I am sure everyone in the House is concerned about the announcement yesterday of the loss of 350 jobs in the NEC plant in Ballivor, County Meath. Every politician is concerned about the impact this will have on the families and workers involved as the plant has been in operation for more than 30 years. It follows the announcement in the past month or so of job losses in Saehan Media, Magee, Platter Foods in Sligo and others.

While no one decries the strength of the Irish economy, credit for which goes to the workers, and everyone can share in that credit, there are fragilities and strains in the economy that the Government should be taking seriously. For instance, the CSO's quarterly national household survey indicated that the number of Irish people working in Irish industry fell by almost 13,000 in 2005, which is approximately 1,000 job losses a month. While the survey showed an increase in employment, it also showed that the manufacturing sector is losing jobs at an alarming rate. It is further evidence of the increasing costs Irish businesses must face to be able to compete. As the Taoiseach has pointed out, a small open economy must be able to compete, to which cost base is crucial. Traditional businesses are now suffering because the Government has failed to tackle the high cost of doing business here. This is having a detrimental effect on our previous attractiveness as a location for foreign direct investment. This is being compounded by intense competition from overseas.

The inflation rate for basic utilities and energy is running at almost twice the rate of that in the euro zone. Broadband penetration is seriously lacking. The competitiveness council report indicates that we are rated 14 out of 15 in this regard. Energy infrastructure shows us running at 14 out of 16 and port infrastructure shows us running at 13 out of 16. Is the Taoiseach concerned that the continuing decline in the manufacturing sector threatens seriously the prosperity of the country? Given the fragility in the economy, to which Deputy Bruton has referred on many occasions, does the Taoiseach agree that between a strong consumer spend and a thriving construction sector there are fragilities which are caused mainly by our cost base and our serious decline in competitiveness, and any fall-off in either the consumer spend or the construction industry would have a damaging effect on the economy? What action does the Government propose to take in the area of our cost base and in advancing our case for competitiveness where we have slipped on a world scale from fourth to 26th? Is this a cause for serious concern to the Government and what is its reaction to the continuing trend of 1,000 job losses a month in the manufacturing sector?

I wish to express my sympathy to the staff of NEC in Ballivor, who have been good and committed workers for three decades and have been working to the best of their ability. This announcement has been a real shock to them.

The manufacturing sector represents 23% of total employment while the services sector accounts for 62%, including 31% of exports and more than 50% of our total GDP. Last year, we created 95,000 jobs and, as has been the case for a number of years, we continued to get the lion's share of foreign direct investment from the United States into Europe. The reality is that our strength is now in the high-tech areas, including in the pharmaceutical, chemical and electronic industries. While there is severe competition both for investment and jobs, it is in these industries we do best. It is true that we have continued to suffer job losses over a number of years in some sectors of the manufacturing industry. As has been pointed out in report after report, the only way we can protect ourselves is by developing our research and development and innovation and providing higher quality and higher skilled jobs so we move up the value chain. As is already the case, higher salaries and lower company and personal taxes create a competitive environment. As Deputy Kenny said, the intensification of competition from low cost locations has exposed a sharp rise in the cost base here. The average cost of Irish goods and services has increased by approximately 20% relative to our trading partners. The increase in the value of the euro and faster growth in domestic prices and wages has played a major part in this development. We must continue to be conscious of this development.

As the House is aware, in order to tackle development, we introduced the One-Step Up initiative, the Outreach initiative, programmes run by FÁS and the programmes run by Enterprise Ireland. The national training fund has been allocated €353 million this year. These initiatives are active in the economy each day to protect existing jobs, help people who have been relocated and to try to protect ourselves from difficulties in the future. I do not believe we can ever be complacent about our competitive position. Maintaining our attractiveness as a competitive and profitable location in which to do business is a key priority. As we undergo fundamental change, we can no longer compete as a low cost location for basic manufacturing investment. We will not be able to compete in that environment because we are no longer a low cost economy. Quite frankly, we are not trying to compete at that level. Our workforce and the people do not want us to compete at that level. However, it means companies at that level must be helped to be more innovative, otherwise they will not survive.

The local Minister said yesterday that indigenous industry should be supported. This was not the case when many of the smaller traditional industries in County Meath went to the wall. Our export performance last year was the worst since 1974. Some 33,400 manufacturing jobs were lost in the last four years but the public sector has increased by 73,800. The cost comparative figures for Irish manufacturing industry as against Britain indicate the cost of electricity is 50% higher here, insurance is 20% higher, landfill costs are 350% higher and broadband is 10% higher. This places our manufacturing industry in a hugely uncompetitive position. These, however, are areas in which the Government has direct influence on the cost base. In the year from 2003 to 2004, for example, the cost of waste collection increased by 31%, water charges by 20%, local authority rates by 18%, energy by 18% and post by 13%. The Government has used the manufacturing sector as a silent tax collection system but this squeeze cannot continue.

The Government will consider the immediate establishment of task forces and so on. In a broader sense, however, its failure to deal with the competitiveness and cost base issues for the manufacturing industry places us at a severe disadvantage against competitors from other locations. One action the Taoiseach might take is to make a simple demand that the cost of no State-supplied service should increase by more than the rate of inflation in the next three years. This would provide some sense of stability for those planning their future here and those making a decision on whether to invest here.

As a serious factor for continued development of our economy, the Government should look seriously at the cost base pressures on the manufacturing sector. We have fallen behind completely in terms of research and development. Exports from Irish-owned firms have remained almost stagnant. In research and development, we are at less than a quarter of the OECD average. We are way behind in the areas which support development, including infrastructure, roads, broadband and energy. It is becoming increasingly difficult for people to make decisions to come here and for those who are here to compete internationally.

Given everybody's understanding of the strength of the economy, will the Taoiseach confirm what actions the Government proposes to take about the fragilities that clearly exist and the pressures upon the cost base applying to the manufacturing sector?

I know the workers at NEC were shocked at the news of the plant's closure and that they have provided a loyal and quality service to the company over the years. The Minister for Enterprise, Trade and Employment, Deputy Martin, the agencies operating under his remit and Meath County Council will take every step to secure alternative employment for the workers and to replace investment in the area.

Before we lose the run of ourselves, however, we should note that the economy employs 2 million people and we have created 500,000 jobs in the last several years. In terms of foreign direct investment, we got the greatest number of the jobs available from the United States in recent years. For example, we have 20% of the share in unwrapped software and 40% of the share in wrapped software. Exports last year were €85 billion, one of the highest figures in the OECD.

What about the trends?

From an enormously high level, the figures stabilised in recent months and have taken off again in the last quarter. For a country with a population of 4 million and a workforce of 2 million, it is an enormous achievement to have exports of €85 billion.

Of the new jobs announced recently, such as the 600 in Google, the 1,100 in Amgen, those in Wyeth, Centocor and Intel, and others in internationally traded services, a significant number are manufacturing jobs. When one thinks of manufacturing jobs there is a tendency to imagine people working with components or screws. We are talking about manufacturing jobs at a sophisticated level. Pressures in the economy arise in those areas where low-cost companies can enter and compete. NEC has two top-class plants, one in Malaysia and the other in Singapore. The company believes it can take the semi-conductor capacity from the Ballivor plant and move that production to the Singapore plant. This fits in with its operational business. In many cases, we attract foreign direct investment here because of our low tax base in terms both of profits and workers.

There are always issues in regard to competitiveness. I repeat what I have said many times; we must ensure wage movements are realistic so labour costs do not become prohibitive. We must also ensure productivity increases are at least in line with wage increases so competitiveness in terms of unit labour costs is maintained. OECD and EU figures indicate Irish salaries are high. Productivity must match those salary pressures and innovation is required so we move into new higher value products. The vast majority of our companies have been doing well in this regard.

We must ensure workers and managers are trained in the skills necessary to adapt to new technologies and procedures and that employment practices are sufficiently flexible to bring those skills quickly into the market. We must also ensure manufacturers have access to technology and research and development. There was no budget for research and development five or six years ago but we now spend a significant amount in this area to facilitate innovation. This will continue to be the case.