Statement to the Seanad on the EU's role in enterprise, innovation and job creation

Speech

In the years and months since the global economic downturn there has been lots of talk about not wasting a good crisis, not turning away from a crisis etc. However, we have no choice but to face both the economic crisis we have been living with in this state and the crisis that has gripped the wider European Union.

Our economic future is tied to the European Union. It has to be. As a member of the Union we, and the companies that invest here, have access to a market of around 500 million people. This benefits us the same way it benefits the other member states of the Union. Together the 27 of us are an economic force. On our own we are insignificant in the face of rising powers in Asia and South America.

Ireland’s future economic growth can only occur by creating an environment that allows enterprise and innovation to foster and, in turn, create jobs. To think that we can achieve any sort of substantial growth or job creation while not part of a large market such as the European Union is delusional.

The Single Market is the most successful transnational economic project in global history.  It opened up an enormous European market, minimised internal trade barriers and led to growth, job creation and prosperity on the continent of Europe.  Equally it has provided exceptional choice and value for consumers – for citizens.

European Governments must refocus their energies on this simple but invaluable process. The deepening and strengthening of the single market is the only logical way the Eurozone can be reignited.  The continued expansion of the single market to services makes sense as we export far more services than goods in the European Union.  The single market currently falls short in this regard and there is immense potential to grow it.

The European Union must start acting collectively to make the knowledge economy a reality.  The Lisbon Strategy for growth and innovation was a failure.  The EU 2020 Strategy, championed by Commissioner Geoghegan Quinn presents another opportunity, a second chance. We have the work force and innovative skills to become the world leaders in R&D and we must set realistic targets to achieve this goal. Public investment must happen by general agreement and targets must be adhered to, with sanctions for those who break commitments.  Private investment should be incentivised by fulfilling FDI potential and creating market conditions for inward investment.  This can happen through clever and competitive taxation mechanisms and keeping our cost base competitive.

I believe that Initiatives like the Single Market Act must act as a lever for more open trade and investment in Europe. Openness to investment is also what makes the Internal Market attractive to investors.

EU investment rules should continue to uphold the EU’s attractiveness to outside investors and create the synergies between multinationals and our SMEs which helps to improve the overall capacity for entrepreneurship in general.

The EU Competitiveness Council has endorsed a new European integrated industrial policy for the globalisation era which puts competitiveness and sustainability at centre stage.   This policy forms part of the seven Flagship policies launched under the European Union's new strategy for Jobs and Growth: Europe 2020.

The Government fully supports the core elements of the Europe 2020 strategy and its objectives to stimulate growth based on knowledge and innovation and a more sustainable and greener economy with high employment and social inclusion.  These objectives are also broadly consistent with the Government's own strategies as set out in the Programme for Government.

The industrial policy Flagship sets out a strategy that aims to boost growth and jobs by maintaining and supporting a strong, diversified and competitive industrial base in Europe.  The new approach also means looking at the whole value chain, from infrastructure and raw materials to after-sales service. With the globalisation of markets and the changing nature of both the manufacturing and services sectors, continued economic progress and growth will be driven by companies continually innovating to successfully add greater value at every point in their value chain.

Promoting the creation and growth of small and medium-sized enterprises is at the core of the EU industrial policy. Moreover, the transition to a sustainable economy is recognised as an opportunity to be seized as a means of strengthening competitiveness.

Yesterday at the General Affairs Council in Luxembourg I, on behalf of the Government, agreed further moves to remove excessive regulation on SMEs, especially micro-enterprises and to further develop the Single Market. I also welcomed the strong focus on the Internal Market. The Council prepared specific draft economic conclusions to be presented at the European Council meeting later this week.

For the EU to be able to compete globally, it must establish the best conditions for business.  It must ensure that its firms can innovate, restructure and transform themselves quickly.  I believe that it is important to facilitate timely and appropriate industrial restructuring and upgrading, thus ensuring the renewal of EU industrial sectors and the necessary upgrading of worker skills and opportunities.  Supports such as the two Structural Funds, the European Regional Development Fund (ERDF) and the European Social Fund (ESF) as well as the Cohesion Fund have contributed to regional competitiveness and employment objectives.  Cohesion Policy for 2007-2013 is explicitly linked to goals in Ireland’s National Reform Programme under Europe 2020.

In addition to the EU Structural Funds, Ireland receives significant European funding from the European Agriculture Fund for Rural Development (EAFRD), the European Fisheries Fund (EFF) and the Seventh Framework R&D Programme (FP7).  The Government has also secured funding from the European Globalisation Adjustment Fund (EGF) for a package of measures to retrain, upskill and offer further entrepreneurial and educational opportunities to workers affected for example, by the closures of Dell, Waterford Crystal and SR Technics.  A number of relevant State agencies such as FÁS, Enterprise Ireland and the CEBs are involved in the distribution of these funds.

Ireland’s ambition is to become a leader in innovation.  Our goal is to develop an innovation-driven economy that maintains competitive advantage and increases productivity.  We have seen during this recession that those companies which invested in research, development and innovation have held or increased market share and employment. 

It is clear that innovation is also a key issue for the future prosperity of the entire European Union.  As we seek to continually improve the effectiveness of our research and innovation systems, we should learn from each other.

The EU Commission in the Europe 2020 Flagship Initiative “Innovation Union” has put entrepreneurs and SME’s at the heart of its innovation and research policy.  Its aim is to remove the remaining barriers to “bringing ideas to market” and promoting entrepreneurial mindsets among students and researchers. 

Commissioner Geoghegan-Quinn’s Directorate-General is tasked with the achievement of the European Research Area and the creation of a genuine single market for knowledge, research and innovation.

The Government attaches great importance to the completion of the European Research Area, the Single Market for researchers, by 2014 and the creation of a genuine single market for knowledge, research and innovation, which is an integral part of the Innovation Union Flagship Initiative of the Europe 2020 Strategy.

The EU Framework Programme for Research has always been an important element in the internationalisation of Irish research.  The currentSeventh Framework Programme for Research and Technological Development  (FP7) offers Ireland's SMEs, multinationals, and research institutions valuable opportunities to participate in high-calibre research collaborations with our European counterparts.

With a budget of approximately €50 billion over seven years (2007 to 2013), FP7 is the most ambitious European research-funding programme to date in terms of scale and scope.  Moreover, as economic conditions have deteriorated nationally (and internationally), FP7 comes into its own as a non-exchequer funding source.

Based on national investment in research, Ireland is participating in the Framework Programme from a far stronger position than ever before. 

Just to put in context how important FP7 is to the research community in Ireland, in the period from commencement of FP7 in January 2007 to end 2010, over 3500 applicants from Irish-based organisations took part in proposal submissions requesting European funding. From these proposals, 847 applicants were successful receiving €269m, giving an overall Irish success rate of 24.04%, above the European Member State average of 22.47%.

The competitive advantage created through research, development and innovation will be a key driver in our economic recovery. Companies that undertake Research and Development, for example, have shown a level of growth in trade and exports during the downturn that demonstrates the value of productive, high calibre research and innovation activity. Every day, these companies are winning and servicing global sales contracts across a range of modern growth industries.

The Programme for Government has placed particular emphasis on developing applied research centres and the new Government has moved swiftly to announce the establishment of centres in cloud computing, manufacturing research and energy efficiency research. These centres will tap into that science base and ensure ideas are progressed into workable businesses so as to create the jobs of the future and get the economy growing again.

The extent to which Ireland’s enterprise base has retained its commitment to research, development and innovation investments in the face of the downturn is both welcome and bodes well for the future.

The importance of the SME sector is well recognised by the Government. Small businesses are the backbone of the Irish economy.  We currently have some 250,000 such small businesses, employing approximately 700,000 workers.  It is important that Government creates the right environment for businesses to expand so that we will see job creation and retention. The Jobs Initiative, which is very much in line with measures contained in the Small Business Act for Europe,  is designed to create and sustain jobs.

As a result, the Government has appointed a Minister for Small Business – my colleague John Perry T.D. He will be the voice of small business to Government to reflect concerns and bring forward proposals to assist businesses.

Minister Perry has also been appointed as Ireland’s SME Envoy, under the Review of the Small Business Act for Europe and will play a constructive role with similarly appointed Envoys from the other Member States. He recently attended the first meeting of SME Envoys in Budapest under the auspices of the Hungarian EU Presidency.

European SMEs derive a much smaller percentage of their turnover from exports than competing economies such as the USA and China. Therefore, there needs to be a much a stronger international orientation of European SMEs in order to compete globally. Ireland is performing better than most with major growth in exports. The biggest increases have been to EU member states. In order for this necessary expansion in EU exports to occur, we will need a greater opening and deepening of the Internal Market, which has to become the natural reference point and basis for a wider global growth.

Some issues impacting on SMEs which are also addressed in the Small Business Act for Europe have already been announced on 10 May as part of the Government’s Job Initiative:

• Access to credit  - the design of a Temporary, Partial Credit Guarantee Scheme. A targeted Scheme will be in place by the autumn and will operate for one year
• An initiative on €100m Microfinance Start-Up Fund
• The extension of the 15 day prompt payment arrangements across the wider public sector in Ireland for invoices received after 1 July 2011; Central Government Departments have been paying within 15 days since June 2009.
• Greater emphasis in making public procurement more accessible to small businesses
• PRSI changes to encourage employers to recruit new employees
• Review of Sectoral Wage Agreements in order to improve competitiveness.

Access to finance for SMEs, especially in the light of the credit squeeze caused by the crisis, is extremely problematic. It is very important therefore, in addition to measures in the Jobs Initiative, that we keep working on the construction of a Single Market in Europe for venture capital and that we continue to broaden access to other European financial instruments, such as guarantee schemes.

In accordance with the Europe 2020 policies under the Industrial Policy Flagship and the Innovation Union Flagship, it is important, of course, that we continue to develop strong areas such as standardisation. For that reason, I welcome the Commission’s proposals to strengthen the system of standard-setting in Europe and I hope that our businesses and business organisations can assist in this process.  It is also important that we continue to develop at EU level public procurement initiatives for small business, an integrated EU venture capital market and the development of more competitive solutions, better regulation and tackling red tape and duplication.  

Following the launch of the Jobs Initiative, the Government’s message is that we are open for business like never before and this means being open to the world.

Ireland’s transformation from a poor country to a wealthy one, with a high standard of living, has been largely down to the opportunities opened up to us through EU membership and particularly the single market. For Ireland to emerge from its current challenges, it is clear that deeper cooperation and coordination with our European partners, within the European Union and the Eurozone, is not simply in Ireland’s best interests, it is the only sane and logical direction for this country on our path to recovery.