ADDRESS BY MR. NOEL TREACY T.D., MINISTER FOR SCIENCE, TECHNOLOGY AND COMMERCE TO THE MEUSE FOUNDATION CONFERENCE AT DUBLIN CASTLE ON TUESDAY 27TH OCTOBER, 1998 AT 5.00 P.M.

Firstly, I would like to extend to the Meuse Foundation, a very warm welcome, to Ireland and in particular to Dublin, for your 1998 Annual Conference. I am particularly pleased that you have chosen Dublin as the venue for this year's Conference. I was glad to be in a position to respond positively, to the invitation from Mr. Jan Bolk, on behalf of the Foundation, to speak to you to-day, about recent economic developments in Ireland.

I would like to acknowledge also the assistance and support, which His Excellency, Mr. L Peter van Vliet, the Netherlands Ambassador to Ireland, has provided in facilitating the holding of this Conference, in our Capital City.

This afternoon, I plan to chart for you the significant progress achieved in the development of the Irish economy, over the past ten years, or so. I will outline some of the major contributing factors to the success achieved, consider the respective contributions of both the multi national and the Irish indigenous sectors. I will highlight some of the issues of concern to us, as we strive to maintain and build, on the achievements to - date and finally, I will address very briefly our Government's policies as regards urban renewal and regeneration - a subject, which I know is close to your hearts and which is of course being explored, in much greater depth, by other speakers and contributors, to your very full programme.

Little more than 10 years ago, the Irish economy was in serious difficulties. Our national debt was almost out of control, and both unemployment and our taxes were very high. Confidence was, not surprisingly, low and both investment and economic growth were low also.

To-day, by contrast, we have achieved a dramatic turnaround in our fortunes. We have the fastest growing economy in the developed world. We have been hugely successful in attracting foreign investment. We are creating new jobs, at a record rate.

The key features of our recent economic performance, have included a rapid and sustained growth in the economy, a remarkable improvement in the public finances, the avoidance of high inflation and a very significant increase in employment. The annual rate of growth in national income, achieved over the past seven years, has been very impressive. Real GNP growth in the period 1994-1997, has averaged 7.5% and this level of growth is forecast again, for this year.

A key feature of our economic performance is the fact, that this growth has not created high inflation, as was experienced in previous periods of strong growth. Inflation in Ireland has fallen from over 20% in 1981, to under 2%, in 1996 and is currently running, at about 3%.

The other key feature of the Irish economic success story, is the strong growth in employment. Between 1991 and 1997, the numbers in employment, grew by a remarkable 18%, as measured by our most recently published Labour Force Survey.

Ireland continues to be one of the best locations in the world, in which to do business. This is evidenced by the significant increases in employment in Irish - owned manufacturing and internationally traded services firms and the continued significant flow of employment generating new investment, into Ireland, by foreign owned firms. There are many reasons, to which this success can be attributed and these include :-

• a stable political environment;
• prudent management of our public finances;
• investment in key infrastructures;
• investment in education;
• a successful system of social partnership, that is unique in Europe;
• an attractive low rate of corporation tax (10%) for manufacturing and certain internationally traded services companies;
• the development of an open economy, which to-day relies on exports for over 81% of GDP; and
• a well educated and flexible workforce

Transfers from the European Union, for development, across a range of sectors, including human resources, has been a major contributing factor also.

These are among the more obvious reasons, to which our success can be attributed. The system of social partnership, which we have created is, as I said, unique in Europe. That process has brought together Government, business and farming labour, in a central forum, which enabled a consensus to develop, as to how our fiscal and economic problems, should be tackled. The success of that social partnership, helped launched this economy, on the road to recovery. Its structures are now formalised and it has been virtually built in to, the fabric of our system of Government. We place a premium on the continuation of that partnership, which I believe is absolutely essential, if we are to continue to control inflation, increase employment and protect our national competitiveness.

I referred earlier to our successes in attracting Foreign Direct Investment (FDI). Foreign - owned manufacturing firms are very important to the Irish economy. In 1995, for example, the output of foreign firms accounted for 56.7% of GDP. In 1997 alone, FDI companies delivered over 10% growth, in their actual employment, creating nearly 15,000 new jobs that year. These companies annual sales and exports, grew by nearly 17% and their expenditures in Ireland, grew by 20%. Total direct full - time employment in these companies, is now nearly 108,000 and annual sales are worth 18 billion Irish pounds, per annum.

In parallel with our policy on Foreign Direct Investment, we are also focusing on the development needs, of Irish indigenous industry, to which State supports, across a range of business functions, are provided. Again, thankfully, we have achieved some notable success here. In 1997, Irish industry enjoyed another record breaking year. Almost 13,000 new jobs were created and total employment in these companies, exceeded 130,000.

As the performance of the Irish economy has improved, there is a growing debate, about the distribution of the benefits of Ireland's economic success. It is clear from an analysis of poverty and disadvantage, that the rising tide of economic success, is not lifting all boats. We continue, despite our positive economic performance, to grapple with issues of unemployment blackspots, long term unemployment, drug abuse, rural population decline and the problems of early school leavers. The rate of economic growth, is a measure of our economic performance, but the challenge for policy makers, is to try to improve the living standards of the population, as a whole. This is one of the key challenges facing the Government, as we plan for the future and address, in consultation with our colleagues in the European Union, the priorities for support in the context of the next round of structural funding. Important considerations arise here, as regards quality of labour, taxation and infrastructural needs, especially in the transport and telecommunications sectors and of course control of inflation and the public finances, as we embark on the new EMU regime.

Before I conclude, I would like to refer briefly to the subject of Urban Renewal, a topic which I know is of particular interest to you all.

When the urban renewal scheme was first introduced in this country in 1986, it was restricted to five main cities. It would have been hard to imagine back then, in the difficult economic climate that prevailed, how successful the scheme would become.

The current scheme, which is drawing to a close, provides a wide range of tax incentives and rates relief, over a set period for construction and refurbishment works, on commercial, industrial and residential projects, in areas, identified as having a special need for urban renewal.

The concept of offering incentives to encourage private developers and investors, to focus attention on specially designated core inner city areas, has proved very successful. The urban renewal scheme has changed peoples' perception of city living and the last few years, have seen a reversal of the trend, towards suburban living, with migration back into inner city centres, becoming a reality.

The State could not have hoped to undertake this task on its own. The key to the success of the scheme to date, has been the partnership of :-

• the State providing the financial incentives;
• the local authorities, promoting the scheme in their functional areas; and
• the private sector, making the necessary investment.

The combined approach of the local authorities and private developers has created significant regeneration of the core areas, of the designated cities. I firmly believe, that the level of investment achieved, would not have been realised, without the benefit of the urban renewal tax incentive scheme.

It wasn't long before this concept was extended, to include core areas of provincial towns. Today, under the current urban renewal scheme, 35 cities and towns have benefited from urban renewal.

A detailed review of the schemes, carried out after a decade in operation, concluded that the scheme has had many successes. But the review also recognised, its lack of ability, to deliver on the wider social and economic benefits.

Physical urban renewal can no longer be seen to operate in isolation. The review identified, that future urban renewal requires a more focused, integrated and strategic approach.

The new integrated area planned approach, gives us a chance to make the most of the opportunities, which tax based urban renewal incentives presents. Integrated Area Plans, are quite broadly based and while they obviously address issues of physical renewal, this is done within a broader context and includes, the wider issues of local socio-economic benefit, including training, education and social housing.

Under the terms of the new urban renewal scheme, prioritising the areas for which plans would be prepared, is the responsibility of the local authorities at county level. They also lead the process of preparing plans in consultation with local partners and communities.

The new scheme is designed to build on the achievement of the previous schemes.

I am pleased to have been able to come here to-day, to share with you our experience in developing our economy, over the last decade, or so. Despite our solid performance, I can assure you that we are anything but complacent. We still have a huge range of infrastructural and social problems which we are addressing and we must remain ever vigilant, that Ireland continues to retain its attractiveness, as a competitive location, for industry and internationally traded services.

In conclusion, I wish you all well in your deliberations here and I would like to invite you to join me now, for some modest hospitality, which we have arranged next door.