Agency chief executive Martin Cronin believes failure to commit to European enlargement would be very damaging to the State's long-term economic prospects. Colm Ward reports

It's been a challenging few months for Martin Cronin since he took over as chief executive of Forfás, the agency charged with developing enterprise, science and technology in the Republic. But, despite international corporate scandals and domestic cutbacks, he is confident that the Republic can successfully ride out this period of economic uncertainty.

"We are coming into this downturn from the best possible position - low unemployment, high employment and lots of world-leading companies," he says.

He believes, in particular, that the types of businesses that have been nurtured here over the past number of years will be better able to resist the downturn.

"A very big proportion of our industrial base is modern, whether it's manufacturing or traded services. So, it's reasonable to hope that we will be less affected than other countries and I think it's fair to be certain that we can come through it."

Mr Cronin identifies a number of factors as being vital in ensuring the Republic's continuing competitiveness. These include:

a strong focus on research and development;

an ongoing effort to keep the cost of doing business down;

the development of technology to "keep one step ahead" of our European counterparts;

the promotion of competition within the Irish marketplace;

a commitment to European expansion.

Failure to commit to European enlargement, he believes, would be very damaging to the State's long-term economic prospects.

"The expansion of the European Union is another step towards the opening up or liberalisation of markets. If Ireland were to turn its back on that, it would send a signal to international business that our commitment to international trade and open markets is questionable.

"I think the challenges that would pose for us would be far greater than any challenges that lie in enlargement of the European Union.

"I think we also need to keep in mind that there are opportunities for us in enlargement of the European Union - greater markets for us to address within the European Union, opportunities for Irish companies to invest in the enlargement areas - all things that can add to our competitiveness.

"So, enlargement brings both opportunities and challenges. To my mind, the opportunities outweigh the challenges."

However, he stresses that the Republic must retain its flexibility in order to adapt to the ever-changing global economy and he believes there is a role for the State "to cooperate with other countries who appreciate that and to get that message through to Brussels at every opportunity".

In response to the recent move by the British government to seek more tax from British companies based in the Republic, he stresses that the State's low corporate tax rate does not pose a threat to other states.

"One of the things we need to do is to demonstrate that profits in Ireland that are taxed at our low 12.5 per cent rate will be profits that will be attributed to activities carried out in Ireland and that this does not pose a threat to any other jurisdiction and that, over time, as companies and profits become more mobile, high corporate tax rates will become less and less sustainable."

He identifies rising prices and wages as a real threat to the Republic's competitiveness. "Take-home pay in Ireland now is estimated as the third-highest in the euro zone. So, we need to make sure that pay and price increases going forward are moderate and don't exceed those in the other euro-zone countries in order to maintain competitiveness."

Social partnership is one of the most effective mechanisms for keeping inflation under control, he believes, and hopes that this will continue in the future. "In the 1980s we had a sense of common purpose because we had a lot of economic difficulties and every sector pulled together to deliver the success that we have seen. Sometimes it can be harder to generate that sense of common purpose when times are good and, yet, that is what we need now to make sure we hold on to everything we have gained."

Ongoing investment in research and development is also vital in ensuring that the Republic does not lose its competitive edge.

Mr Cronin is confident that the high quality of Irish graduates will continue to attract investment in research.

However, a recent survey published by Forfás showed that the Republic still lags the EU average when it comes to expenditure on research and development, with 1 per cent of gross national product spent on R&D compared to the EU average of 1.2 per cent.

Mr Cronin explains that this is due to our more traditional status as a manufacturing location. He predicts that expenditure on research will continue to rise over the next few years but warns that funding for research should not lose out as a result of the current spate of cutbacks in Government spending.

"I think it is important that we do everything we can to protect research funding because it is one of the things that the modern businesses we rely on need to move forward," he says.

"There is a kind of an economic food chain where the most advanced economies are close to the top and countries that are close to the bottom tend to be involved in cost-sensitive activities and therefore have to keep their costs very low." he explains.

"We sit somewhere in the middle of that chain and it is important that, over time, we move up that chain. Research is one major lever to help us do that."

Another such "lever" is the continuing investment in technology infrastructure, particularly high-speed communications technologies such as broadband, which Mr Cronin sees as "a major enabler, particularly for a country on the geographical rim of Europe".

He believes that this technology should be rolled-out on a phased basis and that "it would be a mistake to try and put broadband into every house in the country tomorrow".

"A good yardstick for Ireland is to try to be one step ahead of most other countries in the implementation of broadband and making it available at reasonable rates," he says.

Although he acknowledges that there are many challenges to be faced over the next few years, Mr Cronin is confident that the Republic's economic progress can be maintained. "At the moment, we have the ball at our feet, and our economy is generating more activity than ever before, and our population is higher than it has been for over 100 years, and it's a young dynamic population and a modern economy.

"The issue now is: are we going to kick the ball in the right direction by focusing on the issues that need to be addressed to stay successful? I am absolutely confident that we can do it and I will be doing my best to encourage everyone to do that."