Seanad debates

Wednesday, 10 November 2004

Competitiveness and Consumer Protection Policy: Statements.

 

12:00 pm

Photo of Mary WhiteMary White (Fianna Fail)

Much of the Irish economy remains characterised by low levels of productivity, relative to advanced economies. According to the annual competitiveness report, people employed in Ireland produce an average 16% less for each hour worked than their US counterparts. This productivity gap is particularly evident in those sectors of the Irish economy less exposed to international competition such as retailing, agriculture and parts of the public services. Even in those sectors of the economy more exposed to competition, pockets of weak productivity and performance remain. Large sections of our industrial base, both Irish and foreign, remain beset by low levels of research and development and innovation and limited sales and marketing capabilities. The document produced by the Department of Enterprise, Trade and Employment, Ahead of the Curve, spells out exactly the failures of marketing capabilities and innovation.

An inconsistency exists. High technology production is not widespread. There is high production in the capital intensive multinational industries and from which Ireland's reputation for high productivity emanates. However, job losses have occurred in the manufacturing sector because it is not efficient, not sufficiently innovative, not competitive and does not possess the marketing skills.

Last year's budget introduced a tax credit scheme for research and development which was generally welcomed by industry. However, a survey of Irish exporters on the expected take-up of this scheme by both MNCs and SMEs indicated a significant resistance to further research and development expenditure as a result of the scheme.

The main problem with the scheme is twofold. Its incremental nature is seen as a fundamental weakness. A review of similar research and development tax incentive schemes in 30 countries was found to show that the vast majority were based on straight volume of expenditure. The fact that the scheme does not apply to internationally traded services research and development activity is a major shortcoming, given the focus of both IDA Ireland and Enterprise Ireland on moving companies up the value chain and into service-related activities. This scheme should be reconsidered in the forthcoming budget. This is also the recommendation of the Irish Exporters Association. It calls on the Minister for Finance to introduce a straight volume-based research and development tax credit system which would go a long way to ensure that the Government's targeted level of 2% of GDP by business in its research and development spend is achieved over the next few years. The scheme should be expanded to service export innovations. I appreciate the Cathaoirleach's patience and I apologise for reading a script.

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