The manufacturing and internationally traded services sectors must continue to expand if living standards in the State are to reach those of other EU members, the NESC report said.
Foreign direct investment policy should focus on attracting high-quality products and encouraging the existing base of multinational companies to undertake higher value-added functions such as research in the State.
The NESC said it supports calls by the training agency, Forfas, to gradually phase out grant assistance for capacity expansion. In this context the availability of a skilled and flexible workforce, high-quality infrastructure and competitive business services will be crucial factors in the retention of the State's competitive position in relation to foreign investment.
The council called for a "decisive shift" in State support from the expansion of capacity to developing the skills of workers and management. New forms of work organisation, research, innovation, marketing, technology and design must also be embraced.
"Vulnerable sectors should not be neglected by policy," said the report. "It is not possible to protect non-viable jobs, but the focus should be on assisting vulnerable sectors in terms of developing their capabilities."
On the role of industrial strategy in regional development, it said policy should focus on developing regional economies in an organic way, "in which there are close links between enterprises, regional education and research institutions and sub-suppliers to generate sustained growth".
This policy should complement more attractive financial incentives in the Border, midlands and western regions. "Greater consistency will be required between infrastructure investment and the activities of the industrial develop ment agencies in order to achieve the regional development objective."
On tourism, it said the focus of policy should be on the development of skills and marketing the State overseas as a holiday destination. "Skills shortages in the labour market should continue to be addressed by initiatives such as the industry's Quality Employer Programme."
It said the quality of tourism products should be raised to achieve a better regional balance of growth and ensure that growth respected the quality and absorption capacity of local communities and landscapes. Seasonality should also be reduced.
While saying that marketing in the tourism industry would need to be increasingly funded by the industry, it said State support should be retained for "strategic destination marketing". "This should be supplemented by the voluntary contributions from individual businesses in the tourism industry."
On the development of the IT sector, the NESC said the expansion of the high valued-added knowledge-intensive services was crucial in achieving an economic structure consistent with higher income. It added that smaller businesses in the State should embrace the IT revolution.
It also proposed the development of a national strategy to develop the State's food exports to the EU consumer market.
