I take this opportunity to wish the Seanad the best for the year. I also congratulate the new Members and wish them well.
I welcome the opportunity to discuss the focus of the work of my Department, employment and competitiveness. The Minister of State, Deputy Dara Calleary, will deal with issues of the measures we are taking to assist those who have lost their jobs, keeping the unemployed connected with the labour force, improving the skills base and giving further education opportunities. Ireland is seeing the first signs of recovery at home and in our main international markets. The Government has taken the necessary steps in the course of the past year to build recovery and to position Ireland to take advantage of this recovery. The banking system has been supported and stabilised, the public finances have been brought back under control and, according to the National Competitiveness Council, Ireland's current trade-weighted international price competitiveness has improved since April 2008. Exports have held up and I believe further export growth will form the core of building recovery and getting people back to work.
I am pleased to set out what we have achieved and what we will deliver over the coming year to drive an export-driven recovery. The Government has laid the groundwork for recovery, and as we are all aware reducing expenditure is a crucial part of that plan. In order to build on that groundwork, my Department is refining, driving and implementing forward-looking policies based on targeting resources to position Ireland as a competitive, innovation-driven location in which to do business, grow employment and increase prosperity and well-being. We are positioning Ireland to respond quickly to international stabilisation and recovery. We do so in light of the positive GDP forecasts for our main trading partners, the US, the UK and the euro area, for 2010 and projected global economic growth of 3.1% over the coming year. That is our focus.
While we are working in the context of an EU recommendation and timeframe to reduce our deficit, we are first and foremost taking action to improve the macro-economic climate and trading environment for our businesses and workers, driving recovery and maintaining living standards. This is why we took tough corrective budgetary action last year, why we are working to create better-functioning financial systems, why we are taking steps to improve our competitiveness, why we are focused on maintaining and creating jobs and why we are supporting innovation. Improved competitiveness, increased employment and world-class innovation are the policy-objectives being relentlessly pursued by the Government, and by my Department in particular.
I want to outline briefly the measures we have taken to address the issue of jobs and unemployment and, in particular, to keep people connected with work. According to the latest CSO statistics, there are over 1.9 million people in employment in Ireland. The Government acknowledges that the current conditions in Ireland's labour market, particularly the live register figure, which currently stands at approximately 424,000, very much reflect the international economic downturn and our openness to events affecting the global economy, such as the international financial and banking crisis. The Government has put in place measures to support more than 80,000 jobs in the enterprise sector under the employment subsidy scheme, as well as having doubled the referral capacity for FÁS employment supports in 2009 to 147,000 places. In addition, we are also backing businesses through the difficult period. The enterprise stabilisation fund has helped keep viable businesses going and people in work. Some 148 companies were approved for funding of €59 million by the end of 2009.
Furthermore, the recent budget also saw the Government announce that it would introduce a new jobs stimulus measure this year. Under the employers' jobs (PRSI) incentive scheme, where an employer creates a new job and takes on a person who has been unemployed for six months or more, the employer will be fully exempted from liability to pay PRSI for the first year of that employment. This will give employers an 8% to 10% saving on employment costs for each new job created. The Department of Social and Family Affairs is managing this scheme. The Minister of State, Deputy Calleary, will describe the other comprehensive measures being take to address the current labour market difficulties.
I want to turn to recovery measures which will take us along a jobs and growth pathway through investment in new industries and jobs. Our manufacturing base has changed significantly in recent years and the services sector has grown exponentially. These factors will be reflected in the new strategies and actions which will be delivered by me and the enterprise agencies on my behalf over the coming year.
Trade is the cornerstone of Ireland's economic success and Ireland's enterprise base can take some pride in the resilience it has shown in the past two years. While global exports in goods fell by approximately one third in the first quarter of last year, Irish goods showed a 1% increase for the same period. While global services exports fell by almost 20% over the same timeframe, Irish services declined by just over 2%. Indigenous Irish exporters have, remarkably, sustained growth in total exports at almost 4% between 2007 and 2008. The latest EU trade data for the ten months to October show that Ireland has the second highest trade surplus, exporting €32.6 billion more than we import, behind only Germany. Ireland's exports have been virtually stable in that same ten months, falling by 2%, while in most other EU countries exports fell by over 20%. As Minister for Enterprise, Trade and Employment, my goal is to maintain and enhance the policy environment that has facilitated this resilient performance that will drive export growth. We know that export growth can help create the jobs required to reduce unemployment, fund public services and manage the national debt.
We have seen in this recession that the companies that have invested in research and development and ensured their products or services had a competitive edge, are the same companies that have held or grown market share and employment. This has reinforced our belief that our research and development strategy is the right one. The IMF envisages a significant return to global growth this year of approximately 3%, which will greatly enhance Ireland's ability to benefit from an export-led recovery. I remain committed to maintaining a business environment that supports enterprise and encourages further investment, both from Irish industry and foreign investors. This will be delivered through Enterprise Ireland, IDA Ireland, Shannon Development, the county and city enterprise boards, through cross-Border programmes with Northern Ireland and through Údarás na Gaeltachta. We will also extend the three-year corporate and capital tax exemption for new start-up companies in 2010.
We consistently strive to diversify our export profile, exploit our talents and opportunities and guard against over-dependence on specific markets. Our track record on this is strong and is exemplified by the Government's Asia strategy. In 2005 we set specific targets to be achieved through concerted effort by the relevant Departments and agencies to develop links with eight key economies in the region. As a result, our exports to Asian target markets have shown strong double digit growth. My Department is devising and progressing new policies to build on the success of the Asia strategy. The Government has committed to developing a new action plan for improving trade, investment and tourism links with fast developing markets. We also need a new export and investment strategy that focuses not only on the new high growth markets that will deliver future dividends, but also on our key trading partners such as the European Union, the UK and the US. This will ensure a coherent single-minded focus on driving and delivering on Ireland's international economic and commercial interests.
Our recent export performance has been impressive in the context of the size of our economy compared to others. We will continue to incentivise enterprises to invest further in high value research and development, to increase exports and create new employment opportunities in communities across the country. The recent strengthening of the US dollar and sterling against the euro will also help to sustain our key markets abroad. Exports within the eurozone, which are free from currency exchange risks, are also increasing.
International investment will continue to be a key driver of employment, exports and growth. Ireland's corporate tax rate of 12.5%, our multilingual skilled workforce and our strategic location for serving markets in Europe has served us well in attracting investors, and will continue to do so. Many multinational companies are restructuring their global operations, leading to global rationalisation, making it particularly important to work to retain current investment, stimulate expansion and secure new projects. We are working to develop the opportunities for Ireland to become a key European hub for the international funds industry. In this regard, I look forward to the proposed changes in the Finance Bill to strengthen Ireland's competitive edge. We will continue to market Ireland as a location of choice for the newcomer and for existing investors. In September, I launched IDA's new innovation focused overseas market campaign, designed to position Ireland as the pre-eminent location for companies seeking to invest in future innovation.
During 2009, we won a total of 125 foreign direct investments. Almost 70% of these investments were from existing IDA clients who are making further investments in this country and reinforcing Ireland's reputation as a key strategic global business hub. In these turbulent economic times it is extremely significant that many of the world's leading companies continue to invest in Ireland in a wide array of activities, including high end manufacturing, global services and research, development and innovation. In absolute numbers, Ireland is moving up the global rankings with regard to employment in research and development, having risen from 19th to 11th place in the latest global location trends survey, testament that the strategy being pursued is the right one. During 2010, the IDA will continue its work to capitalise on our quality workforce, our creativity, our international attitude to business, attractive incentives for research and development and our favourable tax climate in order to attract multinationals to set up a base in Ireland as a launch pad for markets in Europe, Africa and the Middle East.
I am in the process of reviewing a new strategy for the future direction of foreign direct investment, which the IDA has developed and which, subject to my approval, will shortly be published. This strategy will outline the historic performance of foreign direct investment and its contribution to the development of the economy. It will set out some specific initiatives which the IDA will undertake to retain existing and secure new foreign direct investment. We will be identifying new opportunities in the foreign direct investment markets while stressing the importance of restoring our relative international competitiveness if we are to maximise foreign direct investment potential.
Growing exports and building investments are intrinsically linked to the framework condition in which our businesses operate. Over the past year, we have taken a number of important steps to improve the environment in which enterprise operates. More work will be done, particularly on competitiveness.
The Government's strategy to support businesses, improve competitiveness and sustain employment is aimed at returning to export-led growth. Improving our competitiveness requires addressing our costs. To move towards a lower-cost environment, a number of issues are being tackled together. These include incomes policy, Government-controlled prices and costs, the regulatory burden and the level of competition in our economy. The Government is acting in a concerted way and with urgency to address all of these issues.
Ireland is undergoing a sharp price correction and prices and rents are dropping. As measured by the harmonised index of consumer prices, Ireland's inflation rate during 2009 fell by an estimated 1.7% compared with an increase of 0.3% in the eurozone as a whole. We have also seen a decline in unit labour costs, which has a direct effect on competitiveness. A further relative improvement in price levels is expected this year, again improving our competitive position.
Further wage adjustment can drive continued improvement of the overall competitiveness of the Irish economy. It is essential for our economy to be in a competitive position internationally to reduce the cost of doing business, in addition to taking steps to restore order to the public finances. On the basis of European Commission forecasts, unit labour costs in Ireland are estimated to have improved by 5% relative to the euro area last year. The ESRI has recently forecast that, given our current control of costs, productivity should grow by over 3% in 2010. Combined with necessary, although difficult, wage adjustments, this represents a significant improvement in the overall competitive position of our economy.
The most recent data from the Central Statistics Office provide further evidence that wages in Ireland are adjusting downwards and that, when the profile of job losses is taken into account, the decline in weekly earnings can be estimated to be in the region of 4% to 5%. The pension levy has reduced public servants' pay by an average of nearly 7%, and there were further reductions arising from the budget in December.
The Government has taken steps to tackle the relatively high cost of energy for business, and energy prices have decreased. Following double-digit energy price reductions in May 2009, from last October there has been a further significant reduction in gas prices and a modest reduction in electricity prices for medium-sized business customers. Gas prices are set to decrease by a further 8% this coming February.
Overall, all categories of businesses, including SMEs, have benefited from these significant energy price decreases in 2009. I will continue to work with my colleagues towards reducing costs and driving competition to bring energy costs into line with our competitor countries.
We have been actively progressing recommendations to increase competition and remove anti-competitive restrictions in the sheltered sectors of the economy. These include competition in transport, electricity, professional services, pharmacy services and the private rental sector. Upward-only rent reviews are now banned.
Preliminary information for 2010 suggests that many local authorities have either frozen their commercial rate or decreased it. I expect this trend to continue throughout the country.
My Department is leading the governmental process to ease the administrative burden that regulations can place on businesses. The high level group on business regulation has already identified more than €20 million worth of administrative cost savings for business in its first report, through cutting out paperwork, revising the rules for small businesses and making better use of on-line services. The group's 2009 work programme initially contained more than 50 recommendations from businesses. Twenty-five of these recommendations have already been progressed by the group to the satisfaction of businesses. In 2009, my Department completed the measurement of administrative burdens in company law, employment law and health and safety law.
In 2010, the high level group intends to focus on the simplifications that will help us reduce these measured burdens. As Senators will know, we have a target to reduce business red tape by 25% by 2012. The continuing dialogue with business is essential for the success of this process. It is from businesses and business organisations, such as those represented on the high level group, that many of the ideas for simplification will come. I will welcome and consider any suggestions made by Members in this context.
Undoubtedly, the retail sector, more than most, is being severely affected by the current downturn. Retailers have responded by reducing prices to boost trade. This is reflected in the consumer price index which shows prices are falling more rapidly in Ireland than in Northern Ireland, the rest of the United Kingdom or elsewhere in the European Union. This narrowing in the differential in prices is very much to be welcomed and clearly will help the competitiveness of Irish businesses, especially those in the Border region. The Minister for Finance has reduced the excise duty on alcohol products and has reversed the 0.5% VAT increase imposed last October. The UK VAT rate increased on 1 January to 17.5%, further reducing the price differential.
One of the most important issues with which we have still to grapple is access to finance. I have held regular meetings with the representative bodies of the SME sector and other stakeholders on access to finance. The Government has taken a series of steps in this regard, including the bank guarantee scheme, the bank recapitalisation scheme, nationalising Anglo Irish Bank and establishing the round table on access to bank credit.
I set up the credit supply clearing group which brings together the banks, business interests and relevant State bodies in an effort to build understanding and communications between the key stakeholders and to get credit to business flowing again. The National Asset Management Agency, NAMA, has now been established. In this context, I welcome the new credit review system announced by the Minister for Finance. It will examine the credit policies and practices of the banks, particularly for SMEs. This new system will inform the Government as to what further action might be necessary to secure the flow of credit to Irish enterprise and, through the publication of the analysis from the review process, help ensure the performance of the banks participating in NAMA is obvious to all.
I want to highlight the prominence I have given to the ongoing process of reforming public procurement. I fully recognise the importance of the public sector market for SMEs, particularly now that demand from the private sector has slowed. Government purchasing, whether by the HSE, local authorities, agencies or Departments, can play an important part in driving SME growth and employment. I recently introduced new policy guidance across the public sector to ensure a level playing field for all companies wishing to participate in public tendering and to promote greater access for SMEs to public sector contracts.
When I travel abroad with the representatives of the SMEs, which are superb, they always say to me that they cannot engage in public procurement at home. We need to strive to solve this. We facilitate the SME sector to avail of the public procurement opportunities that exist in Ireland. This fact did not attract the credence it deserved in the context of the new public procurement policy guidelines. We are still spending astronomical sums of money and it should be to the benefit of our innovative companies. I will continue to strive vehemently to ensure those companies have access to public procurement staff.
One of the first points one will note in the document I launched is that the public service is risk averse. This is natural but there are great opportunities for efficiencies in the context of providing services to the taxpayer. I will strive to ensure further work is done on public procurement policy.
While these issues are of immediate importance to Ireland's recovery in the near term, I am making progress on a number of longer-term issues. For Ireland to compete on global markets for investment and for sustainable export growth to be achieved, we need to be relentless in ensuring our economy has the infrastructure, skills and knowledge to compete and win. This means we need to re-engage publicly with the debate on productivity. Continued progress is necessary on our long-term infrastructural needs, such as next generation network broadband, sustainable and cost-effective energy networks and suitable transport links. These are all important to the country's future growth.
The development of the knowledge economy and the focus on innovation are essential facets of our reputation as a creative and responsive economy. It is in this regard that we are committed to continuing to invest in research and development, as has been clearly articulated and demonstrated. My Department is determined to ensure incentives for businesses to undertake research and development are strong and that Ireland will continue to invest in building its reputation as a leading knowledge economy. A renewed focus is correctly being placed on stronger commercial outputs and the efficiency of investment. As in other areas of public spending, the State is seeking more from less in regard to this expenditure item and the Government is working continuously to ensure this happens.
Supporting innovation as a driver of export growth is critical to sustaining enterprises, maintaining current jobs and driving job creation. The budget sees the total spend on science, technology and innovation exceed €593 million, with core investments being prioritised. The allocation of €297.3 million for science, technology and innovation in my Department's Vote compares favourably with the 12% overall reduction in the Government's capital allocation in the budget. In protecting Science Foundation Ireland's funding the Government recognises the pivotal role it plays in the framework for sustainable economic renewal as outlined in the Government's policy document, Building Ireland's Smart Economy. My Department's policy approach is focused on deriving maximum commercial benefit from the investment made to date. The decision to create a single funding stream for science, technology and innovation will greatly enhance the efficiency of the spend and the State's ability to re-prioritise as economic circumstances change when the economy recovers. Building Ireland's Smart Economy and the programme for Government recognise the importance of the productive public and private investment in research and development and intangible assets. We will shortly be examining the recommendations of the innovation task force in the context of the Finance Bill to determine how we can further enhance the incentives for research and development and intellectual property activity in Ireland.
The smart economy framework emphasises our strong commitment to the pursuit of a green economy involving the transition to a low-carbon economy. I am determined to ensure the opportunities for enterprise investment and jobs which arise from this transition will be vigorously pursued. This vision for the development of the green economy has clear growth prospects for green enterprise to meet domestic needs and also to profit from exportable products and services. Ireland has demonstrable competence in these areas. I will ensure the correct framework conditions are in place to support growth in this sector. The report of the high level group on green enterprise, launched in December, is being implemented across Departments and we will shortly see results in many areas from the measures in this green stimulus package. This is a large and growing sector worldwide and the high level group identified the potential to create about 80,000 jobs in Ireland in coming years. This is an achievable target and I am overseeing implementation of this strategy to drive the development of an internationally competitive green economy in Ireland. Every other country in the world is going green. Ireland, therefore, must use its competences and natural resources to ensure greater creativity in this area and focus on what it does well.
Despite its difficulties, Ireland continues to score well in some key relevant international indices. It was rated first for foreign direct investment and corporate taxes and fourth for ease of doing business in the OECD report, Doing Business. It was rated 14 out of 127 in the 2009 edition of Forbes "Best Countries to do Business". Ireland continues to be a pro-business economy, with one of the lowest tax wedges in the OECD and a commitment to maintaining corporation tax at its current level.
The answer to Ireland's challenge remains a return to export-led growth. That is what drove the economy in the foundation stages of the boom. In Ireland exports mean jobs. Our export engine of high quality, competitive companies is fundamental to our return to economic prosperity. The courage and application shown by the measures we are taking send a strong and clear message to the international community that Ireland will not hide from the challenges it faces and is positioning itself for the future.
I hope I have demonstrated both the progress the Government has made to date with the economy and our serious intent to continue on this road. We are witnessing extraordinary economic changes. Ireland is one of the countries that have made some of the most difficult adjustments. However, we are serious and determined about completing the adjustment, a task that is well under way.
