Dáil Éireann Debate, Thursday - 7 October 2004
91 Mr. Durkan asked the Minister for Enterprise, Trade and Employment the main factors affecting the competitiveness of Irish products on overseas markets; and if he will make a statement on the matter. [23699/04]
View answer95 Mr. Durkan asked the Minister for Enterprise, Trade and Employment if he has satisfied himself that industry here can adequately compete in the export markets in view of the high costs here; and if he will make a statement on the matter. [23695/04]
View answerI propose to take Questions Nos. 91 and 95 together.
Given the fact that Ireland is one of the world's most open economies, firms must be competitive to succeed both in the domestic market and in international markets. Firms operating here in Ireland have been adversely affected by a rise in the cost of goods and services, wages and business costs in recent years. However, there are many different factors, which contribute to Ireland's overall competitiveness other than just prices and costs. A competitive taxation regime, a highly educated and flexible workforce, low levels of business regulation, access to European markets as well as a shift towards higher end-value products and services all combine to create a positive business environment for exporting firms operating in Ireland.
Ireland's trading performance has been remarkable in recent times. Exports constitute an increasing share of the economy's total output of goods and services. They make a substantial contribution to employment creation and maintenance, and underpin a positive trade surplus position. Since the strong appreciation of the euro against both the US dollar and sterling and given the fact that the USA and the UK are Ireland's largest trading partners, Ireland's competitiveness has been significantly affected. However, despite this Ireland's trade remains strong with the most recent figures showing that total merchandise exports were worth €41.8 billion in the period January to June 2004, an increase of 4% on the same period in 2003.
We are no longer a low cost economy and as such our future competitiveness and prosperity is dependent upon our ability to move further up the value chain and become an innovative knowledge intensive economy. The Government is, furthermore, determined to improve Ireland's cost competitiveness and this will remain a high priority into the future.
92 Mr. Durkan asked the Minister for Enterprise, Trade and Employment if he has satisfied himself that industry here can become competitive in the international export markets in view of the high rate of relocation to lower wage economies; and if he will make a statement on the matter. [23698/04]
View answer93 Mr. Durkan asked the Minister for Enterprise, Trade and Employment if he intends to take initiatives to combat relocation to lower wage economies; and if he will make a statement on the matter. [23697/04]
View answerI propose taking Questions Nos. 92 and 93 together.
The competitive characteristics of our enterprise base has made a reliance on low technology, basic manufacturing less sustainable than it was in the past. There has been a fundamental shift in the strengths and competitive advantages of our economy, which is now one typified by higher output and productivity together with high returns to labour in the form of wages, salaries and better living standards.
Clearly, a more attractive cost environment abroad will inevitably attract some firms that are unable to produce in the high-wage environment of modern industrial economies. The continuing structural transformation of our economy is inevitable. With this, some plant transfers and other adjustments are bound to come, but where relocation has occurred to date, it has largely been limited to relatively low-technology, labour-intensive activities — those least suited to the economy we have become. Over the past few years the enterprise support agencies under my Department have been mandated to adjust their support strategies to meet both the needs of society in terms of high quality employment opportunities and the needs of businesses that generate and sustain those jobs.
The agencies have had a good deal of success in attracting higher value replacement enterprises, in line with our policy of moving enterprise in Ireland to higher value output in both products and services. This changing specialisation is a reflection of changing comparative advantage, where we will retain those jobs that are human capital and technology intensive and characterised by high productivity and correspondingly high real wages. I want to sustain this evolution in enterprise development.
The range of incentives provided through the enterprise development agencies are designed to meet this objective and to help enterprise operate at higher levels of skill, undertake higher order strategic investments, product development and innovation. I intend that these will be subject to periodic performance review against the different but converging needs of both foreign and indigenous firms. At the end of the day, businesses make their own investment decisions and it is my intention to ensure that when they do, we are seen as a secure, world-class location to meet their most demanding competitive criteria.
Outsourcing and relocation are inevitable in a free market and our economic performance has benefited considerably from winning investment from other economies. Future policies must ensure we are more open to the opportunities that expanding and less restricted global markets provide. For example, my Department recently completed an expenditure review of Enterprise Ireland's, EI, overseas office network. The review made a number of recommendations aimed at increasing both the efficiency and effectiveness of the network. As a result EI has reorganised its corporate structure and formed a new division incorporating the overseas offices and dedicated to assisting clients to penetrate new markets and expand in existing ones. As Irish companies become more internationally focused and move up the value chain, it may be necessary to tackle competitive challenges in new and flexible ways. This may, for example, involve outsourcing less competitive activities, acquiring new technology or skills through alliances or other collaborative activity. This is a legitimate business strategy for certain companies as it can ensure longer term survival against intensifying competition, while retaining high skills and high knowledge activities at home. The expenditure review has recommended that Enterprise Ireland assist those clients who would benefit from outsourcing or internationalising their activities. Such assistance, however, would have to be part of a client's overall business plan aiming to improve a suite of key business functions such as marketing, finance, human resources, research and development and production.
Regarding the broad direction of enterprise policy, the enterprise strategy group recently reported with a range of recommendations to improve the environment for doing business in Ireland. The group's proposals also seek to substantially enhance our enterprise base by identifying current capability gaps and acting to deliver the skills necessary for sustainable success on world markets. My predecessor set up a high level group to plan how best to implement the ESG recommendations, where appropriate, and to report to Government. I will shortly be informing Government about the high level group's work and on initiatives to reinvigorate enterprise supports towards meeting the strategic objectives supporting the ESG's recommendations.
