High-wage economy a threat to hi-tech jobs

THE shift to a high-wage high-cost economy raises doubts about the continuing presence of some hi-techcompanies in Ireland.

A major study concludes the risk remains that Ireland "will lose some of its manufacturing base within the ICT field and fail to procure additional investment."

That is the conclusion of Goodbody Stockbrokers' report, Ireland.ie.

Carried out by analyst Gerry Hennigan, it warns "unless we ruthlessly defend our position as a location for inward investment we risk losing out big-time to other locations."

At this point pressure is mounting on the Government to ensure US multinationals stay in Ireland.

They will do so only if the Government continues to deliver on five key areas:

* Corporate tax.

* Graduate supply.

* Infrastructure, both physical and telecommunications.

* Wage inflation.

* Bureaucracy it needs to avoid clutter in this area.

Companies most likely to leave Ireland for lower-cost locations have been identified by Mr Hennigan as loss-makers unable to avail of Ireland's competitive corporate rate of tax.

Those with low capital investment are also at risk of quitting the Irish economy for cheaper overseas locations, he said.

But increasing international pressure means that we have to be vigilant if we are to maintain the level of inward investment we currently enjoy. So far, the track record of Ireland has been impressive.

Between 1991 and 2001, one-fifth of all overseas ICT investment by US corporations in Europe was in Ireland.

The sector has also proved more resilient than most, with just 5.2% of jobs lost last year due to the downturn.

ICT multinationals employ 61,000 people and thousands of other jobs are directly attributable to their presence here.

The report says, however, that the sector and the Irish economy is in a period of transition.

Loss of competitiveness means we have to target higher value-added investment rather than the manufacturing carried out by many of the US multinationals.

Already we have won key projects such as Intel, Xilinx, Motorola and Symantec.

But success is far fromassured, said Mr Hennigan.

"The risk remains that Ireland will lose some of its manufacturing base within the ICT field and fail to procure additional investment," he said.

While the threat of further closure exists, the report concludes that "a radical decline in foreign direct investment is unlikely."

Proof of that is the underlying reality that so few multinational jobs have gone in the recent clean-out.

"If there was going to be a major rush for the door, it would have happened over the last year or two," he concluded.