Paul Coghlan (Fine Gael)

I welcome the Minister of State and thank him for his overview of the fourth report of the Expert Group on Future Skills Needs. I am delighted to have the opportunity to comment on this report which comes at a significant time in Ireland's economic development. At a period when the recent economic boom and stability seems to have all but disappeared, it is important we look forward and prepare for the future needs of our economy. The third report on future skills needs was issued in July 1997, before the attack on the World Trade Centre on 11 September 2001 and the resulting downturn in the global economy. We were not prepared for the general economic decline experienced over recent years. Since the last report, there have been ever-increasing concerns about stagnating GNP growth and the competitiveness of the economy. In order to achieve further economic prosperity over the next decade, it is imperative that we closely examine this report and put into place the many recommendations outlined in this publication.

The report deals with nine main areas of interest: a review of the labour market, the ICT sector, biotechnology, engineering, construction, food processing, logistics, finance and soft skills. The labour market began to slow down in 2001 and continued to do so throughout 2002. The rate of employment growth fell from 2.5% to 1% and unemployment continued to rise. The report estimates that the rate of unemployment would have risen by more had it not been for a fall-off in participation levels during that time. Employment fell by 4,600 in agriculture and 9,700 in industry but increased by 32,000 in the services industry in 2002. This growth in the services industry is explained by the increase in the number of jobs in sub-sectors dominated by the public service, such as health, education, public administration and defence.

Labour supply growth also slowed during 2002 and this was due to a reduction in the labour force participation rate among the 20-34 year age group during that period. Earnings growth levelled off in the second half of 2002, from a high of 10.9% in September 2001, to 6.2% in December 2002. The group predicts the outlook for the labour market in 2004 is mixed. It says the slow recovery expected in the EU will have a negative impact on Ireland, but on a more positive note, labour shortages will not be as large a problem.

The group believes that the main challenge in the coming year will be to maintain competitiveness internationally, while minimising unemployment. It recommends increasing the number of highly skilled workers in the labour force by upskilling, re-skilling, improving the quality of vocational systems, increasing the amount of third level science and engineering graduates, creating more educational opportunities for disadvantaged groups and implementing a more targeted immigration policy.

As for the ICT sector, the report details the findings of an investigation into the potential for the development of ICT clusters in Ireland to 2010. This sector suffered a severe knock in late 2000 and the report says there are no immediate recovery signs, but that a comeback is expected to begin gradually in 2004.

The group predicts that one of two scenarios may take place in relation to the supply of graduates for ICT. In one scenario, students will not opt for those careers because of a lack of confidence in the profession. This is what happened in 2003. In the other scenario, the share of students entering computing and electronic engineering professions will rise to 80% of its previous peak by 2007. In general terms, the demand for computing degree graduates is likely to overtake supply after 2006. The group predicts a reasonable balance between supply and demand for engineering graduates but with a slight shortage of electronic engineers and a surplus of civil engineers. The report maintains that the ICT sector will continue to be a driver of economic growth in Ireland over the next decade. It recommends continuing the ICT investment fund, reinstating places on ICT courses, promoting further interest in ICT courses at second level, hiring specialised staff to carry out research and teaching in the area and addressing under-performance in mathematics at second level.

After the ICT sector, biotechnology is considered the next wave of the knowledge-based economy. IDA Ireland envisages 1,500 further employees in the biotech sector over the next five years and Enterprise Ireland plans to expand the sector to employ 1,800 by 2006. However, because of the downturn in the global economy, it is more realistic now to expect this to happen by 2010. Some 30 doctorate and 20 masters graduates will also be needed during this period. Although the numbers participating in postgraduate study are on the increase, the report indicates that the number of undergraduates and those receiving diplomas and certificates is decreasing. The report suggests that the biotechnology sector in Ireland has the potential to grow substantially over the next seven years. However, in order to maximise the potential of the industry, it is important to promote interest in the study of science and careers in science.

The engineering sector shows an overall increase in demand for graduates in the period 2004-06. The report suggests that civil and electronic engineers are in most demand and the potential need for engineers in the pharmaceutical industry is huge. However, the results of the report show the likelihood of a shortage of electronic engineers in the coming years and a surplus of civil engineers. This may hinder the growth of the ICT sector once markets recover. The report advises focusing on boosting the numbers of those graduating from Irish institutions, reviewing mathematics and teaching methods, upskilling, immigration and overseas students.

The construction industry has expanded enormously in the last number of years. The report estimates that output increased by over 75% between 1995 and 2002 and is now equivalent to €20 billion. It is predicted that employment in the sector will decline by 11% from an estimated 185,00 in 2002 to 165,000 by 2010.

There was an increase in the supply of professional and craft skills to the construction industry over the period 1998-2002. This is primarily due to a rise in the number attending postgraduate courses in town planning, surveying and so on. A large number of people have also taken up apprenticeships during the past few years in response to the boom in the industry. The report estimates that the increase in the number skilled in construction will not lead to an increase in unemployment as their skills can be used in other countries such as the UK. The report highlights the lack of architects available to meet the industry needs and suggests providing 45 additional places per year for students who wish to study architecture.

The Irish food processing industry is one of the most important sectors of the economy in terms of output, employment and exports. The sector faces challenges in today's market such as market liberalisation, changing consumer patterns and rapid developments in food processing technology. The report indicates that there is no shortage of graduates entering the food sector and that this will continue for the next five years. However, the skills of those involved in the industry will need to evolve to adapt to market changes. The report does not recommend changing the number of places available on food courses in third level but suggests changing the content of the courses. For example, it found an over-emphasis on science and technology subjects, and it suggests introducing more broadbased courses with an emphasis on marketing.

The research carried out on the logistics sector was based on 250 companies employing 15,600 individuals around the country. The study showed that 4,000 recruits will be needed annually within the logistics sector during the coming years. The report also mentioned that the main requirements in the area are opportunities for further training in computer appreciation, health and safety, customer relations, transport management and so on.

Employment in the financial sector increased by 30% between 1998 and 2002. The report suggests that the financial industry is one of the key components of a healthy economy, as a high level of financial services attracts foreign investment to the country. In the short term, the forecast for the financial sector is a slower growth rate in the next two years with recovery estimated at beyond 2004. However, no major shortages are expected. The market appears to be responding to current demand, and the opening of the National College of Ireland is further testament to a relatively healthy industry.

The final sector investigated by the report is soft skills. The report says that intra-personal and interpersonal skills are becoming more important for organisational success. Ireland currently has no formal policy relating to soft skills and the report recommends that soft skills be taken into account in a national policy agenda. It also suggests that transition year and third level programmes should be put into effect, teaching soft skills to a greater extent.

Although the forecast for our economy is far from dismal for the next number of years, it is important to consider the findings of the report and to acknowledge the forthcoming challenges. Ireland is in a special position as it embarks on its six-month presidency of the EU. It is imperative that the Government uses this opportunity to further the Irish economy by improving our reputation within the EU and worldwide as a thriving country with a highly skilled labour force. Throughout the Celtic tiger period, foreign multinationals were more than satisfied to locate businesses in Ireland. However, as we have seen in recent times with the closure of many businesses nationwide, it appears Ireland is no longer an attractive location to some.

Although unemployment levels remain relatively low, there is a concern that Ireland appears to be losing its ability to create employment. In 2003 we slipped from fifth to 30th in the world competitiveness table. The increasingly high cost of doing business in Ireland undermines our ability to compete worldwide, and this will undoubtedly be reflected in our economic situation in the future. Other countries with lower wages and insurance costs are taking business away from Ireland and damaging our economy in the process. It is important that the Government acknowledges this and acts accordingly.

One of the many recommendations in the report is that Ireland needs a targeted immigration policy. Ireland is now a multi-cultural society with a multi-cultural workforce. It is clear that immigration is healthy for the economy, with immigrant workers often occupying the lower-paid jobs which Irish people are no longer willing to accept. The Government must tackle immigration issues head-on and resolve any outstanding problems so that immigration becomes an acceptable and beneficial part of society, helping to develop a more prosperous Ireland.

It is also clear from the report that in order to enhance the profitability of some sectors of our economy, it is important to emphasise the re-skilling, retraining and upskilling of the labour force in sectors such as logistics and soft skills. The report also stresses the need for improved vocational programmes and education for the disadvantaged. Unfortunately, the Government decided to do away with many CE schemes and education grants for the disadvantaged in the last budget, despite all our protests. No doubt this will hinder the progress and growth of the economy in future years.

Unless the Government actively attempts to resolve the outstanding issues outlined in the report, the economy will have a poor base to build on during the next number of years, and no number of reports will alleviate our problems.