Ruairi Quinn (Dublin South East, Labour)
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Question 96: To ask the Minister for Enterprise, Trade and Employment the actions he intends to take to stem the outward flow of manufacturing jobs from this country; if he has discussed this matter with Enterprise Ireland or the IDA; the incentives he intends to introduce to encourage manufacturing industry here, particularly in view of the increasing price of oil and the consequent increasing price of transporting manufactured goods to Ireland from other countries; and if he will make a statement on the matter. [23484/06]

Micheál Martin (Cork South Central, Fianna Fail)
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Ireland is not unique in terms of recent employment losses in manufacturing. Employment in manufacturing is falling globally and this trend is not limited to developed countries. ILO and UNIDO employment estimates for key non-OECD countries such as Brazil, China and Russia show that manufacturing employment has also declined in these countries. A recent study cites a net job loss of more than 4 million jobs between 1995 and 2002 in China's manufacturing sector.

This suggests that the decline in manufacturing employment in OECD countries is not solely attributable to a shift of production from OECD to non-OECD countries. While this has certainly played a role for some countries and some industries, an important factor driving the decline in manufacturing employment is productivity growth.

CSO data indicates that manufacturing production (in volumes) increased by 28 percent between 2000 and 2005. This implies that in recent years more manufacturing goods have been produced by fewer people, indicating that productivity growth has been a contributor to the decline in employment of manufacturing in Ireland.

Also, other factors such as increased offshoring and trade play a role in explaining the decline in manufacturing employment in Ireland in recent years. Offshoring of lower value-added functions is a reality of modern global manufacturing. Offshoring can occur because of increasing cost competitiveness in other locations or because firms need to gain more efficient access to vital markets. Productivity gains achieved through offshoring represent an opportunity to develop higher end manufacturing and related activities domestically, such as R&D, marketing and sales functions.

The increasing price of oil must be paid for by manufacturers the world over, so this does not place Ireland at a particular competitiveness disadvantage. The issue of cost competitiveness and the health of manufacturing depends on a much wider array of issues, from the availability of suitable skills to the impact of higher wage costs.

The difficulty being faced by some manufacturing sectors in Ireland is mainly due to shifting patterns of international comparative advantage and the process of structural change, with capital and labour resources of declining firms and industries now being allocated to other higher value-added activities more suited to the new, higher cost, Irish operating environment. While employment within manufacturing has fallen by 31,000 since peaking at 251,000 in 2000 at the same time there has been a large increase in employment in the services and construction sectors. Employment in financial services and other business services grew by almost 100,000 while employment in the construction sector grew by 130,000 since 1997. Overall employment has increased by 500,000 in that period.

I am keenly aware of the role played by manufacturing and its continuing importance in the Irish economy. To assist industry maintain competitiveness and increase productivity the economic development agencies are working on an ongoing basis to promote the adoption of new technology and best practice at company level. The agencies aim to support sustainable, high value added enterprise in Ireland through the provision of mentoring and developmental supports, the enhancement of management capabilities and critical workforce skills in client companies, support for the creation and implementation of strategies for market entry, development and growth, and strong supports for innovation and for research and development. The recently concluded social partnership agreement Towards 2016 also recognises the importance of the manufacturing sector with a proposal to establish a high level manufacturing group.