##processing, research and training. recent announcements of major r & d investments by leading multinational companies in the biopharmaceuticals, ict and services sectors as well as the establishment of innovation centres by major indigenous food companies show that we are already moving in the right direction in terms of increasing r & d activity among both foreign and indigenous firms in ireland. ireland ’ s national r & d action plan includes a number of specific targets for the country to achieve by 2010, including increasing total spending on r & d to 2. 5 per cent of gnp, doubling the number of both indigenous and foreign - owned companies with minimum scale r & d and increasing the number of indigenous and foreign - owned companies performing significant r & d. other targets relate to the number of researchers and r & d performance in the higher education and public sectors. while specific r & d targets can be useful in terms of increasing innovative capacity, two points to remember about them are : 3 / 4 first, research targets measured in terms of inputs, such as the amount of money spent or researchers employed, do not substitute for the effectiveness of innovation, which would ideally be measured by some output measure and its positive impact on productivity. and second, a national innovation policy must operate within a strict cost / benefit framework, particularly since smaller economies lack resources to fund all fields of research at high levels. while gross spending on r & d of 2. 5 per cent of gnp by 2010 is below the target set for the eu as a whole, it is an ambitious target given ireland ’ s relatively low starting level. nevertheless, the longerterm target should be to raise r & d expenditure in this country above the european average. apart from providing a stable macroeconomic environment and ensuring high standards of competition and an appropriate regulatory regime, the main challenges for ireland in terms of increasing innovation will be : • to increase the number of researchers in science, engineering and technology, both by funding advanced research degrees and making ireland an attractive location for world - class researchers ; • to continue to strengthen co - operation between third - level institutions and high - technology firms ; • to increase the availability of venture capital and equity capital to high - technology enterprises, particularly for smes ; • to increase linkages between technologically - intensive multinationals and domestic suppliers ; and • to ensure by our education and training that the domestic workforce is sufficiently skilled to enable the economy to absorb innovation developed elsewhere. while these are difficult challenges, they are essential

, the term “ principles - based regulation ” seems to have become a code for deferring to the preferences of the regulated entities. that will certainly not characterise future regulation. instead you may expect to see challenging and assertive supervisors taking an independent and robust view of the risks of a firm, and insisting on mitigation. they will be backed by a credible threat of enforcement action. in fact the regulator already seems to have quite extensive powers. exercising these can, though, sometimes be less trouble - free than you might suppose. for example, to be appointed a director of a bank, a person must be deemed “ fit and proper ” by the regulator. yet if the regulator subsequently revises their opinion and decides that a director is no longer “ fit and proper ” it ’ s not as clear that there are comparably explicit powers to remove that person. likewise, the legal restrictions on confidentiality ( especially those coming from eu directives ) can, at least as they have been interpreted up to now, greatly circumscribe regulatory freedom of action to the point that the regulator can end up appearing passive and defensive. nevertheless, i am determined that there will be a renewed emphasis on enforcement, even at the risk of the regulator incurring legal costs in unsuccessful actions. the risk of losing a court case taken in good faith, where the regulator ’ s legal powers prove insufficient to prevent socially harmful risk - taking behaviour by a financial firm, is one i am prepared to take – always ensuring of course that due process is followed. i am confident that, if existing legal powers do prove inadequate in such cases, legislative amendments will be forthcoming. the emphasis on enforcement also extends to consumer protection. i reject the notion that an unwarranted focus on consumer information and consumer protection played a part in the failure of prudential regulation. achievements in the consumer area over the past number of years have been widely praised – and i would include in this the work of the financial ombudsman and mabs. there is no question of dismantling consumer protection because of a perception that mis - selling was not at the heart of the current crisis in irish finance. of all of the many thousands of regulated financial firms in ireland, only six are fully guaranteed by the irish government. customers, depositors and policyholders at others are, of course, covered by a variety of partial guarantee and insurance schemes. literally thousands of other financial firms – ranging from large international banks and