Keeping a smart eye on manufacturing

14 November 2010

by the Minister for Enterprise, Trade and Innovation, Batt O’Keeffe TD

The role of manufacturing in the development of Ireland’s ‘smart’ economy can sometimes be overlooked amid the talk of white coats and next-generation product innovation.

But just as the concept of a smart economy is not confined to laboratory scientists, manufacturing cannot be defined simplistically as an industry wedded to the production line.

Manufacturing has as great a stake in the development of Ireland’s smart economy as any other industry.

Manufacturing has been a mainstay of our economy for decades and the Government recognises the contribution of the sector to our economic recovery.

There has been a strong rise in new manufacturing business helped by a pick-up in orders from abroad.

Manufacturing firms’ total direct spend in our economy is over €26 billion - contributing 25pc, or about €40 billion, to Gross Domestic Product.

Manufacturing remains at the heart of our economy, employing over 180,000 workers.

It is estimated that there are 74 jobs in related services for every 100 directly employed in manufacturing.

The manufacturing model has changed fundamentally in recent years.

Today, the sector encompasses a broad range of activities from research and development through to design, production, logistics, distribution, marketing and after-sales service.

These sectors often require specialised skilled staff, technologies, flexible operations and a regulatory environment that may not be readily available in many lower-cost economies.

It has been estimated that we will need to recruit up to 96,000 workers on average every year up to 2014.

Businesses here are adapting to change and engaging in higher value-added activities to compete in the global marketplace.

That has been achieved through increased productivity, more advanced technology levels and sophisticated skills.

A knowledge economy does not mean a flight from manufacturing.

It would be wrong to suggest that our enterprise policy should be focused only on one sector.

Rather, the Government's strategy has been to take a whole-of-economy approach to creating a business environment in which jobs can be created.

Like every other sector, manufacturing must continue to be flexible and innovative if it is to grow, replacing tradition with ambition in meeting the complex demands of modern society.

Manufacturing contributes directly to jobs, economic output and exports.

It is a key driver of innovation and technological advance, boosting opportunities to attract and embed research and development activities, collaborate with the higher education sector and stimulate networks.

Ireland’s management capability, high-quality outputs, productivity growth and project management skills have evolved as a result of our success in attracting high-quality foreign direct investments in manufacturing and in stimulating the growth of export-led firms.

To sustain and grow manufacturing jobs, Irish-based enterprises will have to continue to move into high value-added sectors and activities and boost productivity by investing in human capital, technology and innovation.

Irish manufacturers will have to think and work smarter, generate new ideas, sell into new markets and get more for less right across the sector.

Ireland’s enterprise base is now well diversified and it has remained resilient over the past two years.

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

Two points are well worth noting: Ireland was the only country in the eurozone, bar Germany, to record an increase in export activity in the first half of this year and foreign direct investment generates more jobs per head of population here than in any other country.

Within the next decade, we want a significant number of indigenous world-leading innovative firms - tomorrow’s Googles and Microsofts starting in Ireland and scaling abroad.

These firms will provide high-quality jobs and generate exports and tax receipts.

What will be distinctive about these firms is that they will be ambitious, export-focused and, above all, innovative.

Manufacturing will have a central role to play in realising that vision.

The Government is investing €600 million annually in research and development.

This week, I asked a new group headed by Intel Ireland’s former general manager, Jim O’Hara, to focus on economic recovery and high-quality jobs when mapping out the policy priorities for public investment in research and development.

We must continue to focus on commercialising research and getting new products and services to the marketplace.

Many Irish firms have built world-class high value-added manufacturing and services capabilities in food, software, pharmaceuticals and medical technologies.

We believe that Ireland’s manufacturing base will continue to move up the value chain.

Our centres for science, engineering and technology, strategic research clusters and industry-led network of competence centres are all focused on partnering with business in creating new jobs and products.

Ireland is the only country in the euro area in which unit labour cost competitiveness is improving.

But for manufacturing to grow we must continue to drive down business costs.

We are already seeing a recovery in competitiveness, with improvements in wages, energy, construction and rental costs.

As well as that, we are reducing the administrative burden on businesses by driving better regulation and cutting out needless red tape.

The upcoming budget will show our determination to continue to invest in enterprise and jobs because it would be counter-intuitive in a recession to do otherwise.

We will keep the manufacturing sector strong by continuing to drive competitiveness, encourage diversification, invest in market-focused research and development, and create a jobs-friendly policy environment.

ENDS

This article was first published in the Sunday Business Post on November 14, 2010.

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