Newly appointed Minister for Jobs, Enterprise and Innovation Mary Mitchell-O’Connor believes competitiveness is integral to job-creation, exports and economic growth, and improving Ireland’s competitive performance is a key priority for her.
“Ireland’s competitiveness ranking as measured by IMD improved by nine places to seventh in the world and first in the euro area this year,” she says. “As recognised by the IMD, Ireland’s strengths lie in our competitive taxation system, highly skilled workforce, and pro-enterprise business environment.”
According to Mitchell-O’Connor, the Government’s objective now is to deliver a business environment which enhances national performance. “The National Competitiveness Council has already noted that we cannot afford to be complacent, thinking that all of the hard work is done,” she says. “Further action is required to maintain Ireland’s competitiveness – we know that all of our competitors are also constantly seeking to improve their business environments, so standing still is not an option.”
Costs performance
She points to room for improvement across a number of areas, particularly in relation to infrastructure, skills and costs performance. “There is a need to prioritise and target capital investment in competitiveness and productivity enhancing infrastructure and in research and development,” she adds.
Foreign direct investment (FDI) naturally plays a central role in job creation, with American investment being particularly important. “The US continues to be the largest single investor in Ireland, accounting for over 70 per cent of investments won since 2010,” she says. “US corporations currently employ over 135,000 people directly in Ireland and IDA Ireland estimates show that for every 10 jobs provided by FDI, another seven indirect jobs are generated for the Irish economy.”
But the relationship between the two countries is more than just about investment into Ireland. “Ireland has a long history of deep political, cultural and commercial ties with the US,” she says. “In 2015, Ireland exported goods to the value of nearly €27 billion to the US and imported €11 billion worth of goods in return. The US is Ireland’s number one goods export market.
“The European Union and the United States are currently negotiating a trade agreement, the Transatlantic Trade and Investment Partnership, which will be the world’s biggest bilateral trade and investment deal,” she adds. “Given our deep commercial ties, Ireland is particularly well placed to take up opportunities to trade more easily with the US.”
Mitchell-O’Connor cites an independent study carried out by Copenhagen Economics which estimates the benefits to Ireland from an EU-US trade agreement will be proportionally greater than in the EU as a whole. “It estimates somewhere between 5,000 and 10,000 additional export related jobs could be created. The findings are backed up by the recent interim independent report carried out by Ecorys Consultancy, which was contracted by the EU Commission, which estimates that an EU-US free trade agreement would boost Irish GDP by 1.4 per cent.”
FDI remains critically important of course, and Mitchell-O’Connor believes Ireland is well-placed to maintain its strong record in this area. “Almost every aspect of a country, from its infrastructure through to its quality of life, is key when it comes to the decision-making process behind choosing a location for FDI,” she says. “Despite an increasingly competitive global FDI environment, Ireland remains very attractive to overseas companies. While our corporation tax rate attracts a lot of media commentary, the reality is that multinational companies choose to invest in Ireland for many reasons.”
Top-level graduates
Among these reasons are Ireland’s strong pool of highly skilled workers and first-class education system that produces top-level graduates.
“Our country benefits as well from favourable demographics – over 40 per cent of our population is under 29, making ours the youngest in the EU. Establishing in Ireland also offers barrier-free access to the EU, and we also benefit from being the only country of native English speakers in the eurozone.” But she is also aware of the competitive challenges facing the country.
“IDA Ireland posted record results in 2015. However, I am not complacent about this performance. Ireland remains a relatively high-cost location and I will be working hard to create a pro-enterprise environment to ensure Ireland’s attractiveness for FDI is maintained.
“In the future, the ability to remain competitive and retain a pro-enterprise policy environment, as well as continuing to invest in education and skills, infrastructure and enterprise supports will be important if Ireland is to continue to build on the current success rates for foreign direct investment.”