Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Question 122: To ask the Minister for Enterprise, Trade and Employment if he is satisfied that Ireland is well placed with other EU countries in attracting new foreign direct investment as well as meeting the challenges being experienced by certain high employment multinational companies already based here; and if he will make a statement on the matter. [2752/07]

Micheál Martin (Cork South Central, Fianna Fail)
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The level of foreign direct investment in Ireland, relative to the size of the economy, is one of the highest in the world. Many of the world's leading overseas companies have substantial international operations in Ireland. These include companies in ICT, life sciences and international services, including financial services. Employment in IDA-assisted companies increased by 3,795 in 2006, bringing total employment to 135,487.

However, I accept that IDA Ireland faces a significant challenge in seeking to sustain, embed and increase this investment. A growing number of locations are competing for mobile investment, notably in eastern Europe and the Far East, not only on the basis of low costs but also on the basis of future market potential. In recent times, cost-sensitive projects have begun to bypass Europe for lower-cost countries such as China and India and it has to be accepted that Ireland is no longer a prime location for what might be called low-cost, low-skilled, basic manufacturing and service activities.

In responding to this challenge, IDA Ireland is focusing on the development of its client employment base into high technology, high value-added and high-skill functions in areas such as high-end manufacturing, high-end services and research and development. For some years it has focused on facilitating and encouraging existing and new FDI clients to move up the value chain into higher value-added products, functions and activities, more in tune with the competitive strengths of Ireland today.

A key factor that will impact on our ability to sustain rapid growth and high employment levels is cost competitiveness, particularly related to property and construction demand, energy costs, local authority charges and services where competition may be limited. Continued flexibility in responding to changes in both local and international economic conditions is also essential.

The new national development plan will play a crucial role in maintaining Ireland's attractiveness as an investment location. The pace of economic growth makes further investment in education critical. We need to build on our strong relative position in producing science, engineering and business graduates and reverse some of the movement away from the sciences by students in recent years. Rapid improvement in physical infrastructure is also an ongoing need, especially to support regional development. Further investment in research and development as provided for in the NDP will be a key factor in improving our competitiveness into the future.

I am confident all of these issues will be fully addressed by the national development plan and, in tandem with the policies being pursued by the Government and IDA Ireland, we will maintain the attractiveness of Ireland as a location for high-quality inward investment by the world's leading companies.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I thank the Minister for his reply and acknowledge the success of IDA Ireland over many years in bringing a high level of foreign direct investment to this country. The chairman of the Small Business Forum and the managing director of Microsoft Ireland, Joe Macri, said recently that the competitive rate of return on investment by multinational companies here has fallen from 28% in 1995 to 12% in 2003 while the rate in eastern Europe rose by 8% at the same time. Mr. Jim O'Hara, president of the American Chamber of Commerce in Ireland and reputable managing director of Intel wrote four days ago:

In recent years, the cost base for US companies has increased significantly and while it's clear Ireland cannot compete on cost alone, it's imperative we urgently address some of the fundamental drivers of the rapid increase in our cost base.

Are those two people right in their assessment of the economy?

Micheál Martin (Cork South Central, Fianna Fail)
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I was with Mr. O'Hara yesterday at the announcement of a significant investment by Intel in a new digital health research project, the first of its kind by Intel outside the United States. This indicates the attraction of Ireland as a location for high-end research and development in areas that represent core strategic objectives of companies of the calibre of Intel. The project involves three major Irish universities, Trinity, UCD and UCG. In many ways we know that our cost base has increased and economic growth and development have had an impact on the overall cost base of the economy. That is why we must move higher up the value chain and further into the research and development space and upskill the population. The type of investment we announced yesterday with Intel will act as a further reference point to attract a similar type of high quality investment from companies of that calibre.

Last year approximately 80,000 extra jobs were created in the economy and 20,000 were lost through redundancies. We managed to win significant investments from companies such as Google, Amgen, Centocor, Servier, a French pharmaceutical company, financial services, Northern Trust and, last Monday week in Dundalk, Daiwa, a Japanese financial services company. We are concentrating on trying to win the technologies of tomorrow for Ireland and the companies that are developing them, which are high in manufacturing, services and particularly engineering, medical devices and financial services.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Is the Minister aware that in the five years to 2006 manufacturing employment has lost 32,000 jobs? There is a serious threat in that area. When will the manufacturing forum that the Minister announced in T16 be established? What timescale has he set to deal with the issues worrying manufacturers?

Have the Minister or his Department carried out an assessment of all the multinational companies which have invested in this country, taking into account their activity and employment levels and whether they have implemented some of their decisions about increasing activity and employment? Are they examining that situation with a view to changing their minds about some of those announcements? Notwithstanding what the Minister has said about key IDA Ireland backed firms which have come here and are welcome, there is an indication that our economy may be built on a bubble. We want to reassure people in the multinational sector and employees that we have a competitive cost base for the future, and I am not sure that is the case at the moment.

Micheál Martin (Cork South Central, Fianna Fail)
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I must be careful because Deputy Hogan has made gloomy forecasts in the past which did not turn out as he had predicted. I commissioned a study from Forfás last year on the state of manufacturing in Ireland today vis-À-vis internationally traded services. An important outcome of that analysis was that while manufacturing jobs have been lost the yield and output from Irish manufacturing has increased.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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No.

Micheál Martin (Cork South Central, Fianna Fail)
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It has. I will refer the Deputy to the study which has been published. The reason is clear. As we move towards a more efficient manufacturing environment and apply technologies more effectively we will experience a loss in numbers in employment but will have a more efficient and competitive enterprise that is sustainable in the long term. We should welcome that development.

Approximately 150,000 jobs were created in high-end manufacturing in the past six to seven years and approximately 40,000 jobs were created in the area of internationally traded services. By any international standard, that is an outstanding employment record. The Deputy is correct that the challenge we face is to sustain this level of creation in the coming decade. The international arena is clearly much more competitive now than was the case ten years ago. We are witnessing the rise of significant economic powers in different parts of the world and we must box clever and play to our strengths. We must add to those strengths via targeted investments on the part of the State and by creating a flexible and adaptive labour market that can respond to the challenges that are coming down the tracks.