HP Invent National Competition Prize winner, University of Limerick graduate, Kate Corish, shows her innovative new device to Lionel Alexander, Vice president and MD of HP Manufacturing Ireland in March 2008. Kate was awarded a €5,000 prize for her final year project designed to enable construction workers to safely lift and manoeuvre sheet materials.

The newly appointed President of the American Chamber of Commerce in Ireland, Lionel Alexander, Vice President and Managing Director, Hewlett Packard (Manufacturing) Ltd, said today that the Government must lead Ireland in a process of reinvention and transformation in order to secure economic recovery.

We at Finfacts have repeatedly the need for political reform but despite the crash, the inert political class is short of vision and stuck in a conservative groove.

Alexander said; "It is not just the Irish economy which has undergone profound change; the global picture has altered dramatically. The world will not change to suit us, we must make compelling business reasons for investing in Ireland to meet the new challenges, stimulate economic recovery and ensure that Ireland remains an attractive location for inward investment."

 "We must learn from the mistakes of other countries. While it is absolutely true that we must seek to become a Smart economy and support knowledge based businesses, it must be acknowledged that core manufacturing is the foundation stone on which many additional investments are built.  The focus must be to protect and grow the 100,000 plus direct jobs created by the 600 US companies in Ireland 

"66% of investments announced by IDA Ireland in 2009 were made by the current base of US multinationals in Ireland, which included over €350m in R&D investments. This reinforces the need to protect the existing investment base. Everything we do as individual businesses, and as a country, must be focused on maintaining a level of competitiveness which allows us to hold the investment we have and to continue to build from that base".

Alexandr said on competitiveness: "Over the last decade Ireland has experienced a loss of 30% in our national price competitiveness. We need to ensure that all of those costs that are within our control are managed competitively. Insofar as it is possible, for example, we need to align our salary structures to the EU norms. Wage costs for manufacturing workers in Ireland exceed that of the OECD average and the US by approximately 20% and this is not sustainable".

Additional comments made by Alexander on key competitive issues are outlined below.

Tax:

• In the context of competition, taxation is not a single issue agenda but it is a key and increasingly keenly competitive factor that importantly is, in most respects, within our power to determine domestically.
• The American Chamber of Commerce remains fundamentally opposed to any moves towards tax harmonization across the EU and believes that a common consolidated corporate tax base would be unworkable.  
• In the context of overall fiscal policy, taxation levels must be continually reviewed so as to ensure that the levels of taxation in the economy are a driver for international competitiveness. 
• While accepting the possible need of the Government to broaden the tax base in future budgets, it must be recognised that marginal Personal taxation is already quite high in Ireland. Any increase in personal taxation will make it more difficult to retain talent in this country; talent which is critical to realising the Government's goal of transforming Ireland into a smart economy.

Talent:

• The strong talent base which exists in Ireland is still a key attraction for doing business here but increasingly education will be a key factor in our capacity to compete and to flourish in the global market.
• The model Ireland has been using in the post-primary education needs to evolve to encourage the widest number of students to take high levels of numeric (maths, physics, engineering, etc) subjects.  These subjects help develop problem-solving skills in students which can be applied in the workplace.
• In the Smart economy, problem solving skills and creative and innovative thinking will be critical.  We believe there is a reluctance within the education system to make the necessary and sizeable change to the curriculum to adapt to the needs of the Smart economy.
• Although the Strategy for Science Technology and Innovation indicates that there is a requirement to double the number of graduates by 2013, there is little evidence on the ground to suggest a coherent policy that would ensure that this is achieved. In particular, a strong drive to positively promote the career path and opportunity of scientists and engineers needs to be urgently progressed at secondary school level.

Competitiveness:

• Salary costs are the single biggest operating costs for the majority of businesses today. The average salary earned in a multinational company is €45,000[¹] and the sector has led the way in both pay and non-pay benefits for employees. The average rate of wage inflation in Ireland between 2004 and 2008 Q2 was 50 percent above the EU-15 average[²]. We cannot maintain these high levels of wage inflation and continue to win investment.
• Ireland has fallen steadily in rankings of international competitiveness. Having been ranked 5^th in the World Competitiveness Yearbook in 2000, Ireland has slipped to 19^th in the latest edition. In terms of labour costs and productivity Ireland ranks 77^th out of 133 in the Global Competitiveness Report of the World Economic Forum.
• Inefficient government bureaucracy was one of the most problematic factors for doing business in Ireland according to respondents to the WEF Global Competitiveness Report in 2008 and this needs to be addressed though Public Sector Reform. That Reform must increase productivity, reduce inefficiencies and deliver more value for less money

Finfacts article, Jan 2009: Irish and Eurozone Competitiveness Indicators 1999 - 2009

Today, almost 100,000 people are directly employed[^i] in over 600 US firms in Ireland[^ii] accounting for 70% of all IDA supported employment[^iii]..  The IDA announced 130 new and expansion projects with companies during 2008[^v]. Almost two out of every three foreign direct investment projects coming to Ireland in 2008 have originated from the US. In 2008, US firms paid over €2.5b to the Irish Exchequer in Corporate Tax (or approx 40% of total corporate tax take in 2008[^vi]) and contributed a further €13b in expenditure to the Irish economy in terms of payrolls, goods and services employed in their operations[^vii].

^[i]Source: IDA Jan 2009 from a Forfas Employment Survey, plus an estimated 6,000 working in non-grant aided US businesses in Ireland.

[ii] American Chamber Database

[iii] IDA Annual Report 2007

[iv] American Chamber Estimate

[v] From IDA Press office based on the IDA's Annual Report

[vi] Amcham estimate based on IDA End of Year Statement 2008, issued Jan 2009 at 85% of total.

[vii]. Based on the 2007 Annual Business Survey of Economic Impact, and an American Chamber estimate of approximately 80% of total agency assisted firms being of US origin.