Investment needs to be stepped up in research and development and education, according to the National Competitiveness Council's (NCC's) 2004 annual report. It has also warned the Government that it must avoid pushing up inflation through indirect tax increases in the December Budget.
The State's economic performance has been impressive this year, the report says. However, Mr William Burgess, the former IBM chief executive who chairs the NCC, warns that "the pressures on our competitive position going forward are considerable".
The NCC was established by the Government to advise it on competitiveness. Its 2004 report praises the Government for initiatives to promote technology and innovation, including public investment in science and technology and the introduction of a tax credit for business research and development. However, it warns: "More needs to be done."
Education is central in this area, the report says, arguing that Ireland must aim to be a leader amongst advanced economies for investment and attainment. It calls for a programme of pre-primary initiatives targeted towards areas of social and economic disadvantage, as a way of maximising participation in education.
Public investment in research and development must be sustained at current levels beyond 2006, when the National Development Plan is due to end.
The report also says that the roles of different public sector agencies in science, research and innovation need to be clarified, while knowledge transfer between universities and industry must be improved.
"Many of these recommendations are consistent with those of the Enterprise Strategy Group, which published its report in July. The NCC urges speedy implementation of these recommendations," said Mr Burgess.
Like the NCC, the Enterprise Strategy Group was supported in its work by Forfás, the state industrial planning agency.
The NCC report also warns that the increasing regulatory burden from EU and Irish rules was threatening the favourable business environment. This "may explain why the rate of business start-ups in Ireland still lags behind the leading entrepreneurial countries" such as the US, South Korea, Australia and New Zealand.
Government Departments should devote more resources to a system of regulatory impact assessment that tests major initiatives for their impact on competitiveness, it says, and the compliance burden on companies imposed by some recent legislation needs to be reviewed.
The final area focused on by the NCC is cost competitiveness. It recently published an analysis showing that by 2003 Ireland was virtually on a par with Finland as the most expensive country in the euro zone.
"The Government's most immediate competitiveness priority should be to slow the growth of prices and costs," it says.
The report calls on the Government to give new powers to the Competition Authority to levy fines on firms that violate competition law. Better regulation was also needed in areas such as energy, transport, retailing and services. The Government should not fuel wage demands by increasing indirect taxes and a new drive was essential to boost efficiency in the public sector.
