I move: "That the Bill be now read a Second Time."
The provisions of the Bill are explained in the memorandum which was circulated to Deputies on 27th October. The Industrial Development Bill, 1976, which lapsed on the dissolution of the last Dáil, contained a number of provisions amending the powers of the Industrial Development Authority as they related to the provision of assistance for the development of new enterprise and for sectoral restructuring, together with a number of provisions which are technically necessary to keep the industrial development legislation up to date. Since the proposals in the Bill had already been announced and are awaited by certain firms and since a number of the measures were in any case long overdue from the authority's point of view the Government have decided to take a positive view of the merits of these proposals and to proceed with the present Bill, which incorporates the provisions of the 1976 Bill together with a number of amendments to which I will refer later. It is my intention however that a more comprehensive review of the authority's powers and functions will be undertaken at a later date.
As the Bill is, in its broadest sense, concerned with enchancing the job creation abilities of the authority, it will be seen to fit in very well with current Government objectives. A programme of immediate job creation has been our first priority in the months since taking office. Already the Government have initiated a series of measures in key areas which will create over 5,000 new jobs in 1977 and will contribute to the target of 20,000 new jobs in the year to mid-1978. These measures include significant extensions to the employment incentive scheme, the establishment of an Action Team on Youth Unemployment, a substantial increase in the public capital programme for housing and other capital works to boost employment in the construction industry, and the recruitment of substantial additional numbers to the Garda Síochána, health and other services. In addition, the Government have had meetings with the major national representative bodies in the economic sphere to exchange views on how best to boost job creation, and there will be further meetings at various levels.
The Bill's main objective is to enhance the capability of the IDA: to encourage and assist the development of domestic industry, and particularly the small and medium-sized indigenous firms; to stimulate the emergence in much greater numbers of new entrepreneurs. I will, of course, dwell further on this, but first I think some comments on the activities generally of the IDA, as at present constituted, would be expected from me by the House.
The reconstitution of the IDA in its present form under the Industrial Development Act, 1969, enabled the authority generally to expand its job creation capacity and, as Deputies will agree, it has addressed itself to this task with considerable success. Indeed, the results it has achieved would have been far better had it not been for the job losses that have occurred in recent years in our older industries and the impact which the recession has had on the investment plans of overseas firms.
In the period from April, 1970, to December, 1976, a total of over £237 million was approved for new industry projects with a job potential of 84,311. In the same period over £71 million was approved towards projects involving the re-equipment and modernisation of existing industries; £13 million was committed under the small industries programme towards the creation of over 12,000 jobs.
I think all Deputies are aware of the main programmes operated by the IDA, that is to say: the new industries programme—which largely but not exclusively is concerned with the attraction of new projects from overseas—the home industries programme —which is concerned with the development and maintenance of existing industry, and of whose activities the re-equipment grants scheme is a major feature—and the small industries programme. What may be less well known are the series of new measures taken by the authority in recent years to supplement and reinforce the main programmes. These new measures include a joint venture scheme, the operation of a project identification unit, a service industries programme, and a product and process development grant scheme.
Some Irish firms find that the best means of expanding is to enter into partnership with an overseas company with complementary attributes. In such cases the IDA's joint venture unit will seek a suitable partner and help to develop the ensuring project. In the period to December, 1976, 19 joint venture projects were approved which will produce a total of 1,500 jobs at full production.
Many smaller industrialists have developed by taking advantage of business opportunities presented by the establishment of larger foreign industries in this country. There are also opportunities to supply existing Irish firms with materials which are currently imported. To identify these opportunities the IDA has set up a project identification unit which takes the initiative in identifying manufacturing opportunities for Irish firms. Already the IDA has approached over 400 Irish firms with specific proposals, often based initially on import substitution but also having strong export potential. About 40 of these projects have been brought to the approval stage and 50 are under negotiation at present.
Another scheme introduced to promote employment creation is the service industries programme. This programme provides jobs for highly skilled people—such as graduates and professional and technical personnel— by encouraging Irish and foreign firms in the service industries to expand their overseas-orientated operations in Ireland. In 1976, almost 1,200 jobs were approved under this programme in 19 projects, nine of which are being promoted by Irish firms.
The response of Irish industry to the IDA's product and process development grants scheme has grown to the stage where commitments have reached a level of about 150 projects each year involving close to £1 million of grant commitments. This underlines the growing sophistication of Irish industry and the positive attitude of Irish industrialists towards future growth and expansion.
The job creation task now facing the country necessitates further measures, however. One of these is obviously to increase considerably the numbers of new small industries that are established. It is well recongnised, not only in Ireland but throughout the EEC generally, that continuing industrial growth requires an increase in the "birth rate" of small firms. In recognition of this the Government have recently undertaken to double the rate of project approvals for small Irish industries. To enable this target to be met I recently announced a package of new measures.
In the first instance, the small industry "cluster" concept, introduced on a pilot basis a couple of years ago, is to be immediately extended throughout the country with a nationwide programme of nine small industry clusters. The new programme will involve the construction of almost 200,000 sq. ft. of factory space at a cost of over £2 million. Subject to planning permission, construction at all locations will start in the next few months and the availability of these facilities in the near future will enable companies to get into production quickly.
I also recently authorised the IDA to proceed with the building of five 7,000 sq. ft. advance factories specifically for small industries, and plans for construction are proceeding at all locations. In addition, the fixed asset investment criterion for small firms has been raised from £200,000 to £300,000, a change which will enable a greater number of projects to come within the scope of the small industries programme's generous package of incentives.
In recognition of the need to encourage and foster small industries specifically in Dublin, two further initiatives are being undertaken in conjunction with Dublin Corporation and Dublin County Council. At Marley Grange the county council are making craft workshops available and these are being actively promoted by the IDA as a location for suitable craft industries. And in the Liberties area of the city the IDA is currently arranging with Dublin Corporation for the construction of a number of industrial units.
These measures represent a substantial commitment by the Government to increasing the resources available to promote local Irish enterprise. Taken together with the generous financial and aftercare advisory services at present available, I am confident that they will lead to accelerated growth of the small industry sector in Irish industry.
While emphasising this commitment to the development of domestic industry our job creation needs are such that we will continue to need—and in increasing numbers—the establishment of new overseas projects for many years to come. To illustrate this, the IDA estimate that in the four year period 1977-80 overseas investment will have to provide about half of the new job approvals needed.
The task of attracting here the sort of overseas project that we are interested in is getting tougher, however. In the first place international competition for such projects is growing, from both developing and developed countries. In addition, the volume of internatioanl mobile industrial investment, particularly from the USA, has declined in recent years. The number of investment proposals generated by our overseas industries programme has been somewhat disappointing in the past two years; only 39 projects with a total job potential of 7,896 were approved under the overseas new industry programme in 1975, and 33 projects with a job potential of 6,358 in 1976. This compares with 80 projects involving total job potential of 13,694 approved in the year 1st April, 1973, to 31st March, 1974.
In this situation the IDA has been stepping up its promotional efforts to get an increased share of mobile industrial investment for Ireland. And it is my intention to maintain overall industrial incentives at a level which will be adequate and competitive and to have the position reviewed and adjusted as circumstances require.
In the past, some Deputies on the opposite side have put forward the view that to meet our job creation needs, the establishment of a National Development Corporation was necessary. This viewpoint was most recently put forward by the Irish Congress of Trade Unions at their meeting with the Taoiseach and other Ministers and myself on 23rd September. I indicated then that with the provision for the IDA of the additional powers contained in the Bill and the establishment of an Industrial Development Consortium the need for a National Development Corporation did not in my opinion arise. The question of the establishment of the consortium was the subject of a question in the House last week. I would now like to tell the House what are my proposals in regard to the establishment of this consortiom and what objectives it would have.
The remit of the consortium will include the following: (a) setting job creation targets and monitoring and reviewing industrial progress in general, with particular reference to job creation and job maintenance; (b) identification of obstacles to growth and suggesting solutions, and (c) co-ordination of activities of existing State agencies to maximise the contribution of these agencies to industrial development.
One of the main objectives in establishing the consortium will be to ensure that industry has available to it the resources necessary to achieve industrial growth targets. Job maintenance will get as much attention as job creation, and special attention will be given to mechanisms for assisting enterprises in difficulties. The constitution and operations of Fóir Teo. and other agencies concerned in this area will be looked at. In particular I have in mind the possibility that Fóir Teo. might be revamped into a body not associated with impending "bankruptcy". Such possible restructuring might entail transfer of shareholdings acquired by the IDA and other bodies to the new entity. But further study and deliberation will be needed before we can come to final conclusions on these matters.
Initially the consortium will consist of the Ministers and Secretaries of Departments concerned with industrial development and job creation, principally the Departments of Industry, Commerce and Energy, Finance, Economic Planning and Development and Labour, together with the chief executives of State agencies directly involved in industrial development, that is, the IDA, Córas Tráchtála, the Institute for Industrial Research and Standards, An Chomhairle Oiliúna, the Industrial Credit Co. and Fóir Teo. Provision will be made for participation by other State bodies and companies and for consultation with national representative organisations such as the CII and ICTU as required. The Minister for Industry, Commerce and Energy will be chairman of the consortium and other Ministers will attend as required. I wish to stress the flexibility in our approach to both the membership and the operating methods of the new body. What we are most concerned with is achieving results.
I would like now to turn to the provisions of the present Bill. In addition to the proposals previously provided for in the Industrial Development Bill, 1976, the present Bill includes a provision which will extend the shareholding powers of the IDA. Under the Industrial Development Act, 1969, the IDA are empowered to take shares in certain industrial undertakings. Equity participation by the IDA can be an important and valuable part of the overall financial package put together to assist an industrial undertaking, and it can provide the State with a share in profitable new enterprises and thus secure a return on capital invested in industrial development.
I have found, however, on examination that there are unnecessary restrictions on the IDA's powers in this regard. Legal opinion obtained by the authority has indicated that on the basis of the existing statutory provisions, the authority could be confident of having power to take minority holdings in existing companies only. In order to remove the doubt regarding the authority's power to take majority shareholdings and to ensure that it has adequate flexibility to operate successfully in the increasingly sophisticated financial and industiial environment, I propose to extend the authority's shareholding powers to enable it to take shareholdings of up to 100 per cent in suitable industrial undertakings, or in companies participating in the ownership, control or management of suitable industrial undertakings, and to enable it to form or participate with others in the formation of new industrial companies.
This extension should not be seen as providing the authority with exceptional powers; powers similar to those which the Bill proposes to extend to the authority are already available to Gaeltarra Éireann and other bodies.
I would expect that these extended powers of participation would be particularly useful to the authority in the implementation of the new enterprise development programme. With these powers the authority would, if circumstances so warranted, be in a position to set up a company to manufacture a product successfully developed under the programme or become a shareholder in a company being set up for that purpose—for instance, in cases where the Irish party was for the time being over-burdened with technical production and marketing problems or lacked the professional support or finance to bring the project to an early start-up.
I regard this initiative as a reasonable and pragmatic extension of existing IDA powers and functions. Save in exceptional circumstances IDA personnel will not be engaged in the actual day-to-day management of commercial enterprises.
I would draw attention to the fact that under the terms of the Bill it will be necessary for the authority to seek my prior approval before it takes a majority shareholding in any company. The Bill also provides for a limit of £1 million on the amount which the authority may expend on the purchase or taking of shares in a particular body corporate without prior Government approval. All the authority's financial incentives are subject to a maximum limit for each individual case, which can be exceeded only with Government approval; this provision brings expenditure on shares into line in this respect.
In Ireland the volume of new projects promoted by first-time industrialists has been disappointingly small, even though as a country I am sure we have our due proportion of people with the necessary knowledge and skills. It is clear that in many cases one of the causes of this apparent lack of enterprise has been the inability of the entrepreneur to raise the necessary finance to carry him through the start-up situation. All too frequently Irish banks will lend only on the security of assets rather than on ability and enterprise. Accordingly it is proposed in this Bill to provide for the giving of loan guarantees and interest subsidies to first-time industrialists, in respect of loans raised to provide working capital. The new guarantee facilities will be limited to £150,000 in any one case, but the Government may permit a higher figure.
I would envisage that this proposal will get a response from a wide spectrum of Irish people, both at home and abroad, who have the qualifications, experience and enterprise to become successful industrialists. The resulting projects will generally have to be commercially exploitable within a reasonable time span. They are of course likely to be small initially, but should offer significant longer-term benefits in view of the possibilities for expansion and linkage at a later stage.
This new enterprise development programme is an experiment. It will be necessary in each case to assess the ability and commitment of the entrepreneur; in certain instances also the authority may find it necessary to support persons, by consultancy contract, while they are developing a worth-while proposal in its technical details. Assistance towards working capital will be supplemented as appropriate by the existing range of benefits for fixed assets administered by the IDA.
The Bill also provides for the giving of loan guarantees and interest subsidies in respect of the finance needed for mergers and acquisitions.
Up to the present the main incentive to help existing industry become more efficient has been the re-equipment grant scheme. While this has done much to enable Irish firms to modernise, it does nothing to promote planned and orderly restructuring; instead, the existence of excess capacity in industries at a time of competitive pressure from imports is enforcing structural changes involving major costs in terms of redundancies, lost capacity and the need to create substitute employment.
Our commitment to home industry suggests that the authority should be able to take a positive and constructive part in bringing about desirable and orderly change in certain sectors. The industries most at risk are composed of smaller-scale firms and are, for the most part, not capital-intensive. Restructuring assistance is consequently unlikely to entail an outlay proportionate to its obvious benefits. The Bill would set a limit of £500,000 on the amount of borrowings which the authority could guarantee in any one such case without Government approval.
In every other European country some form of positive assistance is provided for restructuring. I am glad to make this contribution to the Irish situation, at the same time recognising that further initiatives may be necessary at a later stage.
I have no doubt that there is widespread approval in the House of the programme carried out by a number of State bodies to provide development assistance to what is called the Third World. There is a general will to do what we can in this field within the limits of our resources.
The IDA is one of the participating bodies and is highly qualified to be of assistance by reason of its extensive expertise in the assessment of projects, promotion of a wide range of industry, construction and management of industrial estates and so on. In the past, although it had no formal power to do so, the IDA has given briefings as the occasion arose to representatives of developing countries and more recently, in anticipation of this provision, has negotiated for a small number of projects in the field of overseas co-operation. There is a considerable demand for such assistance, both from the developing countries themselves and from international organisations which provide contracts for development projects abroad.
Such contracts are likely to be the main source of finance for the limited undertakings by the IDA in this area, and IDA funds as such are unlikely to bear any expense arising therefrom, taking one year with another. In fact, the amount of IDA resources in terms of personnel which can be made available for this work may be more limited than many advocates of development co-operation would like.
This Bill formally gives the IDA power to engage, with my approval, in development work of this kind on the basis of providing technical and advisory services, but not material or financial assistance.
The Bill also contains a number of provisions designed to tidy up the ceilings on aggregate expenditure set out in the existing legislation. Financial commitments under the present Bill are brought within the appropriate limits, namely, £400 million for grants of a capital nature, including interest subsidies, and £100 million for loan guarantees. Expenditures on equity which formerly were not covered by any ceiling are brought within the limit on grants of a capital nature.
Training grants are recognised in every country as an effective instrument in influencing the location of industry, in up-grading the skills of the population, in bringing forward job creation and as a direct incentive to industrial promotion. Up to now there has been no limit in money terms on the amount of training grants which could be given to any one undertaking, although of course each application is examined as to what is technically needed for the specific process in question.
Recently, however, training grants have become larger, due to increases in the scale of projects and promotion of service industries which are intensive in training grant requirement. Accordingly the Bill proposes to bring the amount of training grant which can be approved, without Government permission, into line with that for capital grants generally, namely, £850,000 per case.
Under existing legislation authentication of the authority's seal requires the attendance, sometimes at short notice, of two members of the authority. As the members of the authority are busy people in their own right, and as there is moreover a substantial volume of these papers, the present system is not easy to work. As a practical matter the Bill gives the authority power to delegate this function to two of its senior officers.
On legal advice it is proposed to make clear the purposes for which the authority may borrow temporarily. Such borrowings, I might add, are exceptional and have occurred principally when the amount of money which the IDA has been entitled to draw from the Exchequer has been exhausted, pending further legislation.
The IDA has, since 1970, given grants of up to 50 per cent of the costs involved in research and development projects, subject to an absolute maximum of £15,000, but the limit of 50 per cent of approved costs will continue to apply. The new limit is justified in the context of the increased costs of scientific work and the increased scale of projects now being undertaken by native Irish industry and, in many cases also, being delegated to Irish subsidiaries of overseas companies.
Ireland still stands out as an attractive base for international industry. We can enhance this attractiveness by maintaining competitive incentives, by building up our industrial infrastructure, by continuing to provide a hospitable environment for overseas investment and, particularly, by reducing our rate of inflation. This last will require the co-operation of all sections of the community and is vitally necessary if we are to combat the unemployment problem. The magnitude of this problem is widely recognised. A significant growth in the population and labour force is projected in the years ahead. The urgent need to absorb those who lost their jobs during the last three years and the long standing problem of structural unemployment compound the need for urgent job creation.
For all that, it is not a time for despondency or negativism. The Government have taken positive measures to create employment and additional proposals are at present under examination. The trend in price increases is significantly downward and next year, if all goes well, inflation will be reduced well into single figures. A good rate of growth is likely to be maintained in industry, with GNP as a whole likely to grow by between 4½ and 5 per cent this year. There has been an upsurge in private investment, especially in the manufacturing sector, underlining the growth in business confidence.
The measures contained in the Bill can be seen as further promoting industrial recovery and future development. As such I am confident that they will receive the support of the House. The IDA has achieved considerable success in the past and has shown itself willing constantly to reappraise its own activities and to respond to the need for change as it arises. This Bill extends the range of incentives the authority can offer and increases its ability to operate effectively. I accordingly recommend the Bill for the approval of the House.
