INDUSTRIAL ACTION over Budget cuts would damage Ireland’s international reputation and could affect the foreign direct investment (FDI) sector, the American Chamber of Commerce has warned.
The chamber’s newly appointed president, HP executive Lionel Alexander, yesterday praised the decisions made in Budget 2010 and welcomed the progress that has been made in stabilising the public finances.
However, Mr Alexander warned that Ireland is “not out of the crisis yet” and cannot afford industrial disruption over spending cuts in the Budget.
“At this point in time, any of those disruptions would be quite consequential [for FDI],” he said.
“It is clear that the country has begun to move in the right direction once again and that is being recognised international. Hard decisions have been made and there can be no shirking from these.”
He also warned against increasing personal tax rates in the future, as this would make it more difficult to retain and attract the talent needed to transform Ireland into a “smart economy”.
Ireland’s education system must also encourage more students to take numeric subjects, such as maths and physics, at post-primary level.
It is “vitally important” that Ireland maintains its low corporate tax rate of 12.5 per cent. “Being a competitive tax jurisdiction has helped to mitigate the fact that Ireland has been uncompetitive from a cost perspective.
“However, we cannot use our lower corporate tax rate as a “silver bullet” in relation to higher costs and we must address our overall cost competitiveness,” he said.
Wages of manufacturing workers in Ireland exceed the OECD average and US levels by about 20 per cent, he said, which is “not sustainable”.
The American Chamber of Commerce, which represents US companies based in Ireland, said that up to 90 per cent cent of its members considered introducing “work reduction” measures last year. These ranged from pay cuts and freezes to productivity initiatives.
In the area of low-end manufacturing, Ireland will never be able to beat its lowest-cost competitors, Mr Alexander said.
The country should instead concentrate on delivering “end-to-end” value by developing competencies across the entire supply chain, from research and development to core manufacturing, distribution and marketing.
One of Ireland’s key strengths is its location as a gateway to Europe, as this enables multinationals with a presence here to access Europe’s 600 million consumers.
“This is a significant competitive advantage that which we need to strongly capitalise on when attracting foreign direct investment,” Mr Alexander said.
