Calls continue for a competitive Budget

1 Dec 2003

UPDATE: Ireland is now one of the most expensive countries in Europe and is the last out of 13 countries in terms of broadband take-up, the National Competitiveness Council has warned. The organisation has called on the Government to avoid inflation-fuelling stealth taxes in Wednesday’s Budget.

The National Competitiveness Council’s (NCC) Annual Competitiveness Report looked at 128 key competitiveness indicators against 15 competing European countries and found that Ireland is now the joint most expensive country in the euro zone for consumer goods and services along with Finland. The country is the fourth most expensive in the euro zone in terms of insurance premiums and is the third most expensive in terms of industrial electricity costs.

In order to keep the rate of inflation below the 2pc Euro-zone average, the NCC called on the Government to avoid inflation-fuelling increases in customs and excise duties, Vat and publicly administered prices in the Budget on Wednesday.

The NCC said that Ireland’s goal of becoming a knowledge-based economy requires a modern, efficient telecoms infrastructure. However, this goal is seriously flawed due to the country’s poor standing in this regard, with Ireland last out of 13 countries for overall broadband take-up, 13th out of 14 countries for broadband access and 12th out of 13 countries for the cost of broadband.

In terms of getting the broadband deployment right in Ireland, NCC chairman and former IBM Ireland boss William Burgess said: “The NCC recognises that increasing private sector competition among telecoms companies is, ultimately, the most important tool available to Government to accelerate the roll-out of broadband. But there is little sign that private firms are prepared to make the necessary investments and Ireland cannot afford to wait. In the short-term, therefore, more direct State interventions are required in building broadband infrastructure in key towns around the country.”

Speaking with, Burgess argued that in order to redress the broadband shortfall, the Government should take all the various communications and information society infrastructure projects that are divided between the Department of Enterprise, Trade and Employment, the Department of Communications, Marine and Natural Resources and the Department of An Taoiseach and place them under one department. “We need clear accountability and one responsibility to implement a strategy that encourages the private sector to get involved and that will fill in the gaps. That department should be the Department of Communications, Marine and Natural Resources,” he said.

“It’s all about focus. Another recommendation we are making is that the current National Broadband Strategy is given greater commitment by the Government that extends beyond a year at a time,” Burgess added.

That strategy is mandated to cover metropolitan area networks (MANs) for the first phase of 19 towns up until next year, but was originally a 67 town strategy. “We are recommending that the Minister for Finance can guarantee a multi-annual strategy that will continue to beyond 2006 and complete the entire rollout, which is exactly the signal that the private sector needs to make the investment in Irish broadband. At present the commitment so far is very similar to the problems we’ve seen with the Programme for Research at Third Level Institutes (PRTLI), which was paused for the past year. At present there is fear that the National Broadband Strategy could suffer the same experience. This start-stop nature of investment is not on and sends out the wrong signals to the private sector, at home and abroad.”

Burgess continued: “The Government should also take responsibility for putting in place measures to stimulate demand for broadband services to coincide with the infrastructure roll-out. To this effect, the NCC has called on the Taoiseach to put in place a new institutional structure to accelerate the rollout of e-government, initially targeting the completion of a comprehensive system of e-procurement, e-payment and e-recruitment by January 2006.”

Ireland was also seen to rank poorly in terms of R&D and innovation, described as the cornerstone of a knowledge-driven economy. The country ranked 10th out of 12 countries in terms of patents granted by the US patent office and 10th out of 14 countries in terms of patents granted by the EU patent office. The country also ranked 12th out of 16 countries in terms of researchers per 1,000 people in employment.

The NCC recommended that the Government should include a provision in the forthcoming Budget for a tax credit for business R&D expenditure as well as renewal of both the business expansion scheme and the Seed Capital schemes for a further three years.

Separately, ICT Ireland has called for the retention of Section 481 tax relief for the Irish film industry, as critical to the future of an Irish digital media sector.

ICT Ireland director Brendan Butler highlighted the fact that the links between the mainstream film industry and the digital media sector are increasing and the two sectors are becoming increasingly inter-dependent. He said: “The convergence of technology, information and entertainment is accelerating and is being driven by content. Hollywood studios are now realising more value from technology-related sales (such as games and character licensing) than from initial box office sales. Similarly, the skills that are used to develop successful film scripts and content are of major importance to other digital media sectors such as games and e-learning.

“Digital effects and computer graphics are critical enablers for almost all digital media applications. The film industry is currently regarded as leading edge in this area – other applications rely heavily on the transfer of skills and knowledge from film effects into their sectors. Therefore, the film industry is now viewed as a key enabler for this new digital media sector.

“The success of the Irish film industry to date has been achieved through partnership with Government as is evidenced by the growth of Section 481 for both indigenous and international films shot in Ireland. Annual industry expenditure has grown by 18pc per annum and reached €103m in 2001. The development of the industry will continue this year with €304m worth of productions based in Ireland. There is real potential for this industry to growth further but it is dependant on continued partnership with Government says ICT Ireland,” Butler said.

By John Kennedy