Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Question 77: To ask the Minister for Enterprise, Trade and Employment if his attention has been drawn to the report from the OECD entitled Trends and Recent Developments in Foreign Direct Investment, which shows that foreign investment inflows declined in 2003 and 2004 and turned strongly negative in 2005; and if he will make a statement on the matter. [38045/06]

Micheál Martin (Cork South Central, Fianna Fail)
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The data in the OECD report refers to foreign direct investment, FDI, inflows and outflows that cover a wide variety of transactions. The flows of FDI associated with companies for which IDA Ireland has responsibility would only form a component of the OECD data. It would be incorrect to take the OECD data in isolation and infer from it that Ireland has become uncompetitive, or is losing ground, in terms of foreign direct investment in the areas in which Ireland competes, namely, manufacturing and internationally traded services.

In addition, as is the case with previous OECD reports on trends and recent developments in foreign direct investment, the data on inflows and outflows exhibit much volatility from one year to the next. This is because the data include, and appear to be dominated by, purely financial flows that move up and down in response to a wide variety of factors such as interest rate changes, repayments of inter-corporate loans, the strength of the dollar, changes in regulations and so on. The data do not, in large measure, reflect trends in financial flows associated with investment in actual facilities to produce products and services, which are the focus of IDA Ireland activities.

As noted by the report, one factor that appears to have caused a substantial shift in the flows of US investment in 2005 is the American Jobs Creation Act 2004. While this factor had a real and substantial effect on outward flows from the United States in 2005, in terms of the dynamic of trends from year to year in future, its impact can be expected to wash out of the data quickly.

As for the types of FDI that actually contribute to the development and prosperity of the Irish economy, 2005 was a remarkably good year in many respects, particularly in terms of the quality and regional spread of investments secured. For example, the projects approved included a €42 million expansion of the Bausch & Lomb plant in Waterford, a new 300 person customer service centre to be developed by Toucan in Sligo and the location by Zeus Industrial Products of its new European operations centre in Letterkenny. This success has continued in 2006 with, for example, projects such as Amgen in Cork, Northern Trust in Limerick and Servier in Waterford. This is not to forget today's announcement of the creation by Google Incorporated of 500 jobs.

The Government believes the best way to measure net investment by foreign firms in Ireland is through an assessment of overall economic activity and wealth creation. After a very strong performance up to 2000, job losses from foreign-owned firms outnumbered job gains from 2001 to 2004 as the global economic downturn following the 11 September attacks took hold and the effect of the marked slow down in the information and communications technology sector was felt. However, net job creation in foreign-owned firms was positive in 2005, which indicates that Ireland continues to be a very attractive environment for international investors. A total of 150,689 people were in permanent full-time employment with foreign-owned firms in 2005. This constitutes an increase from 149,079 in 2004.

The level of foreign direct investment in Ireland relative to the size of the economy is one of the highest in the world. Currently, more than 1,000 overseas companies have substantial international operations in Ireland. These include many of the leading companies in information technology and communications, life sciences, international services, engineering and financial services.

The challenge for IDA Ireland is to sustain, embed and grow this investment. The Government's recently-announced research and development strategy copperfastens such a focus on enhancing Ireland's competitiveness to attract foreign direct investment in future.

Additional information not given on the floor of the House.

In responding to this challenge, IDA Ireland is focusing on the development of its employment base into high technology, high value added and high skill functions, including both high-end manufacturing and areas such as high-end services and research and development. I am satisfied the strategies and interlinked programmes in place in IDA Ireland are the most appropriate ones to underpin our continued success in this area.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I acknowledge this morning's announcement regarding the creation in Ireland of 500 jobs by Google Incorporated. This constitutes a major boost to the Dublin region's economy, as well as a welcome boost to the IDA in its efforts to attract foreign direct investment. However, it coincides with some concerns articulated by the OECD report. The Minister does not appear to believe the OECD and asserts it is selective in its interpretation of the figures pertaining to Ireland.

Has the Minister ever heard of a document called the European Investment Monitor report for 2006, which was produced by Ernst & Young? It is a leading company with a database that monitors investment and its origins throughout Europe. Its report states that although foreign direct investment into Europe increased by 5% in 2004, Ireland lost foreign direct investment that year, as it did last year.

As the proportion of investment to Europe increases, the position of Ireland declines. It reported a reduction of 11.8% in foreign direct investment to Ireland last year at a time when foreign direct investment into Europe generally increased.

I wish to ask the Minister some questions. What figures, and from whom, does the Minister believe? From what reporting mechanism does he derive his figures? On what basis does he believe figures? Has he ever heard of the European Investment Monitor report and was it ever brought to his attention? Does he have concerns regarding its comments in respect of manufacturing employment or future foreign direct investment, particularly from the United States?

Micheál Martin (Cork South Central, Fianna Fail)
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Like everything else in life, the projects built and the jobs created are the ultimate benchmarks or inputs to any database. I referred to the impact of the American Jobs Creation Act 2004. If the Deputy listened carefully to my reply, he will note it stated that a range of inflows and outflows are assessed. However, the bottom line is that 2005 was the best year since 2000 in respect of the range and quality of new investment.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Did the IDA say so?

Micheál Martin (Cork South Central, Fianna Fail)
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Yes. A total of 70 greenfield and expansion projects were sanctioned in 2004, and a further 71 in 2005. This year looks even better. The quality of this year's investments says a great deal about Ireland and its world class manufacturing capability in the field of pharmaceuticals and of bio-pharmaceuticals in particular. For example, the largest biotechnology company in the world, namely, Amgen, will locate a major bio-pharmceutical plant in Ireland. This follows other companies such as Wyeth, Cordis Corporation in Cashel and Servier, the French pharmaceutical company to be located in Belview on the Kilkenny-Waterford border. Two weeks ago, Merck Sharpe & Dohme announced a major expansion in Ballydine, County Tipperary.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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They decided on Carrick-on-Suir in spite of the IDA.

Micheál Martin (Cork South Central, Fianna Fail)
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The financial services company Northern Trust will locate in Limerick. Today, Google, the Internet company that is the brand name in terms of Internet activity, decided to locate in Ireland. From my perspective, such high quality investments in what I would describe as the industries of tomorrow are reassuring. Such organisations have made hard decisions. When I visit such companies in the United States and elsewhere, they still speak highly of the quality of the workforce in Ireland, the quality of the business environment in Ireland, the agility and responsiveness of the Government, its agencies and local authorities in respect of the issue of business investment in Ireland. When such factors are considered with our corporation tax rate of 12.5% and our good pro-employment tax polices for both personal and business taxation, we still have a good package.

This is not to deny that we face competitive challenges as we do. We must be extremely vigilant regarding issues pertaining to costs and must ensure productivity is maintained and enhanced. I refer in particular to the substantial productivity gains made during the past decade. While the rate of productivity growth has slowed from the dizzy heights of the late 1990s, nevertheless we must maintain a focus on issues such as productivity and so on. Ireland is winning because it continues to focus on high value activity and this year has been very good. Moreover, 2005 was also a particularly good year.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I acknowledge that in relative terms, our unemployment levels are low and that much investment comes into Ireland. However, when reputable organisations such as the OECD or Ernst & Young which monitor such matters suggest we must consider the challenges ahead very carefully, I certainly will not make any apologies for bringing them to the Minister's attention. Equally however, I expect him to have a plan as to how such challenges will be dealt with and he does not have one. He believes everything is fine and that one can assess variations from any report in a positive or negative light, which I also understand.

In respect of tax, the only time when there was an overall tax reduction for workers and labour costs was when Deputy Quinn, my friend and colleague, held office as Minister for Finance between 1994 and 1997. This was the only time when Ireland experienced a tax reduction for people as a percentage of GNP. While the Minister might suggest otherwise, when one considers the figures for the past 15 to 20 years, this is a fact .

Ned O'Keeffe (Cork East, Fianna Fail)
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The Minister believes his own rhetoric.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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That was the only time when this happened. Opposition Members are conscious of costs in respect of labour and taxation matters. They are also familiar with the corporation tax rate of 12.5% because they introduced it.

Micheál Martin (Cork South Central, Fianna Fail)
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The Opposition parties did not introduce it.

Ruairi Quinn (Dublin South East, Labour)
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They did.

Micheál Martin (Cork South Central, Fianna Fail)
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They opposed it. Deputy Rabbitte opposed it.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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When the Minister talks about Governments, he seeks to airbrush from history the Government of 1994 to 1997. Opposition Members have no difficulty in discussing what happened in the mid-1990s.

I understand the Minister has established his manufacturing group. When will it report to the Oireachtas on the work on which it is engaged? The only reason to set up such a group is because of the worries in the manufacturing sector about the cold competition coming from other countries.

Micheál Martin (Cork South Central, Fianna Fail)
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I welcome any constructive suggestions from Deputy Hogan regarding ongoing issues pertaining to foreign direct investment.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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He does not heed them.

Micheál Martin (Cork South Central, Fianna Fail)
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We are planning very effectively and comprehensively for the future. The research and development strategy is a plan for future industry, jobs and competitiveness. This is why we put so much effort into it. A total of eight Departments were involved in the process, which was chaired by my Department. I chaired a Cabinet sub-committee on science and technology. We see it as critical for winning more jobs for the future and underpinning the kind of quality jobs we have in pharmaceuticals, biopharmaceuticals, medical devices, financial services, digital media and other sectors.

In terms of skilling, the One Step Up initiative and the national skills strategy which is currently nearing completion, we estimate that 80% of the current workforce will be part of the workforce in 20 years time. We have clear plans and have taken investment decisions to enhance the skills of existing employees to ensure we remain competitive and underpin jobs for the future.

In one rhetorical flourish, Deputy Hogan eliminated the former Minister for Finance, Charlie McCreevy, from the tax reduction story of modern Ireland, which is some achievement.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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He reduced the rates but we are talking about the overall tax burden.

Micheál Martin (Cork South Central, Fianna Fail)
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Charlie McCreevy personified the tax cutting agenda in this country, which produced increased revenue flows in respect of corporation tax and capital gains tax.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Who produced the figures?

Micheál Martin (Cork South Central, Fianna Fail)
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I always remember how Deputy Rabbitte attacked Mr. McCreevy's policies on positive tax reform on that occasion and tried to score some political points off them.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Minister is forgetting about who opposed Deputy Quinn when he introduced policies as Minister for Finance.

Micheál Martin (Cork South Central, Fianna Fail)
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It is important to always remember that the Deputies opposite opposed Mr. McCreevy's policies at that time. It is a very positive development that they now attempt to seek credit for them.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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What did the Government do with Mr. McCreevy? It got rid of him and sent him to Brussels.

Micheál Martin (Cork South Central, Fianna Fail)
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On the contrary, it is important that Mr. McCreevy——

Ruairi Quinn (Dublin South East, Labour)
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The Minister should ask Mr. McCreevy himself. If the Minister does not know the story, Mr. McCreevy will tell him.

Micheál Martin (Cork South Central, Fianna Fail)
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With the greatest respect, Mr. McCreevy is making a great contribution to the global enterprise that is the European Union and his impact is already being felt in that jurisdiction.

Jim O'Keeffe (Cork South West, Fine Gael)
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Mediocrity prevails again.

Micheál Martin (Cork South Central, Fianna Fail)
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The Deputy may speak for himself.

Jim O'Keeffe (Cork South West, Fine Gael)
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I am talking about the present Government.