I would like to thank the Chamber’s Chief Executive, Joanne Richardson, the board and the members of the American Chamber of Commerce for the kind invitation to join your Thanksgiving lunch today. This is a major family festival in the US and I’m sure a lot of you are thinking of family members at this time. Given the number of Irish immigrants in America, I am particularly glad to be addressing such a distinguished audience today. I know our Irish Americans will be celebrating this festival too and we would like to think that, in spirit at least, we are narrowing the gap of the Atlantic today and sharing your history.

We are all well aware of the strong performance of the Irish economy over recent years and the fact that it took us a long time to become an overnight success! We are now the second wealthiest country in the European Union, having been one of the poorest only ten years ago. This remarkable pace of development is reflected in the near full employment rate that the country enjoys, which is perhaps the most important factor in assessing the real level of prosperity here and a situation of which we should feel justly proud. Our new prosperity means we can now afford to look to the future in terms of investment in the sources of growth for the next generation, particularly infrastructure, education and publicly and privately funded research and development, and also provide better for the social needs of the current population.

Foreign Direct Investment has contributed hugely to our economic growth and, in this regard, the importance of US investment, our single largest source of inward investment, cannot be overstated. Today we have some 490 US companies in Ireland employing almost 90,000 people. US investment continues to be a key driver of our economy and is crucial to future success, both as an investor and as a trading partner. Intel’s $2 billion investment in Fab 24 is just one example of US confidence in Ireland as a location for investment. The Intel impact is currently valued at over €400m a year to the Irish economy. It has created a demand for world-class infrastructure and services; it has spurred a surge in technology learning and innovation; and has acted as a catalyst for other high-tech investment in Ireland. Above all, Intel coming to Ireland gave recognition to and acknowledged Irish ability to deliver to the demanding standards of a global marketplace.

Today, I am proud to say that Ireland hosts a large number of leading global companies in high-tech sectors. Thirteen of the top 15 pharmaceutical companies, including Pfizer, Wyeth, GlaxoSmithKline and Schering Plough are based here. The announcement by Bell-Labs in May this year that it will invest €69m in a collaborative R&D project was a key win for Ireland.

Furthermore, since its establishment by the Government in 1987, the International Financial Services Centre (IFSC) has successfully attracted high-quality operations from amongst the most reputable and well-known companies in the world and now ranks very high amongst global locations of choice.  Dublin is now well established as a successful and reputable financial centre, providing substantial, high-quality employment over a broad range of services with over 11,000 jobs directly associated with the IFSC. The corporation tax take from all IFSC companies in 2003 yielded about one-eighth of the total corporation tax yield for that year.

Ireland’s competitive success in attracting investment cannot be attributed to any one reason; it is based on the coming together of a number of factors such as

• one of the most favourable taxation regimes in Europe,
• access to the European Union’s Internal Market,
• a well-educated and skilled workforce and
• a history of pursuing Government policies that are pro-business, investment driven and which provide a benign business environment.

These factors will continue to provide the bedrock of our industrial policy into the future.

We recognize, however, that the sophisticated, knowledge-based economy which we are building has many competitors, and that if we don’t make sure that the right support and environment are in place for business to do profitable business from Ireland, those competitors will. We know that we need to rise to the challenge of becoming a significant player in the global hierarchy of knowledge-based economies and build truly distinctive competencies. Ireland has, therefore, placed R&D at the heart of its economic development strategy. Indeed, a central conclusion of the Enterprise Strategy Group (and I recognise that in speaking to this audience, I am in the presence of some of those who gave of their time and experience to inform its analysis and shape its recommendations!), was that an increased focus on research must become a core pillar of our national enterprise policy and that we must act sooner rather than later.

In August of this year, Building Ireland’s Knowledge Economy – The Irish Action Plan for promoting investment in R&D to 2010 was published by Forfas. The Plan sets the Vision that Ireland by 2010, will be internationally renowned for the excellence of its research and be at the forefront in generating and using new knowledge for economic and social progress, within an innovation driven culture. You will be aware of the targets set out in the Action Plan to increase both public and private investment in R&D. Those targets are very challenging but they represent the kinds of metrics we need to achieve if we are to come close to the R&D performance of the economies we wish to emulate. More importantly, I believe they are achievable.

Indeed, at the recent conference led by the Chamber on ‘Collaboration to Commercialisation’, my colleague Minister Martin will have pointed out to you that significant progress has already been made in achieving our R&D targets, particularly through the substantial increases in funding given by this Government to the Programme for Research in Third Level Institutions (PRTLI) and to Science Foundation Ireland (SFI).

The introduction of the generous tax credit of 20% for R&D is a further indication of our commitment. This tax credit will help to enhance our competitiveness as a location for a new internationally mobile research-related investment, and will encourage existing overseas and indigenous firms to add research functions to their operations in Ireland or to increase their level of research activity. The new Cabinet Committee on Science, Technology and Innovation and the structures underpinning it, as well as the newly appointed Chief Science Adviser, also have a central role to play. We are committed to ensuring that this vital area, so important to our future economic development, continues to receive our full support.

The Government is also committed to taking action to address both the shorter and longer-term competitiveness issues, which have been identified by both the National Competitiveness Council and the Enterprise Strategy Group. ‘Ahead of the Curve’ is where we want to be.

The Government is committed to maintaining a business environment conducive to investment. As many of you will be aware, I favour low personal and business taxation and I would like to make my position clear in relation to the ongoing debate on taxation at European level. I am opposed to tax harmonization.  It is important that rights in relation to taxation are retained at national level.  It is for each country to decide on how its expenditure is to be funded but I, for one, have no wish to return to the days of high tax and spend and the consequences this had for our economy.  Ireland has no difficulty with tackling specific barriers to trade and removing those and we play our part in addressing such specific proposals.  However, I do not favour schemes such as the Commission’s proposals on a common consolidated corporate tax base.   Since 1 January 2003, a Corporation Tax rate of 12.5% has applied to trading profits in all sectors in Ireland, marking a 300% reduction on the rate of 40% in 1992. I know that the Corporation Tax rate is a key factor in determining investment so I would like to assure you that the single 12.5% trading rate will continue to support the necessary stable enterprise environment which Ireland has so carefully nurtured down through the years.

I know you will have a keen interest in the future direction of our economy. I would, therefore, like to share with you just a few thoughts about the economy, its performance and its management. Ireland is benefiting from the up-swing in the global economy and mid-year forecasts projected GDP growth at 4.7% with GNP growing at 4.2%. The rate of growth of Ireland’s economy compares very favourably with the forecast for the euro area of 2.1% in 2004. This is a good story and I expect that our strong economic performance will continue over the coming years, provided we all act responsibly in facing the many challenges that lie ahead.

Our efforts to reduce inflation are bearing fruit; the differential between Irish inflation and the euro area average has narrowed dramatically and Ireland is now in the mid-range of euro area countries. Inflation is likely to fall to an annual average of 2.2% in 2004, compared to 3.5% in 2003. We are keeping a keen focus on ensuring that inflationary pressures are minimised.

There are some broad risks facing our economy and we will need to maintain sufficient flexibility to deal with them. These risks include the possibility that: increases in oil prices will be sustained at current levels; the world economy might slow significantly next year; the Dollar will continue to fall against the Euro owing to the twin US fiscal and trade deficits. Countering these risks requires us to focus on domestic factors over which we have some control. A key challenge will be to maintain competitiveness by controlling our domestic cost base.

As shown in my recent publication of the Abridged Estimates, the Government is continuing the policy of prudent management of the public finances and we aim to ensure that spending on public services is kept at a sustainable level into the medium term. Within this framework, we are continuing to provide targeted resources particularly for key priorities such as the Education and Health sectors. Moreover, I am determined to get better value for money for the major levels of expenditure we are providing.

We are seeking to maintain capital investment at a high level to accelerate the provision of much needed infrastructural development and to sustain our potential for continuing economic growth into the longer term. We are continuing to focus on developing high quality transport links, improving our environmental infrastructure, and upgrading our communications networks. All these are necessary for continuing enterprise, social and regional development.

Strong corporate governance must also be at the heart of a successful economy and the Government’s approach in this regard has been both reasonable and balanced; we have sought to ensure that a rigorous approach is taken to the issue while at the same time not imposing an unnecessarily burdensome regime. On the issue of Regulatory reform, I am very pleased to say that the practice of carrying out impact assessment on legislation, long established in the US, has now been adopted as part of the new discipline in EU regulation.

I know that you don’t expect me to show my hand on my budgetary strategy today. What I will say, however, is that my approach to budgetary policy is grounded in my conviction that we must protect our competitiveness and that one way to achieve this is to avoid adding inflationary pressures which give rise to wage demands and set in train a vicious circle for the economy. All will be revealed in a weeks time.

I would just like to remind you that Ireland still has much to offer in terms of expertise, an educated workforce, a stable environment and low corporation tax. In recent years, we have also proven that we can weather the ups and downs of the global marketplace and recent economic data proves just how well we are doing. I would also remind you that Ireland has proven to be a great investment location. US Department of Commerce figures show that US companies in Ireland achieve a very strong rate of return of 24%, on average, on their investment. This certainly has to be one of the deciding factors in taking the decision to invest in Ireland.

Finally, I want to say that our economic progress can be further assisted by fresh thinking and approaches to economic development forming part of a competition of ideas out of which further success can achieved. Your contribution to that competition would be very welcome.

I would like to finish by saying thank you to the Chamber for inviting me here today and to wish you well for the future.

Thank you.