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Ireland: Challenges ahead for the Celtic Tiger

Ireland’s development in the last decade has been a dream. The country’s economy outperformed growth rates in comparable countries by far. In 2005, GDP grew at 5.5%, compared to an OECD average of 3.4% and only 1.8% in the Euro area. But there are challenges ahead, says a new report by Ireland’s National Competitiveness Council. And higher education, research and innovation will be key to mastering these challenges. The 2006 Annual Competitiveness Report of the Council, which reports to the Taoiseach (prime minister), uses about 130 indicators to measure Ireland’s competitive strength. Next to such areas as the economy (growth, productivity, trade) and employment, the indicators also focus on research, innovation and education.

Overall the report is not negative, but it also draws attention to shortcomings. Investment in research and development, for example, which is, according to accepted wisdom, a key driver of growth, stands at 1.2% of GDP only. The objective is to reach 2.5% by 2013, still short of the Lisbon objective of 3%. What is more, over two thirds of the money spent on research in Ireland comes from the corporate sector (unlike in most EU countries), and most of that from multinationals attracted to the country by tax incentives. But with costs rising in Ireland and new Asian competitors offering advantageous conditions, it cannot be taken for granted that Ireland will manage to keep all these companies in the country. More positively, the report notes that Ireland’s higher education sector has palpably stepped up its R&D investment, from €322 million in 2004 to €492 in 2004. But it also states that the country’s PhD sector is still too small.

2006 Annual Competitiveness Report