John Perry (Sligo-Leitrim, Fine Gael)
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Question 189: To ask the Minister for Enterprise, Trade and Employment if his attention has been drawn to the fact that high costs are damaging competitiveness; the steps he has taken to tackle the issue (details supplied); and if he will make a statement on the matter. [31127/05]

Micheál Martin (Cork South Central, Fianna Fail)
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Ireland is undergoing a positive transformation in how we earn our living from international trade and investment. This transformation builds on the success of consistent, pro-enterprise policies that have made the economy adaptable to globalisation. These policies have enabled enterprise in Ireland to make the most of new opportunities thrown up by changing trends in the global flows of goods, services and investments. These policies have resulted in an unprecedented expansion in both employment and job opportunities. The transformation in our economy brings change.

The National Competitiveness Council's, NCC, reports annually on our competitiveness and this year's annual report noted our competitive position over 170 indicators against 15 important competitor economies. The council's latest annual report highlights a number of areas where our performance could be improved but confirmed that Ireland is experiencing a strong and robust economic performance underpinned by impressive competitive strengths. From 1997 to 2004, Irish GDP grew by an average of over 7.5% compared with an average of just over 2% in the EU15. The indicators reflect that living standards in Ireland both in terms of GDP where we are first out of 15 and GNP where we are sixth out of 16, have grown significantly. GDP is expected to grow by around 5% per cent this year compared with an OECD average of 2.6%.

Of the 16 countries benchmarked by the NCC, Ireland is the most attractive for foreign direct investment. US companies, for example, earn the highest rate of return on their investments in Ireland as compared with other investment locations and in 2003 accounted for about 6% of all US foreign direct investment coming into Europe. Uncompromising investment decisions are not made in favour of uncompetitive and lowly rated economies.

The economy is also generating a relatively high rate of indigenous entrepreneurial activity. The NCC's analysis shows that Ireland is ranked second in the EU and seventh among the OECD countries on this measure. Pro-enterprise policies and the obvious success and reward from business activity are changing the climate for indigenous investment and entrepreneurship.

Our continued international competitiveness underpins the high levels of job creation we are experiencing right across the economy. The latest quarterly national household survey shows the number of persons in employment grew by 93,000 in the year to reach almost 1.93 million in the second quarter of 2005. At 5.1% this is the highest annual growth rate recorded since the second quarter of 2000. Moreover, we have seen employment increase in most sectors of the economy, not just construction, with financial and business services showing strong growth. These facts demonstrate that we remain a competitive economy for both foreign and indigenous enterprise and retain a strong capacity to generate and sustain employment while managing the transition to a more knowledge and services oriented economy. While the export performance of manufacturing is weaker it is significant that services exports continue to grow with Ireland's total share of world services trade growing from 0.5% to 2% since 1998. Furthermore we are winning new important and sophisticated foreign investment to replace employment in older manufacturing sectors.

However, despite these successes I am not complacent. To reinforce our competitiveness agenda I have mandated policy changes within enterprise support agencies such as the restructuring of Enterprise Ireland, the launch of its productivity improvement fund and the steady progression in implementing recommendations of the enterprise strategy group. Our investment in the productivity improvement fund is especially important in promoting the importance of productivity for competitiveness. Productivity is a vital area that all enterprises need to act on to embed competitiveness and enhance their ability to grow and invest.

Regarding cost competitiveness in general, the NCC has some good news in that Irish prices and costs are no longer increasing at a rate faster than elsewhere in the EU, where we are eighth out of 15 countries on this indicator. This stability will help in maintaining cost competitiveness but it is worthwhile noting that costs are just one aspect of competitiveness. Of more long-term importance is the rate at which we innovate, invest, increase productivity and provide market driven products and services, faster than our competitors.