I thank the Leas-Chathaoirleach for giving me this opportunity to make a statement to the Seanad on the importance of foreign direct investment to the Irish economy and the role of both Government and IDA Ireland in promoting the country as an attractive location for this inward investment.
In the past ten to 15 years, Ireland has undergone a transformation from a low-wage and low-cost economy towards a high value and knowledge-based one. Arising from this transformation, the nature of foreign direct investment has changed and Ireland is now competing for premium mobile investments against the most advanced countries in the world. Foreign direct investment has played and continues to play a critical role in the development of the Irish economy. I will quote some headline figures to illustrate this point. The foreign direct investment sector accounts for 135,500 jobs and €2.8 billion in corporate tax receipts and spends €14.9 billion in direct expenditure in the economy, of which €3.4 billion is spent on Irish material and components and €5.76 billion is spent on Irish services.
We are now a small, open but vibrant economy, energised by some of the most sophisticated industries and services in the world. Government policies and investments in areas such as transport, science, technology and innovation, regional development, and skills formation are keeping this transformation of our economy on track. Our economic performance consistently reflects the success of these policies. Substantial expenditure by Government is being, and will be, incurred over the life of the national development plan. Government strategies like Transport 21 and the strategy for science, technology and innovation will help us to carefully influence and promote economic activity in new areas that open up different yet more sustainable sources of competitive advantage such as life sciences, biotechnology, services and related research, development and innovation.
These Government changes are beginning to make a real impact on the nature of economic activity and employment in the economy. As we earn the dividend in terms of growing employment and greater prosperity, others around the world now look to Ireland as one of the best examples of sound economic management and creative solutions to the challenges of modernisation. I do not think there is one Member in this House who has not been congratulated by strangers and acquaintances on our economic success while he or she was abroad.
Last year, total employment in the country exceeded two million for the first time and net job creation in agencies such as the IDA and Enterprise Ireland was the highest since 2000. The last quarterly national household survey on the labour market showed that the pace of employment growth actually accelerated slightly and that employment over the year was up nearly 4%. This means there are nearly 2.1 million people employed in Ireland — an increase of 78,000 on the same quarter in 2006. Furthermore, recent national accounts data confirm that growth is still strong. Gross domestic product in the second quarter was 5.4% higher in real terms than a year previously and the growth rate for the first quarter was revised upwards.
The Government is well aware that there are challenges, which are probably in sharper focus now than they were a few years ago. The Government is not complacent. Building and maintaining competitiveness is a dynamic and ceaseless process. As a small economy, we must constantly improve, become more productive, upgrade and change because our competitors are doing the same. We tend to focus on job losses in the multinational sector as the one and only indicator of competitiveness. This assessment is inaccurate. Those in business will appreciate that in a sector which employs more than 135,000 and which is highly competitive and globally mobile, there inevitably will be losses and gains every year, not just for cost reasons but for other company or sector-specific reasons.
International financial and business activity is never a smooth, upward curve of growth, expanding market share and corporate contentment. We are so embedded and deeply interconnected with the global economy that both sector and firm-level changes will have an impact here. It is how we structure our enterprise base, adjust to these changes and encourage a solid, enterprise-centred business environment that marks us out as a competitive and responsive economy.
I ask the House to consider what really makes an economy competitive. Essential conditions to achieve competitiveness include business performance, such as trade and investment, productivity and labour supply. Ireland is an investment-intensive economy that is both attractive to foreign investment and has the entrepreneurial capacity to drive successful overseas investment. Ireland continues to attract a large number of international greenfield investment projects, relative to its size. The United Nations Conference on Trade and Development's 2006 world investment report shows that we are number one in the OECD for the number of greenfield foreign investment projects per capita.
Just this week, a major Irish bank published the first edition of a new foreign direct investment performance index. This compares Ireland's performance at attracting inward investment to that of leading destinations globally. It shows that Ireland continues to attract a high share of global investment projects. In the words of its chief economist, "Ireland continues to punch above its weight when it comes to attracting mobile foreign investment". The index put Ireland at number two in the EU-15 member states for foreign direct investment inflows.
In this context, I mentioned earlier our increasing emphasis on new areas of competitive advantage, such as life sciences. A few days ago, an international consultancy working in the same benchmarking area also reported positively on our economy. It showed that Ireland attracted more foreign investment in life sciences than any other European country in the 12 months from July 2006 to June of this year. This shows we already have an established reputation for competitiveness in emerging high technology sectors, in the quality of our intellectual capital and in the excellence of our research infrastructure on which these investments rely.
Despite what many believe, Ireland is a competitive place to do business. This objective reporting on foreign direct investment, FDI, flows shows that international business believes we are competitive. International investment decisions to invest here are not goodwill gestures. They are made on the basis of hard facts, critical evaluation and confidence in Ireland and Government policies.
In regard to the direct effects of this investment, to which I referred, FDI also has a substantial multiplier effect throughout the economy, indirectly supporting a significant proportion of national income and employment. Indigenous companies are involved in sub-supply and there is an interface with Enterprise Ireland client companies. FDI creates strong demand for high skills and helps spread advanced management and business processes and practices throughout the economy via some of the most innovative and technologically advanced companies in the world, such as Intel, Pfizer, Wyeth, Oracle, Google etc.
Productivity is key to competitiveness. Without strong productivity growth we cannot maintain high standards of living and high incomes. Our levels have converged with those of the OECD and continue to improve. For example, services are now critical to growth and a source of significant employment and national income. In telecommunications, finance and business services our productivity growth rates are higher than similar sectors among our competitors in the most developed countries of the EU.
From another perspective we cannot have high productivity and, consequently, incomes without a serious commitment to innovation. Clever innovation and innovation based on our research base will drive our success in demanding markets. According to the fourth EU innovation survey, Ireland performs above the EU-15 average. This further underlines the continuing competitive attributes of the economy. It reflects the contribution of research and development and innovation programmes that are now very much the foundation of a successful enterprise policy.
These are a few of the reasons my perspective is more optimistic than others. Another is a slightly different form of peer review. Some time ago the representative body for Danish industry published its annual global benchmarking report. It notes that Ireland takes an outstanding leading position owing to top rankings in high technology and up-market exports. For the third year in a row Ireland is the leading OECD country in growth and development. Sometimes even our competitors say things about us that are positive and unbiased.
Our success in attracting international investment is in no small way attributable to the dedication and professionalism of the management and staff of IDA Ireland. As development agencies go they are recognised as the best in their class. The agency was established under legislation as an autonomous body to attract new clients and assist investors to help drive Ireland's economic development at a national and regional level.
Its mission statement declares that it "will win for Ireland, its people and its regions, the best in international innovation and investment so as to contribute to the continued transformation of Ireland to a world-leading society which is rich in creativity, learning and personal and social well-being." This mission statement translates into a number of overarching strategic objectives that are set against the economic developments in Ireland and the changing nature and globalisation of foreign direct investment. Specifically these strategic objectives address the need for expansion and extension of activities undertaken by existing corporations in Ireland; identification, targeting and attracting new investments into the economy; promoting balanced regional development; and developing the overall business environment surrounding companies.
To achieve these objectives the IDA is engaged in many activities that are client focused and all about securing and growing investment, capitalising on Ireland's increasingly high quality operating environment and reinforcing the drive towards a world-class knowledge-based economy. There is a continued focus in the IDA on identifying and securing investments from corporations in new markets, technologies and sectors that will contribute to economic growth in the future. The agency is building on the existing strong base of research, development and innovation to develop and enhance further this key business activity. This work is being undertaken with corporations, educational institutions and research facilities to enhance and expand further the range and depth of expertise in line with the strategy for science, technology and innovation.
The IDA is also promoting balanced regional development as per Government policy whereby regional competencies are clearly developed and articulated to secure additional investments for the key gateway and hub locations in line with the national spatial strategy. In support of this strategy the agency is involved in the provision of world-class property solutions through a network of regionally located business and technology parks and development of large-scale utility intensive sites aimed at securing capital intensive, high value investment. In this regard, it should be noted, for example, that in 2006, almost 60% of new greenfield projects and six out of every seven research and development investments occurred outside of Dublin.
To deliver on its various activities the IDA is organised along five sectoral business areas, information and communications technology, pharmaceuticals and biotechnology, medical technologies, international financial services and globally traded businesses, which operate on a cross-functional basis to maximise potential investment opportunities. In addition, the sectors are supported by worldwide international marketing teams in a network of offices across the globe, including Europe, North America and the Far East, a strong regional footprint in Ireland and a full range of corporate support services.
To compete effectively for mobile FDI Ireland must remain focused and continue to work hard to facilitate existing and new FDI clients to move into higher value added, higher skills products, functions and activities more in tune with the competitive strengths of Ireland today. High value added investments increasingly demand a highly skilled workforce, world-class infrastructure and an agile, flexible and responsive operating environment. The new national development plan provides the framework for this strong investment in infrastructure and knowledge-driven activities.
A number of aspects are particularly critical if we are to be successful in attracting FDI in future and these include investment in transport infrastructure such as roads, rail, airports and public transport; providing competitive and robust energy supplies; providing robust, high capacity and price competitive telecommunications; encouraging our students to study science, engineering and business; and enabling a fully connected and innovative research environment. Only by continuing to be prepared for the future in this way can we continue to be successful in attracting and growing high value and sustainable FDI for all the people.