BUSINESS OPINION: Last Thursday the Central Statistics Office published the latest trade figures. They showed, unmistakably, that industry was in difficulties. Export volumes were down 9 per cent in January compared to the same month in 2002, writes Cliff Taylor
While overall exports last year were 1 per cent up on 2001, the increase was solely attributable to the chemicals sector. Exclude it and the figures show a drop of 6.8 per cent in exports last year.
A cause for concern for the Government perhaps? A time when a Minister might step forward and reassure industry that the Cabinet appreciated the difficulties business was facing and would do all in its power to help?
Unfortunately not. The "official" reaction came from the Minister for Trade and Commerce, Mr Michael Ahern. The Minister, according to a statement, "welcomed the increase in Ireland's exports recorded in trade figures issued by the CSO". The figures showed an "excellent" performance at a time when international conditions were difficult. Exporters were operating at a "world class level" and the sector is flexible and able to withstand global demand.
Mr Ahern's reaction typifies the "ostrich" tactics being employed by this Government to the crisis facing industry. Ignore it and hope that it goes away. Hope that the international recovery comes in time to lift industry's boats.
It is time for the Government to wake up and realise that most of the manufacturing sector is now in recession. This does not mean that the economy is in recession, although recent indicators suggest that growth has now completely stalled. But it does mean that one of the key sectors of our economy is in deep difficulty and - crucially - that many jobs could be vulnerable if conditions do not improve.
Industrial production figures, published by the CSO last Friday clearly illustrate the point. For the first time the CSO broke down the figures to show the performance of the so-called "modern" sector - including the main computer and pharmaceutical multinationals - and that of all other industry. The latter category includes key sectors such as food, textiles and clothing and in total employs some 160,000 of the 250,000 people employed in industry.
The CSO figures showed that the output of this "all other industry" sector fell by 2.3 per cent last year, compared to 2001. In January this year output was 6.2 per cent down on the same month last year, indicating the trend is continuing.
On the face of it, things look better in the modern sector, where production rose 11.8 per cent last year. However a closer look at the figure reveals further cause for concern. Specifically, the increase in production in the modern sector last year was almost entirely due to a 24 per cent increase in the chemical/pharmaceutical sector. In the other big category - office machines and computers - production actually fell by 18 per cent last year. So, much of the "modern" sector is also shrinking.
The Central Bank researchers, presenting their quarterly bulletin last week, saw cause for concern in these trends. In particular they reckoned that some "labour hoarding" must be going on in more traditional parts of industry. In other words firms have more people than they need, but are holding onto them in the hope of an upturn. This was " a mystery, but a worrying mystery" commented Dr Michael Casey, the bank's assistant director general.
Industrial employment is already falling. The latest figures, for last September, show a fall of 18,100, or 6.7 per cent, since September 2001. Clearly the Central Bank is worried that this trend may accelerate unless the production picture picks up.
And the omens for this are not good. There has been a substantial loss of competitiveness in recent years and this will be worsened by the recent rise in the value of the euro. Meanwhile, conditions in many export markets remain poor and the prolonged nature of the war is now adding significantly to the risks to the global outlook.
There is, of course, nothing that our Ministers can do about the global outlook. However, it is their job to do all that they can to support industry over the coming months.
The first step must be to recognise that there is a problem. And the second must be to come up with a strategy to address it. This needs to involve a short-term commitment to do everything possible to attack costs to business and lower inflation and a longer-term strategy of promoting competition and developing strategies to build the infrastructure needed to support value-added industry here. This goes all the way from roads and public transport to the kind of advanced research capability which has started to develop in some sectors, but to which the long-term commitment of the Government remains uncertain.
The worry must be that it is already too late to stop the losses piling up in the months ahead. The Tánaiste, Ms Harney, went to Cork on Friday to announce 300 jobs. But part of the visit also involved trying to limit the political damage from 400 recent job losses in nearby Youghal. Some of the Youghal jobs were moving to Poland, as part of what will be an accelerating trend of companies moving to lower-cost locations in eastern Europe, or even the Far East. The battle for jobs over the next few years could be a case of two steps forward with new investment and three back with jobs lost.
It would be wrong to be too gloomy. The industrial sector has transformed in recent years and yes, Minister Ahern, it is more flexible and efficient. Entrepreneurship and expertise built up during the boom years will not disappear overnight. But our industrial sector faces a short-term competitiveness crisis and long-term questions about what activities can profitably be developed here as much production capacity moves east. It's now past time for some serious Government action in this area.
