Bernard Durkan (Kildare North, Fine Gael)
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Question 283: To ask the Minister for Enterprise, Trade and Employment the extent to which this country has improved or other wise in the international league in respect of economic competitiveness; if he has identified the cause or causes of relocation to low wage economies in respect of the manufacturing sector; the action he proposes to take; and if he will make a statement on the matter. [18454/05]

Micheál Martin (Cork South Central, Fianna Fail)
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The results of the recently published Institute for Management Development, IMD, report indicate that Ireland is in 12th position in the overall world competitiveness yearbook rankings. In 2004, Ireland scored tenth overall. While the IMD report is a useful data source, all forms of international benchmarking should be treated with caution. Ireland was ranked 22nd in the 1995 report yet was the fastest growing economy in the subsequent ten year period, with GDP growth of 4.9% and an unemployment rate of just 4.5% in 2004.

Benchmarking exercises can only measure a small subset of the economic factors. For some economic factors, there is great difficulty in finding directly comparable, reliable and timely indicators for an appropriate range of comparator countries, while for many others no economic indicators are available at all. The National Competitiveness Council's, NCC, Annual Competitiveness Report 2005, while using some IMD indicators, will provide a better insight than international reports into specific Irish competitiveness challenges. This report will be published around the middle of the year.

Maintaining Ireland's attractiveness as a competitive and profitable European location from which to do business is a key priority for my Department. It is fair to accept that our economy is undergoing fundamental change and we can no longer compete as a low cost location for basic manufacturing investment. Our strength and competitive advantages, vis-À-vis emerging economies and rapidly developing overseas growth centres, has changed considerably over the past few years. Primarily this arises because we have become a modern, advanced European economy, with all the associated advantages of high incomes, living standards, employment growth and social services.

While manufacturing faces particular challenges, globalisation is creating significant opportunities as services have significant trading sectors. Internationally traded services will be a growing source of high skilled, knowledge intensive jobs and competitive advantage over the next decade. Manufacturing now represents 23% of total employment, whereas the services sector accounts for 62% of total employment, 31% of exports and over 50% of total GDP. With the increasing emphasis on developing Ireland as a knowledge based economy, it is expected the services sector will to continue to expand in the future.

In a global business world it is inevitable that the investment decisions of some companies will be influenced by the competitive attractions of alternative geographic locations. My Department and its agencies are acutely aware of this. Our focus is firmly concentrated on managing this transition with the best possible blend of policies to strengthen both national and firm level competitiveness.

Ireland operates in a global economy and market forces influencing investment decisions will be both pervasive and unrelenting. Our response to this challenge is strategic yet reflects the business needs of companies. A key element of the Government's strategy to help enterprise is to encourage increased levels of investment in research, business related technological development and innovation across all enterprise sectors. This will assist firms to produce improved, value added products and services. In the longer term this will provide more sustainable and higher quality jobs.

Innovations in the support package available to investors, such as the changes to the taxation treatment for head office operations and research and development, are helping secure new forms of investment. These policy innovations clearly demonstrate the high priority the Government accords to ensuring that Ireland aligns its business supports and competitive characteristics to the requirements of doing business here. They also show that our enterprise policies are creative and flexible to capture the opportunities presented by globalisation.

Following the policy prescriptions contained in the enterprise strategy group report I asked Enterprise Ireland to rethink how we could better support the competitive position of indigenous firms in the face of intensifying global competition. I recently gave the agency a strong mandate to restructure its operations when launching its new strategy to transform Irish industry. Enterprise Ireland will develop closer relationships between Irish firms and third level colleges to increase levels of applied research. This will ensure that market led innovation becomes an integral part of the competitive strategy of individual companies and strengthens Ireland's long term competitiveness.