Infrastructure key to success

FAILURE to continue developing roads, broadband, electricity and public transport infrastructure would have a major negative impact on the Irish economy, FAS director general Roddy Molloy warned yesterday.

While the cost of such investment was massive he said the cost of not investing would be far greater and he warned that areas with inferior infrastructure would lose out to better developed areas.

The opening of a new motorway between Dublin and Dundalk was an example of the positive effects of proper infrastructure he said. Foreign direct investment would want to locate along this corridor.

However, he was highly critical of the road infrastructure between Dublin and Cork saying that it would make the IDA's job of attracting investment to the South much more difficult.

Competitiveness was one of the major problems facing the country in the future, he said. Improved infrastructure would play a key role in solving the problem.

“If we don't get competitiveness and infrastructure right, anything I have to say about the labour market will be meaningless.

“Since 1999 Irish consumer prices have risen twice as fast as eurozone prices, 20% compared to 10%, making Ireland the most expensive country in the eurozone in 2003.

“Further appreciation of the euro compared to the dollar and sterling poses a further threat particularly to companies trading on tight margins.

“Previous high growth in productivity in Ireland which compensated for higher wages has ceased. Excluding the chemicals sector, unit wage cost in manufacturing increased by over 10% over the two years 2001 to 2002. Consequently competitiveness is a key problem into the future,” said Mr Molloy.

“Coupled with this is the reality that EU enlargement will result in increased competition for foreign direct investment.”

Mr Molloy who was speaking at the Cork Chamber of Commerce monthly business breakfast briefing in association with the Irish Examiner said that small companies, particularly those in declining sectors, would have to move up the value chain and improve productivity.

To achieve this he stressed the importance of increased investment in human resources.