'Enterprise economy will get us through'

11 November 2010

Op-ed by the Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD, from today's Irish Examiner

Ireland has two economies - a fiscal one which is manageable and an enterprise one which is growing.

We know how much it will cost to fix the country’s banking system and we have a credible repair plan that is backed by the European Commission.

While the steps in that plan are painful and far-reaching, they are essential for economic recovery.

The story of the enterprise economy - the ‘real’ economy based on the business environment - is much more encouraging.

Since I took office on March 24, 2,585 jobs backed by the Government enterprise agencies, IDA Ireland and Enterprise Ireland, have been announced.

That works out at 11 jobs per day based on a seven-day week, with a roughly matching number of knock-on jobs generated in the local economy.

Just under 2,000 of the direct jobs were in foreign direct investments (FDIs).

FDI generates more jobs per head of population here than in any other country, according to IBM’s Global Location Survey 2010.

Internationally, foreign direct investment was down 30pc last year.

In Ireland, it fell by just 4pc.

In two years, the number of IDA Ireland investment wins with a research and development component has gone from 10pc to 49pc.

That means the Government’s investment strategy for science, technology and innovation is the right one for high-quality jobs and economic recovery.

I know from my two recent trips to the US where I met about 30 of the world’s leading multinational firms that the pipeline for FDIs is very strong for Ireland in the near term.

On the indigenous enterprise side, our exports increased by 13pc in August compared with the same month last year.

Ireland is the only country in the eurozone, bar Germany, to record an increase in export activity in the first half of this year.

Internationally, exports fell by more than 20pc last year.

In Ireland, they fell by less than 3pc and services exports actually grew by 2pc.

Enterprise Ireland projects that their client firms will this year recover about 70pc of the export earnings lost last year.

A key reason for Ireland’s strong export performance is our sharply improving competitiveness.

Our overall national competitiveness has improved 6pc since 2005 and, as labour average costs in the eurozone continue to rise, ours have dropped by about 1.5pc.

Over the past year, the cost of food, drink and leisure activities has dropped by about 2.5pc.

The cost of clothes has dropped by about 7pc.

The Government is taking costs out of businesses and, since 2007, measures we have implemented have saved small firms €20 million in red tape overheads.

I will shortly announce further administrative savings in areas such as Company Law, Employment Law and Health and Safety Law.

As well as that, the Government is grant-aiding cost reduction and productivity projects through Enterprise Ireland’s Lean Business programme.

Things are improving in the labour market, too.

The number of redundancy claims received by my Department for October was 3,910 - down 40pc on the figure for last October.

Unemployment is still running way beyond acceptable levels - and the Government will keep working to get workers back into jobs - but there are important signs of stabilisation.

October’s live register figure showed a drop of 12,864 on September.

So far this year, 11,558 new firms have been incorporated.

Recruitment agencies report a 40pc increase in job vacancies for the third quarter of this year compared with the same period last year.

There are signs, too, that lending to small businesses is improving following the setting up of the Credit Review Office and sustained Government pressure on our banks.

The Irish economy is now well diversified with strong clusters of firms in growth areas such as financial services, life sciences, information communications technology and clean technology.

These sectors are producing thousands of high-quality jobs based on sustainable business models.

They are not jobs wedded to property bubbles or low-cost manufacturing that will disappear whenever trends in the domestic or international economies shift this way or that.

The future of our enterprise economy lies in strong export growth and a thriving foreign direct investment sector.

Irish firms are increasingly agile and outward-looking, trading in new markets and producing innovative products and services, and our workforce is young, educated and English-speaking.

Importantly, too, our 12.5pc corporation tax is a constant and will not change under this Government’s watch.

To compete in international trade, we must continue to improve our productivity and competitiveness and invest in indigenous research and development know-how.

Our business sector is strong and we have one of highest rates of entrepreneurship in the world.

We know that the upcoming budget will be tough and the adjustment will be felt right across society.

But we should recall that taxpayers have already delivered €14.5 billion worth of adjustments in just over two years.

Early next year, we will go to the international money markets with a credible record of fiscal austerity so that we can borrow what we need to fund public services and pay public servants.

The Exchequer is fully funded through to the middle of next year and we still have €25 billion of assets in the National Pensions Reserve Fund.

Our tax take in October was above target and the Exchequer deficit was over €8 billion less than it was at the end of the same month last year.

The Government has a plan for economic recovery.

We must have confidence in our ability to reach the goal of sustainable economic growth.

In the enterprise economy, at least, there are very encouraging signs that we can get there.

ENDS

Bernard Mallee, Press Adviser to Minister Batt O'Keeffe, Department of Enterprise, Trade and Innovation, on Tel: +353 1 631 3944, Mobile: +353 87 9173022, Email: bernard.mallee@deti.ie