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Economic Competitiveness.

Dáil Éireann Debate, Tuesday - 7 July 2009

Tuesday, 7 July 2009

Questions (111, 112, 113, 114, 115, 116)

Bernard J. Durkan

Question:

130 Deputy Bernard J. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment the number of jobs in the manufacturing and service areas which have relocated from Ireland to more competitive economies in each of the past ten years to date in 2009; the extent to which she monitors this situation; the action in relation to same; the result of the action; her future proposals in this regard; and if she will make a statement on the matter. [27999/09]

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Bernard J. Durkan

Question:

131 Deputy Bernard J. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment if her attention has been drawn to manufacturing and service job relocation to more competitive economies in the course of the past ten years; the action she has taken to address such issues; the effect of such action; and if she will make a statement on the matter. [28000/09]

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Written answers

I propose to take Questions Nos. 130 and 131 together.

There are many differing and complex factors, apart from costs, that influence a firm's decision to relocate. Therefore, it is not currently possible to say how many jobs have ‘relocated' from Ireland over the past ten years. Job ‘churn' occurs in the internationally trading sector of the economy, in a number of ways and for a variety of reasons. Companies adjust their plant location and utilisation strategies to address matters such as accessing new markets, moving production nearer to customers, meeting firm or market specific customer relationship issues, accessing technology, in addition to business takeovers and consolidations. For much of the last decade this churn has been positive for Ireland, with companies replacing lower value activities with activities of higher value, resulting in better paid, more highly skilled jobs.

The phenomenon of globalisation is changing the way economic production is organised the world over. Lower barriers to trade and improvements in transport technology are increasing the specialisation of production, resulting in global supply chains. Ireland experiences both benefits and costs resulting from globalisation. Inward Foreign Direct Investment (FDI) illustrates the clearest demonstration of the benefits to Ireland from globalisation. This has been one of the principal causes of the strong economic performance of Ireland over the last two decades. However, as Ireland has gained from the mobility of modern production and supply chain models, competition from other locations for mobile investment has intensified. This shift in the structure of international trade poses challenges to economic policy makers in all countries.

Of course, some churn can be negative, when it results in a net loss of employment. Total job numbers employed in enterprise agency supported companies, (which represents a large portion of employment in the internationally traded sector of the economy), increased by approximately 7.5%, in the 10 years to 2008. The global economic downturn has seen a decline in the number of people employed in the internationally trading element of the economy in 2008/09, but this is a phenomenon being experienced by economies at every stage of development around the globe. The International Labour Organisation forecasts global unemployment to rise considerably, over the immediate term. The decline in the level of employment in Ireland's internationally trading sectors cannot therefore be simply related to job ‘relocation' alone.

Competitiveness can naturally decline in certain areas when an economy becomes more advanced — for example, developed economies cannot compete with developing countries in certain areas of low value, labour intensive production. However, competitiveness is vital to ensure Ireland continues to win investment in the areas of manufacturing and service activity in which it competes with other developed economies, such as high value manufacturing and internationally traded services.

A principal task of government is to ensure that Ireland continues to be an attractive place to do business, and to help foster economic competencies higher up the value chain. This government has made significant attempts to maintain and enhance our framework competitive conditions, and to promote new areas of competitive advantage by developing our R&D base, investing in critical physical and communication infrastructures, and promoting tertiary education and lifelong learning. The Enterprise Strategy Group report outlines the strategy being pursued by Government to move all enterprises in Ireland towards higher value added and knowledge based activities. Subsequent reports and strategies including the "Strategy for Science, Technology and Innovation, 2006-2013”, the “National Skills Strategy” and “Building Ireland’s Smart Economy” further develop and build on these objectives.

Competitiveness is a key driver of economic development and my Department closely monitors Ireland's competitiveness for this reason — by a variety of means including the National Competitiveness Council's annual work in the area, which involves benchmarking the country's competitiveness performance against key competitors across more than 140 competitiveness indicators. The results of this analysis highlight areas where action needs to be taken to improve Irish competitiveness for enterprise, and informs the policy measures formulated to support Irish economic development.

The model of manufacturing in developed countries is changing and Irish enterprises are adapting to those changes. The "Report of the High-Level Group on Manufacturing” contains some 26 recommendations directed at key areas of innovation and productivity leading to transformational change, reskilling and management development, which will ensure Irish manufacturers, can continue to compete successfully on international markets and provide high value sustainable employment.

We continue to be one of the world's leading service exporting countries. The report of the Services Strategy Group, "Catching the Wave: A Services Strategy for Ireland”, sets out new policy proposals on how we can ensure the continued development and growth of Ireland’s services sector and outlines how to maximise the future returns to the country from services activities in all enterprises, both current and potential. Implementation of the recommendations – some of which are already being acted on by the Enterprise Agencies — will enable Irish service companies to exploit new and exciting opportunities, such as eLearning, business and financial services, professional and consultancy services and others.

Bernard J. Durkan

Question:

132 Deputy Bernard J. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment if she has examined the trends in imports and exports in each of the past five years to date; if she has identified issues requiring attention; the action she has taken or proposes to take in response; the effect of such corrective action to date; and if she will make a statement on the matter. [28001/09]

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In the period 2003-2008, annual growth in total Irish exports has averaged 5.5%. Over the five years in question our services exports have risen steadily from €37.1bn or 31.1% of total exports in 2003 to €69.2bn or 44.5% in 2008.

With regard to total imports, the annual growth rate averaged 6.6%. The growth in Merchandise imports showed an average annual growth rate of 3.9%, while the average annual growth in our Services imports was 9.1%. Between 2003-2008 our Services imports rose from being 50.7% to 56.6% of our total Services imports. Our trade surplus in 2008 was €23.79bn.

These healthy trade levels were achieved despite poor economic growth in many of our trading partners and also against the backdrop of adverse exchange rate trends in our two biggest export markets, the United States and the United Kingdom. Our performance is especially significant when compared to our EU partners. The latest figures released by Eurostat, demonstrate that in several of the major Member States, exports declined by over 20% in the first quarter of this year, whereas Ireland's were virtually unchanged at -0.01%. Over recent years, net exports have made a very significant contribution to GDP growth. In 2008 the contribution of net exports was 2.7% and in the first quarter of 2009 it was 6.09%.

The Department of Enterprise, Trade and Employment, through Enterprise Ireland, is active both in assisting Irish indigenous companies to find new markets for their products and services and to increase their existing level of market share. Both my colleague, the Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan T.D. and I, have been active in leading trade missions to develop new opportunities for Irish exporters, in association with Enterprise Ireland. We will continue to do so, to both existing long- established markets, to the new EU Member States and also to other emerging high-growth markets, with a view to increasing the share of exports by Irish companies worldwide. To illustrate the success of these efforts, our exports to the eight priority countries identified in our Asia Strategy, have more than doubled in five years to over €11bn.

The importance of our Services trade to the economy is growing. The future performance in services activities will therefore be increasingly important to overall growth in the economy. The Services Strategy Group, which was set up in 2007 by Forfás and the Department of Enterprise, Trade and Employment, published its report — "Catching the Wave: A Services Strategy for Ireland”, in September last. The report sets out new policy proposals on how the State can ensure the continued development and growth of Ireland’s services sector. The recommendations in this report will guide the development of our services strategy into the future, to further exploit the opportunities that this sector presents.

The manufacturing sector is in transition but is well positioned to meet future challenges. Ireland's manufacturing future depends on a manufacturing sector that is capital intensive, knowledge intensive and skills intensive, focused on developing innovative products, services and solutions and meeting the needs of markets and customers. The 2007 report of the High Level Group on Manufacturing identifies the focused actions needed by employers, employees and Government to respond to challenges and take advantage of opportunities to further develop the sector in Ireland and these are being pursued through the Government Framework for Economic Renewal.

Bernard J. Durkan

Question:

133 Deputy Bernard J. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment if she has identified any issues that are currently deemed to negatively impact on economic growth here; the steps she will take in this regard; and if she will make a statement on the matter. [28002/09]

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There are a number of factors which impact on economic growth. These are level of investment, consumption, government spending and net exports. The impact of the fall in housing and construction volumes is well understood and has had a negative impact on economic growth.

One of the primary areas of focus in my Department is on growing exports. The most recent export figures are encouraging. Year-on-year Irish exports to April rose by 6%. Year-on-year pharmaceutical exports rose by 19%. Our export performance is in turn dependant on our productivity levels and our competitiveness. The Government has taken and will continue to take the necessary steps to improve our competitiveness and productivity in order to return to economic growth at sustainable levels.

Question No. 134 answered with Question No. 98.
Question No. 135 answered with Question No. 57.

Bernard J. Durkan

Question:

136 Deputy Bernard J. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment her plans to address the concerns of small and medium enterprises with reference to costs, credit and competitiveness; and if she will make a statement on the matter. [28005/09]

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Under the framework for Economic Renewal we are taking a number of measures across Government to improve our competitiveness. Cost competitiveness is a particular focus of action and we are already seeing results. Firstly, Irish inflation declined by 4.7% in the year to May 2009. We have also seen a decline in unit labour costs which has a direct effect on competitiveness. We will continue to exert further downward pressure on costs including reviewing the recommendations of the Competition Authority which have most effect on competitiveness. We are working to ease costs to enterprise in administered sectors of the economy under state control such as local authority charges. We are also easing the administrative burden that regulations can create.

Energy prices have come down in recent months and I will continue to work closely with my colleague the Minister for Communications, Energy and Natural Resources to ensure that we continue to exert downward pressure on energy costs. Across Government there is a concerted approach to eliminate structural rigidities that have contributed to high costs. The current initiative to legislate against upward only rent reviews is a further example of this cross Government effort.

With regard to credit, we have taken determined action to address the fundamental issue of access to finance for business, by way of the new code of practice for banks linked to the re-capitalisation scheme. The Minister for Finance and I have, furthermore, recently established the Credit Supply Clearing Group to examine where the flow of credit to viable business appears to be blocked and develop solutions that enable adequate business credit flow.

In addition the Minister for Trade and Commerce, Billy Kelleher TD, is holding a series of regional meetings around the country to assess the factors affecting access to bank credit at local and regional level. These meetings allow the Government to hear at first hand the views and experiences of local business representative groups, local bank representatives and state agencies on access to bank lending. This will complement the work of the Credit Supply Clearing Group and feed into future Government policies on the issue.

To improve the competitive strengths of firms we continue to implement a series of policies to encourage a move to higher productivity levels and the production of higher value added goods and services. Our competitiveness priorities also include a strong focus on skills, education and training.

Furthermore, our long-term commitment to investing in and supporting science will, I am confident, bring an additional dimension to our competitiveness as well as taking us to a new level of innovation and entrepreneurial activity.

Bernard J. Durkan

Question:

137 Deputy Bernard J. Durkan asked the Tánaiste and Minister for Enterprise, Trade and Employment her plans to improve the competitiveness of the economy with reference to improving export opportunities on world markets for Irish products; and if she will make a statement on the matter. [28006/09]

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Ultimately it is individual businesses that must take advantage of global markets but it is my responsibility to ensure that no barriers are placed in their way. In this regard, my immediate competitiveness objectives are to ensure that the broad business environment is conducive to improved export opportunities and to facilitate a return to sustainable export growth. We will continue to provide the appropriate supports to the enterprise sector, restore our cost competitiveness and safeguard the significant achievements of recent years.

Our current enterprise policies are focused on driving export growth momentum by supporting companies to pursue aggressive and progressive growth strategies. Our priorities include strengthening and sustaining companies of strategic importance through a series of targeted initiatives provided by the development agencies. A central priority is to ensure that companies with high growth potential and in which the State has already invested are brought through this difficult period. These are companies that will continue to be successful on world markets and will provide essential high-value employment in the future.

Irish exporters have proved themselves well able to compete decisively on world markets. Between 2003 and 2007 our total Irish exports increased by more than 6% per annum year-on-year. Merchandise exports for the first quarter of 2009 were up by 2% and rose further in April, giving us a trade surplus for that month of just over €4bn, the highest monthly surplus in eight years and the second highest on record.

Our performance is especially significant when compared to our EU partners. The latest figures released by Eurostat, demonstrate that in several of the major Member States, exports declined by over 20% in the first quarter of this year.

Over recent years, net exports have made a very significant contribution to GDP growth. In 2008 the contribution of net exports was 2.7% and in the first quarter of 2009 it was 6.09%. In both cases this made a significant contribution to counteracting the other GDP elements that were negative.

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