Mr. John McCarthy:

----- in GDP. In recent years we have seen a new form of outsourcing. The outsourcing is called contract manufacturing. An Irish-resident multinational contracts out, under licence, the production of goods and services - mainly goods - to a third party in Asia.

At all stages in the production process, the Irish entity owns all of the inputs into that production, including the very valuable intellectual property. The reason it may be doing this is that there might be doubts about property ownership, the business models in Asia and so forth, so it wants to retain the intellectual property in advanced economies. The crucial point is that it has ownership of all the inputs into production right up until the final widget is produced and sold from, say, China to Japan. At that stage, there is a change in economic ownership and it is classified as an Irish export.

This is not just a feature in Ireland as many companies throughout the world are engaging in contract manufacturing. It is just that, in an Irish case, the firms involved are very large and a large amount of the intellectual property is here, so it has much more of a distorting impact in an Irish context than elsewhere. It is very much in line with the new methodology for compiling national accounts. There is a problem in that Europe is one of the main jurisdictions that has moved to this way of dealing with it whereas not every jurisdiction has done this, so there could be problems of double counting. It leads to a situation in which there are goods and services - mainly goods, I would stress - produced in other jurisdictions that are now formally being recorded in the Irish accounts. This was one of the main features of the 26% figure last year.