Financial journalist Eamon Quinn examines the National Competitiveness Council’s latest report which urges Irish export companies to take steps to enhance their edge against overseas firms.
Each year since it was set up in 1997 the National Competitiveness Council (NCC) has published a benchmarking report on the Irish economy. Each year its recommendations and warnings were largely ignored.
In its latest release, the NCC says that at the heart of the economic woes here has been the failure to stop the general level of price levels and wages across the economy rising above levels of competing nations.
From 2002, Ireland’s once enviable competitiveness has been eroded. In the past year, decreases in consumer prices have generated much publicity and comment, adding to an impression that costs are steadily getting back into line. But in its latest report, the NCC’s assembly of industry executives, civil servants and unions warn that apparent price decreases may do little to boost exports.
“In spite of moderating price levels, Ireland is an expensive country in terms of the costs of doing business,” the NCC says. “A high cost base is a damaging legacy of this era. Improving our relative cost competitiveness requires the cost of doing business in Ireland to fall relative to that of our trading partners. Initial signs are positive but the cost base in Ireland remains high.”
Refreshingly, the report welcomes falling property and rent prices for offices, warehouses and residential houses that will “bring long-term economic benefits.” The benefits of falling property prices are, in general media commentary, rarely discussed as a welcome development on the road to restoring economic recovery.
The NCC point out that reduced property prices would “benefit new and expanding enterprises”, they would “support a moderation in pay demands without lowering quality of life for new buyers” and would restore consumer and developer confidence.
But the NCC is urging that much more needs to be done. Its latest report returns to the high cost of electricity, the inadequate level of quality broadband provision and the need for reforms in the public sector – all issues that it addressed in previous reports.
A year ago the NCC report was published in the same month that Dell announced the closure of its manufacturing plant in Raheen Business Park in Limerick and the transfer of almost 2,000 direct jobs to Lodz in Poland. The NCC a year ago pointed out that between 2000 and mid-2008 most new jobs were created in the public and private sectors of health and education (30 per cent) and construction (22 per cent). Manufacturing and agriculture lost jobs over the same period.
On exports, the NCC said a year ago that almost 90 per cent of Irish exports were produced by foreign-owned firms. “Chemicals and pharmaceuticals, electrical and electronic equipment and software accounted for three-quarters of exports in these foreign-owned sectors. Transitioning the Irish economy back towards export-led growth will be challenging.”
The NCC’s latest report makes clear that, despite some price decreases, the competitiveness challenge facing Irish exporting companies remains daunting.