Ireland must compete against China and India

31 Jan 2006

“Firms in Ireland are facing competitive challenges more competitive and unremitting than at any point in our recent economic history,” warned Forfás chief executive Martin Cronin, who said that many parts of China, India and south-east Asia are targeting electronics, software, financial and pharmaceutical opportunities at the high end as well as the low end.

Cronin said it is the fields of electronics, software, financial and pharmaceuticals that drove Ireland’s growth over the past 15 years. He said Irish firms need to compete at a level in line with the world’s best in these fields in order to grow knowledge-intensive jobs and attract investment.

Key to this, Cronin said, is investment in research and development (R&D). As an example he pointed to the number of foreign R&D units in China that have increased from a standing start in 1993 to 700 today. “China’s total spending on R&D climbed from US$21bn in 1996 to an estimated US$102.6bn in 2004 (1.44pc of gross domestic product) and in absolute terms is now behind only that of the US (US$312.5bn) and Japan (US$112.7bn).”

Cronin warned: “Ireland’s goal must be to sustain levels of competitive performance in line with the world’s best. We must focus squarely on our core strengths and on high-value niche areas to achieve success in this increasingly competitive environment.”

Cronin was speaking at the annual Forfás review and outlook for the Irish economy. The report showed that the Irish economy continued to perform very well in 2005 with gross national product (GNP) estimated to have grown by 5pc in 2005 compared with an OECD average of 2.7pc. Income per capita in this country is now amongst the highest in the world. In 2004, GNP per capita measured €30,726, ranking Ireland above the EU average.

Total employment reached 1.99 million in the third quarter, and by the end of the year is likely to have exceeded two million for the first time.

The report pointed to changes in the drivers of Ireland’s growth in recent years. In the early years of the Celtic tiger growth was driven by strong performance in exports. While exports have remained at high levels Irish growth in more recent years has largely been driven by increases in domestic spending by households and by government on construction activity and on consumption. However, internationally trading businesses continue to play a major role.

Employment in companies supported by state agencies IDA Ireland, Enterprise Ireland, Shannon Development and Udaras na Gaeltachta reported jobs growth grew to 303,564.

Companies supported by the development agencies created 27,606 full-time jobs last year — the highest since 2000 — offsetting 24,211 job losses in the economy.

Ireland’s total share in services has increased markedly from 0.4pc in 1993 to 2.2pc in 2004, making Ireland the 14th largest exporter of services in the world.

The report said it was critical that R&D investment was fostered and that Ireland still faces a significant challenge in bringing domestic research and innovation capabilities to the levels that will be required to sustain economic performance. Key areas include early-stage venture capital investments, increased patent applications and more adoption of ICT.

In particular, Ireland faces an unprecedented challenge to grow the high-paid jobs and knowledge-intensive investment needed to sustain the country’s performance into the future.

Among its list of recommendations were benchmarking the competitiveness of telecoms in Ireland, the development of a national skills strategy, support for the Government’s R&D Action Plan as well as ensuring the best practice on intellectual property management in Irish universities and institutes of technology.

By John Kennedy