The government has given enterprise minister Leo Varadkar approval to develop a new White Paper on Enterprise Policy. Here the Tánaiste outlines the issues under consideration.

As Minister for Enterprise, Trade & Employment, I find myself in the odd position that enterprise or industrial policy is rarely debated in the Dáil.

My opposite numbers make suggestions about improving workers’ terms and conditions and sometimes about providing extra help to small business – which is fine - but we never debate enterprise policy.

This leaves me concerned that many take Ireland’s recent economic success for granted – that Irish companies will continue to expand, that trade and employment will grow, that we will attract more investment from overseas and that we will have the skills and talent to underpin that model for years to come.

That’s a dangerous state of affairs. We cannot, and should not take our economic strength for granted, and whatever about others, the government does not.

In Association with

We will not stay successful by standing still. We have to get ahead of the next wave and catch it.

In the past few decades, we have made the right calls – pharma, medical devices, food production, digital, financial services.

But what are the right calls for the future? Do we fully understand our economy’s strengths and weaknesses?
How has the pandemic changed us? How will climate change and climate action affect us? And of course, they are not the same thing.

How will geo-political developments – the divergence of Britain from the EU, the rise of China and the new cold war started by Russia – change the world for us?

How do we drive productivity and success among our own start-ups and scale ups so that they go global?

With these questions in mind, the government has given me approval to develop a new White Paper on Enterprise Policy.

It will be published later this year, setting out a vision for Ireland’s enterprise policy to 2030 and beyond.

Consultation will be central. We will make sure the White Paper is informed and challenged by fresh perspectives and the latest thinking.

An advisory panel of international experts will be established, including experts from organisations such as the OECD, the World Economic Forum, experts from similar jurisdictions, as well as business people and academics.

We want to hear from any organisations or people that can articulate different perspectives and identify what we are doing right and what we are doing wrong.

For Ireland, as an open and global economy at the heart of the European Union, it is critical that we rebuild our European economy and prepare for a new world that is greener, more digital, more resilient and fit for the future.

The fact that we depend so much on undemocratic parts of the world like Russia and the Gulf for energy supplies is simply not in our interests. An agricultural model that relies so much on imported grain is a strategic risk we cannot ignore.

The ongoing ‘zero-covid’ policy in China continues to disrupt the supply of goods to Ireland and demonstrates that we are far too reliant on China to be the world’s factory.

At a European level, the Irish government will advocate for ‘open strategic autonomy’. Yes to producing and developing more things for ourselves, diversification of source and destination markets, more stockpiling and storage of things we may need. However, we will not allow this to be used as a cover for protectionism.

Ireland is engaging with EU Strategic Value Chains and Important Projects of Common European Interest – otherwise known as IPCEI.

IPCEIs are large, multi-country projects for state-of-the-art innovation to solve market or systemic failures in particular sectors. Favourable state aid rules apply, allowing for the possibility of public-sector funding to be granted for certain projects

The Irish government sees this as an opportunity for Irish and Irish-based businesses to be part of developing and strengthening European capacity and capability in frontier technologies and collaborating with other businesses throughout the EU.

Accelerating the twin transition, digital and green, will present both challenges and opportunities for enterprises and we need to be prepared to take advantage of these and ensure Irish businesses expand into new and growing markets in a low carbon economy.

The following are the themes we are likely to explore as part of the White Paper.

Climate

While weaning ourselves off coal, oil and gas is a global challenge, it also presents incredible opportunities for Ireland, specifically in the area of electricity generated by offshore wind, backed up by mega-batteries and interconnection, and of course, green hydrogen.

We can go from being an energy importer to being an energy exporter with all the benefits that come with it – greater energy security and price stability, employment and regional development.

As well as that, by ensuring we have a plentiful energy supply, multinationals and industry will feel more confident investing in Ireland and creating jobs here.

I believe the development of synthetic aviation fuels will be an area of growth and of crucial importance to maintaining our connectivity being an island nation.

Retrofitting is another area where we will see massive growth. I see this as another fantastic opportunity for regional development, with around 13,000 new jobs forecast to be created in the industry over the next three years – in every county.

I’m under no illusions as to how difficult the climate transition is going to be for small businesses. I know many business owners are concerned about what all of this means for their business and how they are going to adapt, especially given the past few years.

We must help them through this transition with practical advice, grants and loans.

Digital Transition

Under our new National Digital Strategy, we will drive a step-change in the digital transformation of businesses, especially SMEs.

The digital economy in Ireland is running at two different speeds. While a small proportion of the enterprise base has fully embraced digitalisation, there is a need to accelerate and enhance digital adoption right across Irish businesses and indeed, the public sector.

We want 90% of SMEs to have achieved basic digital intensity by 2030 and we will help to realise that ambition through a multi-annual Digital Transition Fund for business.

Supporting companies to innovate and scale

While Ireland has performed very well on international innovation indices, on some indicators, such as the European and World Innovation Indices, we are starting to plateau.

On the Global Innovation Index, we have fallen back to 19th position in 2021 from 15th in 2020. That’s not good enough.

It's no secret that our high national productivity figures mask a productivity gap between high-performing ‘frontier’ firms, often foreign-owned, and the rest of the economy.

Closing this gap must be a focus of the new White Paper on Enterprise Policy. To do so, we must broaden and deepen enterprise innovation capability, increasing the number of SMEs investing in RD&I, linking our multinational and SME innovation base and public policy, and embedding a culture of continuous innovation.

We must cultivate collaboration between industry, academia and research commercialisation and simplify the routes for enterprises to engage with the public research system.

To enable this, my Department is developing an overarching National Clustering Policy and Framework to maximise the potential of clustering as a policy tool.

Traditionally, Ireland has lagged behind other countries in our ability to scale up our SMEs into large global companies.

The well-documented shortcomings of our seed funding market for start-up companies has led to high potential businesses seeking investment from outside the jurisdiction, which, in turn, leads to a flight of technology and skills to other jurisdictions, especially the US.

I want this to change. So, last month we launched the Irish Innovation Seed Fund. It will operate as a fund of funds, essentially a fund that invests in specialist fund managers, who then source companies with strong potential for a commercial return on investment.

It’s a collaboration between Enterprise Ireland, the Ireland Strategic Investment Fund and the European Investment Fund.

We have also reformed the Employment Investment Incentive Scheme to increase uptake and we are examining ways to help smaller companies and starts-up that cannot afford large salaries or bonuses to keep their staff.

The White Paper needs to examine what more we can do.

Investing in people

Upskilling and re-skilling will increasingly become the norm for companies needing to adapt to the challenges that lie ahead.

We are trying to reimagine the role of apprenticeships in Ireland. Our ambition is to grow new apprentice registration to 10,000 per annum by 2025.

It’s cliché to say there is a global fight for talent, but recent events mean that fight is only going to intensify.

I am sure that improving pay, terms and conditions for workers is part of the answer. It’s the only way we will attract and retain the staff we need.

I know small businesses have been through a lot in the past two years and new policies like sick pay, remote working, more family leave, a living wage and auto-enrolment just feels like the Government is loading on more costs.

We will help small businesses and employers to manage these changes by phasing them in over time.

Competitiveness

We must be creative about how to preserve Ireland’s reputation as a world-class place to do business. As always, it will be about talent and track record as well as tax, but it must be about other things too like security and infrastructure and liveability.

Competitiveness also means providing the basic infrastructure expected in advanced economies, such as energy, housing, water and transport. I acknowledge the real shortcomings in these areas. We are determined to change that.

With a rapidly rising population, Ireland needs to invest big in infrastructure. Since 2017, the percentage of Gross National Income committed to public infrastructure has risen from 2.5% to about 4.5%. That’s now substantially higher than the EU average and well ahead of our peers like the Netherlands and Denmark.

The revised NDP – Project Ireland 2040 - will see this level of investment continue and grow to 5% of GNI, from €12.7bn this year to €19.3bn in 2030. I recall when I first became a Government Minister it was as little as €3 or 4 billion euro.

Trade Policy

We have not become a wealthy country because of oil, gas, diamonds or gold. Our success is based on a formula of trading goods and services internationally, our attractiveness as a place to invest and our ability to enter into international free trade agreements with other countries.

That formula might sound simple, but it has to be reinforced day-in, day-out by our enterprise agencies and officials working throughout government.

Our position at the heart of Europe, its single market and the eurozone is crucial to this formula.

I believe Europe must be a champion of free trade, free enterprise and multilateralism. Unfortunately, protectionism is alive and well and plenty of excuses for protectionism are presenting themselves.

That worries me because there is no doubt Ireland will be a net loser if we start rowing back on free trade and see the rise of protectionism again.

We have lost a natural free trade ally in the EU with the departure of the UK, so we will continue to have to work harder with like-minded EU trade ministers to make sure we strongly articulate our position.

Conclusion

To conclude, I believe our industrial policy for the last sixty years has served us well. The pace of change and the range of challenges now facing us is so fundamental that we must re-evaluate that policy.

The outcome might be an evolution rather than a revolution. Either way, I am looking forward to the work and the challenge.

• Abridged from address to The Institute of International and European Affairs on 23 March 2022