The Government has launched its new plan to boost the economy amid forecasts of 120,000 job losses in 2009 and new figures showing the domestic economy shrank by almost 5 per cent in 12 months.
Taoiseach Brian Cowen published the Government’s document "Building Ireland's Smart Economy: A Framework for Sustainable Economic Renewal" at a Dublin press briefing this afternoon. The plan will establish a series of venture capital funds worth a total of €500 million in a bid to lure innovative industries to the Republic and boost research and development activity here.
Speaking at today’s press conference, Mr Cowen said there were a number of internal and external factors “conspiring” against the “biggest economic challenge we have faced in a generation”.
“We will eventually come through this. But I don’t want us to come through it, merely as a matter of surviving as best we can. I want us to come through it with a strengthened capacity to provide our citizens with enhanced opportunities and living standards,” Mr Cowen said.
“The aim is that Ireland becomes the world’s leading location for business innovation, a country where there will be a critical mass of companies – both Irish and international – at the forefront of innovation, creating the products and services of tomorrow and well paid quality employment.”
The ESRI, in its latest quarterly economic outlook, today forecast that as well as 117,000 job losses, unemployment will reach nearly 10 per cent and pay cuts in the public sector should be considered.
In further gloomy news, the Central Statistics Office this morning reported that in the 12 months to September gross national product (GNP) was down 4.9 per cent. GNP measures the economy when profits of multinational companies are discounted.
Output of the construction sector dropped by 18.4 per cent over the same period, while capital investment was 14.7 per cent lower. The output of industry overall, including construction, fell by 2.4 per cent.
In the economic plan announced this afternoon, the Government outlined details of a long-term scheme to reposition the Republic as a base for innovation and enterprise.
Key elements of the plan include:
- stabilising public finances and improving competitiveness;
- supporting those who become unemployed;
- supporting Irish business and multinational companies;
- investing in research and development;
- incentivising multinational companies to locate more R&D capacity in Ireland;
- implementing a 'new green deal' to move us away from fossil fuel-based energy production through investment in renewable energy to promote the green enterprise sector and the creation of 'green-collar' jobs;
- supporting high-value innovation of products and services to create hundreds of Irish companies and associated employment;
- developing first-class infrastructure that will improve quality of life and increase the competitiveness of Irish business.
A central element of the plan, is five State-backed venture capital funds established in partnership with private sector players and overseen by the National Treasury Management Agency (NTMA).
The funds will be 49 per cent supported by cash from the National Pension Reserve Fund (NPRF) and 51 per cent backed by private sector venture capital players who specialise investing in start-up companies focused on developing new technologies and products.
The money will be used to invest in such companies that are based here, or move their operations here, and is designed to attract such businesses and workers with scientific and technological expertise, to the Republic.
The funds will have a life cycle of 10 years, over which they will invest in such businesses.
State officials have already begun talks with what sources say are "top" US venture capital funds that have expressed an interest in setting up here under such a regime.
The Government intends backing them up with a favourable tax regime designed to anchor the businesses here. This will include tax breaks for intellectual property and a 15 per cent charge on profits that the funds make. This is the same rate as is charged on venture capital profits in the US and will be the lowest levied in the EU.
European technology start-ups receive less than €1 million in funding, while their equivalents in the US get an average of €6 million.
The framework announced today was not expected to spell out a detailed approach to the thorny issue of public-sector pay but will focus on the scale of the economic challenge in the light of unsustainable borrowing, rising unemployment and the sharp fall in economic activity.
The social partners were briefed before the formal launch of the framework.