Eamon Ryan (Dublin South, Green Party)
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Question 95: To ask the Minister for Enterprise, Trade and Employment his views on the recent National Competitiveness Council's report, Benchmarking Ireland's Performance, which warned that the underlying source of economic growth has shifted from exports towards construction activity and consumer demand, that foreign firms are responsible for 92% of exports in 2006 and that productivity levels are falling. [8918/07]

Micheál Martin (Cork South Central, Fianna Fail)
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The economy is a remarkable success story. During the past decade we have achieved consistently higher economic growth rates than most developed countries. This is among the better-off countries in the European Union and the developed world. We also score well in international rankings of quality of life. The 2006 UN human development index ranks us in fourth position ahead of countries we have long admired such as Sweden, Canada, Switzerland, Finland and Japan. Our position in this index has increased by 14 places since 2004 based on Ireland's improving levels of wealth, health, life expectancy and education.

For each of the past three years Ireland's merchandise exports have recorded year-on-year increases of approximately 3% per annum. This has been achieved despite adverse conditions in many markets, including currency rate changes, and it follows a long-standing trend, albeit one that was interrupted briefly following the economic shock after 11 September 2001 and the dotcom bubble difficulties in the technology sector.

Ireland continues to have a healthy trade surplus. In 2005 this stood at €29 billion on merchandise trade. Statistics for services exports released recently show a healthy trend in the years 2003 to 2005, with a 14% increase between 2003 and 2004 and a 9% increase between 2004 and 2005. While final data on services exports for 2006 are not yet available, the indications are that the positive trend continued.

In recent years domestic demand, particularly for houses, has been an increasing driver of economic expansion and employment growth. While it is good news that we have the resources to address deficits in our housing, transport and broader social infrastructure, our economic prosperity depends on our ability to sell goods and services abroad. Ireland must offer a high quality, cost-competitive business environment. This is still a strong trading nation and the challenge facing us is to stimulate productivity and export growth and increase international market share as key policy objectives.

These are the issues that the National Competitiveness Council addresses in its latest report, Ireland's Competitiveness Challenge, which outlined policy recommendations across a range of areas. The Government is committed to acting on the recommendations of the council's report which are designed to stimulate productivity growth and improve our ability to sell goods and services abroad. For example, the national development plan proposes a wide range of investments that will improve productivity by removing infrastructural bottlenecks that increase costs. It will enhance the skills of graduates and people already in the labour market and create a more supportive environment for enterprises in developing new products and services. The strategy for science technology and innovation will drive research and development performance and underpin long-term competitiveness.

The Government recognises the need to stimulate productivity growth and improve our ability to sell goods and services abroad. A range of strategies are in place to assist in this regard. I am confident that we can build on our past achievements, while laying the pathways for growth and higher productivity.

Eamon Ryan (Dublin South, Green Party)
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I note a similarity in the questions asked. It has become increasingly clear that while no one doubts the economy's success in the past ten to 20 years, there is increasing concern that we have gone through two phases of a boom, the first of which involved genuine growth in productivity, exports and manufacturing, which has been followed in the past five years during the Government's term in office by a phase based on growth in construction and consumption at home which crowds out our ability to develop an economy based on enterprise and exports. While no one doubts that certain sectors such as financial services have continued to grow in recent years, there is a concern that the decrease of 32,000 in the number of manufacturing jobs and the balance of trade deficit, projected to be €6.9 billion this year, paint a picture of an economy heading towards more difficult times and a Government which is not delivering solutions that will have a real impact on the ground. The Minister set out the various ways by which he hopes to address these issues, but we are not seeing any signs of success.

I examined the commercialisation research and development fund and its outcomes in some detail. There may, indeed, be a good deal of money being put into the area of research and development, but it is clear that the outcome in terms of new indigenous Irish exporting companies is not being delivered. One can just count the number of patents and start-ups and look at the detail as regards what is happening in the economy. One could say the Minister for Finance has taken up many of the suggestions of the Small Business Forum and others. However, he is still acting as a Fianna Fáil Minister for Finance in that there are still tax breaks and major incentives in the area of property development, which is crowding out the likelihood of an alternative enterprise economy here.

Has there been discussion in Cabinet about the need to slow down the construction sector in order to free up capacity within the rest of the economy? Has the Minister made the case to the Department of Finance for scaling back some of those other developments? What success has he had with the Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey, for example, in terms of trying to reduce some of the costs facing new entrepreneurs by taking on what the National Competitiveness Council shows as the dominance of utilities in Ireland in areas such as telecommunications and electricity supply? The main cost factors affecting companies are way out of line. What has the Minister done to change Government policy in that regard to try to help an indigenous enterprise economy?

No one disagrees with the analysis that we need to change and to put the emphasis on research and development. What is becoming increasingly clear on this side of the House, however, is that the Minister is not being effective in delivering change.

Micheál Martin (Cork South Central, Fianna Fail)
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I must reject that. We created in the region of 500,000 jobs. The Deputy mentioned the 30,000 jobs lost in manufacturing. Like all developed economies the services sector accounts for a growing proportion of the jobs created. I do not accept the Deputy's view that Ireland is not getting a bang for its buck in terms of research and development. It is early days yet in terms of that evaluation. However, in terms of the numbers of research and development investment projects we are winning from overseas compared to our performance five or six years ago, the picture has dramatically improved. This is because of the emphasis we put in our policy and in our investment on research and development and companies are beginning to see that. We are marketing Ireland strongly and proactively as a country in which to locate research and development activity. Enterprise Ireland has been very successful in terms of its three-year strategic plan, which is now almost two years in operation. Under its transforming agenda, this has helped to orientate indigenous companies in the direction of markets that will open up new export opportunities for them. Enterprise Ireland clients have significantly increased their exports. In any trade missions I have been on all of the successful companies have a research and development or innovation or design house within them, which is a critical factor in their success. Enterprise Ireland client companies' exports in Asia, for example, rose by 14.6% and their figures for the US came in at around 13.6% for 2005; the outlook is looking good for 2006 in that regard also.

In terms of the energy issue, of course we work closely with the Minister for Communications, Marine and Natural Resources. He is preparing a White Paper for publication shortly and we anticipate Green Party support as regards the recommendations and policy proposals that will emanate from it. The Minister for Finance, Deputy Cowen, has already initiated tax reform in terms of the property sector. He is correct to phase out gradually, to ensure stability and continued employment in the sector, as opposed to a sudden sharp change, which is not good. People in any sector of the economy deserve to have a degree of predictability and to know there is an overarching framework and timeframe within which they can operate. The Minister has implemented and followed the spirit of the substantial analysis of our tax reliefs system which all parties in this House supported over the last 22 years in different guises, with the exception, perhaps, of the Green Party, which did not have the opportunity to be in power for most of that period. Nonetheless, other parties, who are not in power now, introduced property tax relief schemes in a different era and for justifiable reasons as well.

On the foreign direct investment side, we continue to attract high end activities into the country, not just in the area of financial services, but in pharmaceuticals, bio-pharmaceuticals, medical devices and some engineering companies as well.

Eamon Ryan (Dublin South, Green Party)
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The Green Party, if it had been in Government, would not have voted for tax breaks for multi-storey carparks, holiday homes or hotels, which have skewed enterprise policy in this country. Having worked in the tourism industry for years, I found it remarkable that the Government knew better than I did, as an operator, what should be built. Unfortunately, the Government got it badly wrong. Productivity growth at the moment has not been lower since the early 1980s. What will turn that around?

Micheál Martin (Cork South Central, Fianna Fail)
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It is not a fair comparison to compare the 1980s with the present by any standard. It is not to compare like with like. Obviously, in a developing economy the productivity gains we have seen over the past ten to 15 years will, by definition, be more significant than those we can expect in the remaining period. Three issues account for this — investment in research and development I am absolutely convinced is essential for our competitiveness and increased productivity; greater investment in technology and innovation; and in terms of the skills agenda, the upskilling of the workforce. Today we launched the national skills strategy, which aims to upskill half a million workers between now and 2020. These are particularly important factors in ensuring a continued competitive performance by Ireland and, indeed, increased productivity. Another key factor is greater competition within the domestic economy. The Green Party opposed this in terms of the abolition of the groceries order, to cite one example. People keep talking about the need for competition within the domestic economy, but when it comes to taking on vested interests everybody runs away and finds excuses to oppose whatever liberalisation initiatives are being put forward at a particular time. Most of the reports that Deputy Eamon Ryan and indeed, Deputy Hogan, quote, keep pointing to the need for more competition in the domestic market and economy as a way of developing stronger productivity and growth. The FDI side is enjoying greater levels of productivity growth than the domestic side of the economy.