By Simon Thomas

OVER the past 12 months manufacturers in Wales have come under increasing pressure from developing countries like China and India.

Not only is China currently the undisputed master of low-cost manufacturing, but when grouped together with India the two giants currently produce 125,000 science graduates per year, as opposed to our 5,000.

At the same time the US dollar - which for many forms the cornerstone of the global economy - has fallen to its lowest level in three years. It has fallen by 33% against the euro and 20% against the Japanese yen.

So amid fears of increasing US inflation, higher interest rates and subsequent global recession, it's no wonder that the Confederation of British Industry reduced its economic growth forecast for 2005 from 3 per cent to 2.8 per cent.

So what does this mean for Welsh manufacturers?

A recent Engineering Employers Federation (EEF) survey of 500 companies suggested that companies expect further outsourcing to low-cost economies over the next five years, with the CBI predicting as many as 5 million outsourced jobs from the USA and Europe over the next decade.

It's not surprising that as many as one in 20 companies now consider outsourcing a viable option to reduce costs and remain competitive.

But companies like Asset International, which provides products and technologies used for infrastructure projects across the UK, will be facing pressures of a different kind.

With high oil prices and other raw material costs such as steel continuing to rise, the challenge for our business over the next five years will be to add value while keeping costs down.

Fortunately, we're able to start from a pretty strong foundation, which CBI chief Digby Jones refers to as "the kind of stable, boring, predictable economy that all business leaders dream of".

Coupled with the chancellor's plans to increase public spending and the awarding of the longest- ever public contracts through Asset Manage-ment Programme Four, our real challenge is to introduce new technology and get buy-in from decision- makers throughout the industry.

I've always regarded Wales as an enterprising nation, and recently trialling one of our innovations with the partners of the Welsh Water Alliance was a highlight of our year.

I am concerned that the public money that's been earmarked for research and development is actually accessible to Welsh businesses.

Plans to set up science cities in northern England will not help Welsh firms.

The chancellor's plans to "create a Britain that leads the globe in hi-tech jobs and boasts the best-educated and flexible workforce in the world" is fine, providing Wales is actually part of it!