Ireland shifts focus to woo manufacturers James Phelan, general manager at PWA International's Dublin manufacturing plant, walks the factory floor, stopping from time to time to talk to one of the operators cutting or welding the huge silver coloured airplane engine casings waiting to be repaired. These casings contain a lot of moving parts and no one wants any of them to end up in the cabin if there is a bird strike or some other problem. In the airline sector safety is paramount, so we compete on quality as well as cost," says Mr Phelan. PWA, a joint venture between engine manufacturer Pratt & Whitney and Singapore-based SIA Engineering, is one of the survivors of an Irish manufacturing sector that has experienced a tough decade. It is also the template for a new drive by Ireland's state investment agency IDA Ireland to attract and retain industrial manufacturing and engineering investment in the country. "Between 2005 to 2009 we weren't competitive for this type of manufacturing because of high costs," says Barry O'Leary, IDA Ireland chief executive. But the recession has brought costs down here while costs in competitor countries in Europe have increased. Already a leader in attracting high-end medical device and pharmaceutical investment, IDA Ireland has recently set up a dedicated unit designed to encourage manufacturers in the industrial and engineering sectors to set up greenfield operations. Two new investments by German company ZDMI and US company MGS are expected to be announced by the agency in the coming weeks. IDA Ireland is also working closely with its 140 existing client companies in the sector to help them become more efficient, attract new functions to their Irish operations and reverse a trend of manufacturing closures in recent years. Surging labour costs during the Celtic Tiger era saw multinationals such as Dell and Motorola relocate to cheaper locations in eastern Europe or China. More recently, a crippling recession has hit indigenous manufacturers, which have struggled to attract finance from banks for expansion or to service debts. Manufacturing employment fell to 212,500 in 2011, down from 263,400 in 2006 and 291,400 in 2001, statistics show. To survive against price competition from Asia and the US, PWA International was forced to cut its workforce by a third to 114 people, introduce a two-year pay freeze and implement lean manufacturing techniques to boost efficiency. "We have had to become more flexible to survive," says Mr Phelan. We now have the same levels of sales with a third less people. PWA International's experience is shared across the sector, with labour costs per hour falling 4 per cent between 2009 and 2011, compared to an average increase of 4 per cent in the euro area. Irish labour costs have now fallen below the eurozone average, according to Eurostat, the Brussels statistical service The cost of renting industrial space has halved since 2007 to €5 per sq ft while the 12.5 per cent corporate tax rate remains very attractive, says IDA Ireland. During the boom, Ireland neglected more traditional industrial and engineering manufacturing as it focused on attracting high-value companies in the pharmaceutical, biotech and internet sectors. But a property crash and four-year recession have changed the situation dramatically, forcing 160,000 construction workers out of work and pushing the unemployment rate up to 14.3 per cent. "With costs coming down there is the possibility of moving some people who used to work in construction into the manufacturing sector," says Mr O'Leary. "We are talking to state training agencies about conversion courses," he says. E&I Engineering, an Irish company based in Donegal that designs and manufactures electrical components, is already tapping into the pool of unemployed construction workers. "I would say 100 of our employees would have worked in construction previously," says Philip O'Doherty, chief executive. We spend a lot on retraining people in-house. Dr Chris Van Egeraat, lecturer in economic geography at Maynooth university, says the shift in strategy by IDA Ireland is commendable. "The reality is that the knowledge economy will be unable to provide jobs for a large number of people that have lost employment in low value-added manufacturing activities," he says. However, it will be difficult to attract medium-level manufacturing because of lower-cost competition from Asia and eastern Europe, he adds. Tommy Fanning, head of IDA Ireland's new engineering and manufacturing unit, admits the manufacturing sector cannot provide the huge numbers of jobs that construction once did, but he expects hundreds of jobs to be created this year in the sector. We can again compete with the UK, Germany and even eastern Europe for these investments due to falling costs. We are making ourselves visible again in this sector," he says.