Address by Minister McGuinness at a Conference jointly hosted by the South and Eastern Regional Assembly and Waterford Institute of Technology

“Developing Competitive Knowledge-based Regional Economies” - Friday 12 October 2007

Ladies & Gentlemen I am delighted to be here at the Ormond Hotel, Kilkenny, to speak to you about the Government initiatives in the areas of Research, Development and Innovation at this conference “Developing Competitive Knowledge –based Regional Economies” which is being jointly hosted by the South Eastern Regional Assembly and Waterford Institute of Technology.

In today’s world, the pace of technological change and changing customer needs require companies to be innovative, flexible and adaptable. A wide range of approaches are needed to succeed in the new competitive environment, in particular the ability to innovate in response to market needs. Therefore Irish companies must develop innovative and relevant products and services, which are targeted at the right geographic markets and supported by the appropriate sales structures.

To assist industry meet these challenges, during 2006 the Government put in place a Strategy for Science, Technology and Innovation which covers the period up 2013. The Strategy aims to make Ireland “internationally renowned for the excellence of its research” and to ensure that Ireland will be at the “forefront in generating and using new knowledge for economic and social progress”.

Over the lifetime of the current National Development Plan 2007 – 2013, the State will invest €8.2 billion in Science Technology and Innovation. This is a tripling on the spend provided for under the National Development Plan 2000 – 2006. This expenditure, it is hoped, will bring Ireland into line with R&D performance in leading countries and also enhance the development of a knowledge-based economy.

A central theme of the Strategy is the collaborative relationship between enterprise and the research institutions. Significant levels of funding increases, provided through Enterprise Ireland, SFI and the IDA are aimed at exploring, promoting and developing the networks that bring companies and researchers together. We want to see more of our research result in commercial successes.

Even at this early stage, we can assert that the Strategy for Science Technology and Innovation has been very well received but of course the challenges lie in maintaining future results. There are early and encouraging signs of success. Total R & D spending across all sectors of the economy reached €2.33 billion in 2006, up over 14% on 2005. Between 2004 and 2006 gross expenditure on research and development (GERD) increased by over 26% in nominal terms. Notwithstanding rapid economic growth, the overall GERD / economic activity intensity ratio rose to 1.56% of GNP compared to 1.48% in 2004. This suggests a real turning point has occurred which places research and development, innovative activity and the commercialisation of knowledge as a real driving force behind our future well-being.

Rigorous enterprise targets were included in the Science Strategy for delivery by 2013. This requires that the enterprise agencies work closely with companies to enhance their competitiveness, driven by greater investment in R&D. It is very encouraging to see that R&D expenditure in the business sector grew strongly in 2005 and 2006. R&D spending in the business sector (BERD) rose by almost 10% from 2004 - to 2005 - and is estimated to have increased by a further 17.3% in 2006 to reach €1.56bn. A recent EU report published in June noted that EU R&D intensity has been stagnating but recognises that Ireland is amongst a small group that is catching up. Like many aspects of change in Ireland, this catch-up is happening very rapidly.

The establishment of a strong research base in Ireland is proving to be a vital driver of major investment decisions by both overseas and indigenous companies. Investment in research & development continues to increase.

Enterprise Ireland has set a target of more than doubling the number of indigenous companies doing in excess of €100,000 per annum in R&D and to increase five fold the number of indigenous companies spending in excess of €2m per annum on research by 2013. This upward shift has already started. IDA will also double its numbers, increasing from 213 companies doing minimum scale R&D in 2003 to 520 in 2013. Similarly, its targets are for 150 FDI companies to be performing significant R&D in excess of €2m per annum by 2013, compared to 60 in 2003. Achieving these targets will represent a very real change for the Irish Enterprise base and both EI and IDA have shown that they are making real progress.

The challenge facing us is to re-focus and re-double our efforts in the areas of building a world-class research system. I see this being achieved by taking SFI investments to a higher plane, by increasing in-company R&D levels, building effective collaborative industry/third level research, helping SMEs innovate to stay competitive and, particularly important, commercialising the outputs of our growing research base.

A number of new initiatives are being prepared or are already underway, that will progress this objective. Over the next months, we will see the launch by EI and IDA of their new simplified R&D offerings to companies. These new schemes bring together, under a single heading within each agency, financial supports for company-led research projects, providing an integrated and unified approach capable of meeting company needs flexibly and efficiently.

Earlier this year, the Innovation Vouchers programme was launched. A third phase of this programme was launched early in October. The programme allows enterprises to explore a business opportunity or problem with a public research body thereby facilitating knowledge transfer to their business.

The Competence Centre programme is a new and important bridge on the spectrum of taking basic research to commercialisation. This industry-led research centre scheme has attracted significant interest with 25 industry groupings responding in May to the first call for Expressions of Interest. Competence Centres will fill a gap on the continuum from often academic led basic research to applied or company led research while ensuring greater commercialisation opportiunities.

It has been particularly encouraging over the last number of years to see the increasing attractiveness of Ireland as a location to conduct research by virtue of the general strengthening of the research system and such initiatives as the R&D tax credit. It is essential that we keep highlighting Ireland as a location of choice for R&D.

Regional based Institutes of Technology have an important role to play in enhancing regional research potential. The Applied Research Enhancement Programme, operated by Enterprise Ireland, supports the establishment of centres of excellence in applied research and assists the institute of technology to compete successfully for national and international funding. This provides opportunities for Institutes of Technology to develop research capability in areas of strategic importance to the local industry in a particular region. In addition, companies in the Southwest region, as well as those in the West and Midwest, can benefit from a range of Technology Transfer Initiatives.

Ireland is highly rated and highly regarded as a good place to start a business. In January 2007, the Global Entrepreneurship Monitor Report measured an early stage entrepreneurship rate of 7.4% in Ireland, ranking Ireland 2nd in the EU and 7th among OECD countries for entrepreneurial activity. It is clear that we have a good climate for entrepreneurship which is due in no short measure to the very benign business framework conditions such as relatively low taxation and low regulatory burden and relatively easy access to finance. In pursuit of the Lisbon Strategy objectives, our Agencies will continue to support the provision of essential business and other supports throughout all of the regions. Enterprise Ireland client companies, for example, are supported through Nine regional Offices throughout the country and locally through the City and Council Enterprise Boards. Enterprise Ireland encourages entrepreneurship at grass root level through its support for Community Enterprise Centres (CEC). These Centres provide a supportive environment for budding entrepreneurs and serve to help the development of entrepreneurship at the local level. The latest CEC scheme which is worth €21 million will be rolled out over three calls for applications from communities over the next three years.

Collaboration and cooperation between firms can stimulate new thinking and be a rich source of innovation capacity. While Government can act as a driver of such collaboration, it should be recognised that firms themselves need to take a leadership role. As a small open economy we have to rely on international business and relationships to compete. Therefore, it is essential that enterprises in Ireland are fully prepared to exploit the added value which meaningful and successful collaboration can bring, in terms, for example, of gaining a foothold in international markets and learning from good practices elsewhere as part of an ongoing process of renewal.

We have consistently recognised the importance of building strength and capacity among indigenous firms. Consequently, we have helped those with high potential to scale-up, invest in research and innovation and use the opportunities of globalisation to internationalise their operations. This does not include a focus on export markets alone, but covers technology acquisition, finding partners and other forms of international collaboration. Effective networking is so important as a catalyst to change and innovation that it is part and parcel of our approach to business supports by our Agencies such as Enterprise Ireland. It also plays a key part in critical EU funded programmes such as the latest Framework Programme FP7 that is driving the research agenda across Europe, and which will support our ambitious objectives to become a highly innovative and knowledge driven economy.

Ireland has a unique opportunity to ensure real coordination and coherence in its efforts to build a knowledge-based society and be at the forefront in generating and using new knowledge for economic and social progress. Our ambition must be to reach a level that generates international renown for Ireland as a base for research and I believe the structured implementation of the Science Strategy and the coherent delivery of other Agency supports, supported by organisations such as the IRDG, is playing and will continue to play a very valuable role to enhance our economy and society.

I would like to wish you success in your deliberations at this Seminar to-day and I look forward with interest to the discussions that will take place. Thank you.

Ends/TC297