John Bruton (Meath, Fine Gael)
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Question 76: To ask the Tánaiste and Minister for Enterprise, Trade and Employment her views on whether the economic growth model for the economy here is unduly dependent on foreign direct investment in view of likely market conditions over the next ten years. [18191/04]

Mary Harney (Dublin Mid West, Progressive Democrats)
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Foreign direct investment has been an important catalyst in our economic growth and development in recent years. I do not expect that this will change in the foreseeable future.

Overseas investors in sectors such as information and communications technologies, pharmaceuticals, health care and financial services have added significantly to output, exports and the sophisticated scale of foreign direct investment. The newer technology orientated and specialised value-added service investments have significant, positive multiplier effects on the indigenous sector in terms of excellent and well-paid employment creation, skills development and quality improvements, as local companies successfully meet rigorous supplier requirements.

There is vigorous international competition for advanced foreign direct investment. Ireland's ability to win technologically advanced foreign direct investment is undiminished. We retain our reputation as a prime investment location for leading multinationals with world-class technologies and operations. The recent decision by Intel to invest a further €1.6 billion in making new processors for its next generation technology and the €22 million investment by IBM in putting more specialised research and development research into its Dublin laboratory are recent examples of how we are managing the transition from production-orientated enterprises to those that use knowledge, superior technologies and innovation and are important for the long-term corporate strategies of their shareholders.

While foreign direct investment has been important in recent economic growth, employment expansion and consequent wealth generation has been rather broadly based. Since 1993, employment has increased from 1.2 million to over 1.8 million. The bulk of all new jobs created have been outside the foreign direct investment sector, with thousands of indigenous companies driving growth and job creation as unemployment fell from 15% of the workforce to less than 5% at the moment. Underpinning this transformation has been the stimulation of a vigorous entrepreneurial economy, where in 2003 Ireland had the highest rate of new business start-ups in the EU.

I recognise that market conditions for foreign direct investment are changing, but our enterprise development policies are also evolving to ensure that Ireland is a serious contender when board room decisions are made about where to locate knowledge intensive, sophisticated and high value added investments. Through Science Foundation Ireland we are building a third level research infrastructure to reinforce our exiting competitive attractions for this market, while at the same time providing intensive research and development support to strengthen the competitive characteristics of indigenous firms in the context of a more aggressive and global cost environment.

My Department's policy development strategy is to ensure that support programmes, public investment and funding mechanisms are tailored for the different growth needs of both foreign direct investment and indigenous sectors. I have been careful to ensure that growth and employment is not unduly dependent on either enterprise categories or narrow sectors, where changes in world markets or consumer preferences could seriously jeopardise our enterprise base. The enterprise development agencies under my Department have re-engineered their operational strategies in recent years to move away from individual projects. Our model now has a focus on developing clusters of excellence in which technology companies, whether foreign and indigenous, education and research activities and venture capital providers form networks to create more competitive and sustainable businesses based on a reinforcing climate of innovation and entrepreneurship.

Following the expansion of the EU and the emergence of dynamic and competitive Asian economies, the direction of business investment is very much less certain than before. To ensure we have the right mix of polices for the future I asked the Enterprise Strategy Group under the chairmanship of Eoin O'Driscoll to propose a medium-term strategy and to develop policy options to make Ireland an internationally successful, competitive and knowledge-based enterprise economy. I expect to receive the group's report shortly.