Seanad debates
Thursday, 18 October 2007
Economic Competitiveness: Statements.
11:00 am
Michael Ahern (Cork East, Fianna Fail)
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I thank the Leas-Chathaoirleach for giving me this opportunity to make a statement to the Seanad on the importance of foreign direct investment to the Irish economy and the role of both Government and IDA Ireland in promoting the country as an attractive location for this inward investment.
In the past ten to 15 years, Ireland has undergone a transformation from a low-wage and low-cost economy towards a high value and knowledge-based one. Arising from this transformation, the nature of foreign direct investment has changed and Ireland is now competing for premium mobile investments against the most advanced countries in the world. Foreign direct investment has played and continues to play a critical role in the development of the Irish economy. I will quote some headline figures to illustrate this point. The foreign direct investment sector accounts for 135,500 jobs and €2.8 billion in corporate tax receipts and spends €14.9 billion in direct expenditure in the economy, of which €3.4 billion is spent on Irish material and components and €5.76 billion is spent on Irish services.
We are now a small, open but vibrant economy, energised by some of the most sophisticated industries and services in the world. Government policies and investments in areas such as transport, science, technology and innovation, regional development, and skills formation are keeping this transformation of our economy on track. Our economic performance consistently reflects the success of these policies. Substantial expenditure by Government is being, and will be, incurred over the life of the national development plan. Government strategies like Transport 21 and the strategy for science, technology and innovation will help us to carefully influence and promote economic activity in new areas that open up different yet more sustainable sources of competitive advantage such as life sciences, biotechnology, services and related research, development and innovation.
These Government changes are beginning to make a real impact on the nature of economic activity and employment in the economy. As we earn the dividend in terms of growing employment and greater prosperity, others around the world now look to Ireland as one of the best examples of sound economic management and creative solutions to the challenges of modernisation. I do not think there is one Member in this House who has not been congratulated by strangers and acquaintances on our economic success while he or she was abroad.
Last year, total employment in the country exceeded two million for the first time and net job creation in agencies such as the IDA and Enterprise Ireland was the highest since 2000. The last quarterly national household survey on the labour market showed that the pace of employment growth actually accelerated slightly and that employment over the year was up nearly 4%. This means there are nearly 2.1 million people employed in Ireland — an increase of 78,000 on the same quarter in 2006. Furthermore, recent national accounts data confirm that growth is still strong. Gross domestic product in the second quarter was 5.4% higher in real terms than a year previously and the growth rate for the first quarter was revised upwards.
The Government is well aware that there are challenges, which are probably in sharper focus now than they were a few years ago. The Government is not complacent. Building and maintaining competitiveness is a dynamic and ceaseless process. As a small economy, we must constantly improve, become more productive, upgrade and change because our competitors are doing the same. We tend to focus on job losses in the multinational sector as the one and only indicator of competitiveness. This assessment is inaccurate. Those in business will appreciate that in a sector which employs more than 135,000 and which is highly competitive and globally mobile, there inevitably will be losses and gains every year, not just for cost reasons but for other company or sector-specific reasons.
International financial and business activity is never a smooth, upward curve of growth, expanding market share and corporate contentment. We are so embedded and deeply interconnected with the global economy that both sector and firm-level changes will have an impact here. It is how we structure our enterprise base, adjust to these changes and encourage a solid, enterprise-centred business environment that marks us out as a competitive and responsive economy.
I ask the House to consider what really makes an economy competitive. Essential conditions to achieve competitiveness include business performance, such as trade and investment, productivity and labour supply. Ireland is an investment-intensive economy that is both attractive to foreign investment and has the entrepreneurial capacity to drive successful overseas investment. Ireland continues to attract a large number of international greenfield investment projects, relative to its size. The United Nations Conference on Trade and Development's 2006 world investment report shows that we are number one in the OECD for the number of greenfield foreign investment projects per capita.
Just this week, a major Irish bank published the first edition of a new foreign direct investment performance index. This compares Ireland's performance at attracting inward investment to that of leading destinations globally. It shows that Ireland continues to attract a high share of global investment projects. In the words of its chief economist, "Ireland continues to punch above its weight when it comes to attracting mobile foreign investment". The index put Ireland at number two in the EU-15 member states for foreign direct investment inflows.
In this context, I mentioned earlier our increasing emphasis on new areas of competitive advantage, such as life sciences. A few days ago, an international consultancy working in the same benchmarking area also reported positively on our economy. It showed that Ireland attracted more foreign investment in life sciences than any other European country in the 12 months from July 2006 to June of this year. This shows we already have an established reputation for competitiveness in emerging high technology sectors, in the quality of our intellectual capital and in the excellence of our research infrastructure on which these investments rely.
Despite what many believe, Ireland is a competitive place to do business. This objective reporting on foreign direct investment, FDI, flows shows that international business believes we are competitive. International investment decisions to invest here are not goodwill gestures. They are made on the basis of hard facts, critical evaluation and confidence in Ireland and Government policies.
In regard to the direct effects of this investment, to which I referred, FDI also has a substantial multiplier effect throughout the economy, indirectly supporting a significant proportion of national income and employment. Indigenous companies are involved in sub-supply and there is an interface with Enterprise Ireland client companies. FDI creates strong demand for high skills and helps spread advanced management and business processes and practices throughout the economy via some of the most innovative and technologically advanced companies in the world, such as Intel, Pfizer, Wyeth, Oracle, Google etc.
Productivity is key to competitiveness. Without strong productivity growth we cannot maintain high standards of living and high incomes. Our levels have converged with those of the OECD and continue to improve. For example, services are now critical to growth and a source of significant employment and national income. In telecommunications, finance and business services our productivity growth rates are higher than similar sectors among our competitors in the most developed countries of the EU.
From another perspective we cannot have high productivity and, consequently, incomes without a serious commitment to innovation. Clever innovation and innovation based on our research base will drive our success in demanding markets. According to the fourth EU innovation survey, Ireland performs above the EU-15 average. This further underlines the continuing competitive attributes of the economy. It reflects the contribution of research and development and innovation programmes that are now very much the foundation of a successful enterprise policy.
These are a few of the reasons my perspective is more optimistic than others. Another is a slightly different form of peer review. Some time ago the representative body for Danish industry published its annual global benchmarking report. It notes that Ireland takes an outstanding leading position owing to top rankings in high technology and up-market exports. For the third year in a row Ireland is the leading OECD country in growth and development. Sometimes even our competitors say things about us that are positive and unbiased.
Our success in attracting international investment is in no small way attributable to the dedication and professionalism of the management and staff of IDA Ireland. As development agencies go they are recognised as the best in their class. The agency was established under legislation as an autonomous body to attract new clients and assist investors to help drive Ireland's economic development at a national and regional level.
Its mission statement declares that it "will win for Ireland, its people and its regions, the best in international innovation and investment so as to contribute to the continued transformation of Ireland to a world-leading society which is rich in creativity, learning and personal and social well-being." This mission statement translates into a number of overarching strategic objectives that are set against the economic developments in Ireland and the changing nature and globalisation of foreign direct investment. Specifically these strategic objectives address the need for expansion and extension of activities undertaken by existing corporations in Ireland; identification, targeting and attracting new investments into the economy; promoting balanced regional development; and developing the overall business environment surrounding companies.
To achieve these objectives the IDA is engaged in many activities that are client focused and all about securing and growing investment, capitalising on Ireland's increasingly high quality operating environment and reinforcing the drive towards a world-class knowledge-based economy. There is a continued focus in the IDA on identifying and securing investments from corporations in new markets, technologies and sectors that will contribute to economic growth in the future. The agency is building on the existing strong base of research, development and innovation to develop and enhance further this key business activity. This work is being undertaken with corporations, educational institutions and research facilities to enhance and expand further the range and depth of expertise in line with the strategy for science, technology and innovation.
The IDA is also promoting balanced regional development as per Government policy whereby regional competencies are clearly developed and articulated to secure additional investments for the key gateway and hub locations in line with the national spatial strategy. In support of this strategy the agency is involved in the provision of world-class property solutions through a network of regionally located business and technology parks and development of large-scale utility intensive sites aimed at securing capital intensive, high value investment. In this regard, it should be noted, for example, that in 2006, almost 60% of new greenfield projects and six out of every seven research and development investments occurred outside of Dublin.
To deliver on its various activities the IDA is organised along five sectoral business areas, information and communications technology, pharmaceuticals and biotechnology, medical technologies, international financial services and globally traded businesses, which operate on a cross-functional basis to maximise potential investment opportunities. In addition, the sectors are supported by worldwide international marketing teams in a network of offices across the globe, including Europe, North America and the Far East, a strong regional footprint in Ireland and a full range of corporate support services.
To compete effectively for mobile FDI Ireland must remain focused and continue to work hard to facilitate existing and new FDI clients to move into higher value added, higher skills products, functions and activities more in tune with the competitive strengths of Ireland today. High value added investments increasingly demand a highly skilled workforce, world-class infrastructure and an agile, flexible and responsive operating environment. The new national development plan provides the framework for this strong investment in infrastructure and knowledge-driven activities.
A number of aspects are particularly critical if we are to be successful in attracting FDI in future and these include investment in transport infrastructure such as roads, rail, airports and public transport; providing competitive and robust energy supplies; providing robust, high capacity and price competitive telecommunications; encouraging our students to study science, engineering and business; and enabling a fully connected and innovative research environment. Only by continuing to be prepared for the future in this way can we continue to be successful in attracting and growing high value and sustainable FDI for all the people.
12:00 pm
Paschal Donohoe (Fine Gael)
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I thank the Minister of State for coming into the House to speak on this matter.
I would like to take a slightly different approach to it. I do so because prior to having the privilege of becoming a Member of the Oireachtas, I worked for ten years for one of the companies Ireland was successful in attracting to invest here, namely, Procter & Gamble. In the time that company has been established in this country, it has significantly increased the number of people it employs. The company has an operation in Dublin and a large manufacturing facility in Nenagh, which is doing an amazing job producing goods that are sold profitably across the world.
The Minister of State spoke of the great economic success our country has enjoyed and how this supported the development of our economy and I am a great example of that. I left Ireland because there were no jobs here and got a job with Proctor & Gamble in the UK. To my unexpected delight, due to factors referred to in the Minister of State's speech, a job became available in Ireland. I spent five years happily working in that job. Towards the end of my tenure, warning clouds began to appear. This led to the company making tough decisions about the number of people employed by it in this country. I saw how difficult these decisions were even though I did not have to make them as they were taken at a different level.
I noticed the speed at which an erosion of competitiveness has an impact on the decisions that companies such as Proctor & Gamble make. It affects their ability to employ and make profit here. I also noticed the major impact of such decisions on the local community and workers. The pride a company takes in operating here turns into an emotional commitment to the country and anguish at the tough decisions that have an impact on workers who will no longer be working for the company in a few years' time.
Ireland's position within the competitiveness league and our ability to recruit and employ people here may seem academic topics. We are speaking at a high level about our global competitiveness and our ability to attract multinational investment but the academic nature of the debate disappears when one is involved in decisions about the ability to recruit people in Ireland. My contribution is informed by that.
Other Members have commented that very few Members of the Oireachtas have a background in business and employing people. My family is involved in small business, a sector that is represented very weakly in the Oireachtas. Those who have worked in multinational companies, benefited from it and then see it not work out so well are not represented here at all, with the exception of me and a few other people. We must represent this experience in the Oireachtas.
The report that ranks us 13th out of 30 countries in terms of attracting multinational investment is correct. It struck me that the countries ahead of us, those who have improved their competitiveness dramatically over the past few years, have been successful at improving their cost base. As a result countries such as Poland, Thailand, Argentina and China have overtaken us. The experience of a huge country such as China may be one we have difficulty copying or learning from because of its size and political structure. Countries such as Poland and Argentina, who learned from us and copied it so quickly, should give us pause for thought.
People may think I am a sad individual but I occupy my few leisure moments by reading publications such as The Economist. For the past few months it has carried a full page advertisement from Macedonia. It is very simple and promises to tax profits made by multinationals in Macedonia at 10% for the foreseeable future. It is written in big bold letters. The advertisement states that the average wage of those working in the country is €440 per month. It also refers to attempts to educate the workforce quickly. It refers to literacy rates and the development of second and third level sectors there. There is the makings of a perfect storm on the horizon. Countries are offering a tax rate lower than what we can do, wage rates far lower than what we can deliver and, most worryingly, they have cottoned on to the success we have had with education. We should not cod ourselves that we can make decisions that will have an impact on competitiveness next year or the year after.
These countries have examined what Ministers from all parties did in the 1960s and 1970s. A Minister from across the House, Minister Donogh O'Malley, took the brave decisions to make education free.
Mary White (Fianna Fail)
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That was second level education, not third level education, which was crazy.
Paschal Donohoe (Fine Gael)
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Of course. They examined the decision to make second level education free and to focus on the quality of education. They are learning from this and we must react. This will not be for the sake of those working in Ireland at present but for the students who frequently fill the Visitors Gallery. We must ensure that opportunities will be available to them in the future in the same way as I benefitted from decisions taken many years ago by Members of Fine Gael and other political parties. The importance of this is acute. The most successful part of our economic growth from the mid-90s to the early part of this century was export led, and concerned driving our international competitiveness and wage moderation. The nature of our economic success has changed dramatically and has changed from export led to construction dependent. It is also dependent on the degree to which our public sector has increased employment and the number of services generated. These factors will change in the coming years, perhaps dramatically.
I wish to focus on elements the Minister of State did not cover in his speech. These will be of major importance. I make these points as someone who worked in the international and multinational environment. They should register more heavily in political debate than is the case at present. The matter of service delivery was brought home to me dramatically yesterday afternoon. Working in a multinational company in Ireland, if one wishes to arrange broadband, a phone line, house insurance, or ask a question on employee or employer tax, the number of telephone calls and the amount of effort it takes to get those basics in place for one's employees is phenomenal.
This debate has touched on broadband availability. The effort it takes to get a telephone line installed in an office is gigantic. It takes the time of senior and middle management in any enterprise at the expense of creating profit and looking after their employees. This must be tackled. Yesterday, I had a query about my health insurance and rang my health insurance provider in the States. Within half an hour it gave me all the details I needed. Seeking the same information from a local health insurance provider would take months. Issues such as this fundamentally impact on the willingness of companies to remain in Ireland.
The Minister's statement did not contain the weight that should be given to the issue of corporation tax. Ireland has benefitted from an attractive rate of corporation tax. Parties on this side of the House played a role in securing this and the party on the other side has done a great job in ensuring it continues. The tax rate, however, will come under pressure. Ireland needs to fight its corner with the same degree of tenacity we have exhibited in EU agriculture and fisheries matters. If we do not secure an attractive tax rate, it will have a phenomenal impact on our ability to hold on to the businesses we have.
There is a need to examine these issues on an all-Ireland basis. I recently became aware of a major infrastructural project having to secure planning permission on one side of the Border. On the other side of the Border, another enterprise examining the same project was having to do exactly the same. Projects of this type must be co-ordinated and harmonised. We have been able to exploit our competitive asset on the global stage. If done on an all-Ireland basis, it will up our game.
Much is made of the third and fourth level sector in education. However, not every school leaver will be able to work in the life sciences sector or the high-tech, high-skilled end of multinational investment. It is of the utmost importance to future economic competitiveness that the basic issue of adult literacy is sorted out. Too many young children leave primary schools not able to read and write to a high degree.
The main nature of employment in the State and our reliance on one type of multinational investment will change in the coming years. The flak for that will have to be taken by domestic employment, whether it is service-based or local manufacturing. Sorting out issues of adult literacy and how best equipped school leavers are for the future will be very important.
I have worked in the multinational sector. What is an academic debate for many is important to me and others. It is important that our views are represented in the Oireachtas. The Minister of State acknowledges these issues. I have seen people lose their jobs in this sector. It is a searing experience, as searing as I having to leave the country when I could not get a job. We all need to come together on the tough issues. I hope this debate is the sign of a new Oireachtas approach to the matter.
Ivor Callely (Fianna Fail)
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I also have a similar experience to Senator Donohoe in working for a multinational company. When I started, it did not have a production plant in Ireland. Arising from a visit to the parent company in France in the early 1980s and because of what I was able to get my hands on because of my attachment to the political system, I encouraged the company to establish a production facility in Ireland. It did so because of the reasons alluded to by the Minister of State and Senator Donohoe, such as the sound education system and the beginnings of social partnership and infrastructural progress. The French pharmaceutical company's operation has developed from strength to strength. All Members acknowledge the pharmaceutical sector plays a large role in the economy.
All Members accept our competitiveness is an important issue. No matter where one goes in the world, people will acknowledge Ireland's economic success. However, when we touch on the issue of competitiveness when speaking to people about our success, they might mention other things about the cost of a product. If we have made Trojan efforts on health and safety and in relation to labour legislation, the minimum wage and all the other things that come with that, how can we compete with a country that does not have the standards we want to ensure are in place?
Talking to people who have gone abroad, for example, they will say that the price of a meal in Ireland is disgraceful. Recently, when abroad, I got a good steak and chips for €7. It would be difficult to find the same price in Ireland. It comes back to service, the expectations and demands of the public and the standards we have in place. While acknowledging the points on competitiveness raised by Senator Donohoe, it is important, however, to put it into perspective considering the level we have reached.
I am confident in the role played by IDA Ireland in promoting Ireland as an attractive location for inward investment. Never in the history of this great country have things been going better. From east to west, from north to south, there is activity and progress. There is scarcely any region that has not experienced some new project or has not a new development underway. Every day we hear of success stories, some new achievement and this is not confined, I am delighted to say, to the Irish economy. If we were discussing this issue, say, 30 or 40 years ago, there might have been great joy over one small project in one corner of this great nation. Given the facts and figures relayed to us by the Minister of State, not alone can we be proud of our achievements on the island of Ireland, we can also take pride in the Irish entrepreneurs who have gone abroad and become so successful in other markets.
We have entrepreneurs on the global stage playing a pivotal role in the global economy. We all know many of the big players and perhaps it is best I do not name them. We recognise that they play an enormous role in the differing economies of the world, from the UK to the US and from Germany to many of the Asian countries.
Not alone have we big players in the world economy, but our Irish products are on sale all over the world. I have referred to the position 30 and 40 years ago. At that time we were not at the races, or even standing still, so we have come a long way.
Although the foundations for this success, as the Minister of State has indicated, were put in place 15 years ago and more, the real period of growth has come about within the last decade. In the past ten years we have found a new confidence and developed a new belief in our capacity to succeed, whether at home or abroad. Ireland Inc. is rocking and rolling and the economy is sound for investment. Hopefully foreign direct investment will continue to locate here.
The economy has expanded at a rate never achieved before. We are showing record amounts of productivity and produce. Building and construction has enjoyed record levels of development. Our transport network has made enormous strides towards achieving appropriate connectivity, while motorway, rail and other forms of transport and infrastructure in general has come a very long way in line with all the other developments. Ireland has undergone an enormous transformation.
Arising from this, and given the global situation, Ireland is now competing for FDI in a very competitive and demanding marketplace. I acknowledge that FDI has, and hopefully will continue, to play a fundamental and critical role in the development of the economy. I also acknowledge the importance of small and medium enterprises, SMEs. Small businesses have a great deal to offer. They are very durable and adaptable, usually flexible and responsive to changing economic circumstances. Many small businesses grow into great success stories. While discussing the importance of FDI it is right, therefore, to acknowledge the significance of SMEs and the major contribution they make to the economy and to regional employment. There are great opportunities for further tapping the potential of SMEs. I congratulate all of those involved in their success and their representative body, the Small Firms Association, which has done enormous work over recent years.
I thank the Minister of State, Deputy Michael Ahern, for his statement and for providing the Irish economic statistics in the new global marketplace. As he said, Ireland continues to box above its weight and is in No. 2 position in the EU 15 for FDI investment. That is not a bad position to be in. The real question is whether we can hold that position and perhaps even top the league table.
Ireland is poised, hard at work and with high expectations of an even stronger economic future. There is confidence and aspiration that the economy will continue to compete successfully in the global economy. Such confidence and aspiration breeds debate and economic analysis, as policy makers and legislators seek to progress. While we do this, as policy makers and legislators, the fact that our communities and regions seek delivery of growth locally and a better quality of life should not be lost sight of.
In his statement on 2 October, Dr. Alan Gillespie, chairman of Ulster Bank, rightly pointed to the changing circumstances on the island of Ireland, the concern with economic life and the wellbeing of our respective communities. He stated these demand a common resolve and a concerted action for an island solution. He pointed out that the North has international goodwill, peace, democracy, devolved government and a flotilla of Stormont ministers serious about making a difference. He stated:
I believe that to market Northern Ireland effectively we should align the inward investment marketing activities of Invest NI (INI) with the Republic of Ireland's IDA. We should promote an all-island economy through a single, joined-up effective agency with the IDA and INI no longer competitors, but merged and fully collaborative.
The IDA is best in class; INI still has some catching up to do. Surely sensible people in Belfast and Dublin could work out a mutually beneficial operating protocol to bring real benefit to the whole island?
I wholeheartedly concur with this. Perhaps the Minister of State might ask his Department, which I am sure has studied this statement, to give me some type of position paper as regards the collaborative approach it has with the INI and its strategy on how progress may best be achieved.
Shane Ross (Independent)
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There seems to be great contrast over the judgment on the IDA in the past and the possible future of the agency. I was struck by the difference in tone in the three speeches that have preceded mine. The speech from the Minister of State reflected, as did Senator Callely's, an enormous confidence in the future. I do not know whether that is misplaced but there is a danger about being too smug over the future of the IDA, just because it has been so successful in the past. I welcome Senator Donohue's contribution because this House, and the other one above all, need people who have worked in multinationals to tell us about them as we are pitifully ignorant about that area and several others. I welcome the fact he gave us one or two amber lights about the future of this particular area of the economy in which the IDA concentrates.
I thought it was interesting when the Senator spoke of Hungary and Macedonia because there is nothing more dangerous in business than copycats. We have been very successful, with one or two highly innovative measures, at championing an economy which has been built on bringing in multinationals and foreign direct investment. However, other countries have caught on to this and have found out that this is rather a good idea. The reality, which we may not face, is that they do it a bit better than we do now. They have cut taxes below our tax rate. Their costs and wage structures are lower and they are attracting foreign direct investment. I am not sure — I do not know the answers to many of the questions — that the response from the IDA is adequate.
I read the annual report and the Minister of State's speech. The annual report contains this kind of mantra which we are used to about the IDA and the knowledge economy. I am not certain it knows what the knowledge economy is or whether it is saying that we do not have the tax cuts and the competitiveness but have clever people who are well educated and who have huge skills which do not exist elsewhere. That may be true and may last for a little while but what it is saying is that it is positioning itself up-market and that if one comes here, one will have to pay for premium goods. It is a dangerous game and is moving into fairly unknown territory. We must, however, accept that the old game is over, which I think the IDA has recognised. It realises that the day when tax cuts, low wages and cost competitiveness were the real carrot for bringing people in is over.
Mary White (Fianna Fail)
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What is Senator Ross's view on the minimum wage?
Shane Ross (Independent)
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Senator Mary White must declare her interest in the IDA before she speaks——
Paul Bradford (Fine Gael)
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Senator Ross should address the Chair.
Shane Ross (Independent)
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——otherwise she could be prosecuted, which I would hate to see.
Mary White (Fianna Fail)
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We want to encourage debate in the House.
Paul Bradford (Fine Gael)
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Senator Mary White will have an opportunity to proffer her opinion.
Mary White (Fianna Fail)
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The Acting Chairman should stop trying to prove himself.
Ivor Callely (Fianna Fail)
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What is the answer to the question?
Shane Ross (Independent)
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I would welcome the interruptions from Senator Mary White if she told us of her interest in this subject beforehand.
Ivor Callely (Fianna Fail)
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What is the answer to the question?
Shane Ross (Independent)
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I would like to tackle the Minister of State's speech.
Paul Bradford (Fine Gael)
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Senator Ross to continue with his statement. This is not a debate but a series of statements.
Shane Ross (Independent)
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I welcome the fact the Minister of State quoted the mission statement of the IDA. I am afraid it fills me with even more fear about the future. I have no problem with what the IDA did in the past. I salute Senator Mary White's husband, who she does not acknowledge in her interruptions, and the great deal he did in the IDA, as did Michael Killeen and others before him. Let us salute all those people but ask what the mission statement means for the future. It really is a pretty contorted meaningless mission statement which lacks any direction. It states: "We will win for Ireland, its people and its regions, the best in international innovation and investment so as to contribute to the continued transformation of Ireland to a world-leading society [What in the name of God is a world leading society?] which is rich in creativity, learning and personal and social well-being." That could be the mission statement for any charity, state agency or state body in the world. It is utterly meaningless.
One of the great strengths of the IDA is that it has been a kind of independent republic within State agencies, within that great sphere in which these rather padded State agencies exist. The Minister of State referred to it as "autonomous". That is a good word because it has been autonomous in the past, has been allowed to do its own thing and, on many occasions, has been counter to the general financial consensus in the country. The IDA has been enterprising and has brought Americans and multinationals to this country when politicians concentrated all their efforts on and love-bombed native industry. Multinationals are bodies which we still handle with kid gloves. As a people, we do not like to acknowledge that the reason for the boom is multinationals. We do not like to acknowledge that because it somehow implies we did not do it ourselves. The truth is we could not have done it without them. That is not to deprive successive Administrations of the credit for creating many of the conditions which welcomed——
Mary White (Fianna Fail)
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The Taoiseach, business and the trade unions——
Shane Ross (Independent)
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Senator Mary White's husband did it all. She knows it and has told us that before. She should stop giving credit to other people; it is very unlike her. She does not normally do it. It was not native industry or normal financial measures but it was welcoming multinationals, to some extent rather quietly.
I agree with all those who said we should keep the 12.5% tax rate. Why do we not cut it to rival Latvia, the Czech Republic, Poland and Macedonia? Why do we not bring it down rather than put it up to attract more industry and compete with those countries? I hope I have not been too critical because what the IDA has done in the past has been wonderful. However, for all its great work, has the IDA any clout? Is it allowed to get on with its work and does the Government ever listen to it? Everything in this particular sector is not rosy.
I do not know whether anybody in this House read the report of the US Chamber of Commerce last year. For a group which tends to pull its punches on the Irish economy, it was deeply critical of some of the inadequacies in the economy. It said the infrastructure was appalling, although it did not use that word because it does not use those types of words. However, that was the message it was sending. It was critical of the airports and said it was very difficult for people to get from one place to another. If the IDA had any clout, I do not believe the roads would be in the state in which they are where it is almost impossible for foreigners, who are absolutely shattered by what is going on in this country, to get from point A to point B. According to the US Chamber of Commerce, that is a deterrent to people coming to this country. If we do not spend the money quickly, they will not come.
Much more important, however, is the issue of broadband which was raised by Senator Hannigan on the Order of Business and by Senator Donohue. Northern Ireland, which has a kind of antediluvian economy compared with ours, provides broadband to every house and business. We cannot do that. It has been promised time and again, yet there is no progress on broadband. How in the name of God does the IDA explain that to Google or to other such organisations? How does it say to them that we cannot do it and we cannot provide the money or the infrastructure? If the message goes out that our infrastructure is inadequate, and I am not just talking about roads——
Ivor Callely (Fianna Fail)
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Senator Ross should not send out that message.
Shane Ross (Independent)
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——people will not invest in this country.
Shane Ross (Independent)
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I am saying that and I will not take any lessons from Senator Callely on what I should or should not say in this House. Broadband is inadequate and its lack is bad for the people, big business and small business in particular. Senator Callely, who referred to small businesses, should know the lack of broadband is a terrible problem for them in Ireland.
Ivor Callely (Fianna Fail)
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Ireland is at the EU average in respect of the roll-out of broadband.
Shane Ross (Independent)
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They never stop complaining about the lack of broadband because they cannot do business without it.
Ivor Callely (Fianna Fail)
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We are at the EU average with regard to the roll-out of broadband.
Shane Ross (Independent)
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The IDA deserves great applause in respect of the International Financial Services Centre.
Shane Ross (Independent)
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There is no doubt that what it did in the IFSC against the odds was a tremendous achievement.
Mary White (Fianna Fail)
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Hear, hear. The Labour Party was against it.
Shane Ross (Independent)
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However, the initiative was tax-based. We did not do it ourselves.
Shane Ross (Independent)
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Mr. Haughey, Dermot Desmond and others deserve full credit for it.
Ivor Callely (Fianna Fail)
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I am glad the Senator agrees with me.
Shane Ross (Independent)
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Let us distinguish between the past, in which the IDA did a wonderful job that should be acknowledged, and the future, which presents dangers that the Government and IDA should consider a little more seriously and about which they should be a little less smug.
Dan Boyle (Green Party)
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I will try to achieve a seamless flow for the next eight minutes.
Dan Boyle (Green Party)
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As the Chairman has pointed out, we are making statements rather than engaging in detailed debate, but the statements afford us the opportunity to outline the success and value of inward investment to our economy, as the Minister of State has already done. However, they also afford us the opportunity to point out some of the difficulties that may lie ahead and for which we need to prepare. To be fair to Senator Ross, his contribution was based very much along those lines.
We have been extraordinarily successful in terms of inward investment and we remain on top of the league table in terms of attracting investors to the European Union. Our success combines with that arising from inward investment in other EU countries. As long as this is the case, the signs for the continued health of our economy look good. We need to be aware of certain factors, however, including the accession of a dozen new members to the Union, all of which are in continental Europe and have logistic advantages over an island economy like that of Ireland. They are closer to the broad mass of the European market and attract inward investors that may not have existed before their becoming members of the Union. We need to rise to this challenge.
The other countries with which we are competing have successful education systems and we have lived for too long on the idea that ours was somehow superior. We believed we had a talented workforce that did not exist in other countries but I do not believe this was the case. Not only should we not rest on our laurels, we should also put in place a means to train a workforce that has higher capabilities. Our education system has great gaps in this area. For instance, the uptake of science and technology at third level is too low. If we want the economy to continue to sustain itself, we need to put in place appropriate resources and policy.
Reference was made to the role of our favourable corporation tax rate in attracting inward investment. While there might have been arguments over the level at which this tax could be levied, there is consensus that the 12.5% rate is effective and should remain. The problem, as we all know, is that efforts are being made to have a common corporation tax rate throughout the Union. This move is being led by the German Government in particular. Regardless of the composition of our Government, we should be prepared to fight against this collectively because the removal of the incentive would mean there would be nothing to attract inward investment to an island economy on the periphery of Europe. As long as the threat exists, there is an onus on all elected representatives and political parties to send out a clear message that corporation taxation is a national competence we are not prepared to surrender and which is vital to our economic future.
We must consider striking a balance between services and manufacturing in attracting inward investment. As Senator Ross and others have highlighted, the International Financial Services Centre has resulted in great spin-offs in terms of helping us to improve our infrastructure, education system and the quality of our workforce. The same does not apply to manufacturing, which is becoming an increasingly small part of our economic makeup. We need to challenge this because a strong manufacturing base is needed to sustain progress in any economy. A feature of inward investment in Ireland has been that we have managed to attract elements of the manufacturing processes of many multinational companies, but we need to up our game by having as many of these elements as possible, from research and development to the finished product.
We are particularly lacking in terms of research and development. There have been Government strategy statements thereon and particular references thereto in the programme for Government with a view to promoting them. Our standing regarding research and development is low in European terms and the target we seek to reach by 2010, in accordance with the Lisbon goals, is a long way off. We need to put in place more resources to meet the target. Without research and development, we leave ourselves open to the type of asymmetric shock to which Senator Ross alluded given that globalisation is a reality of world economics.
One euro is now worth $1.42, bearing in mind that the dollar has traditionally been the main currency of the world, and the price of oil stands at $86 per barrel, but these statistics could change quite drastically. Within the next year, the euro could trade at $1.50 and the price of oil could rise to $100 per barrel, thus changing our economic outlook. That said, the work done and which continues to be done by the IDA deserves great credit because it has resulted in a strong economy robust enough to withstand many of these pressures. Members of this House and public representatives in general need to realise the circumstances of the past may not continue to obtain. We must prepare ourselves to do business differently if, as Senator Callely put it, we want to continue to be head of the class in terms of attracting inward investment. We must ask all kinds of questions of ourselves to ensure competitiveness and if we are to have an economy that is rightly more concentrated on high-tech, high-spec and high-quality industry, it will require substantial changes to Government policy and our approach to industrial policy.
Dominic Hannigan (Labour)
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The Government and the IDA have a pivotal role to play in the continued development of the economy. Globalisation is upon us and it is vital that we continue to be competitive in the world market. To do so, we require serious investment in the country and we need to think hard about where the next benefit to the economy will derive from. In the next five to ten years, there will be new developments worldwide and we must work out how our economy can benefit. We have relied until now on the construction industry, which accounted for 23% of Ireland's GNP last year and in which 13% of the workforce is employed. A significant proportion of our tax intake comes from that industry. That will not last forever, however, because the construction industry is cyclical. We are possibly starting to come down from the top end of the cycle. There is a danger that any economy that relies heavily on the construction industry will suffer at some point. When I graduated as a civil engineer in the 1980s, 38 of the 42 people in my class had to go abroad because there were very few jobs in Ireland. While nobody suggests that we will ever return to those dark days, we cannot continue to rely on a cyclical sector of industry that is currently on the way down. We need to work out where we should target our investment. It is a challenge for the IDA and, more importantly, for the Government, which can control how we develop. I would like the Government to facilitate the growth of indigenous industry. As someone who has set up a business here, I do not think Ireland is one of the easiest countries in which to establish a company. We should learn from other countries.
We should acknowledge the strength of the tourism industry, which is an essential part of our economy with potential for further growth. Some 250,000 people visit Newgrange in county Meath, every year. Many local jobs depend on the continued popularity of that facility. It is hoped that 100,000 people per annum will visit the Battle of the Boyne site, which will be opened soon. Perhaps more jobs will be created in the locality as a result. The Government invested in the tourism products I have mentioned, and it is important that it should continue to do so. Investment of €30 million or €40 million is required if the Boyne Canal is to be reopened. We can expect more jobs to be created in tourism-related enterprises when the canal has been refurbished.
We need to increase the amount of foreign investment in Ireland because we cannot rely solely on indigenous industries such as tourism. It has to be recognised that the IDA played its part in the development of the Celtic tiger. We need to continue to give the IDA the tools to enable it to market the country overseas. The Government should continue to invest in certain areas, such as public transport, to ensure that Ireland remains attractive. Completion of the railway line between Navan and Dublin, for example, will reduce journey times from the capital to the Meath region. Other speakers have mentioned the need to improve our road infrastructure in the context of the lack of connectivity across the country, particularly in the mid-west and the west. It is unacceptable that our major cities and towns are not connected by motorway.
The issue of broadband access, which has been raised throughout this debate, comes up again and again in this Chamber. We need to invest heavily in the roll-out of broadband to all parts of the country so small and medium-sized businesses can benefit from new technologies. Broadband is not a luxury — it is an essential part of doing business. We need to continue to invest not only in primary and secondary education, but in tertiary education and lifelong learning. When people lose their jobs as a result of companies leaving our shores, they should be taught new skills and given additional training to enable them to continue to contribute to the economy. These issues relate to local and central government. It is important for local authorities to zone industrial areas where businesses can locate. My experience, based on my local authority background, is that councillors and planners throughout the country are trying to ensure that locations are available for new businesses. The only problem with the fantastic new business park in Stamullen in County Meath is that broadband is not yet available there, although I believe it is coming.
The Government has a role to play in ensuring that facilities are put in place to allow the IDA to market Ireland as a suitable location for inward investment. As an English-speaking country with a well-educated workforce and competitive and advantageous tax rates, we have a great deal to offer to potential investors. The Lonely Planet guide yesterday rated Ireland as the friendliest country in the world. Ireland is a good place for companies to base themselves. As the IDA is responsible for marketing, it cannot provide infrastructural links such as broadband and transport facilities. That is the Government's job. It is vital that the Government gives the IDA the tools it needs. As Senator Ross said, some international investors are worried about whether they should invest here in the absence of certain services like those I have mentioned. We do not want the IDA to have to answer questions about these matters. The Government needs to give the IDA all the resources it can and to put infrastructure in place to ensure the IDA does not have to answer questions from potential investors.
1:00 pm
John Carty (Fianna Fail)
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I thank the Minister of State, Deputy Michael Ahern, for coming to the House to outline the economic progress Ireland has made, and will continue to make over the years to come, as a result of strong Government support for competitiveness. Over the years, one of the IDA's strengths has been its ability to adapt its policies and strategies constantly and rapidly to meet the needs of the Irish economy. It has taken advantage of the opportunities in the marketplace for foreign direct investment. By identifying emerging new sectors with potential for inward investment, the IDA has generally stayed well ahead of its competitors. It has successfully targeted niche areas of business in which Ireland can offer a competitive advantage. Ireland has changed dramatically over the past decade. The IDA has worked to meet the expectations of a society that is enjoying full employment and is aspiring to a standard and quality of life the equal of any other society in the world. It has moved substantially more of its people and resources into the north-west, midlands and south-east regions. It has established important operating units in Sligo, Athlone and Waterford, with the goal of helping such centres to develop as magnets for investment in their own right, rather than having investment pushed their way from Dublin.
The IDA works with local authorities and service providers to ensure that suitable infrastructure is in place to support an increase in regional development, based around the regional economic centres. As part of its broader role in the Ireland of the future, the IDA helps to ensure that requisite skills and research capabilities are in place. It links Irish research institutes and global businesses with international research centres. The IDA markets overseas the exciting new research facilities that are evolving throughout the country. Most investment has traditionally been made in manufacturing businesses which have been attracted to Ireland by its competitive advantages over its EU neighbours, such as its low costs. Such activity will remain a fundamental part of Ireland's development programme. More recently, however, the investment sought by the IDA has been increasingly based on innovation and research — knowledge-intensive projects that require high skills and expertise.
Recent unprecedented advances in science and technology have meant that our economic growth and development are being increasingly based on information and knowledge. In general, the two main forces that drive foreign investment are the globalisation of business and the dramatic evolution of the knowledge-based economy. In this new world, which is dominated by businesses and based on innovation, research and the use of information, investment is attracted less by asset-related financial incentives than by a conducive and efficient operating environment.
The IDA has taken a broader role in ensuring that world-class skills and infrastructure are in place to keep Ireland competitive. As innovation and research continue to globalise rapidly, developed economies are trying to devise strategies to foster and retain the research activities of their indigenous companies and to attract new facilities. Innovation and research and development are major components of the IDA's well-established programme of helping existing client companies to establish higher-order and higher-value functions with their Irish subsidiaries. On the basis of the premise that such companies must continually grow and develop if they are to remain competitive, the IDA encourages and fully supports local management in securing from the parent corporation the widest possible range of strategic activities. Many companies have developed far beyond their initial proposals and have added higher value functions such as research and development, technical support, software development, e-business, customer support, logistics and shared services. The success of the IDA in attracting international investment is to be commended. The dedication and professionalism of its staff has contributed to its success and on which they are to be congratulated.
I ask IDA to place an emphasis on securing investment in the more remote regions, especially in small towns in the west.
John Carty (Fianna Fail)
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I speak from a parochial point of view in saying this is needed because of the massive development of Knock airport. Investment by the board of the airport and the Government has brought the airport to a high standard and it has a land bank available for companies to develop. The region was once described as the black triangle of east Mayo but thankfully this is no longer the case. The area now provides significant employment but its young population is still forced to move to Dublin and elsewhere and it would be marvellous to keep them in their native region.
Feargal Quinn (Independent)
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I welcome the Minister of State to the House. I know Deputy Michael Ahern has his heart in the right place.
In recent times I have been invited to speak in different parts of the world on the subject of customer service. On every occasion what my listeners really wanted to find out about was the success of the Celtic tiger. When I was going to Argentina last year, Senator Mary White provided me with a copy of a book written by her husband, Padraic White, and Ray MacSharry about the success of the Celtic tiger. I recommend this book as essential reading for everybody in business in Ireland and for all civil servants. It is written like a novel and tells the story of how the Celtic tiger started and developed and lists the elements that achieved success. The only danger is that when I was speaking to people in different parts of the world who wished to hear about the success of the Celtic tiger, I was speaking to our competitors. I am travelling to Estonia soon where I am to speak on the topic of customer service but what they would really like to hear about is how we achieved it and how they can replicate it. Estonia has a company tax rate of 0% as an incentive.
The two most important factors in attracting new investment to Ireland have nothing directly to do with IDA Ireland, although I hope it would support my analysis. The IDA will do the best possible job with the hand it is dealt but it cannot work miracles and we would be exceedingly foolish if we base our expectations on such a belief. Competitiveness and education are the two most important factors and these have been referred to by the Minister of State in his remarks. If these factors are not present, then nothing else matters. We will not succeed in attracting new investment from outside the country. This point bears repeating because the message is not getting through to the point where action is taken. Even the dogs in the street know that Ireland in now a very expensive place in which to do anything.
Foreign direct investment has been encouraged for the past 40 years and initially Ireland was marketed as a low-cost location. In those days everything about Ireland was cheap in the sense that everything was low-priced, such as labour costs and the basic business overheads such as energy costs and taxes. Added to this was one of the lowest rates of corporate tax in the world and so Ireland provided a very attractive package.
Mary White (Fianna Fail)
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On a point of information, other countries had those ingredients also at the time. There was as much competition then as there is now.
Feargal Quinn (Independent)
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I do not disagree with the Senator. I refer to the book written by the Senator's husband in which he states those facts. A number of elements came together at the right time and created the success.
The Minister of State referred to the report by a major Irish bank but he emphasised the favourable points made in the report. However, Ireland in now in 13th place out of 30 as an attractive country for foreign investment. I think we may have rated higher in the past. This is a reminder that we are in a competition.
It is now 40 years later and the situation is almost totally reversed. When a potential investor is considering the attractions of competing locations, he or she will find that Ireland is not at the top of the list under almost all the headings. Every one of our basic costs are out of line with those obtaining elsewhere. We are now at a disadvantage. We still offer a very competitive corporate tax rate but our position is under threat from countries which offer our low tax approach. A head of steam is building inexorably which will see the harmonisation of European corporate tax rates. I am aware we will fight and have done a good job to date but we will be unable to resist forever.
We are uncompetitive in our cost base and potential investors know this. They will want to know our long-term attitude to these costs. They wish to see whether this is a country that is determined to work hard to close that cost gap between itself and the rest of the world or whether this is a country always talking about containing costs but not taking any action. If official policies tend to aggravate the situation rather than improve it, then potential investors will have a very different attitude. They will take their money out and will run to more hospitable locations for their investment. We fall into the second category rather than the first. If we continue in the same manner, we might as well disband the IDA because it will never be able to do its job with a hand tied behind its back, so to speak, with regard to costs. The situation is as stark as this.
If a start is made on addressing the issue of competitiveness, the other mountain to climb is that of cost. We will never again be able to offer a cost advantage to a potential inward investor. The most we can ever hope to do is to neutralise the opposition by offering a highly positive advantage in some other direction. It is generally agreed that any advantage we offer must be based on the calibre and skills of our people. We aspire to leadership in the knowledge society but, unfortunately, we do not accompany our rhetoric with the action necessary to achieve our aspiration. The calibre and skills of our people depend on how much is invested in education, but not enough is being invested to realise those aspirations.
The OECD landmark report called for a quantum leap in the amount of funding for third level education but there is a need for a quantum leap at all stages of the education system, from preschool education through to research stage at university and institute of technology level. We must catch the attention of the Government and of the powers that be. The phrase "a quantum leap" is not just a soundbite; it describes what is needed. It is not enough to increase spending on education in step with the increased amounts expended in other areas of Government spending and it is not enough to put education at the top of the queue. Education must be recognised as the most important national priority and it must be funded properly. This is the status which investment in education must receive if we are to succeed in attracting direct foreign investment in the future. Current policies do not reflect that situation. Spending on education is not given sufficient priority in the national development plan.
The choice before us is stark. Either we begin to recognise that education is our first national priority or we will waste all of the money we pour into new roads and other physical infrastructure. We will never attract outside investors with motorways as investors expect them as a matter of course. The only way to successfully compete in the world market for investment is through the quality of our people and if we want to do so we must pay the price to achieve it.
It was interesting to hear Mr. John Bruton, the EU Ambassador to the United States, at the National Forum on Europe yesterday. He spoke about the success of the United States where jobs are being lost but better jobs are being created. This is done through an investment in innovation and this is the challenge we have. The Minister of State's heart is in the right place and we must support him.
Brian Ó Domhnaill (Fianna Fail)
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I welcome the Minister of State, Deputy Michael Ahern, to the House. This is a timely debate and important for the future of the country and the many people who will seek employment. I listened attentively to what Senator Quinn had to say. He has a background of employing people and he is an innovator.
Brian Ó Domhnaill (Fianna Fail)
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I agree with much of what he stated on the importance of education in a modern knowledge-based society. The economic base we now have was built upon second-level education becoming freely available in 1966. I am the Government spokesperson on lifelong learning on which we will table a motion next week. It is important that we focus on the critical issue of education and we will have an interesting debate next week.
Many people of my father's generation had to emigrate to find employment. Today we have employment opportunities on this island. I graduated from college in 1999 and many or all of those in my class in secondary school and at university have employment opportunities their fathers and forefathers did not have.
Ireland continues to win international investment from global corporations because it is seen as a business location where the workforce, as well as being highly qualified has a unique capacity to improve, innovate and initiate new ideas, processes and ways of working to make business more dynamic, efficient and profitable. The IDA invests extensively in promoting new inward investment with a particular focus on business sectors closely matched with the emerging needs of the economy and which can operate competitively in global markets from an Irish base. Key areas of focus for the IDA are advanced manufacturing projects in sectors such as IT, life sciences including pharmaceuticals and biopharmaceuticals, medical technologies and engineering.
I am glad to see the national development plan involves all of the State bodies in a co-ordinated approach and is well-funded in the medium-term to the tune of €52 billion over the next six years. Despite growing competition from other locations, which was referred to by other Senators, Ireland continues to win a disproportionate share of inward investment to which the Minister of State referred. Independent reviews confirm that Ireland's market share of investment into Europe continues to grow despite competition and the decrease in recent years in the overall pool of investment available worldwide.
Ireland's inward investment projects showed a strong increase of more than 10% according to the latest Ernst & Young European Investment Monitor. The number of investment projects increased to 74 in 2006. Investment continues to be dominated by the US and the UK as the US increased its number of investments in Ireland from 41 to 42 in 2006 and those of the UK increased from six to 16. According to a study by a major Irish bank the European index shows Ireland is in second place with regard to inward investment companies or locations in Europe.
I come from a region in Donegal which has suffered major job losses during recent years predominantly due to losing the manufacturing base of employment we had to low-cost economies. We also lost out as a knock-on effect to the conflict in the north of Ireland which lasted for too many years. The Donegal region has a network of IDA developed quality business parks with the necessary telecommunications, utilities, infrastructure, buildings and site options to cater for the needs of multinational clients.
Overseas companies based in Donegal include UnitedHealth, which is a US health care claims processing company, Pramerica Systems Ireland, Medisize Donegal Healthcare, Boston Scientific, Zeus Industrial Products , SITA PTS which is a Swiss software development company and Abbott Laboratories a US medical devices company. A range of other companies are employed in the Gaeltacht area of County Donegal under Údarás na Gaeltachta.
The Donegal region has a highly-skilled workforce with a good work ethic and competitive labour costs. The new interdepartmental group on Donegal was established at the request of the Government. The interdepartmental group, comprising key players from each Department and the Donegal county manager, was asked to focus on the progress made on infrastructural requirements to make Donegal a more attractive location for enterprise location particularly as it makes the transition from the traditional to more modern and higher-value-added industries.
I call on the Minister of State to use his good office to ensure every Department signed up to the interdepartmental group will fast-track the required infrastructural projects. This will help to ensure that a report should be sought from each Department on the up to date position on the roll-out of critical infrastructural projects including water and sewerage projects announced recently for 2008, 2009 and 2010, the road from Dublin linking Derry and Letterkenny and the roll-out of broadband in the county.
Donegal County Council in association with Derry City Council established the Diaspora project which promotes bringing people back to Donegal to create employment. It is important that IDA Ireland, the Department of Enterprise, Trade and Employment and other agencies work with this project to attract home those who established business elsewhere and who have the knowledge, skills and abilities to come home. We will have a céad míle fáilte for them if they wish to do so. In Donegal Town, IDA Ireland has commissioned architects to design a 1,000 sq. m office building in Lurganbuoy. A substantial number of new jobs will be created through the Ballyshannon IDA project.
At a national level it is important IDA Ireland works with other agencies including Údarás na Gaeltachta, of which I am a member, to attract inward investment to the most geographically dispersed parts of the country, namely, the Gaeltacht areas. There is also a Gaeltacht area in the Minister of State's county.
I wish to make a number of proposals. Projects on infrastructural requirements should be fast tracked. I wish the new IDA Ireland chief executive, Mr. Barry O'Leary, well. He must deliver on implementing Government regional policy in terms of rolling out jobs to the regions and the west of Ireland. IDA Ireland must move quickly to increase site visits to the west and north-west of Ireland, including Donegal. We need site visits for people to realise the potential and opportunity available in regions. If they do not go to regions to discover what facilities are available it is difficult to bring new companies and employers to those areas. This is an important debate and I know the Minister of State will relay what is raised to his Department.
Pearse Doherty (Sinn Fein)
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I welcome this debate. A couple of weeks ago I called for a debate to focus on the problem of unemployment in the north west and I was glad to learn then that this debate was to take place. The role of IDA Ireland is now included. I want to focus on a number of issues, particularly some of those raised by the Minister of State in his contribution, such as the vibrant economy and that Government policy, in terms of regional development, is keeping this economy on track.
The Government is failing to acknowledge that Donegal is in a crisis in terms of economic development. I do not want to appear negative but as Senators and members of the Oireachtas we have a responsibility to face the facts. Unless we face the reality of what is happening in an area we will not be able to address the problems. There is an economic crisis. The Minister for Enterprise, Trade and Employment, Deputy Martin, has dismissed this as a so-called crisis.
I want to speak about the facts in Donegal. We have an unemployment rate of over 16%, some say the rate is over 18%. Whether it is 16% or 18% it is the highest rate in the 26 counties, running at four times the national average. The position is deteriorating in the region with those haemorrhaging jobs. Two weeks ago I rose in this Chamber to speak about three companies in the Gweedore industrial estate that lost more than 100 jobs since the summer. Those companies are not making the national headlines. There are also other companies closing down that are not making the national headlines.
This leads to the problems in Donegal. None of the promised decentralised jobs have come to Donegal town, Buncrana or Gweedore. It is a low-wage economy with employment heavily reliant on the construction industry, more so than the national average, and the low-paid service sector. Over reliance on the construction industry in Donegal, as elsewhere in the State, will be problematic in the long term but the Government does not appear to have any plans in place.
Over 39% of those unemployed in Donegal have no formal or primary education. Donegal has the second highest educational drop-out rate in the State with 25.5% of students not completing the leaving certificate. One out of every four students in Donegal do not complete the leaving certificate according to research carried out by Donegal County Council in 2004. It is an area with the highest levels of unemployment, the highest levels of poverty, the highest levels of early school leaving and the lowest levels of disposable income. Does this not constitute a region that is in need of special economic assistance from the Government? If it does not, I do not know what does. It is an employment blackspot and it is in crisis.
Employers will not be attracted to a region unless the proper infrastructure is in place. Other Senators have mentioned this also. The Government has failed in this area by not tackling the infrastructural deficiencies in Donegal. It is a derailed county. Earlier today I called on the Minister for Transport to come into the House and speak about Transport 21 and the lack of a rail service in Donegal. It is one of the few counties that does not have a rail line. When I took this to Jacques Barrot, the EU Commissioner on Transport, there was disbelief. We showed him the map of the rail network throughout Ireland and when we showed him the north west, he asked what was there. We told him they were all vibrant communities that do not have public infrastructure. We need to move forward on the issue of infrastructure.
We also have poor broadband provision. Members from the Opposition said provision was not as bad as it appears. The reality is that according to the OECD, the 26 Counties still ranks 23rd out of 30 industrial states in terms of broadband provision. Donegal and other counties in the north west, such as Leitrim, Cavan, Monaghan and Roscommon, have a broadband uptake of 10% or less.
I know people who want to set up their own businesses in my parish of Gweedore, Cloughaneely, or the Rosses and who want broadband facilities but they are not available. It is too patchy and too slow and, unfortunately, they cannot work from their own bases. It is a legacy of another Fianna Fáil privatisation debacle.
The so-called world-class infrastructure we heard about earlier is crumbling beneath our feet in Donegal. In the past three years since I was a member of Donegal County Council in the electoral ward that Senator Ó Domhnaill and I represented, three bridges on main routes into west Donegal collapsed. That is the reality in terms of infrastructure in Donegal. The Government must stop treating Donegal as an afterthought and ensure the north west region is designated an area of exceptional economic need. Adequate infrastructure is key to the development of indigenous industry and attracting foreign direct investment.
It is extremely frustrating to hear Fianna Fáil members pat themselves on the back in terms of the unprecedented growth in the economy. Before the election I heard Ministers say they canvassed different areas throughout the country and could not find anybody in because all the people were working, that the unemployment rates of 18% that existed in the 1980s no longer exist, and that people no longer leave communities because they cannot find work. In Donegal, the position is different. Bord Fáilte had a tourism promotion saying, "Up here it is different." Well, up here, in terms of economics it is definitely different and it is not just about statistics.
Different Members talked about their experience of working in multinational companies. My experience of the jobs crisis in Donegal is of members of my family and friends and colleagues losing their jobs. Three members of my family lost their jobs in a factory that closed down. Two of them had to leave Donegal, and leave families and young children, to find employment elsewhere during the week. That is unacceptable in today's environment. I ask that IDA Ireland and the Government make Donegal and the north-west a priority. It needs to be more than about reports.
In 1998 the Government faced up to the reality that there was an economic crisis in Donegal when Fruit of the Loom shed 3,200 jobs. At that time a task force report was commissioned which recommended a net increase of 815 jobs per year. That would have resulted in an additional 5,600 net jobs over the next seven years but the reality in Donegal was not 5,600 net jobs but job losses. Since then we have had the interdepartmental report, by a high level commission of all eight Departments pooled together to look at Donegal. It was a damp squib. It did not fast-track investment as some Senators have called for, it did not look at targets, it did not promise on rail, broadband or motorways. It simply told us what we already knew.
Annual reports from IDA Ireland, Údarás na Gaeltachta and other agencies have been pooled together. I demand that the Government and IDA Ireland address this problem not in isolation of Donegal as there is a need to look at the north west region. Earlier we heard the Government side support the idea put forward by Dr. Gillespie in terms of one all-island agency to attract inward investment. I am glad that support is forthcoming. It has been a long-standing policy of Sinn Féin and I hope it is acted upon.
Donegal is unique in terms of being an economic blackspot. The north-west Border corridor region is the most deprived region on this island. I thank the Cathaoirleach for the opportunity to make this address but I ask that the Government admits this is not a so-called crisis, it is an economic crisis. If there was an 18% unemployment rate in Dublin, would that be a crisis? If one in four people were not completing primary or secondary education, would it be a crisis? It is a crisis and we need to face the facts and put in place energetic plans that will resolve this issue.
Mary White (Fianna Fail)
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Before commencing my statement I concur with our two Senators from Donegal that there is a major problem in their area and in the Border counties, following the Troubles and the civil strife on the island of the past 30 years. One has to visit the Border counties and Donegal to see the difference in economic development between there and the rest of the island. The advice from the two Senators is on the ball.
I wish to focus on two areas, the development of the mid-west region by the IDA and our new position in the ranking of industrial developed countries and competitiveness. Last week the chairman of IDA Ireland, John Dunne, officially opening its new office in the National Technological Park in Plassey in Limerick said:
The IDA is confident in the growth and development prospects of the mid-west region ... and for the country generally over the next few years ... The national economy is sound and a possible growth rate of 4% or less next year, reflecting an inevitable slowdown in construction, is still exceptional in western European terms.
The mid-west region of Clare, Limerick county and city, and north Tipperary has a strong base of overseas companies. There are 49 IDA client companies in the region employing nearly 11,000 people.
Mr. Dunne continued:
Education, skills, research and innovation [the new portfolio of the Minister of State] must be the defining advantage for any location in the future and particularly encouraging are young students to choose science and technology courses at 3rd level. The Mid-West has a substantial advantage in the quality and excellent reputation of its third level institutions; the University of Limerick, the Tipperary Institute and Limerick Institute of Technology, giving a strong impetus to research and development projects, and industry and academic collaborations ... These academic institutions are the key to holding onto your young people in the Region ... to satisfy the needs of the new breed of knowledge-led and high skilled investors and for building a local innovation culture.
As I said at the two parliamentary party meetings we had to discuss the Shannon Aer Lingus issue, the mid-west region is a perfect example of successful decentralisation but it has very serious problems at present.
Commenting on the Aer Lingus Shannon to Heathrow service John Dunne said:
IDA Ireland believes that a robust and dependable infrastructure is essential if it is to continue to develop the economy, provide higher quality better paid jobs ... Easy access to a hub with global links has been a key factor in securing investments against competition from the UK, Germany, France and other European centres. While Heathrow is clearly not the only such hub, it is perceived as an important link in accessing global customers, and in some cases a central location for corporate meetings.
It is the crossroads of the world. As far as airports are concerned, Heathrow is the number one airport in the world. Mr. Dunne continued: "Given the importance of the issue, it is incumbent on all of the stakeholders ... to work together in a constructive fashion to find a solution which will fully facilitate the future development of the Mid-West and, indeed, of the whole Western seaboard". Those stakeholders are the local authorities, the elected representatives of Clare, Limerick and north Tipperary, FÁS, Shannon Development, Shannon Airport Authority and the academic institutions. If a new airline is not found for that service the Government should demand that Aer Lingus divert those slots currently serving the Heathrow to Dublin and Cork routes which are not at full capacity. There should not be a vacuum on the Shannon to Heathrow route. Flights from Shannon to Heathrow should continue seamlessly when Aer Lingus withdraws on 13 January. To lose four return flights a day from Shannon to Heathrow will be a disaster for the area. Academics and right-wing newspapers have no understanding of the fast moving connections that business people need. Unlike them, business people are not in ivory towers dealing with theory; they must move fast.
It is very hard to get knowledge-intensive industries away from Dublin and the eastern region. We want them to locate in the more regional parts of the country. It is even more difficult to attract those industries which need even better communications.
I return to the new index of competitiveness of the world's top 30 economies. Sadly international trade is not contributing to Ireland's growth as in the past, which has not been mentioned in this debate. At the moment we are ranked 13th of the 30 countries for attracting foreign direct investment. While I accept this is a new index, we have lost our position — in another index we have dropped. India has the top slot in the latest index, followed by Poland, Thailand, Argentina and China. Those countries all maintained substantial cost advantages over Ireland. Within western Europe, Belgium and Switzerland are ahead of us on a competitiveness basis. As Switzerland is not in the EU it does not figure in the EU statistics.
In February Dr. Don Thornhill, launching the report, Ireland's Competitiveness Challenge, identified the main challenges facing the enterprise sector. The composition of economic growth has changed. Ireland's Competitiveness Challenge notes that domestic consumption and construction investment have replaced net exports as the drivers of growth. Supported by high and fast-growing private debt levels, construction now dominates employment and economic growth. There is a problem and there is no point in putting our heads in the sand on the matter.
Dr. Thornhill continued to say: "In a small regional economy like Ireland, economic prosperity ultimately depends on our ability to sell goods and services abroad". If everybody is working in the public sector and the non-productive sector we might as well close down the country. We earn our money through trade. People buy our goods, which is why the multinationals have been successful — they pay us money for the goods we have produced. Dr. Thornhill added: "While we are a still a strong trading nation, our share of world markets has begun to dip as resources have shifted towards domestic consumption and construction". In this regard it is crucial to expedite the national development plan as it will remove infrastructural bottlenecks, enhance the skills of the labour force, and improve the business environment for research and innovation. Concerns have been expressed that the NDP will lead to further price inflation. This can be easily resolved by tighter management of Government projects and allowing more international competitors to enter the market.
I look forward to the Minister of State putting on the record today the money being invested in innovation, which is within his remit. I congratulate Mr. Barry O'Leary on his appointment as the new chief executive of IDA Ireland. He has spent many years in the pharmaceutical sector and he will be outstanding. I thank all the Senators who complimented my husband, Padraic. I was side by side with him for 20 years while he did that job. It was a great honour and privilege to be in that position. My husband has been invited all over the world to advise on how Ireland created the Celtic tiger. We recently returned from Korea where the ex-Prime Minister and top businessmen spent an intensive two days listening to his advice on industrial development.
As a public servant, I was not permitted to become a member of a political party. However, I worked with Albert Reynolds when he was Minister for Industry and Commerce and he was very proactive, gutsy and nerveless and he took risks. Even though Fianna Fáil was in Opposition and my husband was in a delicate position for me to become a member of the party, I joined because I witnessed at first hand how the party could drive the country forward and help to erase the massive unemployment of those years.
Paul Bradford (Fine Gael)
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I welcome the Minister of State, a constituency colleague, to the House. His current portfolio is important not only for our constituency but the country, especially given his new role as Minister with responsibility for innovation, on which I am sure he is reflecting deeply as he begins work on his new brief. Innovation must be at the core of industrial development and economic policy. Senator White, prior to outlining how she arrived in the Fianna Fáil Party, mentioned Ireland's need to continue as a trading nation. For us to succeed economically, create jobs and encourage inward investment, we must live with the simple rules of a trading nation at the core of our economic policy. If companies cannot buy and sell at a competitive rate domestically and internationally, they will not succeed.
The issue of competitiveness is one of the challenges facing us. The Minister of State and other speakers addressed it but we must be reasonably concerned that our competitiveness is not what it was over the past ten years and what it must be over the next few years because the challenges the Government faces to secure inward investment at the level required are significant. Senator White mentioned competition from India but Poland, Belgium, China and Far Eastern countries are also becoming more competitive. Ireland also faces strong challenges from the industrial development agencies in Wales and Scotland. We can be proud of what was achieved over the past 25 years but, in one sense, the cost of our success is that others are not only copying the Irish example but, in some instances, improving on it. The bar, which was raised by Ireland, is being further raised and we must improve our standards accordingly.
The Minister of State outlined interesting statistics in his contribution. As Senator Ross stated, 150,000 people are employed by companies that set up in Ireland through foreign direct investment and it must be ensured that investment increases. Prior to the Celtic tiger era, the first political movement to actively secure foreign investment in domestic industry occurred during the Lemass era. Policy changes were made such as the introduction of free education, giving everybody the opportunity to achieve a high level of qualification and, in 1973, Ireland entered the European Economic Community. That political background led to the changed economic environment of the late 1980s and the subsequent Celtic tiger boom.
However, we cannot rest on our laurels. The political, educational and economic formula that led to an improved economy must be enhanced. From an educational perspective, the development of regional technical colleges or institutes of technology was useful but our ambition must to be to ensure every second level student completes third level. In other words, third level must be the new second level. The number of third level courses available has greatly increased but it was disconcerting to hear Senators from Donegal outline how 25% of second level students in the county drop out annually. The statistics are not as bad in the rest of State but our aim must be to ensure second level students also complete third level courses. While that is a debate for another day, it must be borne in mind.
Ireland's relationship with the European Union has been hugely important and successful and the Government must continue to build on that. A debate on the new treaty and Ireland's further engagement with the European political process is under way in another forum, but we must continue on that path.
On infrastructural development, Senator White referred to the importance of completing the national development plan and said we should not have to debate the completion of the broadband network because that should happen immediately. Broadband is of major importance to peripheral regions and smaller towns and villages which do not have access currently. The progress on road and rail transport is welcome but new roads are not being built quickly enough. I acknowledge the substantive improvement made in this regard but the lack of progress on a number of significant projects in the road network is disappointing. As the Minister of State will be aware, the roads between Mallow and Mitchelstown and Mallow and Fermoy are very important economically in our constituency but they are seriously underdeveloped and significant investment in them is required immediately to improve the economic prospects of those towns.
The Minister of State referred to the national spatial strategy and hub towns. Mallow is a hub town and we expected significant infrastructural investment in the town. A decentralisation project was promised for both Mallow and Mitchelstown but neither has been undertaken. I hope the Government will move mountains to bring the projects to fruition. Many people have lost their jobs in Mitchelstown, Mallow and Fermoy in recent times and north Cork experienced great disappointment recently when a major industrial project being undertaken by Amgen, which had been announced for the Minister of State's home town of Carrigtwohill, was at best deferred. These challenges face us locally in Cork East and every Senator could quote his or her constituency's statistics. While the economy has improved dramatically and we can be very proud of our economic success, we cannot rest on our laurels. We must keep moving forward on policy, politically and economically.
The creation of an innovation section in the Minister of State's Department is a positive step forward. It is to be hoped that when Oireachtas committees are set up over the next few weeks, they will focus strongly on industrial development and policy. All political parties, domestically and internationally, must acknowledge that the great ideological debates have concluded and anyone who pretends otherwise is only fooling himself or herself. There is only one way to run a country successfully, to create jobs and increase the amount of money for social spending on the less well-off members of society, and that is by promoting and supporting industry and commerce and introducing policies that make job creation possible.
I wish the Minister of State well in his endeavours. I wholeheartedly congratulate all involved in the IDA — including those, such as Padraic White, who have worked there in the past — for all they have done for the State. IDA personnel are patriots with a capital "p". Without waving any flags or promoting themselves individually, their work has changed people's lives. I wish them well, especially the new chairman, in their ongoing efforts.
I hope the Minister of State will reflect on what I have said, particularly in regard to our own areas in north and east Cork where the jobs crisis requires assistance from the Government.
Marc MacSharry (Fianna Fail)
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I am glad of the opportunity to speak on this issue. I welcome the Minister of State to the House and wish him every success in his endeavours in the area of innovation. Like the Senators from Donegal, I am from the north west and have a specific interest in that area.
It would be remiss not to acknowledge the tremendous and outstanding work done by the IDA and other agencies. Senator Mary White's husband, Padraic White, was chief executive officer of the IDA for many years at a critical time in our economic development. We are all grateful that the efforts of the IDA, combined with good government, allowed us to create an environment conducive to promoting Ireland in a positive way abroad and attracting foreign direct investment. There is no question that substantial progress has been made in all areas in the past 20 years, with the attraction of many new industries and the expansion of existing IDA-sponsored companies.
However, work remains to be done. As our Donegal colleagues observed, not everywhere is thriving to the same extent. In the context of the national spatial strategy, we must prioritise development within the regions. We all want a thriving capital city, but there are tremendous pressures on Dublin. One can see this not only in terms of traffic congestion but in many other infrastructural aspects. Dublin is struggling to cope. Investors like to locate their enterprises in or within striking distance of this thriving capital city. As such, the Government must do more to make the regions more attractive.
The regrettable transfer by Aer Lingus of its Heathrow slots from Shannon Airport does nothing to enhance the capability of the IDA to market the mid-west. Likewise, the decision of the Health Service Executive to downgrade certain services in the region, most notably Sligo General Hospital and cancer services, hinders the ability of the IDA to market the area. These services provided links to other areas and reassured investors that the region had the amenities and infrastructure to support growing populations.
We in the regions, especially in the north west, wish to play our part in relieving the pressures on Dublin. It is predicted that 2 million extra people will live in Ireland in the next ten years. We must be prepared to create capacity in anticipation of demand, in line with the spatial strategy as outlined, designed and announced by the Government. We must take action to implement this strategy instead of just having a document. This will require investment that may appear disproportionate at this time. It is vital that this is done not only in terms of roads and other physical infrastructure but also in respect of energy. North of a line joining Dublin and Galway and west of Mullingar, notwithstanding the Corrib project when it comes on stream, we have no natural gas. There is a limited amount of motorway in the area. There is no university, although we have three institutes of technology. This is not to detract from the tremendous work that has been done.
If we are serious about implementing a spatial strategy, however, we must be prepared to push the boat out further than we have done heretofore. I wish the new chief executive officer of the IDA every success. He has a hard act to follow in all of his predecessors. However, given his experience in pharmaceuticals and international industry, he will be well able to meet the challenge. I have friends working in the IDA. Senator Bradford put his finger on it when he described its staff as patriots with a capital "p" in the manner in which they market this country.
Last year, it was to be announced that PayPal was to locate in Sligo. It was with huge regret that we read in the newspapers that this was not going to happen. I do not know the reasons this project did not proceed. Gateway centres such as Sligo need these types of industries if they are to play their part in taking the pressure off Dublin. We have gone a long way in recent decades in creating an environment where people can be educated and gain employment in the same region in which they grew up. However, there is much more to do in terms of a prioritisation of the regions. We have heard of the specific difficulties in Donegal. I am biased in putting forward the case for the north west. I ask the Minister of State to raise the PayPal issue with the IDA with a view to exerting as much pressure as possible to ensure a replacement employment is secured for Sligo. I do not wish to pre-empt the great work done by the IDA but I hope there will be some positive news soon.
Senator Quinn observed that our most valuable commodity when it comes to the promotion of the State is our people. We must be prepared to invest more in training, especially in the institutes of technology. This includes, in my region, Letterkenny Institute of Technology, the Institute of Technology Sligo and the Galway-Mayo Institute of Technology. We must not allow the elitism of certain elements within the Higher Education Authority to prevent institutes of technology from partaking in research and development. The facilitation of such research would greatly enhance the capabilities of the IDA to market the State, including the north west. Even more importantly, as we look to the future, it will help us to breed our own intellectual property.
I thank the Minister of State for participating in this debate. I hope he will take my views on board.
Michael Ahern (Cork East, Fianna Fail)
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I thank Senators for their positive contributions. They have referred to the main areas of concern, including competitiveness, the need to ensure adequate infrastructure and the importance of education and training. I have responsibilities as Minister of State in both the Department of Enterprise, Trade and Employment and the Department of Education and Science in respect of research and development and innovation. It is vital that we translate ideas into action in terms of job creation. My remit also covers the area of lifelong guidance which strives to ensure there is guidance not only for students but for workers who wish to move from one career to another. An important aspect of this will be a facility to provide employees with guidance on how to upskill within their current jobs.
I have taken note of the points made by Members and will convey them to the Ministers in both Departments. We wish to ensure the wisdom of all Members is taken into account in the formulation of policy in the years ahead.
Terry Leyden (Fianna Fail)
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I, too, congratulate the Minister of State on his appointment and wish him well in his endeavours in the area of innovation. I thank him for his courtesy at all times. He has been very helpful to Members in the past five years. He is always welcome in the House.