FORFÁS, THE national advisory board for enterprise and trade, has called on the Government and the social partners to boost the competitiveness of the Irish economy by working towards a mix of pay and productivity growth and a 2 per cent limit on annual inflation.
In its newly published 2007 annual report, the organisation said that Ireland's cost competitiveness was a major issue that must be addressed. "With increasing costs in Ireland it is important that we take every opportunity to curb further cost increases to ensure that Irish enterprise can continue to compete effectively," said chief executive Martin Cronin.
The partnership approach has become "even more important" in achieving the goal of moving towards more innovative, higher value activities and skills, he said.
"A continued focus on innovation and flexibility to adapt to change across all business activities is vital to secure higher-value-added activities and improved productivity. Achieving higher relative productivity growth rates will be important for further international competitiveness and securing sustainable wage growth."
Mr Cronin and Forfás chairman Eoin O'Driscoll said in a joint statement in the annual report that there had been a "significant loss" in Ireland's international price competitiveness within the past year. This was due to the appreciation of the euro, pay increases ahead of productivity growth rates and high inflation levels.
"Non-pay costs compare unfavourably with other European countries, and property costs, utilities (including waste, water and electricity) and domestic services costs are significantly higher. With costs increasing at a faster rate than other EU countries it is important that we put measures in place to curb the rate of increase and to ensure that companies exporting goods and services from Ireland can continue to compete effectively.
"With many cost issues beyond our control, such as currency fluctuations and international energy prices, it is important that we act now to reduce costs in the areas we control.
"The management of inflation should be complemented with a drive towards raising productivity and improving our overall competitive position. Forfás supports the proposal by the National Competitiveness Council to develop a national programme to restore cost competitiveness, which includes setting a national inflation target close to the ECB 2 per cent target."
The report was welcomed by Minister for Enterprise, Trade and Employment Mary Coughlan. "Undoubtedly we have entered a challenging economic period. Understanding what are the most important strategic issues for enterprise and science is essential for Government in ensuring Ireland continues to deliver an environment in which companies can thrive," she said.
Mr Cronin said Ireland has a dynamic and successful base of companies successful in many sectors, including life sciences, financial services, food, web-based services, specialised engineering and locally delivered services.
"Convergence of technologies and business practices is already occurring in sectors such as ICT [information and communications technology] and financial services, in food and pharmaceuticals and in pharmaceuticals and medical technologies. The potential is significant and Ireland can bring the strengths of experience and adaptability and flexibility to bear.
"We must continue to invest in what is most important and prioritise investments that will make the most significant contribution to our economy."
