Comment: Early in 2006, in view of the growing concerns being voiced concerning the manufacturing sector in Ireland, I asked Forfás to produce a report on the current position in the sector. I wanted to investigate developments affecting the sector, which has been central to our economic success, and place them in a broader context, having particular regard to the growth of internationally traded services, writes Micheál Martin

The report - The Changing Nature of Manufacturing and Services in Ireland: Irish Trends and International Context - makes for some very interesting reading. For decades Irish enterprise policy has focused on exports: on building indigenous companies and attracting in foreign companies, which would produce goods that they could sell on international markets.

The basis of that policy was that it is only through trading successfully on international markets that a small economy can generate wealth and raise the living standards of its people. That policy succeeded spectacularly in the 1990s when our exports of manufactured goods - principally from multinational subsidiaries - increased at a rate that dwarfed the performance of any other member state of the European Union.

This was how we became very wealthy very fast. It was thus a matter of major concern when some commentators began to predict the demise of the manufacturing sector.

That is why I commissioned this study. I wanted to know what is happening to manufacturing. Can it continue to perform in the high cost environment that has developed on the back of our economic success? And if not manufacturing, how else are we going to generate the wealth in the future to sustain the quality of life and the services to which we aspire?

I believe that this report provides an excellent basis for the discussion that must take place on where we want this economy and this society to go. The main message for me is that manufacturing continues to play a central role in this economy. Manufacturing output has increased by 28 per cent in volume terms from 2000 to 2005, and Ireland is punching well above its weight in terms of share of manufactured exports.

The sector spends almost €25 billion a year on wages and with Irish suppliers, and it accounts for almost 30 per cent of corporation tax. The sector is, however, changing very fast and we must respond with equal alacrity to the evolving demands of the new order. It is likely to employ fewer people in the future, but this is a global trend that we bucked in the 1990s but is now asserting itself here.

However, output is still increasing and it is vital that we maintain that momentum. As the report confirms, a vibrant manufacturing sector is vital to a dynamic economy as it drives innovation and productivity.

But the report does not only deal with manufacturing. It also charts the progress of the services sector with a particular focus on internationally traded services. When we first placed manufacturing at the centre of our enterprise policy, it was because we saw trading as critical to a small economy and, at that time, we traded almost exclusively in goods.

However, services can also be traded and, in recent years, technology has extended the range of services that can be traded. The report documents the extraordinary growth of our exports in services. Services now comprise 35 per cent of our exports and we have become the 13th largest exporter of services in the world. Furthermore, employment has been rising in this sector.

Overall, the message from this report is positive. In manufacturing and services, the changes that have been occurring here mirror developments in other developed economies, albeit at a faster pace in many respects. The sectors that generate wealth in the Irish economy - manufacturing and internationally traded services - are performing strongly, although much care and attention will be required to ensure that they continue to do so. The most pressing immediate concern is to maintain competitiveness in manufacturing.

During the recent talks under social partnership, the Government, employers and trade unions all acknowledged the critical role played by manufacturing in the development of the Irish economy. The three parties also recognised that there are challenges facing the sector at present and that all three parties have a role to play in meeting those challenges. To this end they committed themselves to taking the measures required to ensure that manufacturing continues to play a central role in the Irish economy in the future.

As an immediate response, it is proposed that a high-level manufacturing group be established to review the challenges facing the manufacturing sector and to identify further measures to meet those challenges.

The recent launch of the Strategy for Science, Technology and Innovation 2006-2013 was an example of Government commitment to sustaining an environment in which the wealth creators in our economy, both in manufacturing and internationally traded services, can flourish.

It is our determination to vigorously implement the recommendations of the Enterprise Strategy Group (ESG). As the title of the ESG's report implies, it is critical for a small economy such as ours that we keep "ahead of the curve" and the Government is determined to play its part in seeing that we do.

Micheál Martin is the Minister for Enterprise, Trade and Employment