If Ireland is to thrive in future export markets then it needs to urgently resolve crucial issues around broadband, taxation, costs and skills, the National Competitiveness Council has warned.
Future economic growth in Ireland will no longer come from the construction or retail sectors and will instead be driven by exports in sectors like ICT, medical technology, financial services, tourism, food and drink, environmental goods and services (the green economy), other internationally traded services and pharmaceuticals.
These eight sectors account for about 80pc of total Irish exports of goods and services in 2008.
ICT manufacturing alone accounts for 26,000 full-time jobs within development agency (Enterprise Ireland and IDA Ireland) assisted firms and 11pc of total merchandise exports. ICT services account for 60,000 full-time positions within agency-assisted firms and 35pc of total services exports.
Generating export-led growth in these sectors is the only sustainable strategy to secure long-term growth and prosperity, the NCC warned yesterday, and said it is therefore critical that we understand the specific needs of our exporting sectors and enable them to compete successfully in international markets.
“While overall, Ireland’s export performance is holding up relatively well in spite of a very challenging global trading environment, this is primarily due to strong growth in two sectors, medical and pharmaceutical products and chemicals,” said National Competitiveness Council (NCC) chairman Dr Don Thornhill.
“Many other exporting sectors are facing significant challenges, particularly traditional manufacturing sectors, such as food and computer equipment. Urgent action is required to address the critical competitiveness issues for individual exporting sectors,” Thornhill said.
The NCC recently published its report, Driving Export Growth: Statement on Sectoral Competitiveness, which identifies the key competitiveness issues facing Ireland’s main existing and emerging export sectors, including the ICT sector, and details the sector-specific policy actions required to address them.
“It is clear that despite the challenging conditions which they currently face, there is a bright future for our exporters provided employers, employees, policy makers and other stakeholders respond quickly and effectively to develop a more competitive operating environment for firms.
“It is hoped that this report, by identifying sector-specific actions to promote key exporting sectors, will help provide an impetus for action,” said Thornhill.
The NCC study reviews eight sectors with significant opportunities for future growth and highlights the sector-specific challenges which need to be addressed if Ireland is to exploit the significant growth opportunities that exist.
The critical competitiveness issues for the ICT sector are:
Advanced Broadband Networks and Services
ICT acts as an enabler for all other sectors. Increasingly, ICT solutions are supplied online and require higher bandwidth. Developing advanced broadband networks and services in the main regional centres is a critical investment to ensure the long-term competitiveness of the ICT sector and to enhance the productivity of the wider economy. Ireland’s limited capital budget notwithstanding, Government has a central role to play in developing Ireland’s advanced broadband network.
The projected domestic supply of high-skilled analytical computing and electronic engineering graduates needs to be increased to meet future demand. The NCC supports the implementation of the Expert Group on Future Skills Needs’ recommendations for the sector. In particular, the NCC would like to emphasise the importance of policy action in the following areas:
· Enhance the number of highly skilled graduates in the ICT area by creating bursaries for achieving more than 500 points in the Leaving Certificate and entering into a computing and engineering degree course; and:
· Produce more graduates with domain-specific knowledge to meet the needs of software companies that develop products for specific sectors within the market. This will require higher education institutes to modify existing programmes to include modules that develop expertise and understanding of sectors in which the Irish software industry has a strong presence, such as banking and telecommunications.
Innovation and R&D
Given the need for the Irish ICT sector to move to higher-value activity, it is important that Ireland becomes an attractive location for R&D investment. Further potential exists to make Ireland a more attractive location for the purchase and management of intangible assets (eg, intellectual property, brands, software and copyright). Reforming the operation of the tax credit so it is applied to the cost of employment in Ireland could increase the volume of R&D activity taking place here without changing the incentives offered.
Lower-level manufacturing operations as well as low-end service activities, such as call centres, are under increasing pressure from lower-cost locations in Asia and Eastern Europe. Wages are a key cost category.
Access to Finance
Many small and medium-sized enterprises in the software sub-sector are currently affected by a lack of access to finance and venture capital. Continued Government support through Enterprise Ireland working with the venture capital sector to develop new funds and attract investors from abroad is vital to ensure venture capital funding is available to support new businesses.
The ICT sector has highlighted the importance of a competitive corporate tax regime for continued growth in the sector in Ireland. Given the lower corporate tax rates offered by some competitor countries, however, it will be important that Ireland continues to develop its competitiveness in other areas, such as advanced broadband infrastructure and services, skills and innovation.
By John Kennedy
Photo: Ireland’s future economic growth may well lie in exports in sectors such as ICT.