Address by Mr. Noel Treacy T.D., Minister for Science, Technology and Commerce at the ABN Amro Stockbrokers Dinner on the 8th October 1998 at 8pm in the Merrion Hotel, Dublin

The past decade has seen a real transformation in Ireland. We now have one of the strongest economies in the OECD. I would like to take this opportunity to update you on the progress which we have made so far:-

• We are the fastest growing economy in Europe - our GDP growth in 1998 is predicted to be over 7% [a slight drop from almost 9% in 1997, giving us a 5 year average of over 6%.]

• Our balance of trade surplus is expected to continue at 2% of GDP in 1998.

• Our exports are expected to rise a further 13% in 1998. We already export over 75% of our manufactured goods.

• Our Exchequer Borrowing requirement, which is 1.6% of GNP this year, is very low and is on target for elimination in 1999.

• Our General Government Debt has fallen each year over the past decade. As a % of GDP it is on target to be 65.1% this year and to below 50% by 2003.

• Manufacturing output rose 17% in 1997 and a similar increase is projected for this year.

• Strong manufacturing exports growth also continued with this year's outcome likely to be over 20%.

• The rate of return for US investment in Ireland continues to be amongst the highest in the world and almost double the EU and World averages.

• Despite the rapid growth in our economy, inflation has remained at a very respectable level of 3.2%, and is expected to fall again later this year. OUR Governments strong fiscal policies coupled with our membership of the EMU will ensure continued progress.

• Long term interest rates have been falling steadily in the past few years and by 1999 they will have converged with German rates.

• Ireland has moved from less that 70% of average European GDP to over 100%.

As you can see from this short overview we have made considerable advances. I am however convinced that there is much more still to come. As we enter the next millennium, I, and all the political leaders in Ireland are committed to maintaining an environment in which business can flourish. We are convinced that this is the way forward for Ireland.

Our track record of achievement and consistency in translating this philosophy into practical and tangible actions, is, I believe particularly noteworthy.

• At 13.2%, we already spend one of the largest %'s of GDP in the OECD on education. However, anticipating the increasing needs for skilled people as we enter the next millennium, our Government has committed an additional $350m towards educating more software and electronic engineers as well as investing further in language skill development.

• By the year 2001 we will have invested over $10bn. in upgrading our infrastructure. This investment has been in roads, telecommunications, etc. We are determined that Ireland will continue to develop the necessary infrastructure, to support the industries of the future. We clearly, for instance, see an opportunity for Ireland to develop as a significant player in whole E Commerce area.

• Consecutive Governments working with Industry, the Trade Unions, Farmers, etc. have over the past 12 years forged a National Social Partnership which has been a cornerstone of the progress which we have made. It has contributed significantly to the real increases in competitiveness which Ireland has made.

• Last but not least for investors, we have for over 30 years maintained the lowest level of corporation taxes for the Manufacturing and Internationally traded services sector in Europe. I am pleased, this evening, to be able to confirm a continuation of this policy. OUR Government has announced a 12.5 % Corporation Tax rate for all traded activity. The move to 12.5% corporation tax rate on trading profits is designed to ensure the continued flow of investment and jobs in the Irish economy.

In addition, it removes the outdated distinction in the fiscal treatment of manufacturing and services and enhances the reward to risk ratio of Irish enterprise. It also addresses the concerns of the Commission about State aid aspects of Ireland's present corporation tax regime. The agreement will enable our industrial development agencies to plan for the future with the certainty required by an internationally competitive business environment.

• A single low corporation tax rate on trading income is in the best interests of the Irish economy and underpins the progress which we have made in this area in recent years. It will support the strong growth in jobs which is needed to cater for the substantial annual increase in our labour force and to provide jobs for those presently unemployed. Our Government will continue in parallel to reduce the income tax burden on employees in the contest of ongoing Social Partnership.

Existing operations which are eligible for the 10% Corporation Tax rate will retain entitlement to this rate until the end of the year 2010 in the case of manufacturing and certain internationally traded services and until the end of year 2005 in the case of the IFSC and the Shannon Industrial Zone.

New projects establishing after 22nd July, 1998 in manufacturing, certain internationally traded services and in the IFSC or Shannon will be eligible for the 10% rate in respect of their activities until 31 December 2002 after which they will then be subject to the 12.5% rate. A number of specific projects on a pipeline list agreed with the European Commission and which were approved by IDA Ireland or approved for the IFSC by 31 July, 1998 have entitlement to the 10% rate until the end of 2010 or 2005 as appropriate.

A combination of these factors has made Ireland the country of choice for a whole range on investors looking at Europe. We believe our membership of the European Monetary Union will accelerate this process, particularly as we will be the sole English speaking member. Examples of where we have been successful would include the following:

• Ireland is now the 2nd largest exporter of Software in the world after the USA. We are proud to have leading edge companies like Microsoft, Novell, Oracle, Fujitsu and many others, operating out of Ireland.

• Ireland has 35% of all pan European Call Centres which include companies like Citibank, IBM, Hertz, Dell, and many others, are located here.

• We now attract over 30% of all new electronic investment in the E.U. and have companies like Intel, HP, NEC, Dell, and several others on our growing portfolio.

• On Financial Services we have developed an industry of scale from what was only a concept just a decade ago. Our Government has created the regulatory and tax environment in which this industry can develop. Today we have over 400 companies employing almost 5,000 people in areas such as Fund Management and Insurance. As in many other areas we have tried to pursue niche opportunities for ourselves. Today the list of investors reads like a who's who of the Financial Industry.

• Companies from all Continents now operate from Dublin and these include Citibank, Deutche Bank, Bank of Bermuda, ABN Amro, Merrill Lynch, Sumitomo Bank, Bankers Trust and many more.

I believe that our young, well educated workforce, all party support for a pro business working environment and our well developed infrastructure, make Ireland today an excellent choice for anyone considering setting up or expanding in a growing Europe.