Annual Competitiveness Report 2007 · Annual Competitiveness Report 2007 Volume 1 National...

Volume 1

Annual CompetitivenessReport 2007

Benchmarking Ireland's Performance

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Introduction to the NCCThe National Competitiveness Council was established in 1997 as a Social Partnership body. It reports to An Taoiseach on key competitiveness issues facing the Irish economy, together with recommendations on policy actions required to enhance Ireland’s competitive position.

Each year the NCC publishes the two-volume Annual Competitiveness Report.

Volume One, Benchmarking Ireland’s Performance, is a collection of statistical

indicators of Ireland’s competitiveness performance in relation to 16 other economies

and the OECD and EU averages.

Volume Two, Ireland’s Competitiveness Challenge, uses this information along with

the latest research to outline the main challenges to Ireland’s competitiveness and the

policy responses required to meet them.

As part of its work, the NCC also publish other papers on specific competitiveness issues.

This report is Volume 1, Benchmarking Ireland’s Performance. This report analyses

Ireland’s competitiveness performance using over 140 competitiveness indicators. These

range from measures of the successes of past competitiveness, such as economic growth

and quality of life, to the policy inputs that will drive future competitiveness, such as

the regulatory environment and public spending on infrastructure. Drawing primarily on

data from international sources including the OECD, the UN and Eurostat, this report

benchmarks Ireland’s performance, comparing and ranking it to that of our economic peer

group and tracing its evolution over time.

The National Competitiveness Council hopes that this report will, as a reference

document, stimulate further debate and discussion on the competitiveness challenges

that face Ireland.

Ireland’s Competitiveness Challenge examines these challenges facing Ireland’s exporting

sectors in particular in more detail. It highlights policy directions that will sustain

Ireland’s competitiveness so that Ireland can continue to be successful over the next

decade.

Volume 1

Annual CompetitivenessReport 2007

Benchmarking Ireland's Performance

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Council Members

Dr Don Thornhill Chairman

Mr Rory Ardagh Director, Telecom Property Holdings Limited

Mr Brendan Butler Director of Strategy, Trade, EU and International Affairs, IBEC

Mr Donal Byrne Chairman, Cadbury Ireland Limited

Mr Shay Cody Deputy General Secretary, IMPACT

Mr Martin Cronin Chief Executive Officer, Forfás

Mr Pat Delaney Director of Sectors and Regions, IBEC

Ms Thia Hennessy Economist, Teagasc

Ms Annette Hughes Economist, DKM Economic Consultants

Mr Seamus O’Morain Assistant Secretary, Department of Enterprise, Trade and Employment

Mr William Prasifka Chairperson, Competition Authority

Mr William Slattery Chief Executive Officer, State Street International (Ireland)

Mr Paul Sweeney Economic Adviser, Irish Congress of Trade Unions

Mr John Travers Consultant and Former Chief Executive Officer, Forfás

Prof Ferdinand von Prondzynski President, Dublin City University

Council Advisers

Mr Paul Bates Assistant Secretary, Department of Arts, Sports and Tourism

Ms Ruth Carmody Assistant Secretary, Department of Education and Science

Ms Mary Doyle Assistant Secretary, Department of An Taoiseach

Mr Eamonn Molloy Assistant Secretary, Department of Communications,

Energy and Natural Resources

Ms Mary Moylan Assistant Secretary, Department of Environment, Heritage, and Local Government

Mr John Murphy Assistant Secretary, Department of Transport

Mr Liam Nellis Chief Executive, InterTrade Ireland

Ms Ann Nolan / Mr John O’ Connell Assistant Secretary, Department of Finance

Research & Secretariat

Mr Jason Cleary

Mr Adrian Devitt

Mr Declan Hughes

Forfás

Wilton Park House

Wilton Place

Dublin 2

Tel: 01 607 3000

Fax 01 607 3030

Email: [email protected]

Web: www.competitiveness.ie

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Foreword by An TaoiseachIreland’s international competitiveness has played a critical role in our successful

economic performance. As economic growth and social progress are intrinsically

linked, this economic success has brought many benefits to our society. As this

report highlights, Ireland has experienced significant and widespread improvements

in living standards and continues to create high quality jobs. It is for these reasons

that competitiveness remains a key priority of Government policy as we seek to

continually improve the living standards of everyone in Ireland.

Since the mid-1990s, Ireland’s economic performance has been excellent and current predictions for

the next five years suggest that the Irish economy will continue to perform well. However, it is clear that

we are entering a period of more challenging economic conditions. The challenge is to restore Ireland’s

internationally trading firms in manufacturing and services as key drivers of growth. It is important, therefore,

that we focus our efforts in the development of policy and programmes, and in social partnership, to restore

and renew our competitiveness across all dimensions.

This is core to the new Programme for Government. As the Council’s ‘Competitiveness Pyramid’ shows, it

encompasses policies on the regulatory environment, including taxation, competition and the labour market,

on Ireland’s physical infrastructure, including transport, ICT and housing, and on Ireland’s knowledge

infrastructure, including all levels of education as well as R&D.

The National Competitiveness Council is well positioned to contribute to our understanding of a rapidly

changing global environment. On my behalf and on behalf of my colleagues in Government, I would like to

thank the Council for its valuable work, and I am pleased to introduce Benchmarking Ireland’s Performance,

2007.

Bertie Ahern, T.D.

Taoiseach

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Chairman’s PrefaceThe economic context to this report is generally positive. The Irish economy continues to

perform very well. There was further strong growth in the numbers employed, supported

by strong inward migration as well as natural population increases. Government finances

are healthy and there continues to be steady flows of foreign direct investment into the

economy. Overall, figures from the Central Statistics Office suggest that Irish GNP grew

by 7.4 percent in 2006 (and GDP by 6.0 percent), compared to the estimated average

of 3.1 percent in the OECD. However, as noted by the Taoiseach, we may face greater

difficulties in the future as domestic driven growth slows. Maintaining and growing our

international competitiveness is essential.

The aim of this report is to provide an objective evidence base, particularly so that growing or potential

weaknesses in the factors contributing to Ireland’s competitiveness can be identified. While Ireland fares

well in many aspects of competitiveness, there are three main areas of concern that arise from this report:

1 The composition of Ireland’s economic growth is troubling. In general, with a small open economy and a

young, growing and increasingly better educated population, one would expect the sources of economic

growth to be a balance between trading and domestic sectors and between employment and productivity

growth. Ireland’s growth has shifted from export-led and productivity-led growth to domestically driven

growth, dependent on new jobs in construction and public services for increases in GDP. A symptom of

this is Ireland’s increasing deficit on its current account with the rest of the world.

2 Ireland’s price and cost environment remains distinctly unfavourable both to firms and to households.

General cost levels are among the highest in the EU-15 and this situation is worsening, with inflation rates

still among the highest in the EU-15 also. In response, labour costs are growing across a range of sectors

at a rate well above EU-15 average, raising the threat of a wage-cost spiral. Across a range of non-pay

costs, too, Ireland is expensive, including property rental or purchase and domestics services including the

legal and accounting professions.

3 The physical infrastructure in Ireland remains poor and despite high levels of investment, Ireland’s

international rankings have not improved significantly since 2000. Ireland’s transport, energy and ICT

infrastructures in particular – upon which so many of our exporting sectors depend – appear to lag

counterparts across the OECD.

I would like to thank Council members and the advisors from the relevant government departments for their

work on this document, as well as their counterparts from previous years. The structure of the analysis in this

report reflects the evolving thought process of past and current members of the Council. I would also like to

acknowledge the Forfás Secretariat for the work that they have done in preparing material for consideration by

the Council.

Dr Don Thornhill

Chair, National Competitiveness Council

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Contents Foreword by An Taoiseach iii

Chairman’s Preface iv

1. Overview of Ireland’s Competitiveness 11.1 Ireland’s Recent Economic Performance 21.2 Ireland’s Trade Performance 41.3 Productivity, Prices & Costs 51.4 Drivers of Future Competitiveness 61.5 Conclusions 71.6 What Is This Report and How To Read It 7

2. Sustainable Growth 132.1 National Income 162.2 Quality of Life 20

2.3 Environmental Sustainability 21

3. Essential Conditions 253.1 Business Performance 303.1.1 Investment 30

3.1.2 Trade 32

3.2 Productivity and Innovation 343.2.1 Productivity 34

3.2.2 Innovation 38

3.3 Prices and Costs 413.3.1 Prices 41

3.3.2 Pay Costs 43

3.3.3 Non-Pay Costs 47

3.4 Labour Supply 533.4.1 Overview 53

3.4.2 Employment 54

3.4.3 Labour Supply Characteristics 56

4. Policy Inputs 614.1 Business Environment 624.1.1 Taxation 64

4.1.2 Regulation and Competition 69

4.1.3 Labour Regulation 72

4.1.4 Finance 73

4.1.5 Social Capital 75

4.2 Physical Infrastructure 774.2.1 Investment in Physical Infrastructure 79

4.2.2 Transport and Energy Infrastructure 81

4.2.3 Information and Communication Technology (ICT) 84

4.2.4 Housing 86

4.3 Knowledge Infrastructure 894.3.1 Education: Overview 91

4.3.2 Pre-Primary and Primary Education 92

4.3.3 Secondary Education 93

4.3.4 Tertiary Education and Life Long Learning 96

4.3.5 Research and Development 98

5. Appendices 105 Appendix 1: ACR Data Sources 106

Appendix 2: Glossary of Terms 109

Appendix 3: NCC Publications 111

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Overview of Ireland’s Competitiveness

Sustainable

Growth

Essential

Conditions

Policy

InputsBusiness

Environment

Physical

Infrastructure

Knowledge

Infrastructure

1

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1. Overview of Ireland’s Competitiveness

Ireland has made remarkable economic progress over the past 15 years. In that period, there have been

two different phases to Ireland’s economic growth. The first phase, which started in the early 1990s, was

set in motion by high levels of investment in Ireland by multinational companies, attracted to Ireland by

our membership of the European Union and pro-enterprise Government policies in areas such as taxation,

education, international trade and industrial relations through social partnership. By the late 1990s,

export success combined with low interest rates and rising national confidence stimulated household and

government spending.

From 2000 on, Ireland’s national competitiveness declined. During the past few years, domestic growth

has driven the economy and to some degree overshadowed evidence of our weakening international

competitiveness. Currently, the domestically driven boom is decelerating, as increasing Eurozone interest

rates combine with high household debt levels to reduce domestic demand. For sustainable long-run

wealth generation, Ireland needs to return to a phase of export-driven growth. This report by the NCC

presents an assessment of our current competitiveness strengths and weaknesses, and highlights areas

for concerted national focus.

1.1 Ireland’s Recent Economic Performance

The Irish economy continues to perform very well by the standards of other developed countries, according

to indicators that assess income levels, economic growth rates and measures of quality of life. Irish income

per capita has converged with the OECD average. The ESRI predicts that the Irish economy will grow by 4.7

percent in 2007 and 2.7 percent in 2008 (GDP), above the EU average1. Ireland’s rankings in the UN’s

Human Development Index (HDI) also continue to improve. Ireland is now ranked fourth in the world based

on strong improvements in income per capita, life expectancy and education levels.

Figures 1 (a) and (b). Ireland’s Growing Debt Levels

1 Quarterly Economic Commentary ESRI, Autumn, 2007

1 (a). Household debt per capita (E), selected

countries, 2003 and 2007

1 (b). Ireland’s current account balance (Em),

2000-2007

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Source: European Central Bank; Central Statistics Office, ESRI.

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As highlighted in previous NCC reports, the nature of Ireland’s economic growth has changed dramatically

in recent years, from export-led growth to a situation now where domestic sectors are driving the Irish

economy. In particular, consumption and construction, supported by high levels of overseas borrowing, are

driving our performance. Given Ireland’s increased wealth, it is not surprising that consumption is playing

a more prominent role. Also, the additional construction activity is welcome as it is addressing Ireland’s

housing and broader infrastructural deficits. However, the domestic consumption and construction boom

has led to large increases in Ireland’s debt. Irish households are spending more than they are earning,

and in the process are building up foreign liabilities on a scale that cannot continue (Figures 1 (a) and

(b)).

Ireland’s current account balance, the balance between Ireland’s foreign earnings and expenditure, has

slipped into a large and growing deficit. At a more tangible level, Ireland’s debt per capita has increased

very rapidly in recent years. Apart from Luxembourg, Ireland is now the most indebted Eurozone member,

both relative to national income and on a per capita basis. With house prices increasing dramatically

since 2000, household borrowing more than doubled between 2003 and 2007 and the average Irish

person is almost E35,000 in debt by 2007. Debt levels continue to grow - private sector credit growth,

while slowing, grew by 19.5 percent in the year to September 2007, despite higher Eurozone interest

rates.2

One of the great successes Ireland has had in the last decade has been the generation of large amounts

of jobs, virtually solving Ireland’s long-term unemployment problem. Ireland continues to create many

thousands of new jobs every year and is now attracting labour from elsewhere in the EU. Since 2000,

the bulk of Ireland’s new jobs have come from non-trading sectors, in particular public services and

construction (Figures 2 (a) and (b)). Manufacturing, both traditional and modern, and agriculture lost jobs

over the same period. It should be noted that the bulk of job losses in manufacturing occurred between

2000 and 2003. Construction now accounts for over one in seven workers, compared to one in seventeen

in the US, which itself is more dependent on construction than other OECD economies.

Figures 2 (a) and (b). The Nature of Ireland’s Employment Growth

2 Source: Central Bank of Ireland, September Statistics, November 2007.


2(a). Sources of employment growth

(000s jobs), Ireland, 2000-2006

2(b). Construction as proportion of total

employment, Ireland & USA, 2000-2007

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l There are strong signals that construction growth is slowing.3 This slowdown in the construction sector

is inevitable – domestically driven growth cannot sustain itself indefinitely in a small open economy.

Naturally, construction will continue to remain an important part of the economy, particularly given that

Ireland’s per capita housing stock still remains below the EU average. In addition, the latest National

Development Plan (NDP) envisions expenditure of approximately E100 billion in capital investment in

infrastructure and social housing over the next seven years, compared to about E40 billion during the

previous NDP. It is critical, then, that exporting sectors, both goods and services reassume a greater role

in driving Ireland’s long-term growth.

1.2 Ireland’s Trade Performance

Achieving success in international markets is the core of the NCC’s definition of competitiveness. Due

in part to policy and in part to its small size, Ireland is one of the most open economies in the world.

Ireland’s trade performance has been mixed in recent years:

Total exports of Irish-owned firms amounted to ■■ E9.6 billion in 2005, with a nominal growth rate of

six percent between 2004 and 2005. Food and drink exports continue to account for the largest

share of indigenous manufacturing exports (54 percent), while about one-fifth comes from software

development and other internationally traded services.

Total exports of foreign-owned manufacturing and internationally traded services amounted to ■■ E79

billion in 2005. The largest exporting sectors were chemicals (E22 billion), electrical and electronic

equipment (E20 billion), and software development (E17.3 billion). Overall, exports of foreign-owned

manufacturing grew by 5.8 percent between 2004 and 2005.

CSO data indicates that merchandise exports grew by just 0.8 percent in 2006, which is disappointing,

given strong growth in our key international markets. Services exports are performing better, with exports

of services increasing by 14 percent in 2006. In 2000, the export of services from Ireland accounted

for 15.9% of total foreign earnings. By 2006, services earnings were 27% of total foreign earnings, with

growth driven by exports in computer services, business services (including consulting) and insurance.

Figures 3 (a) and (b). Ireland’s Export Performance

3 CSO figures on the number of planning permissions for new dwellings peaked in 2004, while the total size (in square metres) of plan-ning permissions peaked in 2005. Completions figures, albeit based on estimates, point to a year-on-year slowdown in activity starting in December 2006.

3 (a). Growth in Exports of Goods and Services

(%), 2000-2006

3 (b). Ireland’s Share of World Trade (%),

2000-2006

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The NCC is concerned that growth rates in exports have fallen below those in peer countries. Ireland’s

growth in exports during the 2000-2003 period was well above the OECD average, but Ireland’s relative

position has worsened considerably in the 2003-2006 period (Figure 3(a)).

The consequence is that Ireland is losing some of its share in world markets, driven by merchandise

trade, where Ireland’s share has fallen gradually since 2002 (Figure 3(b)). Latest figures indicate that

Ireland’s share of world services trade, a smaller but growing component of Irish trade increased in 2006

after a slight decline in 2005. Ireland’s overall loss in world market share is not simply a reflection of the

growing role of developing economies in world trade. While China continues to gain market share globally,

a range of developed economies also continue to grow their internationally trading sectors strongly

including Germany, Japan, the UK and the US.

1.3 Productivity, Prices and Costs

Productivity levels are important for enterprise as they measure the value added by a typical hour’s work.

In the long run, productivity is the key determinant of living standards. Figures from this report highlight

that Irish productivity levels have converged with the OECD average.4 It is growth rates in productivity,

however, which are important for facilitating international competitiveness and sustainable wage

growth. Productivity growth can come about due to investment in physical or human capital, and greater

efficiency due to improvements in organisational management or the use of technology.

Irish productivity growth has slowed in recent years. Average productivity growth was just 1.4 percent

during the period 2003-2006, below the OECD average of 1.7 percent and well below the Irish average

between 2000 and 2003 of 3.3 percent. As in other advanced economies, Ireland’s productivity is

strongest in a small number of high technology export-oriented manufacturing and services sectors.

While productivity growth has slowed in these high-tech sectors, large and growing domestic services

sectors continue to perform poorly in terms of productivity growth. Many domestic services are more

labour-intensive and less exposed to international competition, with less opportunities and incentives for

automation (through the greater use of ICT for example) and for innovation.

Figures 4 (a) and (b). Ireland’s Pay and Productivity Performance

4 This convergence holds even allowing for some distortion of Ireland’s productivity figures due to the presence of many multinationals here.

3 (b). Average Growth in Output per hour Worked,

Slected Economices,2000-2006

4 (b). Average Growth in Labour Cost, Selected

Economies, 2000-2007


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l As Irish productivity growth rates have been slowing, Ireland’s cost base has been rising. Based on the

consumer price index data, Ireland is now the second most expensive location for consumers in the EU-15

and has the third highest inflation rate in the EU-15. This inflation performance is being driven by sectors

such as housing, utilities, education, health and catering. There is a risk that high inflation rates are becoming

embedded in the Irish economy. Combined with this, Ireland’s harmonised competitiveness indicator

(combination of prices and exchange rate development) has worsened considerably since 2000, although the

bulk of that change occurred between 2000 and 2003.

As inflation remains a problem, so too do increases in labour costs. Unit labour costs in manufacturing, one-

eighth of the workforce, have not increased significantly on average since 2003. However, in sheltered sectors

of the economy, including utilities, catering and communications, labour costs are rising at a rate at least twice

the Eurozone average. This is of serious concern, as prices and costs in non-traded sectors quickly feed into

the cost base of internationally trading firms who purchase goods and services in the local economy. Examples

include labour services frequently purchased by trading sectors, such as accountancy, IT and legal services,

where figures show Ireland – and Dublin in particular – to be very expensive. Other non-pay costs in Ireland

also compare poorly with those in competitor countries across a range of cost types. These include property

costs, both purchase and rental, utilities costs from electricity to water and waste, and communications costs,

in particular mobile telephony.

1.4 Drivers of Future Competitiveness

Improving competitiveness will not be easy. Ireland’s future competitiveness will depend heavily on decisions

made today in key policy areas that affect Ireland’s business environment (e.g. taxation, regulation, finance and

social capital), physical infrastructure, and knowledge infrastructure, as represented by the bottom layer of the

competitiveness pyramid.

Ireland’s business environment compares well on average to OECD counterparts. The taxation regime is

favourable to corporations and workers, although consumers – including tourists – pay relatively high rates of

VAT. Despite relatively low corporation tax rates, the tax take from corporations as a percentage of GNP is above

the OECD average. It is notable that other countries are replicating our strategy.

In relation to competition legislation, perceived efficiency has weakened relative to other countries in recent

years and competition remains weak in many sectors of the economy, including utilities and professional

services. Labour market regulations are perceived to be increasing in Ireland, with the employment framework

here considerably less flexible than in economies such as the UK and Denmark. Overall, access to capital in

Ireland is not perceived to be a barrier to enterprise in Ireland. Finally, social capital, such as trust in political

and social institutions, is good, although there are perceived weaknesses in the accountability of Ireland’s

political system.

Ireland’s physical infrastructure remains a source of acute competitive disadvantage, with a lack of investment

in the 1980s combining with huge growth in the economy and the population since the 1990s to bring about

infrastructural bottlenecks. Across transport networks, energy, information and communication technology and

housing, Ireland’s stock of infrastructure lags those of comparable countries elsewhere in the OECD. However,

government investment in infrastructure is significantly higher in Ireland than in most developed economies.

Finally, Ireland’s housing infrastructure remains an issue, with house prices increasing dramatically since 2000

and household borrowing more than doubling between 2003 and 2007. By 2007, the average Irish person is

almost E35,000 in debt.

Ireland’s knowledge infrastructure fares better. Average educational attainment in Ireland has increased

steadily in the last two decades, with younger cohorts of the population now as well qualified as their OECD

counterparts. However, participation in pre-primary education in Ireland is well below the EU-15 average and

although participation rates in life long learning in Ireland have increased significantly in recent years, there is

still a significant gap between Ireland and the leading countries.

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While educational participation rates are generally strong, except for pre-primary and lifelong learning,

concerns remain about the quality of the outputs. At primary education level, the amount of time spent

on the key subjects of maths, science and technology lags most other OECD countries. At secondary

education, where international benchmarks exist, reading, mathematical and scientific literacy of Irish

students ranks 6th, 16th and 13th consecutively in the OECD. At third and fourth level, based on data

from The Times Higher Education Supplement, none of Ireland’s institutions are ranked among the best

in the world. The use of ICT also remains relatively poor in Irish education.

While Ireland can be regarded as an impressive latecomer in recognising the importance of sustained

investment in R&D, current employment and expenditure on R&D remain well below leading comparator

countries, in both higher education and in enterprise. In terms of global triadic patents granted per

million of population, which is one way of measuring output from R&D, Ireland ranks 19th in the OECD.

1.5 Conclusions

Ireland has made remarkable economic progress over the past 15 years. The first phase was set in

motion by high levels of investment in Ireland by multinational companies, attracted to Ireland by our

membership of the European Union and pro-enterprise Government policies in areas such as taxation,

education, international trade and industrial relations through social partnership. The second phase saw

export success combine with rising national confidence and low interest rates, to stimulate household and

government spending. Over the past few years, this domestic growth has driven the economy and to some

degree overshadowed evidence of our weakening international competitiveness. Currently, the domestic

driven boom is peaking as higher Eurozone interest rates on high debt levels reduce domestic demand.

While there is much to be proud of in terms of our recent economic performance, we must not become

complacent. Ireland needs to enter a new phase of economic growth, one where Ireland regains its

international competitiveness. To remain at the forefront of international trade and competitiveness,

we must display a singular commitment to promoting a competitive business environment. Ireland’s

Competitiveness Challenge 2007 examines the policy requirements in detail, and highlights the key

policy directions that are needed today to ensure that Ireland can be as successful over the next decade,

as it has over the past decade, to sustain improvements in standards of living.

1.6 1.6 What Is This Report and How To Read It

Who is the NCC and what is its purpose?The National Competitiveness Council (NCC) was set up in 1997 under Ireland’s social partnership

process. Its purpose is to advise An Taoiseach and other government ministers in relation to Ireland’s

current competitive performance and the policy measures required to enhance Ireland’s performance.

To fulfil its purpose, it prepares an Annual Competitiveness Report in two volumes, of which this is

Volume 1, Benchmarking Ireland’s Performance. Based on this report and other analysis, Volume 2,

Ireland’s Competitiveness Challenge, makes recommendations on the public policy actions needed to

improve the competitiveness of Ireland’s enterprise base. The NCC also issues other policy statements

periodically on issues of importance to Ireland’s national competitiveness.

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l What is competitiveness? Competitiveness refers to the ability of firms to compete in markets. Ireland’s national competitiveness

refers to the ability of the enterprise base in Ireland to compete in international markets. The NCC uses

a ‘competitiveness pyramid’ to outline the framework within which it assesses Ireland’s competitiveness

(Figure 5).

At the top of the pyramid is sustainable growth in living standards. This is the fruit of past competitiveness

success. Below this are the essential conditions to achieving competitiveness, including business

performance (such as trade and investment), productivity, prices and costs and labour supply. These can be

seen as the metrics of current competitiveness. Lastly, there are the policy inputs, which cover three pillars

of future competitiveness, i.e. the business environment (e.g. taxation, regulation, social capital, etc.),

physical infrastructure, and knowledge infrastructure.

Figure 5. The NCC Competitiveness Pyramid

Sustainable

Growth

Essential

Conditions

Policy

InputsBusiness

Environment

Physical

Infrastructure

Knowledge

Infrastructure

Source: National Competitiveness Council

Why does the NCC measure competitiveness?

Competitiveness is not an end in itself; it is a means of achieving higher and sustainable living standards

(Figure 6). As is set out in Towards 2016, Ireland’s aim over the next ten years is to develop “a dynamic,

internationalised, and a participatory society and economy with a strong commitment to social justice,

where economic development is environmentally sustainable and is internationally competitive”. Ireland’s

national competitiveness, therefore, has been identified as a key objective for the next ten years. Without a

strong enterprise base able to compete in international markets, many of Ireland’s other goals become more

difficult to achieve.

Ireland’s competitiveness is, therefore, a topic of national importance. With this in mind, the NCC measures

competitiveness, as it believes that policymaking should be evidence-based, i.e. making decisions using the

best possible information.

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Figure 6. National Competitiveness and Higher Standards of Living

Policy Inputs

Performance

Outputs

Outcomes

Knowledge Infrastucture Business Environment

National Competitiveness

Employment Growth

Economic GrowthFamily, social,other factors

Higher standardsof living

Growth from Trade/Income(international/domestic)

Growth from wealtheffects (eg property)

Physical Infrastucture

Productivity Growth

Source: National Competitiveness Council

What type of metrics does the NCC use to measure competitiveness?

Benchmarking Ireland’s Performance is divided into three main sections, sustainable growth, essential

conditions for competitiveness and policy inputs, which correspond to the various components of the

competitiveness pyramid. This report uses internationally comparable metrics, with the OECD, the EU,

the UN and the WTO the sources for the vast bulk of indicators. Indicators from specialist international

competitiveness bodies (e.g. from the WEF’s Global Competitiveness Report and the IMD’s World

Competitiveness Yearbook) are also used. Where further depth is of benefit, national sources such as the

CSO, the Central Bank, Forfás and the ESRI are used.

To whom do we compare ourselves and why?

Countries have been chosen to provide a mix of Eurozone members (Finland, France, Germany, Italy, the

Netherlands and Spain), other non-Eurozone European countries (Denmark, Sweden, Switzerland and

the UK), and two new EU member states (Hungary and Poland). Five non-European countries (Japan,

South Korea, New Zealand, Singapore and the US), who are global leaders or are of a similar size or pace

of development to Ireland, are also included. This allows for a detailed comparison between Ireland and

many of its closest trading partners and competitors. Ireland is also compared to a relevant peer group

average, the OECD-28, EU-15 or EU-27 average where possible.

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l What are the limitations of benchmarking?

Benchmarking Ireland’s performance across more than 140 competitiveness indicators is an important

exercise. It informs the policymaking process and raises awareness of the importance of continuing

national competitiveness to Ireland’s wellbeing. Nonetheless, there are limitations to benchmarking:

While every effort is made to ensure timeliness of the data, there is a natural lag in collating ■■

comparable official statistics across the selected countries. There are also factors that are difficult to

benchmark (e.g. the benefit of being in the GMT time zone or of speaking English fluently).

Secondly, given the different historical contexts and economic, political and social goals of various ■■

countries, and their differing physical geographies and resource endowments, it is not realistic or

even desirable for any country to seek to outperform other countries on all measures. There are no

generic strategies to achieve national competitiveness.

Finally, it is important to note that trade and investment between countries is not a zero-sum game; ■■

economic advances by other countries can, in aggregate terms, lead to improvements in living

standards for the Irish population.

How to read the charts

The remainder of this report is broken up into sections whose order follows the NCC’s Competitiveness

Pyramid. We have endeavoured to ensure that all charts are self-explanatory. However, with reference to

the sample chart in figure 7, the following points may be of value when interpreting the charts:

The best performing country is located at the left of the chart (e.g. in vertical bar charts) or at the top ■■

of the chart (in horizontal charts). In a limited number of charts, it is not possible to designate a best

performer.

In charts that assess output/income or other factors relative to these, Irish figures are provided in ■■

GDP and GNP terms. GDP (national output) is significantly greater than GNP (national income) due

to the repatriation of profits and royalty payments by multinational firms based here. Other countries

are assessed in GDP terms.

The text at the right of the chart explains the charts further or provides additional information. ■■

Figure 7. Sample Chart

5%

4%

6%

3%

2%

1%

0%NEU 12 US OECD

RankingN. Ireland EU 15

TEXT

Ireland(GNP)

Ireland(GNP)

2000 - 20032003 - 2006

Text

Ranking:

Source:

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How to interpret the rankings

Ranking are provided where appropriate, but in a limited number of charts, it is not possible to designate

a best performer.

In interpreting the ranking for each indicator, a low ranking (i.e. close to 1st) implies a healthy ■■

competitiveness position, while a high ranking implies an uncompetitive position.

Changes in rankings refer to the change in Ireland’s position, generally since 2000. Exceptions to ■■

this base year, due to data availability, are highlighted in footnotes. ( ) refers to an improvement

in Ireland’s competitive position, so 4 means an improvement of four places in Ireland’s ranking.

(--) means that there has been no change in Ireland’s ranking, while ( ) refers to a fall in Ireland’s

ranking.

The OECD is the preferred comparator group. However, in some cases depending on data availability, ■■

rankings are provided relative to the group of countries shown or to the EU.

OECD rankings and averages are based on a maximum of 28 countries. Turkey and Mexico are not ■■

included in the analysis, in part due to how their size and income levels affect averages and in part

due to data availability. These 28 countries are as follows: Australia, Austria, Belgium, Canada,

Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy,

Japan, Korea, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic,

Spain, Sweden, Switzerland, UK and the US. Where the sample is less than 28 countries due to data

availability, the countries omitted are detailed in the endnotes.

How to interpret the traffic lights

Using a traffic light system, each chart is accompanied by a traffic light indicator, coloured green, orange

or red, in order to provide a high level indication of Ireland’s performance. Green indicates a strong or

improving performance, orange signals an average performance or some cause for concern while red

means that Ireland has performed poorly on the indicator.

How to interpret the summary charts

This year’s report includes new summary charts at the beginning of each chapter in order to give a brief,

general high level overview of current performance in each area relating to the competitiveness pyramid.

An example summary chart is displayed below.

The scale on the left hand side of the chart puts countries with a good ranking (i.e. close to first) at ■■

the top, while countries with a worse ranking are towards the bottom.

There are two entries for each indicator, Ireland’s ranking in 2000 (or nearest) on the left and ■■

Ireland’s ranking in 2006 (or nearest) on the right.

Most indicators are ranked on an OECD basis. However, this is not possible in all cases, meaning ■■

that an EU-15 or group ranking is given instead. A line under each indicator represents the lowest

possible rank obtainable for an indicator, e.g. 15 for an EU-15 ranking and 28 for an OECD-28

ranking. In the sample chart below, indicators 1 and 3 are ranked by OECD-28, while indicator 2 is

ranked by the EU-15.

Each indicator is colour coded. As before, green indicates a strong or improving performance, ■■

orange signals an average performance or some cause for concern while red means that Ireland has

performed poorly on the indicator.

For example, Ireland’s 2000 ranking for indicator 2 below, 15 out of the EU-15, is coloured red to ■■

represent a poor performance. At the same time, a ranking of 15 out of the OECD-28 (Indicator 3,

2006) is coloured orange to represent an average performance.

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Figure 8. Sample Summary Chart

Source: N/A

Indicator 1 Indicator 2 Indicator 30123456789

10111213141516171819202122232425262728

Str

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Sustainable

Growth

Essential

Conditions

Policy

InputsBusiness

Environment

Physical

Infrastructure

Knowledge

Infrastructure

Sustainable Growth2

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2. Sustainable GrowthCompetitiveness is not an end in itself, but is a means of achieving sustainable improvements in living

standards and quality of life. This section benchmarks Ireland’s performance regarding this desired

outcome, under three headings: national income, quality of life and environmental sustainability.

Summary chart 1 highlights key changes in relevant rankings since 2000 or nearest available year.

Summary Chart 1:

Rankings in Indicators of Sustainable Growth, 2000-2006 (or nearest)

Out

put

leve

ls(G

DP

) (2

.01

)

Inco

me

leve

ls(G

NP

) (2

.01

)

Out

put

grow

th(G

DP

) (2

.03

)

Inco

me

grow

th(G

NP

) (2

.03

)

Con

trib

utio

n of

pro

duci

tivi

tyto

gro

wth

(G

DP

) (2

.06

)

Con

trib

utio

n of

pro

duci

tivi

tyto

gro

wth

(G

NP

) (2

.06

)

Ineq

ualit

y (2

.07

)

Hum

an D

evel

opm

ent

Inde

x R

anki

ng (

2.0

9)

Life

Exp

ecta

ncy

- M

ale

(2.1

0)

Life

Exp

ecta

ncy

- Fe

mal

e (2

.10

)

Life

Hap

pine

ss (

2.1

1)

Ene

rgy

from

rene

wab

les

(2.1

3)

CO

2 e

mis

sion

s (2

.14

)

Wea

k R

anki

ngS

tron

g R

ankn

ig 0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

LHS = 2000 RHS = 2006

IncomeHigh and rising living standards are a key measure of the success of national competitiveness. The

indicators in this section cover the level, growth and distribution of Ireland’s national income.

Ireland has made significant progress in recent years. Irish output per capita (GDP) is now among the

highest in the OECD while income per capita (GNP), a better measure of Irish living standards, is close to

the OECD average (Fig. 2.01). Regionally, the South and East region is among the wealthiest in the EU

and the US (Fig. 2.02). The BMW region’s performance is weaker, but it is still above the EU-15 average.

Overall, income inequality in Ireland is greater than the EU-15 average (Fig. 2.07). Regional disparities

have also increased marginally since 2000 (Fig. 2.08).

Irish economic growth rates have slowed since 2000, particularly for GDP, but they remain above the

OECD average (Fig. 2.03). It is clear that international trade, the engine of Ireland’s growth during the

1990s, is no longer driving Ireland’s current economic growth. The contribution of Ireland’s exporting

sectors to economic growth has faltered since 2003, although this rebounded slightly in 2006 (Fig.

2.04). It is also notable that while the 1990s were marked by strong growth in both productivity and

employment, the contribution of productivity to Irish growth has been among the lowest in the OECD for

the 2003-2006 period (Fig. 2.06).

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Quality of Life

A key objective of competitiveness is to support a high quality of life, which is broader than material

living standards. To measure quality of life, the United Nation’s Human Development Index is used, along

with measures of life expectancy and ‘life-happiness’.

Ireland’s recent performance in the Human Development Index has been very strong. The index covers

indicators of economic, educational and health progress. Ireland ranked fourth in 2004, an improvement

of fourteen places since the 2000 report (Fig. 2.09), driven by strong economic growth. Life expectancy

for both men and women in Ireland has also improved since 1990, but has yet to reach the OECD average

(Fig. 2.10). Finally, in response to survey questions, Irish people are generally happier with their lives

than people in many other countries (Fig. 2.11).

Environmental Sustainability

The essence of environmental sustainability is a stable relationship between human activities and the

natural world, one that does not diminish the prospects for future generations to enjoy a quality of life

at least as good as our own. This section examines Ireland’s broad environmental performance and also

focuses specifically on energy, carbon emissions and waste.

Ireland’s performance in relation to environmental sustainability remains mixed. The composite

environmental performance index places Ireland ninth in the OECD (Fig. 2.12). However, there are

challenges. While, Ireland consumes slightly more energy on a per capita basis than the EU-15 average,

Ireland’s share of energy coming from renewable sources is almost one-third that of the EU-15 average

(Fig. 2.13). Given our high dependence on fossil fuels, and a lack of alternative and nuclear energy

sources, Ireland ranks poorly in terms of per capita carbon dioxide emissions (Fig. 2.14). Lastly, none

of Ireland’s municipal waste is converted into energy, compared to about half of waste in Sweden and

Denmark. Landfill, the least preferred waste solution, dominates in Ireland (Fig. 2.15).

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2.1 National Income

Figure 2.01

Levels of GDP per Capita, Ireland and Selected Economies, 2000-2006 (E000 PPPs)

2000 2001 2002 2003 2004 2005 2006

Euro

€00

0 PP

Ps

Ireland (GDP) Ireland (GNP) N.Ireland OECD

NEU 12 EU 15 US

0

5

10

15

20

25

30

35

40

The level of output (GDP) per head of population in Ireland is above EU-15 and OECD averages. Using income (GNP) per head, Ireland’s performance is still strong and is now above the EU-15 average, but has not converged with the OECD average.

OECD-28 Ranking:

GDP: 4 (h2)

GNP: 15 (h4)

Source: Forfás calculations; Groningen Growth & Development Centre, Total Economy Database, January 2007; UK Office for National Statistics [online]

Figure 2.02

Levels of GDP per Capita, US States and EU Regions, 2004/05 (E000 PPPs)

0

10

20

30

40

50

60

70

Eur

o 0

00

PP

Ps

US States

EU 15 Regions

New EU Member State Regions

Regional Averages

US States EU 15 Regions

New EU Member State Regions Regional Averages

Luxembourg

Washington DC

Ireland South and East

USIreland GDP

Ireland GNP Ireland BMWEU15

Northern Ireland

NEU12

Luxembourg

Washington DC

Ireland South and East

US Ireland GDP

Ireland GNP Ireland BMWEU15

Northern Ireland

NEU12

Ireland (GDP) ranks as one of the wealthiest regions in the EU and US. In terms of GNP, a better measure of income, Ireland ranks above the EU- 15 average. A noticeable gap in output per head exists between Ireland’s two regions, the South & East and the Border, Midlands & West.

EU-15 Regions (of 81):

Ireland S.E: 6

Ireland BMW: 33

Source: Forfás calculations, Eurostat General and Regional Indicators, [online]; US Bureau of Economic Analysis [online]

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Figure 2.03

Average Growth Rates (%) in GDP per Capita, 2003-2006 Compared to 2000-031

0%

1%

2%

3%

4%

5%

6%

EU 15N.IrelandOECDUSIreland (GDP)Ireland (GNP)NEU 12

2003-2006 2000-2003

Irish economic growth rates (in both GNP and GDP terms) remain above OECD and EU-15 averages, although GDP growth is slowing. Average economic growth picked up throughout the OECD in the 2003-2006 period, compared to the 2000-2003 period.

OECD-28 Ranking:

GDP: 13 (i8)

GNP: 11( i4)

Source: Forfás calculations, Groningen Growth & Development Centre, Total Economy Database, January 2007; OECD Annual National Accounts Database; UK Office for National Statistics, 2007 [online]

Figure 2.04

Contribution of Growth in Net Exports to Irish Economic Growth (GDP), 2001-2007f

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

2001 2002 2003 2004 2005 2006 2007f

Net ExportsGovernment InvestmentConsumption

This chart examines the sources of recent Irish economic growth. The contribution of trade (i.e. net exports) to economic growth has been small or negative since 2004. This contrasts with the pre-2003 period. Investment, particularly in construction and consumption have driven growth since 2003.

Ranking:

N/A

Source: Forfás calculations, Central Statistics Office, Annual National Accounts [online]

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Figure 2.05

Current Account Balance, Em (2000-2007f)

-10000

-8000

-6000

-4000

-2000

0

2000

�m

2000 2001 2002 2003 2004 2005 2006 2007

The current account balance measures national income less expenditure. Ireland is borrowing heavily internationally to pay for consumption and investment. Future exports and other (factor) income from abroad must be generated to pay for current borrowings; otherwise Irish assets will have to be sold.

Ranking:

N/A

Source: Forfás calculations; Central Statistics Office; Economic & Social Research Institute

Figure 2.06

Contribution of Productivity to Economic Growth, Selected Economies,2000-2006

20%

15%

10%

5%

0%

-5%

Ireland (GDP)

Ireland (GNP)

Northern Ireland

OECD EU 15 US NEU 12

2000-2003

2003-2006

2000-2003

2003-2006

2000-2003

2003-2006

2000-2003

2003-2006

2000-2003

2003-2006

2000-2003

2003-2006

2000-2003

2003-2006

Productivity Employment Average Hours WorkedGrowth in the economy has two main sources: labour productivity and labour use (a combination of employment and hours at work). Since 2003, Irish growth has been predominantly employment-driven, unlike 2000-2003, when it was productivity driven.

OECD-28 Ranking:

GDP: 21 (i17)

GNP: 18 (i11)

Source: Forfás calculations; Groningen Growth and Development Centre, Total Economy Database, January 2007; Eurostat, General and Regional Indicators [online]; UK Office for National Statistics [online]; Northern Ireland Department of Enterprise, Trade & Investment, Northern Ireland Labour Force survey: Spring 2006

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Figure 2.07

Levels of Income Inequality (Gini Coefficient), 2000 and 20052

0

5

10

15

20

25

30

35

40

Sw

eden

Den

mar

k

Cze

ch R

ep

Finl

and

Net

herl

ands

Fran

ce

Ger

man

y

Hun

gary

Irel

and

Spa

in

Ital

y

UK

(2

00

3)

Pol

and

2005 2000

EU

15

Gini coefficients measure the distribution of incomes across households but do not measure absolute poverty. Ireland is marginally more unequal than the EU-15 average. Ireland as with most other EU countries has experienced an increase in relative inequality since 2000 based on this measure.

EU-15 Ranking:

10 (--)

Source: Eurostat, Population and Social Conditions

Figure 2.08

Regional Convergence, Ireland and Northern Ireland,

(Growth versus Wealth), 2000-2004

0% 1% 2% 3% 4% 5% 6% 7% 8%

Average annual growth in GVA per inhabitant, 2000-2004

EU-15 Average GVA per inhabitant (2004) 24.3

EU-15 AverageGrowth in GVA per

inhabitant (2000-2004)2.8%

GVA

per

inha

bita

nt,

20

04

(P

PP

s, 0

00

s)

0

5

10

15

20

25

30

35

40

45

Irl Mid-East

N.Ire NN.Ire Belfast

N.Ire W&S

N.Ire E Ire West Ire Midlands

Ire MidwestIre South East

Ire South WestIre Dublin

N.Ire Belfast I

Ire Border

Convergence between regions would be represented in this diagram by a downward sloping trend line. Irish regions do not appear to be converging, with the richest areas generally those growing the fastest during the 2000-2004 period.

Ranking:

N/A

Source: Forfás calculations; Eurostat, General and regional Indicators [online]

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2.2 Quality of Life

Figure 2.09

Ranking in the United Nation’s Human Development Index, 2000-2004

0

5

10

15

20

25

30

35

40

45

Irel

and

Sw

eden

Japa

n

US

Sw

itze

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Net

herl

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Finl

and

Den

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Fran

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Ital

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UK

Spa

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New

Zea

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Ger

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Hun

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Pol

and

Bet

ter

Ran

king

Wor

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anki

ng 2004 2000The UN’s Human Development Index combines measures of education, health and income. Ireland’s rank has improved strongly since 2000 and is among the highest in the world (4th overall), indicating a high quality of life.

OECD-28 Ranking:

4 (h14)

Source: Forfás calculations, UN Human Development Report, 2006

Figure 2.10

Life Expectancy in Years, by Gender (2005 compared with 1990)

60

65

70

75

80

85

90

Year

s

Japa

n

Sw

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OE

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and

Ger

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Finl

and

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Pol

and

Hun

gary

2005 Male 2005 Female

1990 Male 1990 Female

Life expectancy can be used as a simple indicator of health and well-being. Average life expectancy for Irish males and females was above 75 and 80 respectively in 2005, an increase of three years since 1990 levels. Life expectancy in Ireland remains marginally below the OECD average.

OECD-28 Ranking:

Males: 17(h5)

Females: 20(h3)

Source: Forfás calculations, OECD Factbook, 2007

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Figure 2.11

Average Happiness in Life, Scale (0-10) 2000-2006

0

1

2

3

4

5

6

7

8

9

10

Sca

le o

f 0

(un

happ

iest

) to

10

(ha

ppie

st)

Den

mar

k

US

Net

herl

ands

Sw

eden

Irel

and

Finl

and

UK

OE

CD

Spa

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Ger

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Ital

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Pol

and

Japa

n

Hun

gary

2006 2000This database provides international data on life happiness and satisfaction. Ireland performs relatively well among comparator countries. While these scores are somewhat subjective, the findings mirror those in other international surveys.

Ranking of 15:

5 (--)

Source: World Database of Happiness, Erasmus University Rotterdam

2.3 Environmental Sustainability

Figure 2.12

Environmental Performance Index, 2006, Scale (0-100)3

60

65

70

75

80

85

90

95

100

New

Zea

land

Sw

eden

Finl

and

UK

Den

mar

k

Irel

and

Fran

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Japa

n

OE

CD

Ital

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Ger

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Spa

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Net

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Pol

and

Sou

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orea

This index aggregates sixteen metrics in environmental health, air quality, water resources, productive natural resources, biodiversity and habitat, and sustainable energy. Ireland’s performance is better than the OECD average.

OECD-28 Ranking:

9

Source: Yale Centre for Environmental Law and Policy; Centre for International Earth Science Information Network

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Figure 2.13

Proportion of Energy from Renewable Sources

and per Capita Energy Consumption, 2005

0%

5%

10%

15%

20%

25%

30%

0

1

2

3

4

5

6

Ene

rgy

Con

sum

ptio

n pe

r ca

pita

(o

il to

nne

equi

vale

nt)

Per

cent

age

of e

nerg

y fr

om r

enew

able

res

ourc

es (

20

05

)

Sw

eden

Finl

and

Den

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EU

15

Fran

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Spa

in

Pol

and

Ger

man

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Hun

gary

Net

herl

ands

Irel

and

UK

Renewables Energy consumptionIreland consumes more energy per capita than the EU-15 average (right axis). Ireland’s share of energy derived from renewable resources (left axis) is almost one third that of the EU-15 average, which reflects our high dependence on fossil fuels.

EU-15 Ranking:

13(i1) (ranked by renewables)

Source: Forfás Calculations; Eurostat, Environment and Energy; OECD Factbook 2007

Figure 2.14

Emissions of Carbon Dioxide (per capita), 2000 and 2004

0

5

10

15

20

25

Tonn

es p

er c

apit

a

Hun

gary

Sw

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Pol

and

Ital

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Spa

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New

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Den

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Japa

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Irel

and

Ger

man

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Net

herl

ands

OE

CD

Finl

and

US

2004 2000

Although Ireland’s position has improved since 2000, Ireland is still among the highest polluters of carbon dioxide in the OECD on a per capita basis.

OECD-28 Ranking:

19(h2)

Source: Forfás Calculations, OECD Factbook 2007

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Figure 2.15

Municipal Waste Recycling Performance, Various Years4

22

24

31

35

37

45

49

52

54

71

23

2

38

56

50

46

28

43

25

55

73

31

65

7

5

5

20

3

4

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Czech Republic(2002)

Scotland(2005)

Massachusetts(2004)

Ireland(2005)

Denmark(2005)

Sweden(2005)

Singapore(2005)

Austria(2004)

Netherlands(2004)

Flanders(2002)

Recycling Waste to Energy Disposal The rate of municipal waste recycling in Ireland continues to improve slowly but Ireland still ranks 7th out of 10 locations benchmarked. None of Ireland’s municipal waste is converted into energy contrasting to Denmark where over 50 percent is converted to energy.

Ranking of 10:

7(h1)

Source: Forfás, Waste Management in Ireland, March 2007

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Sustainable

Growth

Essential

Conditions

Policy

Inputs

Business

Environment

Physical

Infrastructure

Knowledge

Infrastructure

Essential Conditions3

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3. Essential Conditions

Ireland’s national competitiveness relies on certain key conditions to support the economic environment.

These intermediate indicators connect the government’s policy inputs (indicators in chapter four) with

improvements in sustainable growth (indicators in chapter two). This section benchmarks Ireland’s

performance regarding four essential conditions:

The performance of Ireland’s businesses in terms of investment and trade; ■■

Ireland’s productivity and innovation; ■■

Ireland’s prices and costs structure; and ■■

Labour supply. ■■

Business Performance

The performance of the business sector is critical to income growth and maintaining high employment

levels in Ireland. Its strength is also essential to sustaining strong government finances and spending on

public services. This section assesses business performance in Ireland under the headings of investment

and trade.

Summary Chart 2:

Rankings in Indicators of Business Performance, 2000-2006 (or nearest)

LHS = 2000 RHS = 2006

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

Stro

ng R

anki

ngW

eak

Ran

king

BusinessInvestment

(GDP) (3.01)

BusinessInvestment

(GNP) (3.01)FDI Stock

(GDP) (3.02)FDI Stock

(GNP) (3.02)

GreenfieldProjects(3.03)

Rate ofReturn (UScompanies)

(3.04)ODI Stock

(GDP) (3.05)ODI Stock

(GNP) (3.05)

Exports ofGoods

(GDP) (3.06)

Exports ofGoods

(GNP) (3.06)

Export Growth(goods & services)

(3.07)

Investment

Ireland remains an investment-intensive country. Domestic investment levels are among the highest in

the EU-15 (Fig. 3.01), driven by investment in construction. Despite a continued reduction in the levels

of FDI relative to GDP, Ireland continues to attract high numbers of foreign direct investment projects

(Fig. 3.02, Fig. 3.03), as overseas investors continue to earn a relatively high rate of return in Ireland

(Fig. 3.04). Irish firms are also increasingly investing overseas, with stocks of outward direct investment

already among the highest in the OECD (Fig. 3.05).

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Trade

Ireland continues to be one of the most open economies in the OECD in terms of our trade performance.

However, growth in total exports - goods and services - remained relatively weak between 2000 and

2006, while growth elsewhere in the OECD accelerated (Fig. 3.07). As a result, Ireland’s overall share of

world trade is falling, driven by a steady fall in our share of merchandise trade. Ireland’s share of services

trade continues to increase despite a fall in 2005 (Fig. 3.08). Comparing Ireland’s world market share

in 2001 to 2006, Ireland’s services exports, particularly in other services, which includes business and

finance, have increased, while the share in office/telecommunications equipment and machinery/transport

equipment has fallen. Ireland’s share of the chemicals sector has remained steady (Fig. 3.09). It is also

notable that Irish merchandise exports to non-EU locations are large relative to other EU-15 states (Fig.

3.06).

Productivity and Innovation

In the long run, a country’s standard of living depends on its productivity performance. The indicators in

this section examine Ireland’s overall productivity performance, as well as by broad sector of economic

activity. As innovation is a key driver of productivity, it is also assessed in this section.

Summary Chart 3:

Rankings in Indicators of Productivity and Innovation, 2000-2006 (or nearest)

LHS = 2000 RHS = 2006

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

Str

ong

Ran

king

Wea

k R

anki

ng

New Trademarks per Million

Population (3.22)

Productivity Levels (GDP)

(3.10)

Productivity Levels (GNP)

(3.10)

Productivity Growth (GDP)

(3.11)

Productivity Growth (GNP)

(3.11)

Productivity

Ireland’s productivity levels (GDP) are now on a par with some of the highest in the world. Using

GNP figures indicates that Ireland has converged with the OECD average (Fig. 3.10). Growth rates of

productivity, rather than levels, are vital to ensuring wage increases are sustainable and in this regard,

Ireland performed poorly between 2003 and 2006, with productivity growth below the OECD average

(Fig. 3.11). Latest sectoral productivity growth figures indicate that a range of sectors performed well

between 2000 and 2004, including agri-food, construction, textiles, metals, financial services and the

wholesale and retail trades (Fig. 3.12). Productivity growth has lagged behind in a range of sectors across

modern manufacturing (e.g. publishing/reproduction, office machinery and medical/precision goods) and

traditional manufacturing (e.g. paper, wood, non-metallic minerals and transport equipment), as well as

transport services and utilities (Fig. 3.13-3.17).

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More Irish firms engage in innovation (the creation of new products, services, or processes) than the

EU-15 average, although this masks a significant gap between manufacturing and services (Fig. 3.18).

Modern manufacturing and tradable services sectors are generally at the forefront of innovation, although

the proportion of financial services firms engaged in innovation was the lowest of all sectors (Fig. 3.19). A

relatively modest percentage of turnover in Ireland comes from innovated products, compared to leading

countries (Fig. 3.20).

Prices and Costs

While productivity is the key long-run determinant of competitiveness, the cost environment within the

economy is a very important factor. This section examines the overall level and inflation in Ireland’s prices

and business costs, both pay and non-pay.

Summary Chart 4:

Rankings in Indicators of Prices and Costs, 2000-2006 (or nearest)

0

2

4

6

8

10

12

14

16

18

20

22

24

26

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Str

ong

Ran

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Wea

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anki

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Price Level (3.23) Price Growth (3.23) Labour Cost Growth (3.29)Change in Trade WeightedExchange Rate (3.25)

LHS = 2000 RHS = 2006

General Prices

In terms of general consumer price levels, Ireland is among the most expensive locations and still

exhibits inflation rates that are among the highest in the EU-15 (Fig. 3.23). A breakdown of inflation

by sector shows that food, clothing, furniture and communications have shown little or no inflation

since 2003. Other sectors, however, compare very poorly with the Eurozone average throughout the

2003-2007 period. These include housing, utilities, education, health and catering (Fig. 3.24).

Ireland’s trade-weighted exchange rate has worsened considerably since 2000, although the bulk of that

change occurred between 2000 and 2003 (Fig. 3.25). Combining prices and exchange rates, Ireland’s

harmonised competitiveness indicator deteriorated markedly in 2002, and has declined marginally since

then (Fig. 3.26).

Pay Costs

Unit labour costs, the ratio of changes in productivity to earnings, show little change for the

manufacturing sector as a whole over the 2003-2007 period, regardless of the choice of weighting

(Fig. 3.27). Since 2000, economy-wide labour costs continue to rise at a rate over one and a half times

the Eurozone average (Fig. 3.29), particularly in utilities, construction and a range of services sectors

including public services (Fig. 3.30). Given high inflation rates, a risk exists that Ireland could become

trapped into a wage-price spiral that could damage Ireland’s competitiveness, as increasing costs in

domestically trading sectors are passed on to internationally trading firms who source goods and services

in the local economy.

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This report indicates that for basic manufacturing occupations, Ireland remains cheaper than other high-

income locations, but significantly more expensive than locations in the new EU member states and in Asia

(Fig. 3.31). For certain occupations in science and R&D, Ireland remains attractive relative to other high-

income locations (Fig. 3.32, 3.34). The same is true for financial services, with Dublin cheaper than other

leading financial centres (Fig. 3.33). Overall, wages in internationally trading sectors have grown relatively

slowly due to pressures from international competition. This is not mirrored in the wider economy, which is

dominated by domestically trading sectors.

Non-Pay Costs

Non-pay costs in Ireland compare poorly with other countries across a range of cost types. These include

property costs - both purchase and rental, utilities costs from electricity to water and waste, mobile

communications costs, and a range of domestic services, such as accountancy, information technology and

legal services (Fig. 3.35-3.45). Dublin is particularly expensive.

Labour Supply

Growth in labour supply has played a key role in Ireland’s economic development over the past decade. This

section looks at the overall trends in Ireland’s labour supply and identifies areas of spare capacity.

Summary Chart 5:

Rankings in Indicators of Labour Supply, 2000-2006 (or nearest)

Str

ong

Ran

king

Wea

k R

anki

ng

PopulationGrowth (3.53)

Net Migration(3.54)

Foreign LabourStock (3.55)

Total ParticipationRates (3.56)

Male ParticipationRate (3.56)

FemaleParticipationRate (3.56)

Unemploymentrate (3.57)

DependencyRatio (3.60)

LHS = 2000 RHS = 2006

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

Ireland’s labour force continues to grow strongly, driven by both natural increases in the Irish-born

population and growing levels of inward migration (Fig. 3.47, 3.48, 3.53, and 3.54). Foreign-born workers

now comprise almost 11% of the Irish labour force; more than two and a half times the level in 2000 (Fig.

3.55). Despite rapid increases, participation rates, particularly for women, remain below leading OECD

countries. While, Ireland’s overall demographic position is among the healthiest in the OECD, Ireland will

also face an ageing population into the medium term (Fig. 3.60).

Employment growth in Ireland has been exceptionally strong. The bulk of new jobs between 2000 and

2006 were created in the public service (37 percent - predominantly in education, health and the civil

service) and construction (29 percent) while manufacturing, both traditional and modern, and agriculture

lost jobs over the same period (Fig. 3.49, 3.50). Certain manufacturing sectors, including medical/precision

devices and chemicals, increased their employment levels between 2000 and 2007, although most,

including the largest indigenous sector, food - were static or falling (Fig. 3.51). Unemployment remains

among the lowest in the OECD, and regional variance in the unemployment rate remains relatively small

(Fig. 3.57, 3.58).

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3.1.1 Investment

Figure 3.01

Gross Fixed Capital Formation by the Private Sector (% of GDP), 2006

0%

5%

10%

15%

20%

25%

30%

Irel

and

(GN

P)

Spa

in

Irel

and

(GD

P)

Den

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k

Hun

gary

Ital

y

EU

15

Fran

ce

Finl

and

Net

herl

ands

Ger

man

y

UK

Pol

and

Sw

eden

2006 2000Investment rates in Ireland are among the highest in the EU-15. While investment is dominated by construction related activities (74%), investment in machinery and equipment is also growing rapidly.

EU-15 Ranking:

GDP: 3 (h2) GNP: 1 (--)

Source: Eurostat, Structural Indicators

Figure 3.02

Stock of Inward Direct Investment (FDI, % of GDP), 2005

0%

20%

40%

60%

80%

100%

120%

140%

160%2005 2000

Irel

and

(GN

P)

Irel

and

(GD

P)

Net

herl

ands

Hun

gary

New

Zea

land

Sw

eden

Sw

itze

rlan

d

Den

mar

k

UK

Spa

in

Pol

and

Fran

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Finl

and

OE

CD

Ger

man

y

US

Ital

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Sou

th K

orea

While the stock of inward investment in Ireland as a percentage of both GDP and GNP has declined since 2000, it remains among the highest in the OECD and well above the OECD average. Hungary has made strong progress since opening its economy to FDI.

OECD-28 Ranking:

GDP: 4 (i2) GNP: 3 (i2)

Source: UNCTAD World Investment Report 2006

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Figure 3.03

Number of Greenfield Projects by Destination (per million of population), 2004/05

5

10

15

20

25

30

35

402004/05 2002/03

Sin

gapo

re

Irel

and

Hun

gary

Den

mar

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Sw

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Sw

itze

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d

Pol

and

Net

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Finl

and

Fran

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New

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Spa

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Ital

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US

Japa

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Ireland continues to attract a large number of international greenfield investment projects, relative to its size. Only Singapore has attracted a similar number of projects per capita. The number of new greenfield projects increased between 2002/03 and 2004/05.

OECD-28 Ranking:

1 (h1)


Figure 3.04

Rate of Return to US-Owned Companies on their Investments in

Foreign Countries (%), 20055

0%

5%

10%

15%

20%

25%

30%

Spa

in

Ital

y

Net

herl

ands

EU

15

Bel

gium

Ger

man

y

Fran

ce UK

Sw

eden

Pol

and

Hun

gary

Japa

n

Den

mar

k

Irel

and

Sin

gapo

re

Finl

and

2005 2000 This indicator measures income earned by US companies as a proportion of the amount invested in a particular country. The rate of return in Ireland is well above the EU-15 average and among the highest of the countries benchmarked.

EU-15 Ranking:

3(h1)

Source: Forfás calculations; US Bureau of Economic Analysis figures, 2007 [online]

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Stock of Outward Direct Investment (ODI, % of GDP), 2005

0%

20%

40%

60%

80%

100%

120%S

wit

zerl

and

Net

herl

ands

Irel

and

GN

P

Irel

and

GD

P

Sw

eden UK

Den

mar

k

Fran

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Finl

and

Ger

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Spa

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Ital

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US

New

Zea

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Hun

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Sou

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Pol

and

2005 2000Ireland’s levels of outward direct investment increased significantly between 2000 and 2005, meaning that Ireland’s stock of investments abroad relative to the size of our economy has grown rapidly.

OECD-28 Ranking:

GDP: 8 (h4) GNP: 6 (h2)


3.1.2 Trade

Figure 3.06

Exports of Goods, intra-EU and extra-EU (% of GDP), 2005

Irela

nd G

NP

Hun

gary

Irela

nd G

DP

Net

herl

ands

Den

mar

k

Pol

and

Sw

eden

Finl

and

Ger

man

y

EU

15

Por

tuga

l

Fran

ce

Spa

in

Ital

y

UK

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Exports to Non-EUExports to EU

Ireland continues to be one of the most open countries to trade in the EU-15. Most of Ireland’s goods exports in 2005 were to other parts of the EU, although Ireland also trades substantially with the rest of the world, compared to other EU member states.

EU-15 Ranking:

(Ranked by total exports) GDP: 3 (i1) GNP: 2 (i1)

Source: External and Intra EU trade-Statistical Yearbook (1985-2005)

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Figure 3.07

Annual Average Growth in Exports of Goods and Services (%), 2000-20065

-4%

-2%

2%

0%

4%

6%

8%

10%

12%

16%

14%

2003-2006 2000-2003

Sou

th K

orea

Pol

and

Hun

gary

Japa

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Ger

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Finl

and

Sw

eden UK

Den

mar

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Sw

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US

OE

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Net

herl

ands

Irel

and

Por

tuga

l

Fran

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Spa

in

Ital

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New

Zea

land

Total growth in Irish exports between 2000 and 2003 was substantially above the OECD average. However, between 2003 and 2006, while Ireland’s export growth increased, growth in trade elsewhere has been at a quicker pace.

OECD-28 Ranking:

17(i11)

Source: OECD, Economic Outlook No. 81, 2007

Figure 3.08

Ireland’s Share of World Trade: Overall, Merchandise and Services (%),

2000-2006

20

00

20

01

20

02

20

03

20

04

20

05

20

06

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%Services Total Merchandise

Ireland’s share of merchandise trade has fallen gradually, while our share of services trade (a smaller but growing component of world trade) continues to grow. While trade from China and India is growing, the EU was the world’s largest source of new trade in 2005.

Ranking:

N/A

Source: World Trade Organisation [online]

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l Figure 3.09

Ireland’s Share of World Trade by Sector (%), 2006

Oth

er s

ervi

ces

Che

mic

als

Off

ice

and

tele

com

equi

pmen

t

Agr

icul

tura

l pro

duct

s

Mac

hine

ry/t

rans

port

equi

pmen

t

Trav

el s

ervi

ces

Tran

spor

t se

rvic

es

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%2006 2000 The period between

2000 and 2006 has seen a change in the structure of Ireland’s trade. Strong gains in the ‘other services’ finance, computers, and business, have offset losses in office and telecommunications equipment, and machinery and transport equipment.

Ranking:

N/A

Source: World Trade Organisation [online]

3.2 Productivity and Innovation

3.2.1 Productivity

Figure 3.10

Per Hour Output, Ireland and Selected Economies, 2000-2006 (E value added)

10

15

20

25

30

35

40

45

50

55

60

2000 2001 2002 2003 2004 2005 2006

NEU 12Ireland (GDP)

EU 15

OECD

N.Ireland

Ireland (GNP)

US

Figures for GDP per hour worked indicate that Irish productivity has been among the highest in the world since the late 1990s. Using GNP figures, which reduces the effects of MNCs, suggests that Irish productivity levels have converged with the OECD average.

OECD-28 Ranking:

GDP: 3 (h4) GNP: 14 (h2)

Source: Forfás Calculations; Groningen Growth & Development Centre, Total Economy Database, January 2007; United Kingdom, Office for National Statistics, 2007 [online]; Northern Ireland Department of Enterprise, Trade & Investment, Northern Ireland Labour Force Survey: Historical Supplement Spring 1984 – Spring 2006, March 2006

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Figure 3.11

Annual Average Growth in Output per Hour Worked,

Selected Economies, 2000-20066

-1%

0%

1%

2%

3%

4%

5%

NEU 10 N.Ireland US OECD Ireland (GNP) EU-15 Ireland (GDP)

2003-2006 2000-2003

While productivity levels in Ireland remain strong, growth rates have declined to their lowest levels since the 1980s. Average productivity growth in Ireland is now below the OECD average and in line with the EU-15.

OECD-28 Ranking:

GDP: 22(i18) GNP: 18(i10)


Figure 3.12

Productivity Growth by Sector, Ireland, EU 15 and US, 2000-2004

Pub

lic S

ervi

ces

Who

lesa

le/R

etai

l

Con

stru

ctio

n

Agr

icul

ture

Bus

ines

s S

ervi

ces

Hot

els/

Res

taur

ants

Tran

spor

t S

ervi

ces

Fina

ncia

l S

ervi

ces

Ele

ctri

cal E

quip

men

t

Food

/Bev

erag

es

Tele

com

mun

icat

ions

Che

mic

als

Pap

er/p

ublis

hing

Met

als

Oth

er M

achi

nery

Oth

er M

anuf

actu

ring

Oth

er M

iner

als

Uti

litie

s

Tran

spor

t G

oods

Text

iles/

Leat

her

Woo

d/C

ork

Min

ing

Ave

rage

Gro

wth

in

Valu

e A

dded

per

hou

r w

orke

d. 2

00

0-2

00

4

-10%

-5%

0%

5%

10%

15%USEU 15Ireland

This chart shows productivity growth by sector between 2000 and 2004. The sectors are ranked from left to right by employment share. Few of Ireland’s larger, mostly services, sectors have shown productivity growth in line with the national average of 3.5% between 2000 and 2004, which was driven instead by smaller sectors.

Ranking:

N/A

Source: Forfás calculations, EU KLEMS Database March 2007

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ual C

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00

7 V

olum

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Nat

ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.13

Annual Average Productivity Growth in Primary Sectors, 2000-2004

12%

10%

8%

6%

4%

2%

0%

-2%

-4%Food Products Agriculture Construction Utilities Mining

Aver

age

grow

th in

� v

alue

add

ed p

er h

our

wor

ked,

20

00

- 2

00

4 Ireland USEU 15

Relative to the US and EU-15, productivity growth in Ireland’s agriculture and food sectors has been strong since 2000. Productivity growth rates in utilities continue to lag behind EU and US averages. Productivity growth in construction is strong compared to other countries.

Ranking:

N/A


Figure 3.14

Annual Average Productivity Growth in Modern Manufacturing, 2000-2004

12%

10%

8%

16%

14%

6%

4%

2%

0%

-2%

-4%Electrical

EngineeringChemicals/

PharmaRubber/Plastics

Publishing/Reproduction

Medical/Precision

OfficeMachinery

USEU 15Ireland

Aver

age

grow

th in

� v

alue

add

ed p

er h

our

wor

ked,

20

00

- 2

00

4

The measurement of productivity in modern manufacturing in Ireland is difficult due to the concentration of foreign-owned multinationals. The US has achieved the highest productivity growth rates in modern manufacturing over the period 2000-2004.

Ranking:

N/A


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Figure 3.15

Annual Average Productivity Growth in Traditional Manufacturing, 2000-2004

15%

10%

5%

0%

-5%

-10%Textiles/Leather

OtherMachinery

Metals Paper/Pulp Wood/Cork TransportEquipment

Non-metalicMinerals

USEU 15Ireland

Aver

age

grow

th in

� v

alue

add

ed p

er h

our

wor

ked,

20

00

- 2

00

4

Between 2000 and 2004, productivity growth rates in paper, wood, non-metallic minerals, and transport equipment lagged their EU and US equivalents. The Irish textiles, metals and ‘other machinery’ sectors performed better.

Ranking:

N/A


Figure 3.16

Annual Average Productivity Growth in Tradable Services, 2000-2004

8%

6%

10%

4%

2%

0%

-2%Telecommunications Finance Business Services Hotels/Restaurants

USEU 15Ireland

Aver

age

grow

th in

� v

alue

add

ed p

er h

our

wor

ked,

20

00

- 2

00

4

The productivity growth performance of the hotels/ restaurants sector has been stagnant in all three regions. Irish productivity growth in telecommunications is on a par with the EU and US, while productivity growth in financial

services is strong.

Ranking:

N/A


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ual C

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t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.17

Annual Average Productivity Growth in Non-Tradable Services, 2000-2004

Wholesale/retail Education Health PublicAdministration

TransportServices

USEU 15Ireland

Aver

age

grow

th in

� va

lue

adde

d pe

r ho

ur w

orke

d, 2

00

0 -

20

04

6%

5%

4%

3%

2%

1%

0%

-1%

-2%

-3%

-4%

Non-tradable services are critical to Ireland’s overall productivity performance as they account for almost half of total hours worked. Productivity is particularly difficult to measure in non-tradable services. The figures suggest that Irish productivity growth is relatively strong in the wholesale and retail trade, but has been negative in transport services.

Ranking:

N/A


3.2.2 Innovation

Figure 3.18

Percentage of Firms Engaged in Innovative Activity, 2004

80%

70%

60%

50%

40%

30%

20%

10%

0%

Ger

man

y

Irel

and

Den

mar

k

Sw

eden

EU

15

Finl

and

UK

Ital

y

Spa

in

Net

herl

ands

Fran

ce

Pol

and

Hun

gary

Industry ServicesTotalThis chart shows the total number of firms which engage in innovative activity, either by changing their products or their processes. Overall, Ireland performs above the EU-15 average, although the innovation gap between Irish industry and services sectors at almost 20% is among the widest in the EU.

EU-15 Ranking:

4

Source: Eurostat, Fourth Community Innovation Survey, 2004

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Figure 3.19

Percentage of Firms Engaged in Innovation Activity, by Sector, 2004

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Financial services

Wholesale trade

Transport

Eng. & tech. services

Communications

Computer related services

Mining & quarrying

Electricity, gas etc.

Furniture & other

Textiles, clothing & leather

Metal & non-metal minerals

Fabr. metals & other mach.

Publish. & recorded media

Wood & paper products

Computers, elect. & comms.

Motors & transport

Food, beverages & tobacco

Rubber & plastics

Medical & precision

Chemicals

This chart presents the innovation activity rate by sector in Ireland. Overall, manufacturing sectors exhibited higher innovation activity rates, although certain services sectors, particularly computer-related services also show high innovation activity rates.

Ranking:

N/A

Source: Forfás, Fourth Community Innovation Survey, 2004

Figure 3.20

Percentage Turnover from Innovative Activity, 2004

0%

2%

4%

6%

8%

10%

12%

14%

Pola

nd

Finl

and

Swed

en

Ital

y

Fran

ce UK

Ger

man

y

EU15

Hun

gary

Irel

and

Den

mar

k

Net

herla

nds

Spai

n

Ultimately, innovation is about turning ideas into revenue. This chart shows the percentage contribution to turnover from the introduction of new/improved products to the market among innovative firms. Ireland’s performance is in line with the EU average but lags leading countries.

EU-15 Ranking:

9


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ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.21

Percentage of Innovation Firms Engaged in Co-operation, 2004

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%Fi

naln

d

Sw

eden

Den

mar

k

Pol

and

Fran

ce

Net

herl

ands

Hun

gary

Irel

and

UK

EU

15

Spa

in

Ger

man

y

Ital

y

Innovation co-operation is defined as active participation with other enterprises or non-commercial institutions on innovation activities. This chart displays all categories of cooperation (customers, businesses, public institutions, etc.).

EU-15 Ranking:

7


Figure 3.22

New Community Trademarks per Million Population, 2006

50

0

100

150

200

250

Sw

itze

rlan

d

Den

mar

k

Irel

and

Net

herl

ands

Spa

in

Ger

man

y

Sw

eden UK

EU

15

Finl

and

Ital

y

Fran

ce US

Pol

and

Japa

n

Trademarks identify a product to a specific owner and are important business assets that can play a key role in the marketing of innovative products and services. Irish firms have a relatively high number of community trademarks per million population.

EU-15 Ranking:

4(i1)

Source: European Commission, European Innovation Scoreboard, 2006

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3.3 Prices and Costs

3.3.1 Prices

Figure 3.23

Price Level 2006, and Inflation 2003-2007, EU Member States

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

50 60 70 80 90 100 110 120 130 140

Infl

atio

n (C

hang

e in

Pri

ce L

evel

)

Price Level, Eurozone = 100Less expensive More Expensive

Eurozone Inflation (2.0%)

Low Cost, Rising Quickly High Cost, Rising Quickly

Low Cost, Rising Slowly

Czech RepublicPoland

PolandGreece

FranceGermany

Spain Luxembourg

Ireland

Denmark

Finland

Sweden

Netherlands

UK

High Cost, Rising Slowly

Prices, and the rate of change in prices, are key indicators of competitiveness. Price levels in Ireland are the second highest in the EU and are continuing to rise at rates above both the Eurozone average and the ECB target rate of 2 percent.

EU-15 Ranking:

Price Level 14 (i3) Inflation 12 (h3)

Source: Eurostat, Economy and Finance Indicators, 2007 [online]

Figure 3.24

Inflation by Commodity Group, Ireland and the Eurozone, 2000-2007

-4%

-2%

0%

2%

4%

6%

8%

10%2003-2007 Ireland

2000-2003 Ireland 2000-2003 Eurozone

2003-2007 Eurozone

-4%

-2%

0%

2%

4%

6%

8%

10%2003-2007 Ireland

2000-2003 Ireland 2000-2003 Eurozone

2003-2007 Eurozone

Hou

sing

/uti

litie

s

Edu

cati

on

Hea

lth

Tran

spor

t

Cat

erin

g

Ove

rall

Mis

cella

neou

s

Alc

ohol

/tob

acco

Rec

reat

ion

Com

mun

icat

ions

Food

Furn

itur

e, e

tc

Clo

thin

g

Hou

sing

/uti

litie

s

Edu

cati

on

Hea

lth

Cat

erin

g

Tran

spor

t

Alc

ohol

, et

c

Ove

rall

Mis

c.

Rec

reat

ion

Com

mun

icat

ions

Food

Furn

itur

e, e

tc

Clo

thin

g

This chart shows inflation in particular sectors of the Irish and EU economy. While Irish inflation rates have fallen since the first period (2000-03), they remain higher than the Eurozone average across most sectors, particularly for housing, utilities and domestic services such as education and health.

Ranking:

N/A

Source: Eurostat, Economy and Finance Indicators, 2007 [online]

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Nat

ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.25

Percentage Change in the Trade-Weighted Exchange Rate, 2000-20067

-9.0%

-1%

-0.2%

1.2%

4.0%

6.8%

7%

8.5%

8.4%

8.9%

9.3%

10.3%

11.3%

12.6%

14%

15%

25%

-15% -10% -5% 0% 5% 10% 15% 20% 25% 30%

US

Sweden

UK

OECD

Hungary

Poland

Spain

France

Denmark

Switzerland

Italy

Germany

Finland

Netherlands

South Korea

Ireland

New Zealand

Competitiveness Gain Competitiveness Loss

Exchange rates show the price of an economy’s currency. This chart shows the change in a country’s exchange rate weighted by the importance of trade with other countries. Ireland’s trade-weighted exchange rate has appreciated by 15% since 2000, meaning that Irish goods/services are now more expensive in international markets.

OECD-28 Ranking:

24(i5)

Source: Forfás Calculations; OECD, Economic Outlook no. 81, 2007

Figure 3.26

Harmonised Competitiveness Indicator, 2001-2007 (2004=100)

80

85

90

95

100

105

Impr

ovem

ent

Det

erio

rati

on

Aug-

01

Aug-

02

Aug-

03

Aug-

04

Aug-

05

Aug-

06

Aug-

07

This chart combines changes in price levels and exchange rates to give a single measure of changes in international price competitiveness. The bulk of Ireland’s loss of price competitiveness occurred between 2002 and early 2004, when the euro strengthened considerably against the

dollar.

Ranking:

N/A

Source: Central Bank of Ireland, 2007

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3.3.2 Pay Costs

Figure 3.27

Changes in Unit Labour Costs in Manufacturing, 2003-2007 (Q1, 2000 = 100)

ULC (employment) ULC (output)

75

80

85

90

95

100

105

110

20

03

Q1

20

03

Q2

20

03

Q3

20

03

Q4

20

04

Q1

20

04

Q2

20

04

Q3

20

04

Q4

20

05

Q1

20

05

Q2

20

05

Q3

20

05

Q4

20

06

Q1

20

06

Q2

20

06

Q3

20

06

Q4

Cos

ts, 2

00

0-Q

1=1

00

Cos

ts W

orse

ning

Cos

ts I

mpr

ovin

g

20

07

Q1

Unit labour costs reflect relative changes in productivity and earnings. A downward trend indicates that productivity rose faster than wages, which is good for competitiveness. ULCs weighted by output and employment both suggest that manufacturing unit labour costs have not changed significantly since the start of 2003.

Ranking:

N/A

Source: Central Bank of Ireland; Central Statistics Office, Industrial Production, IndustrialEarnings, Employment (by 2 digit NACE codes)

Figure 3.28

Average Annual Change in Unit Labour Costs by Manufacturing Sector, 2000-2007

-15%

-10%

-5%

0%

5%

10%

15%

Ris

ing

Cos

tsFa

lling

cos

ts

Pri

ntin

g

Ele

ctri

cs

Rad

io/T

V G

oods

Ele

ctro

nics

Che

mic

als

Med

ical

Dev

ices

Food

Oth

er M

achi

nery

Met

als

Tran

spor

t G

oods

Uti

litie

s

Woo

d

Text

iles

Pla

stic

Min

eral

s

Pap

er

Fabr

ic.

Met

als

Unit labour costs (ULC) measure the change in labour costs relative to output. While some Irish manufacturing sectors (e.g. electrics and printing) have seen their ULCs fall since 2000, costs have risen faster than output in a number of sectors.

Ranking:

N/A

Source: Forfás Calculations; Central Statistics Office, Industrial Production, Industrial Earnings, Employment (by 2 digit NACE codes)

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ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.29

Average Growth in Labour Costs, 2000-20078

0%

2%

4%

6%

8%

10%

14%

12%

UK

Hun

gary

Pol

and

Irel

and

Spa

in

Fran

ce

Finl

and

Den

mar

k

Sw

eden

Eur

ozon

e

EU

15

Net

herl

ands

Ger

man

y

2003-2007 2000-2003Labour cost growth rates show the change in the cost of employing workers over time. Ireland’s growth rates across all sectors of the economy have exceeded the EU-15 average over both periods. The average rate of wage inflation in Ireland between 2003 and early 2007, was over one and a half times the Eurozone average.

EU-15 Ranking:

13(i5)

Source: Eurostat, General and Regional Indicators, 2007 [online]

Figure 3.30

Inflation in Overall Labour Costs, by Sector, Ireland & the Eurozone, 2000-20079

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Ove

rall

Man

ufac

turi

ng

Uti

litie

s

Con

stru

ctio

n

Ret

ail/e

tc

Cat

erin

g

Com

m'n

s/et

c

Fina

nce

Oth

er s

ervi

ces

Pub

lic S

ecto

r

UK

10% 2003-2006 Ireland

2003-2006 Eurozone2000-2003 Ireland

2000-2003 Eurozone

Since 2000, labour costs in all sectors of the Irish economy have increased by more than the Eurozone average.

While Irish wage inflation fell in the 2003-2007 period, it is still growing by more than double the Eurozone average in utilities and a number of services sectors.

Ranking:

N/A

Source: Eurostat, General and Regional Indicators, 2007 [online]; Central Statistics Office, Labour Market Statistics; Office of National Statistics, Labour Market Statistics

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Figure 3.31

Wage Costs for Highly Skilled and Unskilled Production Operatives, 2007

Ban

galo

re

Sin

gapo

re

Bud

apes

t

Der

ry

Bel

fast

Gal

way

Lim

eric

k

Cor

k

Man

ches

ter

Lond

on

Dub

lin

Bos

ton

Maa

stri

cht

Cop

enha

gen

�0

� 5,000

� 10,000

� 15,000

� 20,000

� 25,000

� 30,000

� 35,000

40,000

45,000Highly Skilled Unskilled

Wage costs for highly skilled and unskilled production operatives follow a relatively similar pattern among the benchmarked countries. While Ireland is cheaper than some European cities, it is considerably more expensive than Budapest, Singapore and Bangalore.

Ranking of 14:

Highly skilled: Galway 6, Limerick 7, Cork 8, Dublin 11

Source: NCC, Costs of Doing Business in Ireland, 2007

Figure 3.32

Wage Costs for Laboratory Technicians, 2007

Ban

galo

re

Bud

apes

t

Sing

apor

e

Bel

fast

Der

ry

Man

ches

ter

Cork

Lim

eric

k

Gal

way

Dub

lin

Lond

on

Bos

ton

Maa

stric

ht

Cope

nhag

en

� 0

� 5,000

� 10,000

� 15,000

� 20,000

� 25,000

� 30,000

� 35,000

� 40,000

45,000 Laboratory technicians undertake research and development. Although wage costs are over four times higher in Ireland than the cheapest location, Bangalore, Ireland’s highest cost location, Dublin, is still 35 percent lower than Copenhagen.

Ranking of 14:

Cork 7, Limerick 8, Galway 9, Dublin 10


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Nat

ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.33

Wage Costs for Financial Analysts, 2007

Ban

galo

re

Bud

apes

t

Sin

gapo

re

Man

ches

ter

Bel

fast

Der

ry

Maa

stri

cht

Cor

k

Lim

eric

k

Gal

way

Dub

lin

Bos

ton

Lond

on

Cop

enha

gen

� 0

� 10,000

� 20,000

� 30,000

� 40,000

� 50,000

� 60,000

� 70,000 Financial analysts assess economic trends and risk. They account for a large part of the labour cost base of a fund administration company. Irish locations rank among the highest countries benchmarked. Nonetheless, Dublin is cheaper than other financial centres such as Boston and London.

Ranking of 14:



Figure 3.34

Wage Costs for Directors of Research & Development, 2007

� 0

� 20,000

� 40,000

60,000

� 80,000

� 100,000

� 120,000

140,000

� 160,000

� 180,000

Ban

galo

re

Bud

apes

t

Sin

gapo

re

Cor

k

Lim

eric

k

Gal

way

Der

ry

Bel

fast

Dub

lin

Man

ches

ter

Maa

stri

cht

Bos

ton

Cop

enha

gen

Lond

on

A director of R&D, with at least 15 years of experience, has control of the R&D function of a company exporting to international markets. There is a gap between Dublin and the other Irish cities. However, all Irish cities compare favourably to other high-income cities.

Ranking of 14:



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3.3.3 Non-Pay Costs

Figure 3.35

Cost (per m2) to Purchase or Rent a Prime Industrial Site, 2007

€0

€100

€200

€300

€400

€500

€600

€700

€800

Cop

enha

gen

Bud

apes

t

Maa

stri

cht

Bos

ton

Man

ches

ter

Lim

eric

k

Cor

k

Gal

way

Dub

lin

Der

ry

Sin

gapo

re

Ban

galo

re

Bel

fast

Lond

on

Purchase Rent

All firms face property costs, either to rent or to purchase. This chart shows purchase and rental costs for industrial sites. Irish cities are among the most expensive of the cities surveyed to rent a prime industrial site but are cheaper than other locations particularly London for purchase costs.

Ranking of 14:

Purchase cost: Limerick 6, Cork 7, Galway 8, Dublin 9 Rent cost: Limerick 5, Cork 10, Galway 12, Dublin 13


Figure 3.36

Cost (per m2) to Purchase and Rent an Office Space, 2007

Ban

galo

re

Bud

apes

t

Bel

fast

Der

ry

Sin

gapo

re

Bos

ton

Maa

stri

cht

Man

ches

ter

Gal

way

Lim

eric

k

Cor

k

Dub

lin

Cop

enha

gen

Lond

on

€0

€500

€1,000

€1,500

€2,000

€2,500

Purchase Rent

The cost to purchase an office site in Ireland is among the highest of the cities benchmarked. While office rents in most Irish cities are on a par with those in other high-income cities, rents in Dublin are expensive and only exceeded by London.

Ranking of 14:

Purchase Cost: Galway 9,

Limerick 10, Cork 11,

Dublin 12

Rent Cost: Limerick 5,

Galway 7, Cork 9, Dublin 13


48

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ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.37

Electricity Costs (per 100 kwh) for Industrial Users, 2007

€0

€2

€4

€6

€8

€10

€12

€14

Per

10

0 k

wh

Sin

gapo

re

Bos

ton

Bud

apes

t

Ban

galo

re

Man

ches

ter

Lond

on

Bel

fast

Der

ry

Maa

stri

cht

Lim

eric

k

Gal

way

Dub

lin

Cor

k

Cop

enha

gen

This indicator measures electricity costs (including VAT) for a typical medium sized enterprise. It shows that Ireland ranks as the second most expensive location.

Ranking of 11:

Irish cities 10


Figure 3.38

National Mobile Telephone Costs (per min), 2007

Ban

galo

re

Sin

gapo

re

Bud

apes

t

Cop

enha

gen

Lond

on

Man

ches

ter

Bel

fast

Der

ry

Bos

ton

Maa

stri

cht

Cor

k

Dub

lin

Gal

way

Lim

eric

k

€0.00

€0.05

€0.10

€0.15

€0.20

€0.25

€0.30

€0.35

€0.40

€0.45

€0.50

Cos

t pe

r M

inut

e

Mobile telephony has become an integral part of enterprise. National mobile telephone costs per minute are significantly more expensive in Irish cities than all other cities surveyed.

Ranking of 11:

Irish cities 11


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Figure 3.39

Internet Costs (per month) 2MB, 2007

Maa

stri

cht

Bos

ton

Bel

fast

Lond

on

Man

ches

ter

Der

ry

Cor

k

Dub

lin

Gal

way

Lim

eric

k

Cop

enha

gen

Sin

gapo

re

Bud

apes

t

Ban

galo

re

Cos

t pe

r M

onth

€0

€20

€40

€60

€80

€100

€120

€140

€160 Broadband internet is now a necessity for modern business, particularly information-intensive services. Ireland’s internet costs (per month) are in line with many of the other cities surveyed. Costs are falling across most of the cities surveyed.

Ranking of 11:

Irish cities 7


Figure 3.40

Waste Disposal Costs (per tonne), 2007

€0

€50

€100

€150

€200

€250

Cos

t pe

r To

nne

Ban

galo

re

Sin

gapo

re

Bos

ton

Man

ches

ter

Lond

on

Bel

fast

Cop

enha

gen

Lim

eric

k

Bud

apes

t

Gal

way

Maa

stri

cht

Der

ry

Dub

lin

Cor

kWaste costs measure the cost of disposing of a tonne of non-hazardous waste into landfill. While costs in Irish cities have fallen in the last year, Dublin and Cork remain the most expensive cities surveyed.

Ranking of 14:

Limerick 8, Galway 10, Dublin 13, Cork 14


50

Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.41

Water Costs (per cubed metre), 2007

€0.0

€0.5

€1.0

€1.5

€ 2.0

€2.5

Cos

t pe

r M

3

Bud

apes

t

Bos

ton

Sin

gapo

re

Ban

galo

re

Gal

way

Man

ches

ter

Lond

on

Maa

stri

cht

Lim

eric

k

Bel

fast

Der

ry

Cop

enha

gen

Dub

lin

Cor

k

Water costs measure the cost for industrial users per metre cubed. Cork and Dublin rank as the most expensive cities. Furthermore, costs have increased in the last twelve months.

Ranking of 14:

Galway 5, Limerick 9, Dublin 13, Cork 14


Figure 3.42

Accountancy Fees per Hour 2007

€0

€20

€40

€60

€ 80

€100

€120

€140

Ban

galo

re

Bel

fast

Der

ry

Sin

gapo

re

Cop

enha

gen

Man

ches

ter

Bos

ton

Cor

k

Dub

lin

Gal

way

Lim

eric

k

Bud

apes

t

Maa

stri

cht

Lond

on

Fee

per

Hou

r

This chart measures junior accountancy fees per hour. Irish cities are among the most expensive for accountancy fees, significantly more expensive than Belfast, Derry or Copenhagen.

Ranking of 14:

Irish cities 8


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Figure 3.43

IT Fees per Hour 2007

€0

€20

€40

€60

€80

€100

€120

€140

€160

€180

€200

Fee

per

Hou

r

Ban

galo

re

Sin

gapo

re

Cop

enha

gen

Maa

stri

cht

Bud

apes

t

Man

ches

ter

Bel

fast

Der

ry

Lim

eric

k

Bos

ton

Gal

way

Cor

k

Dub

lin

Lond

on

This chart measures the cost of ad-hoc on-site services per hour. Irish cities, particularly Dublin, are among the most expensive cities surveyed. IT services fees vary considerably across the cities surveyed.

Ranking of 14:

Limerick 9, Galway 11, Cork 12, Dublin 13


Figure 3.44

Legal Fees per Hour 2007

Fee

per

Hou

r

Ban

galo

re

Sin

gapo

re

Lim

eric

k

Bud

apes

t

Cor

k

Bel

fast

Der

ry

Gal

way

Man

ches

ter

Cop

enha

gen

Lond

on

Maa

stri

cht

Bos

ton

Dub

lin

� 0

� 50

� 100

� 150

� 200

� 250

300 This chart measures the cost charged by a major legal company for a junior legal assistant excluding VAT. There is considerable variation between Irish cities. While Galway, Cork and in particular Limerick are cost competitive relative to other cities surveyed, Dublin remains the most expensive city.

Ranking of 14:

Limerick 3, Cork 5, Galway 8, Dublin 14


52

Ann

ual C

ompe

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vene

ss R

epor

t 2

00

7 V

olum

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Nat

ional

Com

pet

itiv

enes

s C

ounci

l Figure 3.45

Health Insurance Costs, 2007

�0

�200

�400

�600

�800

�1,000

�1,200B

anga

lore

Sing

apor

e

Cope

nhag

en

Bud

apes

t

Lond

on

Man

ches

ter

Cork

Dub

lin

Gal

way

Lim

eric

k

Bel

fast

Der

ry

Bos

ton

Maa

stric

ht

Health insurance costs for firms are broadly similar across high-income countries. However, Maastricht is particularly expensive and Copenhagen is cheap.

Ranking of 11:

Irish cities 7


Figure 3.46

Interest Rates, Ireland and the Eurozone, by loan type, 2007-q2

Overdraft Small - short Small - medium Small - long Large - short Large - medium Large - long

2007 q2 Ireland 2007 q2 Eurozone

2004 q2 Ireland 2004 q2 Eurozone

0%

1%

2%

3%

4%

5%

6%

7%

8%

9% This chart shows average interest rates in Ireland and the Eurozone, by loan type, in the second quarter of 2004 and 2007. All loans types in Ireland are now more expensive than the Eurozone average. While interest rates have increase in Ireland and the Eurozone since 2004, the gap between Ireland and the Eurozone has widened for almost all loan types.

Ranking:

N/A

Source: European Central Bank; Central Bank of Ireland

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3.4 Labour Supply

3.4.1 Overview

Figure 3.47

Labour Force (Employment & Unemployment), Ireland 000s, 2000-2007

Long Term Unemployment Short Term Unemployment Employment

(000

’s)

1500

1600

1700

1800

1900

2000

2100

2200

2000

Q1

2001

Q1

2002

Q1

2003

Q1

2004

Q1

2005

Q1

2006

Q1

2007

Q1

Ireland’s ongoing economic growth has been facilitated by a remarkable increase in labour supply. Labour force growth continued in 2006 and early 2007, with most unemployment taking the form of short term unemployment.

Ranking:

NA

Source: Forfás Calculations; Central Statistics Office, Quarterly National Household Survey Data, 2000-2007

Figure 3.48

Decomposition of Change in Total Hours Worked in Ireland, 2000-2006

200

150

100

Cha

nge

in h

ours

wor

ked

(mill

ions

)

50

0

-50

-100

Natural Increase/Demographics Migration Participation Unemployment Average Hours Worked

2000 2001 2002 2003 2004 2005 2006

Changes in total hours worked in the Irish economy depend on a wide variety of factors. Natural population growth and migration induced increases in population are driving employment growth. Average hours worked are falling.

Ranking:

NA

Source: Forfás Calculations; EU KLEMS Database, March 2007; Central Statistics Office, Quarterly National Household Survey Data, 2000-2006

54

Ann

ual C

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ss R

epor

t 2

00

7 V

olum

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ional

Com

pet

itiv

enes

s C

ounci

l 3.4.2 Employment

Figure 3.49

Percentage Change in Employment, 2000-2006, by Broad Sector,

Ireland, EU-15 and US

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

IRL

EU

US

A

IRL

EU

US

A

IRL

EU

US

A

IRL

EU

US

A

IRL

EU

US

A

IRL

EU

US

A

IRL

EU

US

A

IRL

EU

US

A

IRL

EU

US

A

IRL

EU

US

A

Construction OtherServices

Government BusinessServices

Finance Retail Communications Catering Manufacturing Agriculture

USEU 15Ireland

Overall, employment in Ireland increased faster than either the EU or US averages between 2000 and 2006. At a sectoral level, employment growth in construction, ‘other services’, and public services has outstripped the EU / US performance.

Ranking:

N/A

Source: Central Statistics Office, Eurostat, US Bureau of Labour Statistics

Figure 3.50

Source of Jobs Growth in Ireland, (000’s) 2000-2007

Edu

cati

on/H

ealt

h

Con

stru

ctio

n

Fina

nce/

Bus

ines

sS

ervi

ces

Ret

ail/C

ater

ing

Oth

er S

ervi

ces

Civ

il S

ervi

ce

Tran

spor

t/C

omm

’ns

Trad

itio

nal

Man

ufac

turi

ng

Agr

icul

ture

Mod

ern

Man

ufac

turi

ng

-40

-20

0

20

40

60

80

100

120

140

2000 -20032003 - 2007

This chart shows the number of jobs created by sector in Ireland between 2000 and the second quarter of 2007. Modern and traditional manufacturing and agriculture have contracted, while education/health, construction, and finance/business services have expanded strongly, particularly since 2003.

Ranking:

N/A

Source: Central Statistics Office (by 2 digit NACE codes)

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Figure 3.51

Change in Employment in Irish Manufacturing by Sector (000’s), 2000-2007

2003-2007 2000-2003

Cha

nge

in n

umbe

rs e

mpl

oyed

(0

00

s)

-12

-10

-8

-6

-4

-2

0

2

4

6

8

Che

mic

als

Med

ical

, P

reci

sion

Rad

io, TV

Met

als

&M

achi

nery

Woo

d, P

aper

Com

pute

rs

Oth

er M

iner

als

Food

Text

ile, Le

athe

r

Ele

ctri

cal

Mac

hine

ry

Pub

lishi

ng

Oth

er

The rate of job losses in manufacturing slowed over the 2000–2007 period. The chemicals and medical/precision devices sector have expanded throughout.

Ranking:

N/A

Source: Central Statistics Office (by 2 digit NACE codes)

Figure 3.52

Change in Employment in Manufacturing by Region (000’s), 2000-2006

-12

-10

-8

-6

-4

-2

0

2

Midlands West Mid West Border Mid East South West South East Dublin

Cha

nge

in n

umbe

rs e

mpl

oyed

(0

00

s)

2003-2006 2000-2003

Dublin, Ireland’s most populous region has experienced the bulk of manufacturing job losses over the past six years, particularly in the 2000-2003 period. The Midlands, West, Mid West and Border regions have regained manufacturing jobs since 2003.

Ranking:

N/A

Source: Forfás Annual Employment Survey, 2006

56

Ann

ual C

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vene

ss R

epor

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00

7 V

olum

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Nat

ional

Com

pet

itiv

enes

s C

ounci

l 3.4.3 Labour Supply Characteristics

Figure 3.53

Average Population Growth per Annum, 2000-2006

2.0%

2.5%

1.5%

1.0%

0.5%

0.0%

-0.5%

2000-20032003-2006

Aver

age

popu

lati

on g

row

th p

er a

nnum

(%

)

Ireland Northern Ireland OECD EU 15 US NEU 12

1.6%

0.4%0.5%

0.3%

0.9%

-0.2%

2.1%

0.5%0.4%

0.2%

0.9%

-0.2%

Ireland’s population continues to grow at a fast rate. Overall, the EU-15 population is growing at a very slow pace, while the population in the new 12 EU member states is falling.

OECD-28 Ranking:

1(--)

Source: Forfás Calculations; Groningen Growth & Development Centre, Total Economy Database, January 2007; United Kingdom, Office for National Statistics, 2007 [online]

Figure 3.54

Net Migration per 1,000 of Population, 1999-200510

8%

10%

12%

6%

4%

2%

0%

-2%

Ireland EU 15 OECD US NEU 10 Northern Ireland

Mig

rant

s pe

r 1

,00

0 o

f po

pula

tion

2002-2005 2000-200211.1

4.74.0 3.9

0.6

-0.1

9.0

3.73.6

4.3

-0.3-0.8

Ireland’s increases in population are not just domestically driven. Net migration has been increasing dramatically.

OECD-28 Ranking:

2(--)


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Figure 3.55

Stock of Foreign Labour as a Percentage of the Total Labour Force, 200512

2005 2000

0%

5%

10%

15%

20%

25%

30%

Sw

itze

rlan

d

Aus

tral

ia

New

Zea

land US

Irel

and

20

07

Q2

OE

CD

Ger

man

y

Spa

in

Ital

y

UK

Fran

ce

Sw

eden

Den

mar

k

Net

herl

ands

Cze

ch R

ep

Finl

and

Sou

th K

orea

Japa

n

Foreign workers comprise 10.9% of the Irish labour force, more than two and a half times the level in 2000. A more detailed breakdown of Irish statistics reveals that almost half of these foreign workers are from the twelve new EU member states.

OECD-28 Ranking:

7 (h2)

Source: Forfás Calculations; Central Statistics Office Labour Market Statistics; OECD, International Migration Outlook, 2007

Figure 3.56

Participation Rates of 15-64 Population in the Workforce, by Gender, 2006

Total Female

0

10

20

30

40

50

60

70

80

90

Sw

itze

rlan

d

Sw

eden

Den

mar

k

New

Zea

land UK

Net

herl

ands

(2

00

4)

Ger

man

y

Finl

and

OE

CD

Japa

n

Spa

in

Irel

and

Fran

ce

Sou

th K

orea

Pol

and

Ital

y

Hun

gary

This chart displays total and female participation rates in 2006. Participation rates in Ireland have increased steadily in recent years. They are converging on the OECD average, but the gap between female participation in Ireland and leading countries such as Switzerland and Sweden remains considerable.

OECD-28 Ranking:

Overall: 18(h2) Males: 15(h1) Females: 17(h5)

Source: Forfás Calculations; OECD, Employment Outlook 2007

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ional

Com

pet

itiv

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s C

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l Figure 3.57

Unemployment, Standardised Rates, 2000 and 200613

20002006

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%S

outh

Kor

ea

Sw

itze

rlan

d

New

Zea

land

Den

mar

k

Net

herl

ands

Japa

n

US

Irel

and

UK

OE

CD

Ital

y

Sw

eden

Hun

gary

Finl

and

Ger

man

y

Spa

in

Fran

ce

Pol

and

Unemployment remains low in Ireland, below the OECD average and many of the larger economies in the EU. A number of OECD countries have recorded higher unemployment rates since 2000, causing Ireland’s ranking to improve marginally.

OECD-28 Ranking:

8(h1)

Source: Forfás Calculations; OECD, Employment Outlook 2007

Figure 3.58

Regional Unemployment, 2004 and 2007, Ireland and Northern Ireland Lo

wer

Une

mpl

oym

ent

Hig

her

Une

mpl

oym

ent

2007Q2

2004Q2

-1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5%

Mid West

Border

South East

West

Midlands

Dublin

Mid East

South West

Northern Ireland

Difference in Unemployment Rate, compared to National Average (2004: 4.4%, 2007: 4.5%)

In the second quarter of 2007, unemployment was lowest in the South West, Mid East, Dublin and Midlands regions. Unemployment levels in the West region are now above the national average and the Mid West region now has the highest unemployment rate in the country. Northern Ireland has made strong progress.

Ranking:

N/A

Source: Forfás Calculations; Central Statistics Office, Quarterly National Household Survey Data, 2000-2007; Northern Ireland Department of Enterprise, Trade & Investment, Monthly Labour Market Report, September 2007

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Figure 3.59

Average Hours Worked per Person Employed per Year

1,500

1,600

1,700

1,800

1,900

2,000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

USIreland OECDNEU-12 EU-15

Average hours worked per person in Ireland have declined gradually since 2000 and remain below the OECD average for the entire 2000-2006.

OECD-28 Ranking:

12(h2)

Source: Forfás Calculations; Groningen Growth & Development Centre, Total Economy Database, January 2007

Figure 3.60

Number of Persons of Working-Age per Dependent, 200614

2005 2015

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Spa

in

Sou

th K

orea

Irel

and

Pol

and

Hun

gary

New

Zea

land

Finl

and

OE

CD

Ital

y

Nor

way

Net

herl

ands

Ger

man

y

Fran

ce

Japa

n

Den

mar

k

US

Sw

eden UK

Economies with higher ratios of workers to dependents (children and retirees) are able to fund their social services more easily. Ireland’s population is favourably structured, due to a peak in births in 1980. Projections for 2015 suggest there may be a slight decline in the ratio.

OECD-28 Ranking:

8(i3)

Source: Forfás Calculations; OECD, Labour Force Statistics 2007 (online); UN, Human Development Report 2006

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Sustainable

Growth

Essential

Conditions

PolicyInputs

Business

Environment

Physical

Infrastructure

Knowledge

Infrastructure

Policy Inputs4

Ann

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62

4. Policy Inputs

4.1 Business Environment

The business environment can have a significant impact on a country’s economic performance and

competitiveness. In this section, indicators that illustrate Ireland’s relative performance on taxation,

regulation and competition, labour market regulations, finance and social capital are assessed.

Chart 6 provides an overview of Ireland’s recent performance in terms of key business environment

indicators.

Summary Chart 6:

Rankings in Indicators of Business Environment, 2000-2006 (or nearest)

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

Str

ong

Ran

king

Wea

k R

anki

ng

Corp

orat

ion

Tax/

GNP

(4.0

5)

Tax

Wed

ge o

n La

bour

(4.

06)

Leve

l of R

egul

atio

n (4

.11)

Cost

of S

tart

ing

a Bu

sine

ss (

4.12

)

No.

of P

roce

dure

s to

Sta

rt

a Bu

sine

ss (

4.12

)

Mar

ket S

hare

of L

arge

st

Elec

tric

ity G

ener

ator

(4.

13)

Mar

ket S

hare

of I

ncum

bent

in

Inte

rnat

iona

l Tel

epho

ne C

alls

(4.

14)

Com

petit

ion

Legi

slat

ion

(4.1

5)

Prod

uct M

arke

t Leg

isla

tion

(4.1

6)

Labo

ur R

egul

atio

n (4

.17)

Rigi

dity

of E

mpl

oym

ent I

ndex

(4.

18)

Capi

tal A

cces

s In

dex

(4.2

0)

Priv

ate

Equi

ty In

vest

men

t/GN

P (4

.21)

Mem

ber

of a

t Lea

st O

ne C

ivil

Soci

ety

Orga

nisa

tion

(4.2

2)

Publ

ic T

rust

in P

oliti

cal

Inst

itutio

ns (

4.23

)

Publ

ic T

rust

in S

ocia

l In

stitu

tions

(4.

24)

Impa

ct o

f Leg

al C

ontr

ibut

ions

to P

oliti

cal

Part

ies

on P

ublic

Pol

icy

(4.2

5)

LHS = 2000 RHS = 2006

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Taxation

Overall, tax revenues in Ireland as a proportion of income are above the OECD average (Fig. 4.01).

Ireland’s tax structure is much less dependent on social security contributions than elsewhere in Europe,

raising Government revenues instead from direct and indirect taxation (Fig. 4.02, 4.07). Nonetheless,

taxes on both capital (profits) and labour (wages) are low relative to other countries, while the tax take

from corporations is above the OECD average (Fig. 4.03-4.06). Indirect taxation rates are amongst the

highest in the OECD (Fig. 4.08), which influences consumer prices and tourism. Tax revenues from

property are in line with the OECD average, although they come from taxes on transactions rather than

taxes on assets (Fig. 4.09). Lastly, Ireland does not tax pollution directly, unlike some other countries

(Fig. 4.10).

Regulation and Competition

Both overall regulatory levels and regulatory impediments to product market competition in Ireland are

perceived to be lower than the OECD average, although perceived regulatory levels have increased in

recent years (Fig. 4.11, 4.16). Nonetheless, the financial and administrative costs of starting a business

in Ireland are small compared to other countries (Fig. 4.12). In relation to domestic competition, while

the legislation is perceived to be efficient, incumbents still dominate the market in certain utilities - in

particular, the electricity and communications markets (Fig. 4.13-4.15).

Labour Market

Labour market regulations are perceived to be increasing in Ireland, with the employment framework here

considerably less flexible than economies such as the UK and Denmark (Fig. 4.17, 4.18). The minimum

wage in Ireland is the fourth highest in the OECD (Fig. 4.19).

Finance

Overall, access to capital in Ireland is not perceived to be a significant barrier to enterprise (Fig. 4.20). In

the Milken Institute’s Capital Access Index, Ireland ranked 9th place globally in 2006, an improvement of

8 places since 2000. However, private equity investment is not well developed in Ireland (Fig. 4.21).

Social Capital

Membership of civil society organisations increased in Ireland between 1990 and 2000 (Fig. 4.22).

The public’s trust in social and political institutions, while falling, still compares favourably with other

countries (Fig. 4.23, 4.24). Finally, when surveyed, more Irish executives believe that legal contributions

to political parties have a direct influence on specific public policy outcomes than in all but two other

countries in the EU-15 (Fig. 4.25).

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Business Environment

4.1.1 Taxation

Figure 4.01

Total Tax Revenue (% GDP), 2005

Sout

h K

orea

Japa

n

US

Switz

erla

nd

Irel

and

GD

P

OEC

D

Pola

nd (

2004

)

Ger

man

y

Spai

n

Irel

and

GN

P

New

Zea

land

Hun

gary UK

Net

herla

nds

(200

4)

Ital

y

Fran

ce

Finl

and

Den

mar

k

Swed

en

0%

10%

20%

30%

40%

50%

60%2005 2000

Ireland’s tax take, as a proportion of its income (GNP) is above the OECD average. Total tax revenue taken as a percentage of GDP has remained relatively stable across the OECD since 2000.

OECD-28 Ranking:

GDP: 6 (h1)

GNP: 14 (h1)

Source: OECD, Revenue Statistics 1965-2005

Figure 4.02

Breakdown of Tax Revenue, 2005

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Direct Indirect Social Security Tax

42.4%

40.5%

38.7%

38.7%

34.6%

32.9%

30.7%

30.4%

25.9%

25.8%

23.6%

20.2%

34.2%

32.0%

42.1%

33.3%

34.5%

35.6%

34.0%

33.5%

34.4%

30.0%

40.9%

40.2%

23.4%

27.5%

19.2%

28.1%

30.9%

31.4%

35.3%

36.1%

39.7%

44.2%

35.5%

39.6%

UK

Finland

Ireland

Sweden

EU15

Italy

Spain

Netherlands

France

Germany

Hungary

Poland

Ireland’s tax structure is less dependent on social security contributions than other economies. There is a relatively even split between direct and indirect taxes, reflecting a policy to reduce taxes on factors of production – i.e. workers and firms.

Ranking:

N/A

Source: Eurostat, Statistics in Focus 31/2007

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Figure 4.03

Top Standard Tax Rate on Corporate Income (%), 2000-200615

2000

2001

2002

2003

2004

2005

2006

2007

Ireland EU 15EU 27 NEU 12

0%

5%

10%

15%

20%

25%

30%

35%

40%

The average top rate of corporation tax in the EU has continued its declining trend as economies seek to create attractive investment environments. At 12.5 percent, Ireland has the third lowest rate in the EU-27.

EU-15 Ranking:

1 (--)

Source: Eurostat, Taxation Trends in the European Union

Figure 4.04

Effective Average Tax Rate on Companies (%), 2005

36.1%

36.0%

34.8%

32.0%

32.0%

28.9%

28.5%

25.2%

24.8%

24.6%

17.9%

14.7%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Ireland

Hungary

Finland

Sweden

Denmark

Netherlands

UK

Italy

EU 15

France

Germany

Spain

These estimates measure the burden on a hypothetical investment project, taking into account the existing tax rules in each country. It includes corporate tax rates on income, taxes on capital and local taxes (where applicable). This rate fell in six of the EU-15 countries in 2005 reflecting a downward trend.

EU-15 Ranking:

1

Source: CESifo, The Effective Tax Burden of Companies in Europe, DICE Report 4/2005, Michael Overesch

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Figure 4.05

Corporation Tax Receipts as a Percentage of GDP, 2004

0%

1%

2%

3%

4%

5%

6%

7%N

ew Z

eala

nd

Irel

and

GN

P

Japa

n

Finl

and

Irel

and

GD

P

Sou

th K

orea

Spa

in

Sw

eden

Den

mar

k

Net

herl

ands UK

OE

CD

Ital

y

US

Hun

gary

Pol

and

Ger

man

y

2004 2000While Ireland’s corporation tax rates are low, Ireland earns more in corporation tax payments as a percentage of GNP or GDP than most other OECD countries.

OECD-28 Ranking:

GDP: 8 (h4)

GNP: 6 (--)


Figure 4.06

Total Tax Wedge on Labour (% of Average Earnings), 2006

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Irel

and

Sou

th K

orea

New

Zea

land US

Sw

itze

rlan

d

Japa

n

UK

OE

CD

Den

mar

k

Spa

in

Finl

and

Net

herl

ands

Ital

y

Hun

gary

Pol

and

Sw

eden

Fran

ce

Ger

man

y

2006 2000

Ireland’s tax wedge on labour, i.e. the gap between what the employer pays and what the employee receives has fallen since 2000. Ireland’s tax wedge is now the smallest in the OECD and is less than half the OECD average.

OECD-28 Ranking:

1 (h5)

Source: OECD Taxing Wages 2005/2006

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Figure 4.07

Social Contributions Received by Government (% GDP) 2006

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Fran

ce

Ger

man

y

Net

herl

ands

Sw

eden

EU

15

Pol

and

Spa

in

Ital

y

Hun

gary

Finl

and

UK

Irel

and

GN

P

US

(2

00

4)

Irel

and

GD

P

Den

mar

k

2006 2000Social contributions are paid by workers to social security funds – typically run by governments – in return for entitlement to social benefits. Contributions by Irish workers are about half EU-15 levels.

EU-15 Ranking:

GDP: 15 (i1)

GNP: 14 (i1)

Source: European Commission, AMECO, General Government Data, February 2007

Figure 4.08

Value Added Tax, Standard Rate, 200616

0%

5%

10%

15%

20%

25%

30%

Japa

n

Sw

itze

rlan

d

Sou

th K

orea

New

Zea

land

OE

CD

Ger

man

y

Spa

in UK

Net

herl

ands

Fran

ce

Hun

gary

Ital

y

Pol

and

Irel

and

Finl

and

Den

mar

k

Sw

eden

2006 2000The main source of indirect tax revenues for all countries is a sales or value added tax on consumption. While they are less likely to affect incentives to work or invest, they can be regressive. They can also discourage tourism. Irish VAT rates are amongst the highest in the benchmarked countries.

OECD-28 Ranking:

19(i1)


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Figure 4.09

Property Tax Receipts as a Percentage of GDP, 2005

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%G

erm

any

Hun

gary

Finl

and

Pol

and

(20

04

)

Sw

eden

Den

mar

k

New

Zea

land

Ital

y

Net

herl

ands

Irel

and

GD

P

Sw

itze

rlan

d

OE

CD

Irel

and

GN

P

US

Spa

in

Sou

th K

orea

Fran

ce UK

20002005 Ireland’s tax take from property is close to the OCED average. The major component of property tax revenue in Ireland is stamp duty, which is dependent on property transactions. Other components include capital gains tax and capital acquisitions tax.

OECD-28 Ranking:

GDP: 17 (i5) GNP: 22 (i6)

Source: OECD Revenue Statistics 1965 - 2005

Figure 4.10

Use of Environmental Taxes by Type (as % of Total Tax Revenue), 200417

0%

2%

4%

6%

8%

10%

12%

Net

herl

ands

Den

mar

k

Slo

veni

a

Irel

and

EU

15

Finl

and

UK

Pol

and

Ital

y

Ger

man

y

Spa

in

Sw

eden

Fran

ce

Energy Transport Pollution

Overall, Ireland collects a relatively large proportion of its tax revenue from environmental sources, but Ireland does not tax pollution, as some other countries do. Ireland’s share of revenues from energy is also below the EU average.

EU-15 Ranking:

4 (i1)

Source: Forfás Calculations; Eurostat, Economy and Finance Indicators, 2006 [online]

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4.1.2 Regulation and Competition

Figure 4.11

Level of Regulation, 2007 (Scale 1-7)18

1

2

3

4

5

6

7

Sin

gapo

re

Finl

and

Sw

itze

rlan

d

Sou

th K

orea

Japa

n

Den

mar

k

Irel

and

US

OE

CD

New

Zea

land UK

Sw

eden

Net

herl

ands

Ger

man

y

Spa

in

Pol

and

Hun

gary

Fran

ce

Ital

y

Low

Lev

elof

Reg

ulat

ion

Hig

h Le

vel o

f R

egul

atio

n

2007 2001The overall level of regulation in Ireland is among the lowest in the OECD. Regulation levels are increasing in most countries, including Ireland. Denmark, Japan and South Korea have reduced perceived regulatory levels since 2001.

OECD-28 Ranking:

9(i4)

Source: WEF Global Competitiveness Report 2007/08

Figure 4.12

Cost of Starting a Business and the Number of Procedures Involved, 200619

0

5

10

15

20

25

0 2 4 6 8 10 12 14

Number of Procedures

Hungary

Spain

Poland

ItalySouth Korea

JapanNetherlands

Germany

FranceUKUSIreland

Sweden

Cos

t (%

Gro

ss N

atio

nal I

ncom

e pe

r ca

pita

)

This chart shows both the financial costs of establishing a business and the number of procedures required. Ireland ranks well on both measures, particularly on financial costs.

OECD-28 Ranking:

Cost: 3 (h11)

Procedures: 7 (--)

Source: World Bank, Doing Business, 2006 [online]

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Figure 4.13

Market Share of Largest Generator in the Electricity Market, 200520

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Fran

ce

Irel

and

Sw

eden

EU

15

Hun

gary

Ital

y

Spa

in

Den

mar

k

Ger

man

y (2

00

3)

Finl

and

UK

Pol

and

2005 2000

The Irish electricity market is undergoing reform, but despite progress it remains highly concentrated, with the incumbent having a larger share than its average EU counterpart. This may be partially explained by our limited market size and limited international connectivity.

EU-15 Ranking:

9(h4)


Figure 4.14

Market Share of Incumbent in International Telephone Calls, 200421

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Hun

gary

Ger

man

y

Pol

and

Irel

and

Spa

in

Fran

ce

Ital

y

EU

15

UK

Net

herl

ands

Finl

and

Sw

eden

(2

00

3)

2004 2002

This chart shows the market share of the incumbent in the market for international phone calls. While, the Irish telecommunications market is open to competition, the largest player in the market still dominates, with almost 70 percent of the market.

EU-15 Ranking:

9(h2)


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Figure 4.15

Efficiency of Competition Legislation, 2007 (Scale 0-10)

0

1

2

3

4

5

6

7

8

9

10

Eff

icie

nt L

egis

lati

on

Den

mar

k

Net

herl

ands

Sin

gapo

re

New

Zea

land

Finl

and

Sw

itze

rlan

d

Ger

man

y

Fran

ce

Sw

eden UK

Japa

n

US

OE

CD

Irel

and

Hun

gary

Spa

in

Ital

y

Sou

th K

orea

Pol

and

Inef

fici

ent

Legi

slat

ion

2007 2000Competition can boost productivity and reduce prices for consumers and other businesses. According to executives, Ireland’s competition legislation is perceived as slightly less efficient than the average OECD economy.

OECD-28 Ranking:

19 (i10)

Source: IMD World Competitiveness Yearbook, 2007 [online]

Figure 4.16

Product Market Regulation, 2003 (Scale 0-6)22

0

1

2

3

4

5

6

Mos

t R

estr

icti

veLe

ast

Res

tric

tive

UK

US

Irel

and

Den

mar

k

New

Zea

land

Sw

eden

Japa

n

Fina

lnd

Net

herl

ands

OE

CD

Ger

man

y

Sou

th K

orea

Spa

in

swit

zerl

and

Fran

ce

Ital

y

Hun

gary

Pol

and

2003 1998

This measure captures the degree to which policies promote or inhibit competition in product markets. Regulatory impediments to product market competition declined throughout the OECD between 1998 and 2003. Ireland, along with the UK and US, has one of the most liberalised environments.

OECD-28 Ranking:

5 (h2)

Source: OECD, Going for Growth, 2006

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4.1.3 Labour Regulation

Figure 4.17

Labour Market Regulations, 2007 (Scale 0-10)

0

1

2

3

4

5

6

7

8

9

10

Faci

litat

e B

usin

ess

Hin

der

Bus

ines

s

Sin

gapo

re

Den

mar

k

Sw

itze

rlan

d

Hun

gary US

Irel

and

UK

Japa

n

OE

CD

Finl

and

Net

herl

ands

New

Zea

land

Sw

eden

Spa

in

Ital

y

Ger

man

y

Sou

th K

orea

Pol

and

Fran

ce

2007 2000According to executive opinion, labour market regulations in Ireland are not believed to have a significant impact upon business activities but the trend for most countries, including Ireland, is one that is increasingly impacting on business activities.

OECD-28 Ranking:

9 (--)


Figure 4.18

Rigidity of Employment Index, 2006 (Scale 0-100)23

0

10

20

30

40

50

60

70

Mor

e R

igid

Less

Rig

id

US

New

Zea

land UK

Den

mar

k

Switz

erla

nd

OEC

D

Japa

n

Pola

nd

Irel

and

Sout

h K

orea

Hun

gary

Net

herla

nds

Swed

en

Ger

man

y

Finl

and

Ital

y

Fran

ce

Spai

n

2006 2005

This index measures the flexibility of employment regulation. Higher values indicate more rigid regulation. Ireland’s employment framework is more rigid than the OECD average and significantly more rigid than economies such as the UK, Denmark and Switzerland.

OECD-28 Ranking:

12 (i1)

Source: World Bank, Doing Business, 2006 [online]

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Figure 4.19

Hourly Minimum Wages US$, 200624

$0

$2

$4

$6

$8

$10

$12

Net

herl

ands

Fran

ce UK

Irel

and

New

Zea

land

OE

CD

19

(ave

rage

)

Japa

n

US

Spa

in

Sou

th K

orea

Por

tuga

l

Hun

gary

Pol

and

$

2006 2000Ireland’s minimum wage is relatively high compared to nineteen other OECD countries. However, by 2004 only 3.1 percent of full time employees were on the minimum wage in Ireland.

Ranking of 19:

4(i1)

Source: OECD, National Accounts Database, 2007

4.1.4 Finance

Figure 4.20

Capital Access Index, 2006 (Scale 0-10)

0

1

2

3

4

5

6

7

8

9

10

Bet

ter

Wor

se

Sin

gapo

re UK

US

Sw

itze

rlan

d

Net

herl

ands

Irel

and

Sw

eden

OE

CD

Finl

and

Den

mar

k

Ger

man

y

New

Zea

land

Japa

n

Sou

th K

orea

Fran

ce

Spa

in

Hun

gary

Ital

y

Pol

and

2006 2000

This index measures the breadth, depth and vitality of capital markets. Efficient financial markets by making capital accessible to entrepreneurs are key to long-term growth. Ireland ranks in 7th place in the OECD, an improvement of 4 places since 2000.

OECD-28 Ranking:

7(h4)

Source: Milken Institute’s Capital Access Index, 2006

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Figure 4.21

Private Equity Investment, including High-Tech Investment (% of GDP), 2004/0525

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%U

K

Sw

eden

Den

mar

k

Net

herl

ands

EU

15

Fran

ce

Spa

in

Ital

y

Finl

and

Ger

man

y

Irel

and

%G

NP

Irel

and

%G

DP

Pol

and

Hun

gary

High-Tech Investment 2004 Private Equity Investment 2005Private equity investment is formal investment outside public capital markets and represents total start up, expansion, turnaround and buyout investments. Private equity investment is not well developed in Ireland.

EU-15 Ranking:

GDP: 12(i2)

GNP: 11(i3)

Source: Forfás Calculations; European Venture Capital Association (EVCA)/Thompson;PricewaterhouseCoopers, European Technology Investment Report, 2005

Figure 4.22

Percentage of the Population that is a Member of at Least One Civil

Society Organisation 1990-200026

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Hig

h Le

vel

Low

Le

vel

Icel

and

Net

herl

ands

Den

mar

k

US

(1

99

0)

Bel

gium

Can

ada

(19

90

)

Gro

up A

vera

ge

Irel

and

Ger

man

y

N.I

rela

nd

Ital

y

Fran

ce

2000 1990

Social capital refers to trust between actors in society. One summary measure of this is the proportion of the population that is a member of at least one civil society organisation (e.g. youth work, human rights). The proportion increased slightly in Ireland between 1990 and 2000, but lies well below countries such as Iceland and the Netherlands.

Group Ranking of 11

7(h3)

Source: World Values Survey,1980- 2000

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4.1.5 Social Capital

Figure 4.23

Public Trust in Political Institutions 1990-200027

0%

10%

20%

30%

40%

50%

60%

70%

Icel

and

Den

mar

k

Irel

and

Net

herla

nds

Ger

man

y

N.I

rela

nd

Hun

gary

UK

Gro

up A

vera

ge

Bel

gium Ital

y

US

Cana

da

Fran

ce

Sou

th K

orea

Japa

n

Low

Lev

elH

igh

Leve

l 19902000

Trust in political institutions (parliament, civil service and the judiciary) fell in most countries between 1990 and 2000. This was also true of Ireland; however the fall was not as marked as most.

Group Ranking of 15

3(h4)

Source: World Values Survey, 1980-2000

Figure 4.24

Public Trust in Social institutions 1990-200028

Sou

th K

orea

Icel

and

Net

herl

ands US

Den

mar

k

Gro

up A

vera

ge

Can

ada

Irel

and

Ital

y

Japa

n

Fran

ce

Ger

man

y

N.I

rela

nd

Bel

gium

Hun

gary

UK

0%

10%

20%

30%

40%

50%

60%

70%

Low

Lev

elH

igh

Leve

l 19902000Social institutions, including the media, religious organisations and trade unions, are important parts of civil society. Irish people’s trust in these institutions fell by almost 10% to 44% although it still remains above the group average.

Group Ranking of 15

6(i3)

Source: World Values Survey, 1980-2000

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ual C

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Figure 4.25

Impact of Legal Contributions to Political Parties on Public Policy 2006,

Scale (1-7)29

1

2

3

4

5

6

7

Sing

apor

e

Net

herla

nds

Den

mar

k

Finl

and

Swed

en

Ger

man

y

Fran

ce UK

Japa

n

OEC

D

Sout

h K

orea

Irel

and

Pola

nd

Hun

gary

Ital

y

US

Wea

k Im

pact

Stro

ng I

mpa

ct

20012006

When surveyed, more executives based in Ireland believed that legal contributions to political parties have a direct influence on specific public policy outcomes than in all but two other countries in the EU-15.

OECD-28 Ranking:

20(h6)

Source: WEF Global Competitiveness Report, 2006/07

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4.2 Physical Infrastructure

The level of infrastructure in a country affects competitiveness in a number of ways. Well developed

infrastructure can reduce traffic congestion, increase productivity and reduce costs. This not only affects

existing firms, but also affects a country’s attractiveness as an investment location and general quality of life.

In this section, indicators that illustrate Ireland’s relative performance are grouped under four headings;

Investment in Physical Infrastructure, ■■

Transport and Energy Infrastructure, ■■

Information and Communications Technology Infrastructure, and ■■

Housing.■■

Chart 7 provides an overview of Ireland’s recent performance in terms of key infrastructure indicators.

Summary Chart 7:

Rankings in Indicators of Physical Infrastructure, 2000-2006 (or nearest)

0

2

4

6

8

10

12

14

16

18

20

22

24

26

28

Str

ong

Ran

king

Wea

k R

anki

ng

Hou

sing

C

ompl

etio

ns (

4.4

1)

Gov

ernm

ent

Inve

stm

ent/

GD

P (

4.2

8)

Gov

ernm

ent

Inve

stm

ent/

GN

P (

4.2

8)

Ove

rall

Infr

astr

uctu

re Q

ualit

y (4

.29

)

Dis

trib

utio

n In

fras

truc

ture

(4

.30

)

Qua

lity

of A

ir

Tran

spor

tati

on (

4.3

2)

Por

t In

fras

truc

ture

Q

ualit

y (4

.33

)

Ene

rgy

Infr

astr

uctu

re (

4.3

4)

ICT

Exp

endi

ture

/ G

DP

(4

.37

)

ICT

Exp

endi

ture

/ G

NP

(4

.37

)

Per

cent

age

of

Hou

seho

lds

wit

h B

road

band

(4

.38

)

Per

cent

age

of

Ent

erpr

ises

wit

h B

road

band

(4

.39

)

E-G

over

nmen

t Av

aila

bilit

y (4

.40

)

Hou

sing

Sto

ck

(4.4

1)

Hou

seho

ld

Bor

row

ing

(4.4

3)

LHS = 2000 RHS = 2006

Investment in Physical Infrastructure

Public capital stock as a proportion of output in Ireland has fallen steadily since the late 1980s as the

economy has grown (Fig. 4.26). Overall, perceptions of infrastructure quality remain very low (Fig. 4.29), and

despite real improvements to date, Ireland’s rankings have fallen across a number of categories since 2001.

Through successive National Development Plans, Ireland’s investment rates - the rate at which new public

capital stock is formed - are among the highest in the EU-15 (Fig. 4.28).

Transport and Energy Infrastructure

Ireland’s distribution networks rank poorly internationally, with peak speeds in Dublin well below most other

cities surveyed (Fig. 4.30, 4.31). Air and seaport infrastructure also scores poorly, highlighting the need

for ongoing investment to improve Ireland’s performance (Fig. 4.32, 4.33). In energy, the perceptions of

enterprise about the efficiency of energy infrastructure have weakened across many countries since 2002.

Ireland’s energy infrastructure again scores poorly (Fig: 4.34). Ireland is particularly dependent on imported

and non-renewable forms of energy (Fig. 4.35).

Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

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s C

ounci

l

78

Information and Communication Technology Infrastructure

Ireland’s investments in both information and communications technologies are below the EU-15 average, and lags

leading countries by some distance (Fig. 4.37). Related to this, the penetration rate of broadband in both households

and firms in Ireland is well below the EU-15 average (Fig. 4.38, 4.39). At government level, the proportion of public

services available online is below that of the EU-15 average (Fig. 4.40).

Housing

There are two aspects to housing that are relevant to competitiveness: infrastructure/activity and costs/debt. In

relation to relative levels of housing, Ireland has fewer houses per capita than the EU-15 average (Fig. 4.41). This

gap is narrowing quickly as household completions per capita are by far the highest in the EU. Housing activity is

slowing, however, with the number of planning permissions peaking in 2004 (Fig. 4.42).

In relation to costs and debt, house prices have increased dramatically since the mid-1990s (Fig. 4.44). As a result

household borrowing, almost four-fifths of which is for house purchase, more than doubled between 2003 and 2007.

The average Irish person is almost e35,000 in debt by 2007 (Fig. 4.43). The value of Irish housing stock (over

E500 billion) significantly outweighs mortgage debt (E118.5 billion). However, a disproportionately large part of the

debt is borne by recent entrants to the housing market.

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Physical Infrastructure

4.2.1 Investment in Physical Infrastructure

Figure 4.26

Ireland’s Public Capital Stock as a % of GDP and per Person (2003 prices) 2004

Per

cent

age

GD

P/G

NP

Thou

sand

Eur

os p

er p

erso

n

20

30

40

50

60

70

80

90

100

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

8

9

10

11

12Per person Thousand � Ratio to GNP % Ratio to GDP % This indicator

measures the level of public capital stock (e.g. roads, railways, airports, schools, etc.) relative to national income and per person. Since 2000, the level of public capital stock per person has grown due to high rates of investment in infrastructure.

Ranking:

N/A

Source: OECD (2005), Economic Outlook 78 database and Kemps, C. (2004), “New Estimates of Government Net Capital Stocks for 22 OECD Countries: 1960-2001”, IMF Working Paper

Figure 4.27

Public Capital Stock per Person in Thousand E, 2004

8.0

8.1

10.3

10.5

10.5

11.3

11.4

12.0

12.3

12.8

13.3

14.0

14.4

14.4

15.6

17.2

17.6

17.9

19.1

19.6

19.9

38.5

0 5 10 15 20 25 30 35 40 45

Portugal

Greece

Spain

UK

Ireland

Belgium

Australia

Sweden

Canada

Italy

Finland

Norway

Denmark

Germany

France

Netherlands

New Zealand

Austria

OECD

Switzerland

US

JapanLevels of public capital stock per person in Ireland compare poorly with other countries, with the estimated amount just over half the OECD average. Ireland’s poor ranking is a result of underinvestment in the past and strong population growth in recent years.

OECD-28 Ranking:

17

Source: OECD (2005), Economic Outlook 78 database and Kemps, C. (2004), “New Estimates of Government Net Capital Stocks for 22 OECD Countries: 1960-2001”, IMF Working Paper

Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

ounci

l

80

Figure 4.28

General Government Gross Fixed Capital Formation (% GDP), 2005

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

20002005Ir

elan

d G

NP

Spa

in

Irel

and

GD

P

Hun

gary

Fran

ce

Pol

and

Sw

eden

Net

herl

ands

Finl

and

EU

15

Ital

y

UK

Den

mar

k

Ger

man

y

The 2000-2006 National Development Plan resulted in higher levels of investment in gross fixed capital formation (% of GNP) in Ireland than in other countries. The new National Development Plan (2007-2013) commits to sustained investment.

EU-15 Ranking:

GDP: 5 (--)

GNP: 2 (i1)


Figure 4.29

Overall Infrastructure Quality, 2007 (Scale 1-7)30

1

2

3

4

5

6

7

Switz

erla

nd

Ger

man

y

Sing

apor

e

Fran

ce

Den

mar

k

Finl

and

US

Swed

en

Japa

n

Net

herla

nds

OEC

D

Sout

h K

orea UK

Spai

n

New

Zea

land

Hun

gary

Irel

and

Ital

y

Pola

nd

Hig

hly

Deve

lope

dPo

or Q

ualit

y

20012007

Measuring the quality of infrastructure across countries is difficult.This chart shows executive perceptions regarding overall quality of infrastructure in an economy. Ireland’s score is improving slowly relative to the OECD average.

OECD-28 Ranking:

25 (--)


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4.2.2 Transport and Energy Infrastructure

Figure 4.30

Efficiency of Distribution Infrastructure, 2007 (Scale 0-10)

0

1

2

3

4

5

6

7

8

9

10

Effic

ient

Non

-Eff

icie

nt

Sin

gapo

re

Den

mar

k

Sw

itze

rlan

d

Ger

man

y

US

Sw

eden

Finl

and

Fran

ce

Net

herl

ands

OE

CD

Japa

n

Sou

th K

orea

Hun

gary

New

Zea

land

Spa

in UK

Pol

and

Irel

and

Ital

y

2006 2000

This chart shows executives’ perceptions of Ireland’s distribution infrastructure, including road, rail, air and sea transport. While Ireland continues to rank poorly – among the weakest in the OECD - there has been an improvement since 2000.

OECD-28 Ranking:

27 (i1)


Figure 4.31

Average Peak Hour Speeds in Major Cities (KM/ Per Hour), 2002/3

14.5

15

16.5

18

19

20

22

22.3

22.8

24

26

27

28

32.6

36

40

0 5 10 15 20 25 30 35 40 45

(KM/PH)

UK-Bristol (2000)

UK-London

Ireland- County Dublin

UK-Oxford

Scotland-Glasgow

Poland-Warsaw

Austria-Vienna

Hungary-Budapest

Spain-Madrid

Belgium-Brussels (2001)

Netherlands-Rotterdam

Nothern Ireland-Belfast

Denmark-Copenhagen

Romania-Bucharest (2000)

Finland-Helsinki

Germany-CologneA possible measure of transport congestion in our main cities and regions is the average peak-hour speeds of cars and motorcycles in these cities. Dublin is ranked 28th out of 30 cities and regions on this measure. The Irish car speed data is taken from the Dublin Transport Office. It should be noted that Dublin refers to car speeds only.

Ranking of 16:

14

Source: Urban Transport Benchmarking Initiative [online] / Dublin Transportation Office

Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

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ional

Com

pet

itiv

enes

s C

ounci

l

82

Figure 4.32

Quality of Air Transportation, 2007 (Scale 0-10)31

1

2

3

4

5

6

7

8

9

10

Enc

oura

ges

Bus

ines

sD

eter

s B

usin

ess

Sin

gapo

re

Ger

man

y

Sw

itze

rlan

d

Den

mar

k

Net

herl

ands US

Sw

eden

Sou

th K

orea

Finl

and

New

Zea

land

Fran

ce

OE

CD

Hun

gary

Japa

n

UK

Spa

in

Irel

and

Pol

and

Ital

y

2007 2002

This chart measures executives’ perceptions of the quality of Ireland’s air transportation infrastructure. Ireland scores poorly, although the score is improving. A second terminal at Dublin airport, due to open in 2009, should improve Ireland’s score.

OECD-28 Ranking:

25 (--)


Figure 4.33

Port Infrastructure Quality, 2007 (Scale 1-7)32

Dev

elop

edU

nder

deve

lope

d

1

2

3

4

5

6

7

Sing

apor

e

Net

herla

nds

Ger

man

y

Den

mar

k

Finl

and

Fran

ce

Swed

en US

OEC

D

Japa

n

Switz

erla

nd

Sout

h K

orea

New

Zea

land UK

Spai

n

Irel

and

Hun

gary

Pola

nd

Ital

y

2007 2001

Ireland’s seaport infrastructure also lags our economic peer group. Based on a survey of enterprise perceptions, Ireland ranks among the lowest in the OECD. Ireland’s score has not changed significantly since 2001.

OECD-28 Ranking:

25(i3)


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Figure 4.34

Efficiency of Energy Infrastructure, 2007 (Scale 0-10)33 E

ffic

ient

Inad

equa

te

0

1

2

3

4

5

6

7

8

9

10

Sin

gapo

re

Sw

itze

rlan

d

Den

mar

k

Fran

ce

Ger

man

y

Net

herl

ands

Japa

n

Sou

th K

orea

Finl

and

Hun

gary

OE

CD

US

Sw

eden UK

Spa

in

Pol

and

New

Zea

land

Irel

and

Ital

y

2007 2002

The perceptions of enterprise about the efficiency of energy infrastructure have weakened across many countries since 2002. This includes Ireland, which ranks among the weakest in the OECD.

OECD-28 Ranking:

27 (i3)


Figure 4.35

Fuel Mix for Electricity Generation, 200434

Coal Gas OilRenewables Nuclear Other

New

Zea

land

(2

00

2)

Finl

and

Por

tuga

l

Den

mar

k

Spa

in

Ital

y

Fran

ce

Ger

man

y

US

Net

herl

ands

Irel

and

UK

Sin

gapo

re

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ireland’s energy comes predominantly from imported non-renewable resources, in particular coal and gas. Of the countries surveyed, only the UK and Singapore generated less energy from renewable resources.

Ranking of 13: (ranked by renewables)

11

Source: Forfás Calculations; International Energy Agency

Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

ounci

l

84

Figure 4.36

Level of Spare Electricity Generation Capacity over Peak Demand

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%S

inga

pore

New

Zea

land

Spa

in

Ger

man

y

Net

herl

ands UK

Por

tuga

l

Fran

ce

Ital

y

Irel

and

Capa

city

mar

gin

as p

ropo

rtio

n of

pea

k de

man

d

2005 2004

This indicator shows the difference between available electricity capacity and peak demand. In Ireland, peak demand is highest in winter. Ireland has a low level of spare electricity capacity over peak demand among the benchmarked countries.

Ranking of 10:

10

Source: Forfás Electricity Benchmarking Report, 2006

4.2.3 Information and Communication Technology (ICT)

Figure 4.37

ICT Expenditure as a % of GDP, 200535

3.7%

3.2%

3.4%

3.8%

2.6%

3.1%

3.8%

3.3%

3.1%

2.7%

3.3%

5.0%

3.7%

3.4%

3.8%

5.7%

4.2%

1.2%

2.0%

1.9%

1.7%

3.4%

3.1%

2.4%

3.1%

3.4%

4.0%

3.7%

2.2%

3.9%

4.3%

4.2%

2.4%

4.4%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

Greece

Italy

Spain

France

Germany

Ireland GNP

Ireland GDP

EU 15

Denmark

US

Finland

Poland

Netherlands

Switzerland

UK

Hungary

Sweden

Communications

IT

Information and communication technology (ICT) are essential to modern enterprise. Ireland’s investment in both forms of technology, particularly IT, ranks among the lowest in the EU-15.

EU-15 Ranking:

GDP: 14 (i2)

GNP: 10 (i3)


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Figure 4.38

Percentage of Households with Broadband 200635

Net

herl

ands

Den

mar

k

Finl

and

Sw

eden UK

Ger

man

y

EU

15

Fran

ce

Spa

in

Hun

gary

Pol

and

Ital

y

Irel

and

0%

10%

20%

30%

40%

50%

60%

70%

2006 2003Broadband affects not just how enterprises work internally or with each other, but also how they interact with consumers.This chart shows the percentage of total households that use a broadband connection. Despite strong growth since 2003, Ireland continues to perform poorly.

EU-15 Ranking:

14(--)

Source: Eurostat, Information Society Indicators

Figure 4.39

Percentage of Enterprises with Broadband, 200637

Finl

and

Sw

eden

Spa

in

Den

mar

k

Net

herl

ands

EU

15

UK

Luxe

mbo

urg

Ger

man

y

Ital

y

Por

tuga

l

Hun

gary

Irel

and

Pol

and

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%2006 2002

Broadband penetration in Irish firms is among the lowest in the EU. Despite broadband growth in Ireland, Ireland’s ranking has not improved since 2003.

EU-15 Ranking:

14(--)


Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

ounci

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86

Figure 4.40

E-Government Availability, 200638

0%

10%

20%

30%

40%

50%

60%

70%

80%

Hun

gary

Pol

and

Sw

itze

rlan

d

Sw

eden

UK

Fran

ce

Den

mar

k

Finl

and

Ital

y

EU

15

Spa

in

Net

herl

ands

Irel

and

Ger

man

y

2006 2002This indicator shows online availability of 20 basic public services i.e., for which it is possible to carry out full electronic case handling. There has been a significant decline in Ireland’s relative performance as other countries have progressed faster.

EU-15 Ranking:

11 (i8)


4.2.4 Housing

Figure 4.41

Total Housing Stock and Completions (Dwellings per 000 of Population), 200539

300

400

500

600

Hou

sing

Sto

ck P

er 1

00

0 o

f po

pula

tion

0

5

10

15

20

25H

ousi

ng C

ompl

etio

ns

Spa

in

Por

tuga

l

Finl

and

Sw

eden

Den

mar

k

EU

15

Ger

man

y

UK

Hun

gary

Net

herl

ands

Irel

and

Pol

and

Compared to the EU-15, Ireland is under-housed, relative to its population size. Ireland is adding to its housing stock at a rate far above any other European country. In 2006 there were approximately 90,000 house completions in Ireland.

EU-15 Ranking:

Stock 14 (h1)

Completions 1 (--)

Source: European Mortgage Federation, Hypostat, 2005

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Figure 4.42

Year-on-year Change in Planning Permissions Granted, 2003-Q1 to 2006-Q4

-40%

-20%

0%

20%

40%

60%

80%2

00

3 Q

1

20

03

Q2

20

03

Q3

20

03

Q4

20

04

Q1

20

04

Q2

20

04

Q3

20

04

Q4

20

05

Q1

20

05

Q2

20

05

Q3

20

05

Q4

20

06

Q1

20

06

Q2

20

06

Q3

20

07

Q1

20

06

Q4

No. of permissions Area of permissions (sq-m)

While the number of housing completions remains at a very high level relative to the population, forward-looking indicators based on the number of planning permissions have pointed towards a slowdown in construction activity since 2004.

Ranking:

N/A

Source: Forfás Calculations; Central Statistics Office, Housing and Households Statistics

Figure 4.43

Household Borrowing per Capita, 2007

�0

�5,000

�10,000

�15,000

�20,000

�25,000

�30,000

�35,000

2007 2004

Ital

y

Gre

ece

Por

tuga

l

Bel

gium

Fra

nce

Aust

ria

Euro

are

a

Fin

land

Ger

man

y

Spai

n

Net

her

lands

Irel

and

Ireland’s debt per capita has increased very rapidly in recent years and Ireland is now one of the most indebted Eurozone members. Average household debt per person is almost z35,000 in 2007. 80% of this is mortgage debt, followed by consumer credit (13%). Assets values have increased also - the value of the Irish housing stock is over four times greater than mortgage debt.

Eurozone-13 ranking:

12 (i2)

Source: European Central Bank, Aggregated Balance Sheet of Euro Area Monetary Financial Institutions

Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

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ional

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s C

ounci

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Figure 4.44

National House Price Index Change (%), 1997-2006

231%

176%

165%

115%

109%

95%

93%

92%

86%

81%

16%

-1%

-31%

-50% 0% 50% 100% 150% 200% 250%

Ireland

UK

Spain

France

Sweden

US

New Zealand

Denmark

Netherlands

Italy

Switzerland

Germany

Japan Excessive house price growth places upward pressure on wage demands and business costs. It also exposes the economy to greater volatility. Between 1997 and 2006, Irish house prices increased by 231 percent. There is evidence that house prices are falling in 2007.

OECD-28 Ranking:

28

Source: Economist Intelligence Unit (EIU)

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4.3 Knowledge Infrastructure

Education, training and research and development form key parts of a nation’s infrastructure for generating

knowledge. This section assesses Ireland’s performance in this area. Chart 8 provides an overview of Ireland’s

recent performance in terms of key knowledge infrastructure indicators.

Summary Chart 8:

Rankings in Indicators of Knowledge Infrastructure, 2000-2006 (or nearest)

1

0

23456789

10111213141516171819202122232425262728

Str

ong

Ran

king

Wea

k R

anki

ng

Edu

cati

onal

Att

ainm

ent

25

-64

yrs

(4

.45

)

Exp

endi

ture

Pre

-Pri

mar

y (4

.46

)

Exp

endi

ture

Pri

mar

y (4

.46

)

Exp

endi

ture

Sec

onda

ry (

4.4

6)

Exp

endi

ture

Ter

tiar

y (4

.46

)

Par

tici

pati

on o

f Th

ree

Year

Old

s in

Edu

cati

on (

4.4

8)

At

Leas

t U

pper

Sec

onda

ry E

duca

tion

20

-24

yrs

(4

.50

)

At

Leas

t U

pper

Seo

ndar

y E

duca

tion

25

-64

yrs

(4

.51

)

Sci

enti

fic

Lite

racy

of

15

Yea

r O

lds

(4.5

2)

Mat

hem

atic

al L

iter

acy

of 1

5 Y

ear

Old

s (4

.52

)

Rea

ding

Lit

erac

y of

15

Yea

r O

lds

(4.5

2)

Stu

dent

s to

Tea

chin

g S

taff

in S

econ

d Le

vel (

4.5

4)

At

Leas

t Th

ird

Leve

l Edu

cati

on 2

5-6

4 y

rs (

4.5

5)

Kno

wle

dge

Tran

sfer

(4

.57

)

Life

Lon

g Le

arni

ng (

4.5

8)

GE

RD

/GD

P (

4.5

9)

GE

RD

/GN

P (

4.5

9)

Tota

l Res

earc

hers

(4

.60

)

BE

RD

/GD

P (

4.6

1)

BE

RD

/GN

P (

4.6

1)

Bus

ines

s R

esea

rche

rs (

4.6

2)

Tria

dic

Pat

ents

(4

.64

)

HE

RD

/GD

P (

4.6

5)

HE

RD

/GN

P (

4.6

5)

Hig

her

Edu

cati

on R

esea

rche

rs (

4.6

6)

PhD

Gra

duat

es (

4.6

7)

LHS = 2000 RHS = 2006

Education: Overview

Average educational attainment in Ireland has increased steadily in the last two decades, with younger cohorts of

the population as well qualified as their OECD counterparts. Older cohorts of Ireland’s labour force remain less

qualified than the OECD average, though, and a relatively large share of the working age population has no more

than lower secondary education (Fig. 4.45). Expenditure per student is below the OECD average at all levels

(except pre-primary), while the pre-primary education system is predominantly privately funded, unlike in other

countries (Fig. 4.46, 4.47).

Pre-Primary and Primary

Without a comprehensive state-funded pre-primary system, participation of three year-olds in education in

Ireland is minimal and well below the EU-15 average (Fig. 4.48). At primary level, while the average number

of hours tuition given to 9-11 year-olds is among the highest in the OECD, the amount of time spent on the key

skills of mathematics, science and technology is among the lowest of the countries surveyed (Fig. 4.49).

Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

ounci

l

90

Secondary

Ireland has made significant progress over time and relative to other countries in terms of increasing secondary

school participation rates. The proportion of the 20-24 year-old population with upper secondary in Ireland is above

the EU-15 average and now exceeds the Lisbon target of 85 percent (Fig. 4.50). In the latest OECD PISA study

(2003), Irish 15 year-olds ranked well among OECD countries in terms of reading literacy (6th) but less well in terms

of scientific literacy (13th) and mathematical literacy (16th) (Fig. 4.52). Ireland’s scientific literacy ranking has

fallen four places since 2000. The number of computers per student is relatively low in Ireland (Fig. 4.53).

Tertiary and Life-Long Learning

Ireland’s younger population is considerably better qualified than older cohorts, with 41 percent of the 25-34 age

group possessing a third-level qualification. This compares very favourably with the OECD average of 35 percent (Fig.

4.55). It is difficult to measure the quality of third level institutions due to a range of issues. Based on available

data, the performance of Irish third level institutions ranks far behind the leading institutions overseas. Ireland’s

leading third level institution ranks 78th in the world (Fig. 4.56).

Life long learning is defined as all learning activity undertaken throughout life, with the aim of improving knowledge,

skills and competencies. Adult participation in life long learning remains relatively low in Ireland - below both the EU

average and Ireland’s Lisbon target (Fig. 4.58).

Research and Development

The transition to a knowledge economy requires higher levels of expenditure in research and development, both in

terms of capital infrastructure and development programmes. This section examines various measures of expenditure

in research and development, and the outputs achieved.

Despite a large increase in actual expenditure on R&D, Ireland is making limited progress towards the Irish (2.5

percent of GNP by 2013) and the Lisbon (3 percent of GDP by 2010) targets as strong economic growth is making

these targets more difficult to achieve. Total R&D spending in Ireland increased from 1.32 percent of GNP in 2000

to 1.59 percent of GNP in 2006 (Fig. 4.59). This compares with an OECD average of 2.26 percent (2006). The

number of researchers in Ireland is also growing. The number of researchers per 1000 total employment has grown

from 5 per 1000 in 2000 to 6 per 1000 in 2006 (Fig. 4.60). The R&D Action Plan for promoting investment in

R&D has set a target of 9.3 researchers per 1000 of total employment by 2010. Despite strong growth rates in

expenditure, business R&D as a percentage of economic activity has remained relatively static over the past decade

(Fig. 4.61). Most business expenditure on R&D in Ireland is undertaken by foreign-owned companies (Fig. 4.63).

Finally, higher education expenditure has increased strongly since 2000 (Fig. 4.65).

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Knowledge Infrastructure

4.3.1 Education: Overview

Figure 4.45

Educational Attainment of Population Aged 25-64 by Highest Level of

Education (%), 200540

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pre-Primary/Primary/Lower secondary Upper Secondary/Non-tertiary Tertiary

Japa

n

US

Finl

and

Den

mar

k

OE

CD

Sou

th K

orea

Net

herl

ands

Sw

eden UK

Irel

and

Spa

in

Fran

ce

Ger

man

y

Pol

and

Hun

gary

Ital

y

1221 17 20

28

16 14

35

51

34

17 1524

49

60

49

44 47 5044

42

56

35

20

41

5968

59

38

40 39 35 33 32 32 30 30 30 29 28 25 2517

12

24

54

17

Average educational attainment in Ireland has increased steadily in the last two decades. Older cohorts of Ireland’s labour force remain less qualified than the OECD average, though, and a relatively large share of the working age population (35%) has no more than lower secondary education.

OECD-28 Ranking:

(Ranked by third level)

14(i1)

Source: OECD, Education at a Glance, 2007

Figure 4.46

Annual Expenditure on Educational Institutions – per Student (E’000s PPP), 2004

4.24.6

6.1

8.7

6.77.5

8.5

19.2

4.7 4.9

6.5

9.2

4.05.0

6.2

9.510

15

0

5

20

25

Pre-Primary Primary Secondary Tertiary

OECDIrelandEU 15US

At all levels of education, Ireland invests less per student than the EU-15 and OECD averages (with the exception of pre-primary). The gap between the EU-15 and the US at all levels is considerable, particularly at third level.

OECD-28 Ranking:

Pre-Primary 10 (h7)

Primary 16 (h3)

Secondary 26 (i4)

Tertiary 15 (i6)


Ann

ual C

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00

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Com

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Figure 4.47

Relative Public and Private Expenditure on Educational Institutions (%), 200441

0

10

20

30

40

50

60

70

80

90

100Public Expenditure Private Expenditure Ireland’s pre-primary system

is almost entirely privately funded, unlike the typical OECD system. Public funding is relatively more important in Ireland at all other levels of the education system.

Ranking:

N/A

Source: OECD, Education at a Glance, 2007: Pre-Primary data for Ireland provided by the Department of Education and Science, Ireland

4.3.2 Pre-Primary and Primary Education

Figure 4.48

Participation of Three Year Olds in Education (as a % of population age cohort), 200442

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Fran

ce

Spa

in

Sw

eden

Den

mar

k

EU

15

Hun

gary

Ger

man

y

Japa

n

UK

US

Finl

and

Pol

and

Sw

itze

rlan

d

Irel

and

Net

herl

ands

2004 2000Pre-primary education includes programmes designed for children at least three years old and not older than 6 years. Ireland lags the EU-15 average by a considerable amount on this indicator. Pre-primary education, rather than childcare, is found to have significant individual and social returns.

EU-15 Ranking:

13 (--)

Source: Eurostat, Population and Social Conditions [online]

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Figure 4.49

Average Annual Hours of Tuition to 9-11 year-olds, by Subject, 2005

0 100 200 300 400 500 600 700 800 900 1000

Hungary

Finland

Poland (2004)

South Korea

Denmark

Japan

Germany

Spain

OECD

Portugal

France

UK

Ireland

Maths, science& technology

Other tuition

Overall, 9 -11 year old students at primary level in Ireland receive more hours of tuition per year than in most other OECD countries. However, of 22 countries surveyed, only two spent less time teaching mathematics, science, and technology.

OECD-28 Ranking:

Overall 4


4.3.3 Secondary Education

Figure 4.50

Percentage of the Population Aged 20 to 24 having Completed at Least

Upper Secondary Education 2006

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Lisbon Target 85%

Pol

and

Sw

eden

Irel

and

Finl

and

Hun

gary

Fran

ce UK

Den

mar

k

Ital

y

EU

15

Net

herl

ands

Ger

man

y

Spa

in

2006 2000

This indicator forms a key metric in the Lisbon Agenda. It is defined as the percentage of young people aged 20-24 years having achieved at least an upper secondary education attainment level. Data for 2006 suggests that Ireland (85.4 percent) exceeds the EU Lisbon target of 85 percent.

EU-15 Ranking:

3 (h1)


Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

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94

Figure 4.51

Percentage of the Population Aged 25-64 with at least Upper

Secondary Level Education, 2005

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%2005 2000

US

Japa

n

Sw

eden

Ger

man

y

Sw

itze

rlan

d

Den

mar

k

Finl

and

New

Zea

land

OE

CD

Hun

gary

Sou

th K

orea

Net

herl

ands UK

Fran

ce

Irel

and

Pol

and

Ital

y

Spa

in

Current secondary level completion rates take a long time to raise the overall level of qualifications. 65 percent of the 25-64 age group in Ireland have attained at least upper secondary education, which is below the OECD average and significantly below leading countries (e.g. US).

OECD-28 Ranking:

21(--)


Figure 4.52

Scientific, Mathematical and Reading Literacy of 15 Year Olds, 200343

Inde

x of

Lit

erac

y (3

35

-62

5)

rank

ed b

y ov

eral

l av

erag

e

Finl

and

Sou

th K

orea

Japa

n

Net

herl

ands

New

Zea

land

OE

CD

Sw

itze

rlan

d

Sw

eden

Irela

nd

Fran

ce

Ger

man

y

Pol

and

Den

mar

k

Hun

gary

Spa

in

Ital

y

US

400

420

440

460

480

500

520

540

560

Reading Literacy Scientific Literacy Mathematical Literacy

In the 2003 PISA study, Irish 15 year olds ranked comparatively well in terms of reading literacy but ranked less well for scientific and mathematical literacy. Small differences between countries should be interpreted with caution.

OECD-30 Ranking:

Reading 6 (i1)

Science 13 (i4)

Maths 16 (i1)

Source: OECD, PISA Database, 2003

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Figure 4.53

Computers and Number of Internet Connected Computers per 100 Pupils, 200644

0%

5%

10%

15%

20%

25%

3 0%

Den

mar

k

Net

herl

ands UK

Sw

eden

Finl

and

Aus

tria

Fran

ce

EU

15

Hun

gary

Spa

in

Ger

man

y

Ital

y

Por

tuga

l

Pol

and

Computers per 100 pupils Internet connected computers per 100 pupils

Irel

and

ICT has profound implications for education, as it can facilitate new forms of learning and is now a necessary preparation for adult life. Among the benchmarked countries, Ireland has fewer computers per student than the EU-15 average.

EU-15 Ranking: 9(--)

Source: Benchmarking Access and Use of ICT in European Schools, 2006

Figure 4.54

Ratio of Students to Teaching Staff in Secondary Education Institutions, 200545

0

5

10

15

20

25

2005

Spa

in

Ital

y

Hun

gary

Fran

ce

Pol

and

Sw

eden

OE

CD

Japa

n

Finl

and

UK

New

Zea

land

Ger

man

y

Irel

and

US

Net

herl

ands

Sou

th K

orea

2000Ireland continues to be above the OECD average of 13.7 for the ratio of students to teaching staff in secondary schools in 2005. As in most countries, this ratio has fallen since 2000.

OECD-28 Ranking:

22(i2)


Ann

ual C

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00

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4.3.4 Tertiary Education and Life Long Learning

Figure 4.55

Population by Age Cohort that has at Least Third Level Education, 200546

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

EU 15

Ireland

UK

OECD

US

35-44 45-54 55-6425-34A breakdown of third-level graduates by age reveals that Ireland’s educational attainment varies much more by age than in other countries. While cohorts over 45 – in particular the 55-64 age group – have lower attainment rates than the OECD average, Ireland’s 25-34 year-olds are more qualified than most of their counterparts elsewhere in the OECD, in particular the EU-15.

OECD-28 Ranking:

(ranked by total 25-64 year olds) 14 (--)


Figure 4.56

Performance of the Third Level Sector (Scale 0-100), 2005

0

10

20

30

40

50

60

70

80

90

100

Trin

ity

Col

lege

US

UK

Chi

na

Aus

tral

ia

Fran

ce

Sin

gapo

re

Japa

n

Can

ada

Sw

itze

rlan

d

Hon

g K

ong

New

Zea

land

Den

mar

k

Indi

a

Ger

man

y

Sou

th K

orea

Net

herl

ands

Bel

gium

Irel

and

Aus

tria

Sw

eden

Ranking third-level institutions is an exercise fraught with difficulties. The rankings shown in the chart are based on peer review and recruiter review assessments, number of citations, ratio of faculty to student numbers and success in attracting foreign students. Ireland’s leading institution, Trinity College, comes 78th out of 200.

Ranking of Institution:

78 (out of 200)

Source: The Times Higher Education Supplement, 2006

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Figure 4.57

Knowledge Transfer Between Companies and Universities, 2007 (Scale 0-10)

0

1

2

3

4

5

6

7

8

9

10

Litt

le T

rans

fer

Hig

hly

Dev

elop

ed

Sw

itze

rlan

d

Sin

gapo

re

Den

mar

k

US

Sw

eden

Ger

man

y

Net

herl

ands

Irel

and

OE

CD

New

Zea

land

Sou

th K

orea

Japa

n

UK

Hun

gary

Fran

ce

Finl

and

Spa

in

Ital

y

Pol

and

2007 2000Executive opinions regarding the state of development of knowledge transfer between academia and enterprise in Ireland are in line with the OECD average. Barriers to more effective knowledge transfer include lack of knowledge of third level research projects and difficulties with intellectual property contracts.

OECD-28 Ranking:

14 (i8)


Figure 4.58

Life Long Learning in EU Member States (% 25-64 year olds), 200647

0%

5%

10%

15%

20%

25%

30%

35%

Lisbon Target 12.5%

Sw

eden UK

Den

mar

k

Finl

and

Net

herl

ands

EU

15

Spa

in

Ger

man

y (2

00

4)

Irel

and

Fran

ce

Pol

and

Ital

y

Hun

gary

2006 2000

Sw

eden

(200

5)

Den

mar

k

UK

Finl

and

Net

herla

nds

EU

15

Spa

in

Ger

man

y

Irela

nd

Fran

ce

Italy

Pol

and

Hun

gary

Life long learning is defined as all learning activity undertaken throughout life, with the aim of improving knowledge skills and competencies. This indicator measures the percentage of persons aged 25 to 64 in receipt of education in the four weeks prior to the survey and includes both formal and non formal education. Ireland’s score is below both the EU-15 average and the Lisbon target.

EU-15 Ranking:

9 (i1)


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4.3.5 Research and Development

Figure 4.59

Gross Domestic Expenditure on R&D (GERD), % GDP, 200548

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Irish Target 2.5%

EU Lisbon Target 3%

Sw

eden

Finl

and

(20

06

)

Japa

n

US

20

06

Ger

man

y

Den

mar

k

OE

CD

Fran

ce

Net

herl

ands

(2

00

4)

UK

Irel

and

GN

P (

20

06

)

Irel

and

GD

P (

20

06

)

Spa

in

Ital

y (2

00

4)

Hun

gary

Pol

and

2005 2000

As part of the Lisbon Strategy, the European Council set a target that 3 percent of EU GDP would be spent on R&D by 2010. The Irish Strategy for Science, Technology and Innovation 2006-2013 foresees Ireland reaching 2.5 percent of GNP by 2013.

OECD-28 Ranking:

GDP: 21(--)

GNP: 17(h2)

Source: Forfás, Research and Development Statistics in Ireland at a Glance 2006; OECD, Main Science and Technology Indicators, 2007/ Issue 1

Figure 4.60

Total Researchers per 1000 Total Employment, 200549

0

2

4

6

8

10

12

14

16

18

Irish Target 9.3

Finl

and

Spa

in

Den

mar

k (2

00

4)

US

Fran

ce (

20

04

)

Sou

th K

orea

OE

CD

Ger

man

y

Sw

itze

rlan

d (2

00

4)

Irel

and

(20

06

)

Pol

and

Net

herl

ands

(20

03

)

Hun

gary

Ital

y (2

00

4)

2005 2000

The R&D Action Plan for promoting investment in R&D has set a target of 9.3 researchers per 1000 of total employment by 2010. The number of researchers has grown from 5 per 1,000 total employment in 2000 to 6 per 1,000 in 2006.

OECD-28 Ranking:

17(h1)

Source: OECD, Main Science and Technology Indicators, 2007/ Issue 1

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Figure 4.61

Business Expenditure on R&D (BERD) % GDP, 200550

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

EU Lisbon GDP Target 2%

Irish GNP Target 1.7%

2005 2000Ja

pan

Finl

and

(20

06

)

Sou

th K

orea

Sw

itze

rlan

d (2

00

4)

US

(2

00

6)

Ger

man

y

Den

mar

k

OE

CD

Fran

ce

UK

Irel

and

GN

P (

20

06

)

Net

herl

ands

Irel

and

GD

P (

20

06

)

Spa

in

Ital

y (2

00

6)

New

Zea

land

(2

00

3)

Hun

gary

Pol

and

The Irish Strategy for Science, Technology and Innovation has set a target of E3 billion for business expenditure on R&D by 2013. In 2005, business expenditure on R&D in Ireland stood at E1,329 million.

OECD-28 Ranking:

GDP: 19(--)

GNP: 15(h2)

Source: Forfás, Research and Development Performance in the Business Sector Ireland, 2005/06; OECD, Main Science and Technology Indicators, 2007/ Issue 1

Figure 4.62

Business Researchers per 1000 Total Employment 200551

0

1

2

3

4

5

6

7

8

9

102005 2000

Finl

and

Sw

eden US

Japa

n

Den

mar

k

Sou

th K

orea

OE

CD

Fran

ce (

20

04

)

Ger

man

y

Irel

and

UK

Hun

gary

Ital

y

Pol

and

Research staff can play an important part in helping a company increase its scientific and technological capabilities. Ireland had a lower number of business researchers per 1000 employment than the OECD average in 2005.

OECD-28 Ranking:

15(--)

Source: Forfás Calculations; OECD, Main Science and Technology Indicators, 2007/ Issue 1

Ann

ual C

ompe

titi

vene

ss R

epor

t 2

00

7 V

olum

e 1

Nat

ional

Com

pet

itiv

enes

s C

ounci

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100

Figure 4.63

Business Sector R&D Expenditure by Firm Type 2001-2005

19

95

19

97

19

99

20

01

20

03

20

05

0

200

400

600

800

1000

1400

1200

All (�mn) Foreign-owned (�mn) Irish-owned (�mn)

mill

ions

�

Foreign-owned companies undertake most business expenditure on R&D in Ireland. The Irish Strategy for Science, Technology and Innovation 2006-2013 has set a target for business expenditure on R&D in indigenous firms to grow to E825 million by 2013. This is more than double the amount being spent by Irish firms in 2005.

Ranking:

N/A

Source: Forfás, Research and Development Performance in the Business Sector Ireland, 2005/06

Figure 4.64

Triadic Patent Granted per Million Population, 2005

0

10

20

30

40

50

60

70

802005 2000

Ger

man

y

Sw

eden

Net

herl

ands US

OE

CD

Finl

and

Fran

ce

Den

mar

k

UK

Irel

and

Ital

y

Spa

in

Hun

gary

Pol

and

Patents can be taken as the reflection of a country’s inventive activity. Triadic patent are patents granted at the European, Japanese and US Patent offices. On this measure, Ireland continues to perform well below the OECD average.

OECD-28 Ranking:

19(i1)


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Figure 4.65

Higher Education Expenditure on R&D (HERD) as a % of GDP, 200552

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

0.9%2005 2000

Swed

en

Fina

nd (

2006

)

Den

mar

k

Net

herla

nds

UK

Japa

n

OEC

D

Ger

man

y

Fran

ce

Irel

and

GN

P(2

006)

US

(200

6)

Ital

y (2

004)

Irel

and

GD

P(2

006)

Spai

n

Sout

h K

orea

Hun

gary

Pola

nd

Higher education expenditure has more than doubled over the last seven years rising from E238 million in 2000 to E565 million in 2005. As a percentage of GNP, Ireland has converged with the OECD average, but remains far behind the leading countries.

OECD-28 Ranking:

GDP: 19 (h5)

GNP: 16 (h7)


Figure 4.66

Higher Education Total Researchers per 1000 Employment 200553

0

1

2

3

4

5

62005 2000

Finl

and

Sw

eden

Den

mar

k

Pol

and

Japa

n

Fran

ce (

20

04

)

OE

CD

Irel

and

Ger

man

y

Hun

gary

Sou

th K

orea

Ital

y (2

00

4)

The number of researchers in the higher education sector in Ireland is growing rapidly. This is evident by Ireland’s convergence towards the OECD average.

OECD-28 Ranking:

17 (h5)

Source: Forfás Calculations; OECD, Main Science and Technology Indicators, 2007/ Issue 1

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Figure 4.67

PhD Graduates per 1000 of Population aged 25-34, 200554

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.52005 2000

Fin

land

Sw

eden UK

EU

15

US

Net

her

lands

Den

mar

k

Irel

and

Fra

nce

Pol

and

Spai

n

Ital

y

Hunga

ry

PhD graduates are central to the delivery of Ireland’s Strategy for Science, Technology and Innovation. In 2005, PhD graduates per 1000 of population in Ireland lagged the EU15 by more than 25%. While more 25-34 year-old males in Ireland have PhDs than females, the gap is not as large as in other EU-15 countries.

EU-15 Ranking:

9 (h1)

Source: Eurostat, Population and Social Conditions; National science Foundation, Thompson ISI, Science and Engineering Indicators, 2006

Figure 4.68

Scientific Citations and Publications Index 2003

1 1.2

0.4

0.5

0.6

0.6

0.7

0.7

0.8

0.8

0.8

0.8

0.9

0.9

0.9

1.0

1.0

0 0.2 0.4 0.6 0.8

Poland

Hungary

Japan

Spain

Italy

EU15

France

Ireland

Germany

Finland

Sweden

UK

Denmark

Netherlands

US This index represents an economy’s share of scientific citations and references relative to its share of published literature. Ireland performs relatively well in this measure, scoring just above the EU-15 average.

EU-15 Ranking:

9

Source: Science and Engineering Indicators, 2006 (National Science Foundation), Thomson ISI

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End Notes1 Base year for ranking change is 2000-2003 period compared to 2003-2006 period

2 UK refers to 2003 data

3 OECD average minus Luxembourg

4 Base year for ranking change is 2004 compared to 2005

5 EU-15 2000 average – Austria, Italy, Luxembourg, Portugal and Spain refer to 2001

6 Base year for ranking change is 2000-2003 compared to 2003-2006

7 Base year for ranking change is 2000-2003 period compared to 2003-2007 period



10 Ireland public sector wage inflation (minus health) refers to third quarter 2006;

Public sector comparison is made to UK public sector wage inflation due to data availability


12 OECD average minus Iceland, Canada and Poland. Australia and US refer to 2004

13 OECD average minus Iceland

14 Base year for ranking change is 2005 compared to 2015 projections

15 In Ireland, companies in the manufacturing industry had a rate of 10% until the rate changed to 12.5% in 2003. In making international

comparisons of corporate tax rates, it is important to take account of the impact of exemptions in the tax base.

16 OECD average minus US




20 EU-15 average minus Austria and the Netherlands

21 EU-15 average minus Luxembourg and Denmark


23 Base year for ranking change is 2005 compared to 2006. OECD average minus Luxembourg

24 OECD average composes of 19 countries

25 EU-15 average minus Luxembourg









34 Data for Singapore ‘other’ category is 2002

35 EU-15 minus Luxembourg




39 EU average minus Italy, Greece and France


41 EU-15 average minus Greece

42 OECD-28 minus UK in 2003 and minus Slovakia and the Netherlands in 2000

43 EU-15 average minus Greece

44 OECD average minus Canada, Norway and Denmark


46 Ireland refers to change since 2002 and Poland since 2001

47 Rankings incorporate the latest available data for countries that are unavailable for 2005

48 OECD average minus UK & Ireland. Rankings incorporate the latest available data for countries that are unavailable for the current year

49 Rankings incorporate the latest available data for countries that are unavailable for the current year



52 OECD average minus UK & US. Rankings incorporate the latest available data for countries that are unavailable for the current year

53 EU-15 minus Luxembourg; Finland and France refer to 2003

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Appendices5

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5. Appendices

Appendix 1- ACR Data Sources

Organisation for Economic Cooperation and Development (OECD)

The OECD is an organisation of 30 member countries characterised by democratic government and

adherence to the market economy. These countries are located primarily in Western Europe, but also

in North America and in the Asia-Pacific region. Its work covers economic and social issues including

macroeconomics, trade, education, development and science and innovation. The OECD provides

statistical data for member countries on a wide range of economic and social indicators.

http://www.oecd.org/statistics

Eurostat

Eurostat is part of the European Statistics System (ESS). The ESS comprises Eurostat and the statistical

offices, ministries, agencies and central banks that collect official statistics in EU Member States,

Iceland, Norway and Liechtenstein. Member States collect data and compile statistics for national and

EU purposes. The ESS functions as a network, in which Eurostat’s role is to facilitate the harmonization

of statistics in cooperation with the national statistical authorities. The ESS also coordinates its work with

international organisations such as OECD, the UN, the International Monetary Fund and the World Bank.

http://www.europa.eu.int/comm/eurostat/

Central Statistics Office (CSO) Ireland

The Central Statistics Office serves as Ireland’s national statistical agency. The Office exists primarily to

meet the needs of Government for quality statistical information that is a vital input to the formation,

implementation and monitoring of policy and programmes at national, regional and local levels in a

rapidly changing economic and social environment. It also serves the needs of the wider national and

international community (i.e. business, EU, international organisations, media, researchers, and the

public generally) for impartial and relevant information on social and economic conditions.

http://www.cso.ie

Groningen Growth and Development Centre

The Groningen Growth and Development Centre is a research group of economists and economic

historians at the Economics Department of the University of Groningen. It was created in June 1992

within the Economics Department of the University. The group carries out research on comparative

analysis of levels of economic performance and differences in growth rates in the world economy. Up-to-

date GGDC data include: the Total Economy database (GDP, Population and Employment data), and the

EU Klems Database (Value added data and Employee data), which allow analysis of macroeconomic and

productivity performance over time.

http://www.ggdc.net/

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IMD World Competitiveness Yearbook (IMD WCY), (2007)

The stated aim of the World Competitiveness Yearbook is to analyse and rank the ability of nations to create and

maintain a competitive enterprise environment. It features 55 industrialised and emerging countries and provides

323 different competitiveness criteria grouped into four ‘Competitiveness Factors’ (Economic Performance,

Government Efficiency, Business Efficiency, and Infrastructure). Indicators are derived from both hard data taken

from international, national and regional organisations and private institutes, and survey data drawn from the annual

Executive Opinion Survey (over 4,000 respondents). This report is published every summer, and the figures in the

2007 report generally relate to 2006 and 2007 data.

World Economic Forum Global Competitiveness Report (WEF GCR), (2006-2007 and 2007-2008)

The Global Competitiveness Report measures the competitiveness of nations through two main indices developed by

the WEF team, the Global Competitiveness Index (GCI) and the Business Competitiveness Index (BCI). Both indices

are derived from a combination of publicly available hard data, and information provided in the Forum’s Executive

Opinion Survey, which conveys information about the competitiveness of 131 countries. Through the survey, over

11,000 business executives in these countries assess the importance of a broad range of factors central to the

business environment. The response rate to the survey averages over 80 respondents per country. The ACR mainly

uses WEF survey data to supplement statistical information about the innovation, enterprise and general business

climates. This report is published every year and the figures in the 2006-2007 and 2007-2008 reports generally

relate to 2006 and 2007.

UNCTAD World Investment Report (2006)

Established in 1964, UNCTAD promotes the development-friendly integration of developing countries into the world

economy. In performing its functions, the secretariat works together with member Governments and interacts with

organizations of the United Nations system and regional commissions. Its World Investment Report focuses on global

trends in foreign direct investment. This report is published annually.

http://www.unctad.org

The UK Office for National Statistics (ONS)

The ONS is the government department that provides UK statistical and registration services. It is responsible for

producing a wide range of economic and social statistics that are used by government to monitor performance. It

also registers life events and holds the decennial census of the population.

http://www.statistics.gov.uk/

United Nations Human Development Report (UN HDR), (2006)

This report presents two types of statistical information: statistics in the human development indicator tables, which

provide a global assessment of country achievements in different areas of human development, and statistical

evidence on the thematic analysis in the chapters. The Human Development Report Office is primarily a user, not a

producer, of statistics. It therefore relies on international data agencies with the resources and expertise to collect

and compile international data on specific statistical indicators. This report is published annually and the figures in

the 2006 report generally relate to 2003-2004.

http://hdr.undp.org/

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International Energy Agency

The International Energy Agency is the energy forum for 26 industrialised countries. IEA Member

governments have agreed to share energy information, to co-ordinate their energy policies and to co-

operate in the development of rational energy programmes. These provisions are embodied in the

Agreement on an International Energy Program, which established the Agency in 1974.

http://www.iea.org/Textbase/subjectqueries/index.asp

US Bureau of Economic Analysis (BEA)

BEA is an agency of the Department of Commerce in the US. BEA produces economic accounts statistics.

These consist of national accounts which provide a quantitative view of US domestic production and

investment, of exports and imports, national and domestic income and saving, and regional accounts

which provide detailed data on economic activity by region, state and county.

http://www.bea.gov/

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Appendix 2: Glossary of Terms

BERD Business Expenditure on Research and Development

CPI Consumer Price Index

Index which measures the price that consumers pay for a representative basket of

goods.

Enterprise Ireland State agency with primary responsibility for the development of Irish-owned business

in manufacturing and internationally-traded services.

EPO European Patent Office

ESRI Economic and Social Research Institute

Ireland’s national independent think-tank undertaking economic and social research,

with the aim of informing policy formation and societal understanding.

FDI Foreign Direct Investment

Investment by a multinational company in establishing production, distribution or

marketing facilities abroad.

Forfás State agency responsible for providing policy advice on enterprise, trade, science,

technology and innovation and for advising and co-ordinating the functions of IDA

Ireland, Enterprise Ireland and Science Foundation Ireland.

GDP Gross Domestic Product

The total money value of all final goods and services produced in an economy over a

defined period.

General Government Gross

Fixed capital Formation

This consists of resident producer’s acquisitions, less disposals of fixed assets during

a given period plus certain additions to the value of non-produced assets realized by

the productive activity of government producer or units.

GERD Gross Expenditure on Research and Development

Total public and private expenditure on R&D

Gini Coefficient The Gini Coefficient is a measure of income distribution whereby a score of zero

indicates perfect equality, and 100 indicates that all national income in enjoyed by

one person.

GNP Gross National Product

The value of all final goods and services produced within a nation in a given year,

plus income earned by its citizens abroad, minus income earned by foreigners from

domestic production.

Greenfield

Projects

The setting up of a new activity as opposed to the acquisition of one that already

exists.

Gross Fixed capital Formation

by the Private Sector

This consists of resident producer’s acquisitions, less disposals of fixed assets plus

certain additions to the value of non-produced assets realised by productive activity.

The private sector consists of non-financial and financial corporations, households

and non-profit organisations serving households.

HEA Higher Education Authority

The statutory body responsible for the funding of universities and designated third-

level education institutions. Its functions include the development of third level

education to meet the needs of the community and to advise in relation to all higher-

level education.

HERD Higher Education Expenditure on Research and Development

HDI Human Development Index

Composite index which combines measures of life expectancy, school enrolment,

literacy and income.

ICT Information and Communications Technology

IDA Ireland State agency responsible for attracting inward investment in manufacturing and

internationally-traded services sectors.

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IP Intellectual Property

The asset which arises where innovation or creative activities lead to an invention,

design or process sufficiently unique or original to be considered confidential or

valuable or both.

Labour Costs Labour costs cover all market economic activities except agriculture, fisheries,

fostery, education, health, entertainment, information and personal services

activities. Labour costs include gross wages and salaries, employer’s social

contributions and taxes net of subsidies connected to employment.

Labour Force The total number of people, aged 15 years and over, employed and unemployed and

seeking employment.

NDP National Development Plan

The NDP 2007-2013 is a 184 billion seven year spending plan across five priority

areas; economic infrastructure, enterprise, science and innovation, human capital,

social instrastructure and social inclusion.

PPP Purchasing Power Parity

PPP is a method of measuring the relative purchasing power of different countries’

currencies over the same types of goods and services. Goods and services may

cost more in one country than in another one, hence PPP allows us to make more

accurate comparisons of standards of living across countries.

Productivity The relationship between the output of an economic unit and the factor inputs that

have gone into producing that output. Productivity is usually measured in terms of

output per hour worked, also known as value added per hour worked.

R&D Research and Development

Creative work undertaken on a systematic basis in order to increase the stock of

knowledge, including knowledge of man, culture and society, and the use of this

stock of knowledge to devise new applications. (OECD)

SFI Science Foundation Ireland

Established by the Government in July 2003 to invest €648 million between 2000

and 2006 in academic researchers and research teams to generate knowledge,

leading-edge technologies and competitive enterprises in the fields underpinning

biotechnology and information and communications technology.

Sustainable Development Development that meets the needs of the present population without compromising

the ability of future generations to meet their own needs (UN definition).

ULC Unit Labour Cost

Measures the cost of labour required to produce one unit of a good. Changes in

unit labour costs occur due to changes in productivity (output per hour worked) or

changes in earnings/wages.

VAT Value Added Tax

An indirect tax levied on the sale of goods and services.

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Appendix 3: NCC Publications

Publication Date

Annual Competitiveness Report, 1998 March 1998

The Competitiveness Challenge Summary Statement March 1998

Statement on Telecommunications: A Key Factor in Electronic Commerce and

Competitiveness

November 1998

Statement on Skills December 1998

Annual Competitiveness Report, 1999 May 1999

Report on Costs June 1999

Statement on Social Partnership September 1999

Proposals on Transport Infrastructure, the Planning Process and Public Transport March 2000

The Competitiveness Challenge May 2000

Annual Competitiveness Report, 2000 May 2000

Statement on Telecommunications, e-Business and the Information Society July 2000

Statement on Regulatory Reform July 2000

Statement on Labour Supply and Skills September 2000

The Competitiveness Challenge, 2001 December 2001

Annual Competitiveness Report, 2001 December 2001

The Competitiveness Challenge, 2002 November 2002

Annual Competitiveness Report, 2002 November 2002

Statement on Inflation May 2003


Annual Competitiveness Report, 2003 November 2003

Statement on Prices and Costs September 2004

The Competitiveness Challenge, 2004 October 2004

Annual Competitiveness Report, 2004 October 2004

Annual Competitiveness Report, 2005 September 2005


Annual Competitiveness Report 2006, Volume 1: Benchmarking Ireland’s Performance October 2006

Overview of Ireland’s Productivity Performance, 1980-2005 October 2006

Statement on the Costs of Doing Business in Ireland, 2006 October 2006

Annual Competitiveness Report 2006, Volume 2: Ireland’s Competitiveness Challenge February 2007

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