I thank the committee for the invitation to address it on the development of the economy in the west of Ireland. The WDC is the statutory agency set up to promote the economic and social development of the western region, a region on the periphery of Europe. We have 15 full-time equivalent staff and are based in Ballaghaderreen in County Roscommon, and come under the auspices of the Department of Community, Equality and Gaeltacht Affairs.
The WDC is particularly conscious of the need to foster coordination and to promote the development of our region as set out in our governing legislation. We strive to be innovative and work in collaboration with the public, private and voluntary sectors to focus on the needs of the west at both the strategic and operational level. Our presentation today will offer an overview of the current economic challenges facing the region and outline the priorities for future economic development. We will highlight areas of our own activities that will demonstrate an aspect of the economic potential of our region and areas that we consider as essential to the development of the western economy and that are of direct relevance to the terms of reference of this committee.
The WDC is fully aware of the current strains on the public finances. We offer to the committee an avenue to unlock the economic potential of the western region so the country can benefit from the untapped resources we offer. The country currently faces significant challenges, with the west in particular vulnerable because of its narrow employment base and its heavy reliance on construction, locally traded services and the public sector, especially in rural areas.
Sustaining and creating jobs is the most critical element of turning around our country's economic fortunes. We urgently need to adjust the west's economy to the post-construction boom. The decline in our region's population is almost exclusively in the 15 to 29 year age group. The members of this committee are well aware that the western region has a long legacy of emigration. In 2002, the census showed for the first time since the Famine that the west had increased its population. We do not want to see a return to large scale emigration, we want to offer employment opportunities in our region for our young people.
Education and training offer one of the ways out of our current unemployment crisis. A person in the western region with the junior certificate or lower qualification faces an unemployment rate of 18%; the unemployment rate for a person with a third level qualification is 7%. Rural residents, however, have difficulty accessing education and training services. For example, only 17% of rural residents participate in lifelong learning, as opposed to 27% of urban residents. The cohort of young men with low formal education levels who have become unemployed from construction presents a particular challenge — 35% of all male early school leavers aged 18 to 24 in the region are currently unemployed, more than twice the rate than for those who did not leave school early.
The priority is to make the most of the assets and potential of the region. We must invest in infrastructure and the three Es of enterprise, employment and education, as well as innovation. There are growth areas where the west has or can develop a comparative advantage. It is seen as a global centre of excellence for medical devices, with 15 of the top 20 medical device companies in the world based in the region, employing more than 9,000 people. Our western investment fund in the past five years has invested in 18 indigenous start ups in the medical device and life science area. It can be done.
Food production also presents a job creation opportunity but we must move from primary processing to higher value added food products, with a focus on small-scale, high value niche food.
Tourism currently employs 23,700 people in the region, with 18% of overseas visitors staying there. The west has unique attributes that can attract increased domestic and foreign tourists but we absolutely must develop the rural tourism product to create jobs in our area. International air access and other methods of access are critical to get tourists into the region. The marine is our most under-utilised resource and it has huge wealth-creating potential and employment opportunities covering renewable energy, tourism and leisure, marine food, shipping and transport.
Employment in the caring professions is increasing as the population ages. The western region has a proportionately higher level of older people. This presents the west with the opportunity to become a site of best practice in elder care, with direct care-related employment opportunities. It also provides the opportunity for training and education providers in the area to become leaders in the area. There is significant potential to create jobs in the wider educational sector, in third level and language training, as we have a strong network of third level institutions.
The ICT sector experienced the strongest employment growth in the western regions since 2007, increasing employment by 3,000. While the region has a lower share in these sectors, they have performed better in our region than in the rest of the State since 2007. Skilled staff and networks are critical factors in the growth of this sector.
The green economy is made for the west of Ireland, we have some of the best wind and ocean resources in the world. The potential from wave energy alone could transform Ireland from being a 90% importer of energy to being a net exporter. There are huge opportunities downstream in technology and manufacturing jobs from this capacity to generate renewable energy. The Danish example is often quoted. In the 1970s the Danish Government focused its efforts on wind energy, a sector which now employs 30,000 people and manufactures 60% of the world's wind turbines. Green and creative initiatives will be used as examples of the kind of innovative work done by the Western Development Commission on the ground.
We are currently leading two regional development initiatives which have the potential to create 2,900 jobs, the first of which is a Western Development Commission-led INTERREG project, a bio-energy market stimulation programme for wood and seaweed cultivation pilot programmes. Both seek to exploit in a sustainable manner our region's natural resources, thereby reducing emissions and dependency on imported fossil fuels and creating jobs and wealth in rural areas. The second initiative is Creative West. There are currently 11,000 people directly employed in creative industries, generating sales of almost €530 million per annum. However, only €70 million, or just over 13%, is associated with exports.
The Western Development Commission has been leading the creative sector in our region. We are engaged with EU partners and the NUIG in implementing a programme of export and growth, targeting 2,000 additional jobs. The creative sector is important in its own right and also drives innovation in the wider economy. It is a sector in respect of which the west has an endowment of factor conditions, including quality of life, existing clusters and a lower cost base. However, there are significant deficits to be addressed, including networking, the promotion of the concept of Creative West, the need for cost-effective and suitable workspace, the availability of high-capacity broadband and, fundamentally for the long-term future of the region and country, creativity in education.
Earlier this year, the Western Development Commission produced a short policy briefing entitled Why Care About Regions? A New Approach to Regional Development, of which members have received a copy. Its goal was to examine new thinking on regional policy at international level to determine how it may apply in an Irish context. Lessons from this policy briefing are relevant to all regions, not just the west.
Work done by the OECD shows that regions are the drivers of national economies. They are the focal points for economic development and comparative advantage. If the potential of the lagging regions is not harnessed for the national economy, it is a waste of talent and opportunity and it will reduce overall national economic performance. Regional development is not a zero sum game as growth in one region does not have to be at the expense of another.
The west still requires special intervention to maximise its employment potential and the contribution to the national economy. However, the focus needs to be on place rather than sector, and on investment rather than subsidy. The western region tapped into unused potential during the boom with increased employment and labour force participation. This illustrates that when investment is made and opportunities are created, those opportunities will be taken up. Regions will mobilise their own assets if policy supports conditions for growth. These conditions are the three e's of enterprise, employment and education, and infrastructure and innovation.
Investment in physical infrastructure has always played a predominant role in regional policy. Improvements in infrastructure will generate productivity gains for local businesses and increase the attractiveness of an area for investment and tourism. Access to quality road and rail infrastructure, international air access, broadband communications and energy play a critical role in positioning the west within a modern global economy. In higher-value and more knowledge-based economies, the efficient movement of people and knowledge is essential.
Enterprises located in all regions must have access to infrastructural facilities that are at least on a par with those of their competitors if they are to compete successfully for inward investment and grow indigenous firms. Otherwise, they will be at a competitive disadvantage. Improvements in infrastructure alone are not enough to unlock the west's potential to contribute to the national good.
The OECD found that human capital is more important than infrastructure as a determinant of regional performance. Policies for developing enterprise, employment and education must work together to strengthen the west's human capital. It is critical that there be a strong link between education and training, and enterprises and employment opportunities, both now and well into the future. It is important that the enterprise policy have a strong regional policy development perspective and be cognisant of each region's comparative advantages. If policy is not structured in this manner, it could lead to increased disparities between regions.
The capacity for sustained innovation is a core long-term driver of economic development. Irish innovation policy must support the broad concept of innovation, which not only pertains to newer and improved products and processes but also to new marketing, branding and design methods and new forms of business organisation. Innovation is not just about science and technology as it applies to all types of businesses, not just technology businesses.
Innovation policy must be appropriate to a region's needs. For instance, the western region has a proportion of more traditional industries and services and innovation policy must be relevant to them. It must also ensure that regions such as the west have absorption capacity to adapt innovations. As such, a review of the western region in light of the potential market demand may emerge from the above drivers and the west may be particularly well placed for development of an industry-led innovation hub targeting areas of comparative advantage, as highlighted in our presentation. My colleague, Mr. Ian Brannigan, will address this issue in more detail if required.
Access to finance, particularly venture capital, is a major issue for western SMEs. The importance of venture capital to Ireland's economic recovery is highlighted in the Government's Building Ireland's Smart Economy framework. The western investment fund, WIF, which the Western Development Commission operates, was established to address this funding gap and has been instrumental in growing the west's share of private venture capital from 3% in 1998 to its current level of 10%. However, we have a long way to go to achieve aper capita level. The Western Development Commission’s investment fund addresses this private sector market failure in our region. It invests on a commercial basis and has, to date, revolved and re-invested €6 million. We have invested in a total of 89 enterprises with employment creation potential of 2,500.
In 2009, the WIF received €2.3 million in Exchequer funding. The SMEs it supported paid a total of €6.6 million in payroll taxes to the Exchequer that year, had a total payroll of €27 million and leveraged an additional €18.3 million into the region. In 2010, the WIF received just €492,000 in Exchequer funding, at a time when creating and sustaining jobs have never been more critical. The commission has been informed that it will receive no budget allocation for the WIF from its parent Department in 2011, and that any budget allocation will have to come from the Department of Enterprise, Trade and Innovation. Allocating a budget to the WIF will nurture enterprises and jobs in the western economy. We call on the committee to support such a budget allocation.
The west needs an integrated and tailored regional approach to unlock its potential, thus enabling it to contribute fully to the nation's economic recovery. Investment in infrastructure and human capital development, focus on the broad definition of innovation and building on regional assets and comparative advantage will unleash this potential.