Bernard Durkan (Kildare North, Fine Gael)
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Question 134: To ask the Tánaiste and Minister for Enterprise, Trade and Employment if Ireland is regarded internationally as a high, medium or low wage economy; and if she will make a statement on the matter. [20216/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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As a small, open, export-led economy, our best response to the realities of globalisation is to ensure that Ireland remains attractive for investment and enterprise growth. Our enterprise support policies have consistently evolved to meet the needs of both foreign direct investment (FDI) and growth-orientated indigenous firms.

We have ensured that Ireland can offer the skills, education, research and innovation capabilities that modern mobile and indigenous firms need to be competitive in world markets. In recent years, Ireland has undergone a transformation from a low wage-low cost economy towards a high value and knowledge-based one. Arising from this transformation, the nature of FDI has changed and Ireland is now successfully competing for premium mobile investments against the most advanced countries in the world.

Ireland continues to be one of the most attractive places in the world as a location for global business. Low wage costs are no longer an enticement but have been replaced by other attractions such as a benign tax and regulatory environment, a highly educated workforce, an improving infrastructure and a commitment to world-class standards of research, development and innovation. These, combined with our can-do, responsive and open attitude, ensure that we remain a location of choice. By utilising these competitive strengths, our policies have been successful as many foreign companies continue to make significant investment in Ireland and in the skills of our labour force.

The most objective indicator of a competitive economy is the rate of investment by the FDI sector in our country. We have a firm focus on ensuring that we win for Ireland the leading companies that are at the forefront of global products and services. Last year despite the global turmoil, 2008 saw Ireland win a total of 130 foreign direct investment projects (60% of which will be located outside of Dublin), worth circa €2 billion and also saw the creation of over 8,800 new jobs.

The IBM Global Location Trends Annual Report 2008 in October 2008, ranks Ireland as one of the top performers at third place for attracting R&D investment. The Lisbon Council's "European Jobs and Growth" Monitor ranks Ireland the second most competitive economy in Europe for 2008. Educational attainment in Ireland has increased significantly in recent years and Ireland is also making substantial progress in strengthening its research and development capabilities. We also have a substantial and sustained focus on our targeted capital investment programme.

Given the changes taking place in world trade and the opportunities arising from more open markets, the essential conditions which we are focused on for competitive advantage are constant skill development, innovation and ensuring that Ireland is an attractive place to conduct business.

Growth rates in Irish labour costs slowed significantly in 2008 and were lower than the EU average, with average wage inflation falling significantly across all sectors (excluding utilities) during the year. Indeed, there has been a rapid adjustment of wage and price levels. Public service wage rates reduced by 7.5% on average in February. Private sector pay rates are also declining. According to EU projections, unit labour costs will fall by 4% this year, compared with a 3% increase in the EU on average. That translates into a significant improvement in competitiveness and is positioning the economy for future growth.

Ireland has a track record of adjusting and showing its flexibility. We have made significant strides in the development of a modern 21st century infrastructure whilst also positioning ourselves for the next stage of development as a knowledge economy. Implementation of the actions included in the Smart Economy framework will continue to enhance and improve our competitiveness in this respect.