Despite the apparent return of the Celtic Tiger, the National Competitiveness Council (NCC) has warned against taking economic success for granted in its seventh Annual Competitiveness Report, which benchmarks Ireland’s competitiveness against 15 other countries.
Speaking at the launch, William Burgess, chairman of NCC said: “At a time of such strong performance, it may seem untimely to focus on emerging threats to our future prosperity. Yet this year’s competitiveness reports show that the pressures on our competitive position going forward are considerable. These include the continued growth in domestic prices and wages and intense competition from EU accession countries and emerging Asia in export markets and for FDI flows. We need to further improve our competitiveness in order to ensure that the current strong economic performance is sustained into the medium term.”
The report was formally received by Micheál Martin TD, Minister for Enterprise, Trade and Employment, who said the Government understood the competitive pressures facing the economy and would carefully evaluate the report’s recommendations. “This Government is not complacent about our future economic well being and understands that national competitiveness and social progress go hand in hand.”
The report identifies a number of specific competitiveness challenges for Government. In the education area, the report acknowledged the significant investment in third level research but said that Ireland continued to perform poorly at second level, ranking ninth out of 11 OECD countries in terms of the percentage of students who complete secondary education.
Moreover, Ireland’s business investment in R&D – recognised internationally as a key indicator – was still below average, at 1pc of GNP compared with an OECD average of 1.6pc. Said Burgess: “Too much of our economy is characterised by low levels of innovation and productivity relative to other industrialised economies.”
The report sets out a number of recommendations designed to improve Ireland’s knowledge-economy performance: develop a programme for the rollout of pre-primary initiatives aimed at areas of social and economic disadvantage; sustain public investment in research and development at current levels beyond the current National Development Plan (2000-06); clarify the respective roles of different public sector agencies in science, research and innovation; improve knowledge transfer between universities and industry; ensure an adequate supply of qualified scientists and engineers for industry; and promote the application of ICT among Irish companies, in part through a better coordinated e-government programme.
Noting that many of the recommendations are consistent with those of the Enterprise Strategy Group, which published its report in July, Burgess urged a “speedy implementation” of the recommendations.
The report also identifies a worrying trend towards increasing regulation of industry particularly within the small and medium-sized enterprise sector. Its main recommendation here is that the Government conducts a review of recent legislation – the Company Law Amendment Act 2001 and the Companies’ (Auditing and Accounting) Act 2003 – with regard to its effects on entrepreneurship and start-up companies.
The most pressing competitiveness priority highlighted by the report is the fact that prices and costs are rising faster than other countries. The report calls for new powers for the Competition Authority to levy fines on firms that violate competition law and better regulation in areas such as energy, transport, retailing and professional services in order to stimulate more competition and put downward pressure on prices in these sectors.
With regard to retailing, the Government should end the blanket ban on large retail formats for food and non-food shopping, the report says. In addition, it makes several other recommendations in the areas of fiscal policy (retention of a low-tax environment), public sector (greater efficiency), incomes policy and social partnership (wage moderation) and infrastructure (better transport, energy and communications).
By Brian Skelly
