Ireland’s competitiveness watchdog has warned that the Government needs to do more to address significant longstanding challenges to securing the country’s ability to remain competitive into the medium to long-term, particularly in relation to infrastructure.
In its flagship annual piece of research, Ireland’s Competitiveness Challenge 2024, the council said that while compared to other EU member states, Ireland continues to perform relatively strongly in terms of its competitiveness, “complacency is unwarranted.”
The council claimed that at a time of persistent and global uncertainty, it is fundamental that Ireland addresses the matters that are within its own sphere of influence and control.
In particular, issues which are long-standing and have not been tackled need to be dealt with urgently, it said, amid concerns they may now be impacting on the pipeline of domestic and international investment.
Chairperson, Professor Frances Ruane, said actions must be progressed if the country is to achieve sustainable growth.
“This reflects the nature of competitiveness, which requires persistent action over a number of years with the impacts only becoming evident over time,” she said.
Prof Ruane added that while historically, Ireland’s economic model has leant on our capacity to attract internationally mobile foreign-owned businesses, paradigm shifts at EU level in relation to the role of State Aid are now a threat to the EU level playing field from which Ireland has benefitted enormously.
“This new challenge, combined with continuing infrastructural deficits (most notably in housing, energy, water, and waste-water), risks our reputation as an attractive location for new FDI,” she warned in the report.
“Furthermore, these infrastructural deficits are adversely impacting our existing enterprise base by adding to the cost base for all businesses, including SMEs, which have to compete on both local and global markets.”
“The infrastructure challenges are compounded by a rapidly growing population, and it is imperative that the forthcoming National Planning Framework take full account of the exigencies of a larger State.”
“Addressing these infrastructural challenges will require Government to engage in strategic prioritisation and sequencing of capital projects, and increased efficiency and timeliness of delivery, particularly in the context of an economy that is operating at capacity.”
The report also said that Ireland’s high cost and price position and low levels of unemployment, point to an economy operating at capacity.
“In addition, there remain significant legacy challenges to securing Ireland’s competitiveness into the medium to long-term, many of which have been called out by the Council in our previous reports,” the report stated.
“In an intensely competitive international environment, there is a need to prioritise actions to address competitiveness issues related to energy costs, renewable energy provision, infrastructure, housing and water/wastewater.”
“In the context of such concerns and given the concentration of corporation tax (and income tax) returns arising from a small number of large multi-nationals, a prudent approach to fiscal policy is advised – with a focus on productivity-enhancing capital investment ahead of a pro-cyclical expansion in current expenditure, and a focus on actions which mitigate rather than exacerbate capacity constraints.”
Council makes 20 recommendations
The council laid out 20 recommendations for action it said needs to be taken to underpin competitiveness here.
It said the Government must focus on actions which mitigate rather than exacerbate capacity constraints, and which avoid excess risks and imbalances in terms of its macroeconomic and fiscal position.
On construction, it has recommended that local government assesses new planning applications for commercial property developments and give careful consideration to vacancy rates in the sector, the labour input required to complete these developments and the excess demand for residential property.
At EU level it has proposed that Ireland advocates strongly for further integration of the Single Market, the maintenance of the level playing field and the reduction of regulatory and administrative burdens, as well as progress on Capital Markets Union.
Regarding the cost of doing business, it has recommended the implementation of a test to gauge the potential impact of new regulation on small firms and that an annual summary of forthcoming measures likely to impact SMEs be published.
It has also called on Government departments to streamline existing regulations and the establishment of a regulatory oversight body.
The council also said Government must focus on ensuring conditions for firms to compete are fair and adequate and one-off broad supports are only used as a last resort and are time limited.
The report also contained a broad range of recommendations around skills, including reform of the National Training Fund and the use of its surplus.
It also said an investment incentive should be introduced to encourage firms, particularly small ones, to digitalise and adopt new technology.
Action is also required to address inadequacies in infrastructure underpinning utilities, it said, including a review of the management of Ireland’s energy supply.
It has also recommended that reforms of the planning system are speedily implemented and that action be taken to address legal costs.
The NCPC also said it welcomed plans by the Taoiseach to convene a roundtable discussion on competitiveness in September.
Recently it has been reported that Simon Harris is supportive of calls from business for the setting up of a Department of Infrastructure.
The council said it has brought forward the publication of this annual report, which last year was published in September, so that it is available ahead of policy discussions taking place in the run up to Budget 2025.
