The Government must act to tackle a rising cost base and weakening productivity if the economy's competitiveness is to be protected, a top-level report has recommended. Marc Coleman, Economics Editor, reports
Prof Don Thornhill, chairman of the National Competitiveness Council, which yesterday published the Annual Competitiveness Report, said future policy on energy security would be a key to ensuring longer-term growth in the economy and called for a debate to take place on nuclear power.
Despite welcoming the economy's "remarkable achievement" since the 1980s, the report warns that the economy is over-reliant on the construction sector and on "high levels of borrowing".
The report, which comes in the wake of several high-profile business closures in recent weeks, also warns that Ireland's trade patterns are now having a negative effect on growth in the economy.
While Ireland's productivity levels - a measure of the efficiency of economic output - are still strong, rising costs and congested infrastructure are causing productivity growth to slow by comparison with competing economies, the report argues.
"The current phase of domestically driven growth cannot continue indefinitely . . . Construction is now the main driver of employment growth and economic growth. International trade did not contribute to Ireland's growth in 2005," Prof Thornhill said yesterday.
Growth in personal borrowing and in the current account deficit - a measure of how much imports exceed exports - suggests growth is unsustainable, he added.
Prof Thornhill welcomed the National Development Plan, saying it would act to reduce inflation in the long run, but said further competition and investment were needed to tackle Ireland's vulnerability in energy. "There is a White Paper on energy coming up . . . we favour the separation of the electricity transmission network from generation."
While the report does not favour adopting nuclear power, Prof Thornhill said it was now time for a debate on the matter to take place. "I'm always uncomfortable in a debate where a significant number of people feel they can't discuss the issue, that's a personal view. Very definitely there should be a debate."
The report has also highlighted high accommodation costs as a challenge facing the economy and argued that land planning issues needed to be examined in the long-term. "We don't go into that in any great detail . . . it may be the subject of a separate paper in the future."
Other recommendations in the report include further investment in the development of the electricity interconnector between the Republic and the United Kingdom, improvements in pre-primary education and a doubling of science and technology PhD students.
Last week US telecoms giant Motorola announced the likely loss of 300 jobs in Cork due to rising price competition, while Thomson Scientific said that 200 jobs based in Limerick would be outsourced to India. Minister for Enterprise, Trade and Employment Micheál Martin said Ireland's manufacturing sector was undergoing a process of change.
Proposals
Infrastructure
• Further investment to connect the Irish energy market to Northern Ireland, the United Kingdom and Continental Europe.
• Develop higher density housing with integrated transport systems nearer places of work
Education
• Ring-fence the funding of facilities and teacher training for pre-primary education in disadvantaged areas
• Graduated re-introduction of fees for undergraduate courses as well as a student loan system
Labour force
• Provide incentives to participate in lifelong learning.
• Increase the use of Information Technology and distance learning in training courses.
Regulatory environment
• Remove unnecessary regulations on business and assess potential burden of proposed new regulation.
• Introduce an integrated 'Single Window' portal to handle exporter and importer regulations
