Forfas report calls for productivity increases

FORFAS has called for productivity increases as well as major investment by indigenous firms to support the economy's transformation over the next decade.

In its new strategy document, the State agency with overall responsibility for industrial and economic policy has said that the key to achieving well-paid, sustainable jobs and higher living standards over the next decade is to shift to skilled, knowledge-based jobs and away from traditional industry.

The report, Enterprise 2010, also calls for a speeding-up of the deregulatory and privatisation process as well as a doubling in productivity in the sheltered sector - largely occupied by public sector employees - to 2 per cent.

If the overall objectives are realised, Irish Gross National Product per head should exceed the EU average before 2010, according to Forfas.

Introducing the report, the organisation's chairman, Mr Peter Cassells, said the report provided a framework for action by the public and private sectors to ensure that the economic gains of recent years were built upon.

Forfas is calling on the development agencies to increase employment in the internationally traded sector of the economy from around 325,000 to 400,000 in 2010. Around half of all new foreign direct investment should go to the Border, midlands and the west, according to the report.

The overall productivity target is 3 per cent which implies growth of around 7 per cent in the internationally traded sector, around current norms. However, it means a very ambitious doubling of productivity in local services and public administration to 2 per cent.

According to Mr John Travers, chief executive of Forfas, this can be achieved through deregulation and regulatory reform. The report also notes that with the slowing of the natural increase in the labour force and a reduction in the pool of women and unemployed people available to work, a sustained increase in net migration will be needed to meet shortages and prevent spiralling wage inflation.

Forfas also warns that there will be an acceleration of the shift to high-growth, high-tech, high-productivity activities and from production type activities.

There will also be a shift in employment to higher value added sectors.

One of the other major focuses of the State agencies will now be to encourage foreign multinationals to "bed down" or deepen their roots in the Irish economy as well as a focus on companies which are performing research and development.

As part of this, the report says that business expenditure on research and development needs to be increased as a percentage of GDP from 1.11 per cent at the moment to 2 per cent by 2010, with a doubling of the number of firms undertaking significant R&D over the period.

At the same time, training expenditure for all enterprise as a proportion of labour costs needs to be increased from 1.5 per cent to the best international practice of 3 per cent to 5 per cent by 2010.