Full Text Of Bertie Ahern’s Keynote Speech To CBI Conference 2006

Ladies and Gentleman.

I am delighted and greatly honoured to have been invited to address the CBI's Annual Conference.

The Evolution of Ireland’s Economy

Some forty years ago - during the term of one of my predecessors, and a great hero of mine, Seán Lemass - a new way of thinking about the economy, society and the future was taking hold in Ireland. We began to move away from protectionism and towards a new openness, especially towards seizing market challenges and opportunities.

It was a long journey and success did not come overnight. In the mid-1970s for example, our GDP per capita was only a third of Germany's. In the early 1980s, Ireland's national debt per capita was higher than in either Ethiopia or Sudan.

In the mid-1980s, our economy was losing between 20,000 to 40,000 people per annum - or 1% of our population - to economic migration.

But by the early 1990s, the Irish economy had started to turn around and it continued to grow beyond all expectations. Last year, the economy registered its 18th consecutive year of expansion, with virtually full employment and GDP per capita 16% above the EU average.

Lessons for a Globalising World

How did we achieve this? And are there any lessons of more general application as we address the challenges and opportunities of ever increasing globalisation?

Openness Works

I think the first and most obvious point to make is that, from our experience, openness works. As a country which suffered the consequences of protectionism, we have secured unprecedented gains from opening up to Europe and the wider world.

The Policy Mix must be Right

But, of course, openness, on its own, is not enough. We need to have a pro-business, pro-employment environment. In our case, we did this through a mix of mutually consistent policies, covering areas like taxation, incomes, investment, education and skills. All of these, consistently applied, continue to be of critical importance in this era of globalisation. But for economies like ours, there is an increased premium on investment in education, skills and R&D.

An Actively Engaged Workforce

Sustained growth of the type we have enjoyed can only be generated with the proactive engagement of the workforce - employers and employees alike. In Ireland, we secured this through our system of social partnership, which has delivered key benefits: of industrial relations peace and stability; the associated freeing up of management time for managing and innovating; a climate of certainty for investors; a capacity to respond quickly to emerging challenges; and a predisposition to flexibility and adaptation to change in the workplace.

More recently, Ireland’s system of social partnership is enabling us to respond to the dramatically changing circumstances in the Irish labour market arising from our decision in common with the UK and Sweden, to allow direct access by citizens of the new Member States. Through dialogue and negotiation, we have agreed measures to ensure decent employment standards, without compromising flexibility or adding unreasonably to regulatory burdens.

Obviously, we would not presume to be prescriptive about our system of social partnership but it has served us very well as a process that helps us to adapt to the changing economic environment.

Ireland and the UK: Our Special Economic Relationship

As a small open economy, Ireland’s economic success is dependent on our ability to export the goods and services we produce. As the UK is Ireland’s second largest export market after the US, its importance is clear.

For many companies, especially newer or smaller businesses taking their first steps into exporting, links of culture and language make the UK the obvious first port of call.

In 2004, the UK accounted for 18% of Ireland’s total exports, worth approximately £10 billion sterling. ICT products, food and beverages, and chemicals dominate Ireland’s exports to the UK, with food and beverage products, accounting for over one fifth of our exports to the UK.

The relationship is by no means one way. Ireland is the UK’s fourth largest export market and the largest on a per capita basis, accounting for £13.7 billion sterling in 2004. From the perspective of Foreign Direct Investment, Ireland historically has received large inflows and the UK has been the second largest source of inward investment into Ireland. In recent years, continuing high rates of inward investment have been accompanied by a growing value of overseas investment from Ireland.

Mergers and acquisitions have largely driven the increase in overseas investment by Irish companies. The UK has been one of the largest beneficiaries in recent years of this increase, with more and more Irish firms opening up operations in the UK.

On the other side of the coin, one fifth of all foreign-based firms in Ireland are British – second only to the United States. There are clearly a number of factors driving this investment.

Excellent Workforce

Firstly, Ireland has one of the youngest populations in Europe, with over 36% under the age of 25; and demographic trends mean that we will continue to have a capacity for growth far ahead of other EU countries in the coming years.

Almost 40% of our 25 to 34 year olds have been educated to third level. Indeed, I believe that our education system is particularly attuned to the needs of a competitive economy and it was described in the IMD World Competitiveness Report as one of the best in the world. Perhaps most importantly, our people have a reputation for a positive attitude, hard work, flexibility and above all for innovation – for coming up with new ideas, new processes and new methods of operating.

Strong R&D Focus

A second feature of our economy is that we have an excellent R&D base, following on from a fivefold increase in research investment over the period 2000 - 2006, and we are continuing to prioritise investment in this area.

Earlier this year, we launched a new Strategy for Science, Technology and Innovation, involving an investment of €3.8 billion. Over the lifetime of this Strategy, we aim to secure our position as one of the world’s advanced knowledge economies, developing a worldwide reputation for research excellence and the generation of new ideas.

Our objectives are to double the number of Phd graduates, especially in the physical sciences; to reinforce R&D in our core strengths of ICT, biotechnology and pharmaceuticals; and to significantly enhance R&D in the areas of agri-food, marine industries, energy, healthcare and the environment.

We aim to further internationalise our R&D capability by attracting more top scientists to Ireland, by participating in leading international research networks and collaborations, and by creating strategic international partnerships in key areas.

We will also be seeking to ensure more effective commercialisation of the ideas and know-how being generated in our universities and public research institutions, and to forge new partnerships between these institutions and enterprise.

Good Corporate Tax Environment

Thirdly, we have one of the most favourable corporate tax environments in the world, with a corporation tax rate of 12.5%; tax exemption for certain income derived from patents; tax credits for incremental expenditure on R&D; a positive holding company regime; and an extensive network of double taxation agreements.

Heavy Investment In Competitiveness

Fourthly and more generally, through our most recent National Development Plan, we have undertaken an unparalleled level of investment in developing our infrastructure and our education and training services.

We will be renewing that effort in our next National Development Plan, covering the period 2007 to 2013. Under it, we will continue to invest around 5% of GDP in infrastructure development, ensuring in the process that we remain competitive in the global marketplace. No doubt, there will be plenty of opportunities for CBI members in this next phase of investment. Likewise, your Irish counterparts will be hoping to maximise the opportunities presented by your great achievement in securing the 2012 Olympics for London.

Industrial Relations Stability

Fifthly, our economy enjoys industrial relations stability and certainty around wage development derived from our system of social partnership.

Ease Of Doing Business

And, two last points. Our political and administrative system is very accessible, we listen to business and we are geared to responding quickly to business needs and concerns. Furthermore, it is easy to do business in Ireland.

As a small country, our State agencies, local authorities and others work together as a team. So much so that the Director of the IMD Competitiveness Yearbook recently held up, as an example for others, our one stop advice system – where an investor only has to deal with one authority, IDA Ireland, rather than “20 different people – and you still don’t know with whom you should be dealing”.

So in all therefore, the seven particular attributes of the Irish economy that I have just listed, amount to seven good reasons for investing in Ireland. Last year was a particularly good year for R&D investment from multinational companies. Key investment decisions in this area included Bristol Myers Squibb, Citigroup, Genzyme, Pfizer, Xilinx, Dell and Microsoft – celebrating their 20th anniversary in Ireland.

This year promises to be just as good, with major announcements by Amgen, Amazon, Cisco, Georgia Tech Research Institute and Abbot among others. So we are making real progress in putting Ireland on the map as a Knowledge Economy.

Today five of the top ten ICT companies in the world have substantial operations in Ireland. This sector of over 220 companies employs nearly 40,000 people, accounts for €50 billion exports and generates €500 million in corporate tax annually.

Another sector of huge significance is the pharmaceutical sector. Ireland has attracted 13 of the top 15 pharmaceutical companies in the world and 25 of the top 50. 6 of the top 10 leading drugs in the world are manufactured in Ireland.

Ireland and the EU

Ireland’s success is in part due to our place at the heart of the European project. In our view, the Union must continue to justify itself by delivering real benefits for its people. It must deliver and be seen to deliver, starting by the contribution it makes to growth and jobs.

The current difficulties being experienced in the adoption of the Constitutional Treaty reflect a real sense of disconnect between significant segments of the European public and the institutions and policies of the Union. To my mind, this sense of disconnect springs from a feeling that at the European level, there has been too much emphasis on constitutions and too little focus on practical results.

I firmly believe that the draft European Constitution is a necessary and worthwhile enterprise. And having chaired the final negotiations that led to it, I am certain that the Constitution represents the best outcome available. However, if we are to persuade the people of Europe that further constitutional advance is both necessary and desirable, we need to show clearly that Europe can make a real difference in their day-to-day lives. To that end, the Lisbon Agenda is of key importance.

Stepping back from the detail for a moment, it is clear that maintaining the European way of life depends on successful competition within the EU and on successful competition between the EU and the other economic blocks.

The Lisbon Agenda challenges Member States specifically, and the EU generally, to look more closely at how we can compete more effectively and how we can balance more appropriately economic growth with social goals.

At the heart of the issue is getting the balance right between standardisation, to ensure fairness and flexibility, to adapt to change. That is a key and daily challenge for the Union with regard to economic sectors holding varying significance for different Member States. This challenge is particularly evident from the National Reform Programmes now being implemented in each Member State to give effect to the Lisbon Agenda.

Northern Ireland

Perhaps I could conclude by saying a few words about Northern Ireland.

Last Friday, we heard an echo of a terrible past but we also got a glimpse of a shared future.

The failed attempt by one individual to use violence on one hand, and the continued suspicion between the political parties on the other, suggest a world that never changes.

But that is not the case.

Things have changed enormously, and for the better.

People, especially young people, are putting the past behind them. They are building for the future.

In many ways, the people are way ahead of the politicians.

But, to be fair, the parties are, more than ever, also trying to get on with it.

And, as you know, the British and Irish Governments now enjoy a unique partnership in our dealings on Northern Ireland. Through this partnership we have also ensured that relationships between Britain and Ireland have never been better.

The strength of this partnership has driven the peace process towards conclusion. It has been slow and indeed at times frustrating. But it has been worth it. Lives have been saved and Northern Ireland is now a different place with a real and promising future. Prime Minister Blair and I remain absolutely committed to seeing this process successfully completed. We are determined to proceed with the implementation of the St Andrews Agreement leading to the re-establishment of a devolved power-sharing Government next March.

That will give important political stability and local leadership to boost the economic progress that has been made.

Business has taken a leading role in placing economic issues at the heart of the public debate about the future.

And there is significant and welcome common ground between the political parties on economic matters.

They recently went together to meet the Chancellor to discuss a financial package for the future Executive. He responded with a significant package which the parties now need to address together.

I welcome the increasing focus by politicians and business in Northern Ireland on economic development, on improving the climate for business, and about how to encourage investment.

And they are increasingly looking to the Republic and to ways in which we can work together.

For our part, we wish to work with the British Government and the new Northern Ireland Executive to build an even stronger economy.

There is no reason why the Celtic Tiger cannot be an all-island phenomenon.

The people of Northern Ireland certainly have the capacity and the drive to succeed.

Last month, the British and Irish Governments published a ground-breaking report on the all-island economy.

We are in negotiations with the Treasury and the Northern Ireland administration about a potential package that can help both economies, North and South.

We want to invest together in the productive capacity and competitiveness of the island – in infrastructure, in education, in skills and in science. We also want to see how we can improve services to our citizens by working better together.

This all-island dimension will be an important part of our new National Development Plan.

I look forward to seeing these plans agreed and implemented – on the basis of mutual respect and for mutual benefit - with a new First Minister, Deputy First Minister and Executive, in 2007.

Conclusion

In conclusion, Ireland and Britain have come a long way by acting together. We have brought our relationship onto a new plane. We have replaced conflict with co-operation. We are working closely together to realise the progressive vision of the Good Friday Agreement. We are busily trading with each other and investing heavily in each other. We are holidaying in each other’s countries and enjoying each other’s cultures, while cherishing our own. Our economies and our peoples have benefited enormously as a result.

The scope for co-operation has by no means been exhausted. We face many common challenges in the years ahead, not least those being addressed at this important Conference. Let us keep working closely together as we take them on.

Thank you for your attention.