Urgent action needed to restore competitiveness

“Urgent action is required to ensure a competitive operating environment for business and to enable exporters to trade successfully in difficult international markets”. So says Dr Don Thornhill, Chairman of the National Competitiveness Council, in their recent report Ireland’s Competitiveness Challenge – creating a better future.

Ireland is currently experiencing one of the deepest recessions in the developed work, driven by a steep decline in the domestic economy and the international financial crises. As the world economy is likely to return to growth more rapidly than the Irish economy, export driven growth can play a key role in restoring the Irish economy to growth. In addition to sustaining and growing employment in exporting sectors, including tourism, export success will increase sub-supply demand for Irish goods and services across the economy and can help support a recovery in consumer demand.

While Ireland’s competitiveness has improved during 2009, this to a great extent reflects the sharpness of the recession rather than competitive advantages arising from structural change. Urgent action is required to develop an enduring competitive operating environment for business and enable exporters to trade successfully in difficult international markets.

The report points out the critical necessity of understanding the basic drivers of competitiveness, and what needs to be done to improve Ireland’s international standing. The report rightly reminds us that following a sustained period of increasing competitiveness in the 1990’s and early 2000’s, we took a wrong turn when strong growth in the domestic economy replaced exports as the key driver of economic growth. Growth derived from housing and consumer spending, fuelled by low interest rates and reckless lending was not a sufficient basis for sustainable growth, and it seriously damaged our competitiveness.

The report highlights the priority policy actions to restore Ireland’s international competitiveness, which include:

– reducing the costs of doing business, especially energy, waste and professional services;
– enhancing the skills of those in employment and improving the employability of those who have lost their jobs;
– the need to ensure open competitive markets in all sectors of the economy and to drive competition in non-traded services sectors in particular through the effective implementation of Competition Authority recommendations;
– fostering innovation at all levels of economic activity including R&D programmes which have strong industry relevance and participation;
– developing world class advanced broadband networks and services in key regional centres to support the smart economy; and
– continued action to restore the sustainability of the public finances and ensure credit is channelled to viable businesses.

Ireland can have a bright future provided we confront these challenges and exploit the opportunities for creating a more competitive economy.

CLICK HERE to access a Powerpoint presentation on Ireland’s Competitive Challenges. Or for the full report, Annual Competitiveness Report 2009 CLICK HERE.

January 27th 2010

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