Minister says competitive markets will play 'essential part' in recovery

THE GOVERNMENT is determined to implement the authority’s outstanding recommendations on the removal of barriers to competition that exist in some sectors, Minister of State for European Affairs Lucinda Creighton said yesterday.

Speaking at the Competition Authority’s annual conference, she said competitive markets would play an essential part in economic recovery, noting that countries with high levels of competition domestically also tended to be the most competitive internationally.

Ms Creighton said the importance of a freer market in services in the EU was a priority for Ireland given that the EU offered the best export opportunities for companies in Ireland. She noted that Irish exports to Germany had grown by 48 per cent last year.

Dr Don Thornhill, chairman of the National Competitiveness Council, stressed the role innovation played in generating prosperity, saying it accounted for up to 60 per cent of economic growth. Competition was central to innovation, he said.

He welcomed the aspects of the EU-IMF bailout which involved reforms that enhanced competitiveness, saying more competition in the domestic sectors of the economy strengthened the export sector in numerous ways.

Dr Thornhill noted that prices of business services had fallen by almost 10 per cent over three years. This had enhanced competitiveness. In most areas of professional services, prices were now well below 2006 levels.

He said the “legal, accounting, PR and business consultancy” sub-sector was the exception. Prices for these services have fallen by much less than others, such as advertising, IT and human resources services.

Dr Thornhill made a number of recommendations to liberalise the legal profession.

Anna Colucci, a senior official at the European Commission’s powerful competition office, said many of the conditions of Ireland’s bailout had been advocated over a long period by the Competition Authority.

Prof John FitzGerald of the Economic and Social Research Institute said lower costs for consumers were achievable but it was not an easy message to communicate owing to the differences in different markets.

Markets for energy, water and telecommunications required different solutions to drive prices down for consumers. Along with these markets, the wider retail sector was insufficiently competitive, he said, estimating that prices were 5 per cent higher than they should be.

UCD economist Colm McCarthy said competition in financial services could be “excessive”. This affected both banking and insurance. He said that a “just enough” level of competition in financial services was optimal, but that achieving this posed considerable challenges for regulators of financial services.

He said the “spectacular” failure of the Quinn Insurance Group, which he estimated would ultimately cost €1 billion, had many parallels with the collapse of the insurer PMPA in the 1980s.

The regulators did not learn the lessons of PMPA, he said.