Ireland has become increasingly uncompetitive for a lot of basic manufacturing, largely as a result of the State's recent economic success, the Tánaiste told the Dáil.
Ms Harney said the challenge was to assist companies to move into the type of higher-value-added activities which would provide well-paid jobs for an increasingly educated workforce.
"In addition to current measures, I recently set up the enterprise strategy group under the chairmanship of Eoin O'Driscoll. I have asked the group to recommend new strategies and policies which the Government and I will need to take into account in charting a course for enterprise in Ireland to the end of the decade. Among other issues, I have asked the group specifically to examine what Ireland needs to do to address the strengthening competition from Asian and EU accession states."
Mr Finian McGrath (Independent, Dublin North Central) asked if the Tánaiste agreed that many of the multinationals, because of their size and capacity for employment, were setting the economic agenda and the Government was gradually losing influence.
"If they decide to move to another low-wage country, there is nothing the Tánaiste can do about it," he said.
He added that Irish people did not live in a low tax economy when PAYE workers were paying over 40 per cent of their wages, and when PRSI, the 2per cent health levy, VHI and BUPA private insurance schemes, the extra 15 per cent Government levy on chemists, the 29 per cent increase in the bin tax in Dublin City Council area, the new ATM tax and an increase of 100 per cent in parking permits were taken into account.
"Does the Tánaiste accept that, despite the image of being a low tax economy, the average taxpayer is being hammered and this is not good for the broader economy?"
Ms Harney said she did not accept that the multinational sector dictated the agenda.
"We live in a globalised economy. A recent survey indicated that Ireland has the most globalised economy in the world. Employment will only grow if sales increase, and sales will only increase if productivity increases through innovation. We will not achieve productivity through low wages because there are many countries that can produce goods for much less than us."
