strategy statement03 - 05

as measured by the proportion of GDP devoted to R&D, improved but, at 18th position, remains low (see table 2).

With 1.2% of GDP invested in R&D, Ireland is significantly behind the EU average and well short of the EU’s target of achieving three per cent by 2010. Ireland’s spend is below the OECD average (2.21%) and significantly below best performing countries such as Sweden (3.8%), Finland (3.2%), US (2.65%) and Japan (2.9%). It should be noted, however, that the unusually large divergence between GNP and GDP in Ireland exaggerates the apparent R&D gap for Ireland.

Table 2: R&D Expenditure

Gross expenditure on Research and Development

(GERD) as a % of GDP and GNP 1991 to 19994

1991 1995

GERD €m 345.4 667.4 856.2

GERD as a % GNP 1.07 1.43

GERD as a % GDP 0.92 1.27

Ireland’s Rank (out of 26 countries) for GERD/GNP ratio 17

Ireland’s Rank (out of 26 countries) for GERD/GDP ratio 17

EU Average (GERD as % GDP) 1.98 1.81

OECD Average (GERD as % GDP) 2.32 2.11

4 Source: Forfás; OECD - Main Science & Technology Indicators (Nearest year used where data is not available for a particular year)

The research environment in Ireland has been significantly altered as a result of the planned allocation of €2.5bn to Research, Technological Development and Innovation across a range of Departments and agencies under the National Development Plan (NDP). Key investments aimed at building Ireland’s research capability are now underway through Science Foundation Ireland (SFI), the Programme of Research in Third Level Institutions (PRTLI), the EU’s Sixth Framework Programme and through increased support aimed at building R&D capability and capacity in industry, and promoting collaboration between industry and the third level sector.

Ireland’s Business Expenditure on R&D (BERD), at around 0.9 per cent of GDP, is well below the OECD average of 1.5 per cent and has remained static since the mid-nineties. The EU 2001 Enterprise Policy Scoreboard ranked Ireland below 75% of the EU average on BERD as a percentage of GDP and also on the number of high-tech patents.

Ireland’s manufacturing output is now dominated by sectors which require high R&D intensity to remain competitive. Exports in sectors such as pharmaceuticals, electrical and electronic machinery, office and data processing equipment, and instruments accounted for over 50% of merchandise exports by 2001. The share of total manufacturing output accounted for by foreign-owned companies grew from 53 per cent in 1991 to 76 per cent in 1999. However, FDI operations in Ireland have low R&D intensities. The research activity which underpins the employment, output and exports of these foreign-owned sectors in Ireland is primarily conducted overseas and not in Ireland. This is a significant weakness that must be addressed.

Between 1995 and 1999 the share of indigenous manufacturing output devoted to R&D remained static at 0.9% compared to an OECD average of 2.4%. However, it should be acknowledged that within that overall number, eight indigenous sub-sectors have R&D intensities that exceed the OECD average.