Irish business is to move away from low margin activities into the margin that requires higher human resources that goes into design, customer services and marketing.
A central message of the report, however, is the broader one of an encouragement of enterprise. We have to recognise the requirements of enterprise and make these the driving force of industrial policy. Most crucial will be the maintenance and improvement of an environment in which enterprise can flourish, in which new businesses can start and thrive. Many aspects of industrial policy, and economic and social policy generally, will have to be harmonised and focused in order to bring this about. The barriers to entry will have to be lowered, access to finance will have to be improved, administrative burdens will have to be eased and the right infrastructure and support measures will have to be in place.
Existing Irish owned companies will be in need of an updated and strategic package of support measures in which the development agencies will have an important role. Less tangibly but more importantly, an enterprise culture will have to become pervasive; one that respects and encourages enterprise because it creates the wealth that will allow us to reach our higher goals as a society.
The crucial nature of education and training for the success of the strategy for enterprise is clearly recognised in the paper. Significant proposals are made in the report not only in terms of increasing training activities in industry but also in the wider and fundamental areas of the schools system and university education. There is also a major focus on work organisation and regulation and on long-term unemployment. The overall message is that these areas are interlinked and progress in one cannot in the long term be sustained without progress in others. Skills and creativity in the workforce are the main determinants of competitiveness in the enterprise sector.
It is worth dwelling upon that thought. There is no doubt that as we move into the next century what will determine our ability to compete is the willingness to have a vision of the way a company is heading, to use the talents of the workforce effectively and also to be willing to plough resources back into improving the workforce, the way they work and the intelligence they bring to bear on problems.
One of the major themes I hope to have addressed at the end of my period in office is human resource development. Irish firms have traditionally been weak and have not had sufficient foresight to invest in human resources and in training. We have clearly identified skill gaps between some of Irish industry and overseas competitors. There is a need to upgrade many of those who are entering into the workforce without adequate skills to sustain them in the longer term. That is an important element of this report and one that will be a growing focus of attention. It will be at the heart of the preparations that I am currently making for a White Paper on human resource development. We are close to finalising it and will soon be able to circulate it to other Departments for comment.
Equally, if we are to place this greater emphasis on human resource and developing the talents of those at work, we will need a more open style of industrial relations where managers and employees work together to innovate, continually improve and manage change. We are seeing encouraging indications of that.
The old adversarial approach to industrial relations is, thankfully, on the wane. There are many interesting documents being produced from both sides of the social partnership which address this issue of how we can manage change in a partnership rather than as part of old style adversarial industrial relations.
In business support development, a broad based response will be needed in the areas of science and technology, international trade and marketing and in the provision of finance in the development of the enterprise sector. Creating and sustaining knowledge driven competitive advantage across all sectors of the economy will be crucial.
As a small open economy, Ireland's development depends fundamentally on success in international trade. With increasing innovation worldwide, Ireland's enterprises will need wide support and encouragement to increase their activity in this field. For this reason, the capital markets must become more relevant to the vast bulk of Irish owned industry and improving the flow of finance for investment in young, high growth companies will be a priority.
The Forfás report identifies key areas where action is needed to improve our performance in relation to science, technology, innovation and competitiveness. These include technological skills, accessing technology and strengthening our research and development capability and performance.
Surveys have shown weakness in proficiency in science at age 13. Similar surveys have shown a worrying ignorance of basic scientific facts among adults. The Department of Education is now addressing these issues in its new schools curricula and we must ensure that these proposals are pushed forward with all possible speed.
More also needs to be done to bring support for basic research and post-graduate training up to the level of our competitors. We also need to improve our performance relating to the accessing of technology from abroad as a counterpart to generating it within the country. Networks, a mix of formal and informal contacts, are an important means of enabling firms and other organisations to identify and access technology worldwide.
The evidence is that in Ireland only one in seven manufacturing companies is involved in technology licensing. This is an area where there are the beginnings of significant change. In recent times Forbairt has emphasised forms of strategic alliance as a valuable way in which small Irish business, perhaps without the financial strength to invest heavily in research and development, can form alliances with companies in other countries — most notably in the US — and thereby fill a gap by way of technology franchising or other alliances. For a small company that can be a fruitful way of getting foreign investment into the country than through the traditional greenfield route because you are effectively taking the indigenous companies and dramatically strengthening their growth.
The report focuses on infrastructure which will be an important element in the success of enterprise development. It will depend both on the investment in and the pricing of infrastructural services. Telecommunications, transport and logistics, energy and the physical environment are all areas to which the report has paid particular attention. Of these four important areas, two have been especially emphasised in the report — telecommunications and logistics.
There is a need for immediate action in the field of telecommunications so that our systems can once again be the most advanced in Europe. The new science of logistics represents the integration of transport planning with stock control, production, storage and delivery systems. The need for Ireland to have a greater focus on logistics as a strategic choice for a geographically disadvantaged economy is highlighted in the report.
I draw the attention of Senators to that section of the report because new and interesting thinking is being developed there. It is like Columbus discovering America; it was easy when he discovered it but to point out what should be obvious can often be a significant discovery too. As an island economy located on the periphery, we should be developing key skills like logistics and transport; how we get our products to market in time without excessive stock carrying. The call for more strategic thinking in this area is a valuable part of the report.
In the energy area the report has called for increasing competition and ensuring competitive prices as the central focus of future energy policy. As regards the physical environment, the principle of sustainable development and the opportunities offered by the environmental industry itself, and the growing appreciation of the environment as a competitive asset, are also explored. In this regard, I have established an expert group on "Enterprise and the Environment" to bring forward proposals for action. Opportunities are being opened up there that as a country we can exploit. Too often Irish business sees environment as a question of obligations rather than opportunities. It is important that we bring into that picture those very real opportunities.
The final set of actions in the report deal with the public finances and administration. The taxation principles set out have as their fundamental objectives the stimulation and sustained support for an enterprise economy, where risk is encouraged and rewarded. The broad thrust of the taxation recommendations relate to reducing personal and corporate taxes and widening the tax base over time. Competition policy will require continued monitoring and strengthening in order to ensure that the conditions for successful enterprise growth are favourable. A Bill to deal with that issue is currently before the House.
As the report notes, there is no prospect of achieving the challenging social and economic objectives outlined without a well managed, innovative and efficient administration system. At the level of regional policy, the importance of a wide spread of diffusion of enterprise culture is outlined; the objectives can only be achieved with a full participation of all sections of the community and for this reason an essential target will be action at the regional and local level to ensure that enterprise growth and development are understood, appreciated and shared by all parts of the country.
The issues raised in this report with regard to the development of an enterprise economy could be summed up in the word "competitiveness". As the report has made clear, competitiveness means far more than costs alone. Competitiveness is determined by the factors we mobilise, the institutions we build up and the skills of our own people. These factors, in turn, have to be brought together and allowed to function to maximum efficiency. Thus the process of competitiveness, the way in which the factors are combined and allowed to flourish, is of crucial concern. The competitiveness agenda in this report is central to our ability to foster enterprise, to create jobs and to export. I intend to incorporate a significant initiative in this regard in the enterprise strategy I will publish in the coming months. I am also planning to accelerate action on the competitiveness issue at European level, and during our Presidency of the EU this year we will encourage initiatives in this connection.
The Forfás document is of exceptional value and will provide guidance for this Government in the detailed application of many of the policy areas discussed in the report. It has already provided major inputs to the strategy documents in preparation in my Department dealing with enterprise, services and human resources. In addition, I have already taken action to implement the recommendations with regard to the information society initiative outlined in the report. This is an essential component of enhanced competitiveness in the Irish enterprise sector to meet the new challenges raised by advances in telecommunications and computing.
A working group, chaired by Vivienne Jupp, a director in Arthur Anderson, is considering the issues surrounding the information society in Ireland and what we need to do to prepare for its further development. A fundamental transformation is now taking place towards an information intensive society and a knowledge based economy in which advanced technologies, particularly information and communications technologies, and other forms of innovation have a strategic role in economic development. Government has an essential function in promoting an environment which fosters and supports innovation — enabling enterprises to turn new knowledge into innovation and thus into growth and job creation.
In conclusion, I wish to express my appreciation to Forfás for the work they have carried out. Forfás is a cross-social and cross-agency partnership. It has a wide range of expertise and this report has benefited from the broad vision of the board. Tom Toner, the chairman, and John Travers, the chief executive of Forfás, deserve our congratulations. I hope the report can be widely debated and its overall thrust accepted and further developed through discussion and dialogue at all levels. Building on this we can better define the course of action needed to make a reality of the goals that are outlined. It is for this reason that the document is being debated here today and I am sure the House will give it the serious and detailed consideration it merits.
I hope I have not outstayed my welcome in presenting this report. It is an exciting and valuable report and I am encouraged by the welcome it has received as an important contribution to policy making not only within the business and economic community but also from political parties. I look forward to the rest of the debate.
