Dáil Éireann debate -
Thursday, 13 Dec 1979

Vol. 317 No. 9

Supplementary Estimates, 1979. - Vote 43: Industry, Commerce and Energy (Resumed).

Debate resumed on the following motion:

That a supplementary sum not exceeding £13,139,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December 1979, for the salaries and expenses of the Office of the Minister for Industry, Commerce and Energy, including certain services administered by that Office and for payment of certain loans, subsidies, grants and grants-in-aid. —(Minister for Industry, Commerce and Energy.)

Minister for Industry, Commerce and Energy (Mr. O'Malley)

I had begun to reply to the debate on 6 December when the Dáil adjourned. I should like specifically to reply to points made by a number of Deputies who had expressed appreciation of the work of some of the bodies for which additional funds are being sought in the Supplementary Estimates. Deputy O'Toole referred to what he called the recent attack on the work of IIRS. I presume he was referring to some articles which had appeared in the newspapers, reporting on a study published by a US professor stating that the IIRS were failing in their task of aiding Irish industry.

The first point I should like to make in that respect is that nobody wishes to stifle constructive criticism of the IIRS. When it is valid, such criticism should be made; but there are certain matters in regard to the study which make it difficult to accept the sweeping generalisations in this report. I do not wish to give that report any status that it does not deserve by discussing it in detail. Suffice it to say that the research on which the report is based is years out of date. The study concentrated on a limited range of industries and a limited number of firms. Two big industries in an Irish context were not surveyed, for example, the engineering and construction sectors, in which the IIRS were very active.

The IIRS provide a broad range of 66 different services to industry. If one is in any doubt about the services which they provide he need only look at the IIRS Annual Report in which details of instances are given where the institute have successfully aided both domestic and foreign industry. I do not doubt that they will have to continue to extend their services. They have been doing that in recent years and I will encourage them to go on in that way so that a fuller service can be given to industry.

Contrary to the impression conveyed by Deputy O'Toole in his references to the recent IIRS Bill, the purpose of that Bill was not to place the institute at a disadvantage in borrowing vis-á-vis other State bodies but rather to give the institute powers to borrow which they do not have at the moment, and a flexibility through this borrowing which they also have not got. This will enhance the powers of the institute to carry out their functions. The Bill will strengthen rather than weaken their position.

Reference was made to the availability of credit for small industries. Deputy O'Toole may not be aware af the global loan facilities which have been negotiated with the European Investment Bank for small manufacturing industries. Since the original loan of £2.5 million was arranged in June 1978 three further loans totalling in all £20 million have been obtained from the bank. These moneys are lent by the Industrial Credit Company to small manufacturing firms at a fixed rate of interest over a period of up to ten years. The provision of these very attractive facilities and their rapid rate of take-up are convincing testimony of the Government's concern to ensure that the financing of small manufacturing firms will be secured.

Deputy O'Toole referred to the difficulties, both domestic and external, which have affected manufacturing industries here. I am pleased that notwithstanding these difficulties manufacturing industries have performed excellently in 1979. The March 1979 industrial inquiry report published by the Central Statistics Office shows that manufacturing employment was 8,300 higher than 12 months previously. The associated increase in manufacturing output was a healthy 7 per cent. This rapid pace of expansion was not alone maintained but intensified during the June 1979 quarter. Manufacturing output was 8 per cent higher than in the June 1978 quarter.

In 1979 the IDA for the first time carried out a mid-year employment survey the result of which indicates that by the end of June employment in manufacturing industry was about 6,600 up on the end of December figure. I am talking about December 1978. That increase almost matches the increase shown in the full year, 1978, and must be regarded as extremely encouraging. This figure of 6,600 is the net increase in manufacturing employment after all redundancies and losses of employment had been taken into account and allowed for. It is by far the highest figure that we have ever known in the history of the State, not just by a few percentage points or anything of that kind but in terms almost double the best that has been known for a long time, or indeed ever.

The IDA now expect to exceed by a significant margin their 1979 job approvals target of 30,000 which will make 1979 the best year ever for the promotion of new industrial projects, reflecting the buoyant level of activity in the industrial sector. Manufactured exports increased by over 25 per cent in value terms during the period January to September 1979. The position generally, therefore, in relation to manufacturing industry in this current year is extraordinarly good, notwithstanding difficulties which Deputy O'Toole and others pointed out and which are clear for all of us to see. It is not easy to envisage just how good the position would be if we were not subjected to these difficulties, both external and internal. There is no point in complaining about the external ones because we can do nothing about them. They do have a major influence. However, there may be some point in making reference to the internal factors which are inhibiting industrial development. Some of them are under our control as a people, and surely enough has been said in recent months to have made it clear to everybody what the dangers are, but, unhappily for all of us, certain courses of action seem to continue. If these internal inhibitions on growth, employment creation and so on did not exist we could almost certainly now or in the very near future have full employment here.

I am beginning to get complaints from industrialists in certain parts of the country about the inability to recruit workers. I would not like it to be thought that that is a general complaint throughout the country as a whole. Clearly, there are many areas still which need further employment creation and some of them need a good deal of it but there are areas in the country where it is not possible to create any more jobs because there is no one to work in them.

Mr. Bruton

Of the right qualifications.

Mr. O'Malley

Of the right qualifications and in some cases of none.

Mr. Bruton

They cannot even get unskilled workers.

Mr. O'Malley

In some places, it seems.

Mr. O'Toole

Is the Minister surprised at this?

Mr. Bruton

There is something wrong in the labour market.

Mr. O'Malley

It is surprising because our official figures for unemployment are still in excess of 80,000, but the experience of some industrialists is that in certain towns it is very difficult to get anybody. This matter needs careful investigation. In particular I do not want to give foreign industrialists the impression that there is a shortage of labour in this country. There is not. I must be careful in what I say to ensure that I do not give that impression. Nonetheless, I am told that in certain places there is great difficulty in getting people to take up employment.

Deputy O'Toole asked for an explanation of the increase from £700,000 to £1,450,000 in subhead J.2. This subhead is in respect of grants to industries in the Shannon Industrial Estate. The increase of £750,000 in the original Estimate is the result of a more rapid pace than was anticipated earlier at which industrialisation has taken place on the estate this year. Most of the additional money represents the payment of grants to new, incoming industries. The number of new industries coming into Shannon was about double what was estimated last year. I am glad to say that the quality of the industries which have come in there in the past year is extremely high. I welcome particularly the investment in three plants at Shannon by Westinghouse which is an especially valuable acquisition for this country. They are indeed one of the most valuable customers we have had in terms of industrial investment in this country and I believe they are committed to five plants here and the possibility of even more is not to be ruled out.

Deputy O'Toole criticised the inaccuracy in the Estimate for subhead K.2 which relates to export credit finance for capital goods exports. It is impossible to estimate these things accurately 18 months in advance and in no sense am I critical of anybody for getting it wrong. This figure was underestimated for two reasons. One is that our exports of capital goods are far higher this year than anybody could have expected last year. The second is that interest rates are much higher this year than anybody could have expected last year. Through this Vote the State has to pick up the difference between the AAA lending rate for banks and the preferential concessionary rate of interest at which this money is made available. The concessionary rate is very attractive. It varies between 7.5 per cent and 8 per cent and the gap between that and the AAA rate is much bigger this year than could have been anticipated when the Estimate was prepared in the middle of last week. Also, of course, the rate of exports is very high.

Deputy Kelly referred to the alleged shortcomings of the advice that I get on energy. In particular he is perturbed about the number of officials in my Department dealing with energy. As I informed him previously, the number of officials of HEO rank and upwards dealing with energy in my Department on 1 January last was 17. In the course of a year that figure has been increased by nine which is an increase of 53 per cent.

Mr. O'Toole

It is due for major expansion now.

Mr. O'Malley

Now that it is going to become a self-contained bureaucracy you will see it spawning new people at a fierce rate.

Mr. B. Desmond

It might even strike oil.

An Leas-Cheann Comhairle

Hopefully.

Mr. O'Malley

The total number of civil servants employed in the sections dealing with energy matters has increased from 35 on 1 January 1979 to 55 at present, an increase of 57 per cent. This is all happening at a time that Mrs. Thatcher is reducing the British civil service by 15 per cent. Since September last my Department have also had the full-time services in relation to energy matters of a senior technical expert seconded from the IIRS. Also in that time the Irish National Petroleum Corporation have been established and their achievements to date are well known. The practical benefits of what they have done can be seen already. They are in the process of recruiting staff. I would like to take the opportunity to thank the directors of the company for the work they have done since their formation last July. Several of them have devoted an enormous proportion of their time to doing the work of that company because full-time employees were not available in the company. It should be acknowledged here that several of the directors have given more than generously of their time.

Reference was made to energy conservation and I have pages of notes as to what was done this year in regard to that, but I do not propose to go through them because I have already given that information to the House. There is no saving of money, as I pointed out, in relation to energy conservation; there is simply the transfer of part of the funds from one subhead to the other. That gave the impression of a saving which is not correct.

Deputy Kelly asked for the reasons for the cash flow problems being experienced by National Film Studios of Ireland Limited and Deputy Bruton asked about the introduction of legislation dealing with the development of the film industry in Ireland. The serious cash flow problems at NFSI are due to unforeseen additional trading losses during 1979 and the necessity to pay pressing outstanding creditors. A grant of £150,000 to meet administration expenses has already been paid to the company in 1979. However, this has proved insufficient to cover the company's operating losses due to difficulties in attracting a suitable level of film-making activity. At the time the 1979 Estimates were originally framed, it was anticipated that the level of film-making business at the studios would have been much greater than, in fact, has turned out to be the case. This is due, in part, to the lack of financial incentives to encourage film-making in Ireland. It is hoped that the two film Bills which I introduced in the House on 29 November will go some of the way in rectifying the financial position of the studios in the immediate years ahead. The Irish Film Board Bill will result in the setting up of a film fund which will encourage an increased level of film-making activities in Ireland. The National Film Studios of Ireland Limited Bill will give the company a proper share capital structure which will enable the company to liquidate some of its borrowings with consequential changes in interest charges.

This will give the studios their final chance to prove themselves. If, after a number of years, they cannot do so and are still losing money very heavily we will have to think again about them. I am prepared to give them one final chance but not more than one. I do not think I would be justified in the public interest in allowing the existing situation to continue indefinitely. The Committee of Public Accounts has commented very strongly, and unfavourably, on this company, so much so that I had some doubts as to whether I should proceed with the Bill. I have decided to do so and give the studios one final opportunity.

The film industry generally of its nature is not one for which a public type State board is necessarily the most suitable. It is an imaginative, innovative type of business where artists and people of originality get strokes of genius and tend to come to the top rather than people who want a steady 9 a.m. to 5 p.m. job with a pension at 60 or 65 years of age. I see the film board, however, being a long-term operation which will be of considerable importance to the whole question of the film industry here. That industry is by no means confined to the NFSI at Bray. One must look at it in much broader terms than simply the physical studios which are located at Bray. Much of the modern film making can be done without any reference to a studio at all. Techniques available nowadays are such that the traditional dependence on studios is becoming increasingly less.

Deputy Bruton asked for an explanation of the size of the saving of £900,000 for industrial housing. As I explained in my speech, there is no saving; it is paid under another subhead. The total amount, in fact, has increased to £1.25 million. That is now spent through the NBA who build the houses at the request of the IDA. This scheme is only a standby for emergency cases for key workers where they are unable in an area to get housing facilities from any of the more usual sources.

Mr. Bruton

The Minister mentioned labour shortage and I should like to know if the Minister thinks that lack of housing contributes in any way to the local labour shortages he referred to?

Mr. O'Malley

It may in some areas. Deputy Bruton asked for a report on the work of the Irish Productivity Centre. Copies of the centre's annual report are laid before both Houses of the Oireachtas and the centre has informed me that they sent a copy to each Deputy. The centre is an autonomous body established jointly by the FUE and ICTU. Its primary objective is to raise productivity in Irish industry. To achieve this end the centre caters for firms, particularly the smaller firms, firstly by helping them to become financially stronger and more competitive, and, secondly, by developing more effective human relations at work. The centre is not in direct competition with private sources because the centre's work is concentrated on smaller firms which cannot afford the services of commercial consultants.

Deputy Bruton asked for further details in relation to the saving under shipbuilding subsidies. The original sum was £500,000 and an interim payment of £350,000 hase been paid in respect of the loss incurred by Verolme Cork Dockyard Limited on the construction of a vessel which was covered under the loss-subsidy scheme for shipbuilding. It will not be possible to determine the actual final level of subsidy payment due in respect of this vessel until the financial accounts of Verolme Cork Dockyard for 1979 become available next year. Arrangements will be made then to provide for the balance of the subsidy payment out of my Department's Estimate for next year.

Deputy Bruton suggested that there is considerable potential for trade with Hong Kong and on this point I can say that Córas Tráchtála constantly assess markets for Irish exports worldwide. A country ranking list is prepared annually from this research which is based primarily on market potential and factors including political stability, market size, import propensity, rate of economic growth, origin of imports and degree of economic development. Since 1973, when Córas Tráchtála opened its Tokyo office, Hong Kong has been serviced from that office. In 1973 and 1975 trade missions visited the market and over the entire period Córas Tráchtála's Tokyo office introduced individual companies to the Hong Kong market.

While Hong Kong, indeed, is a great trade centre it has not proved the most important Asian market for Irish exporters. It has been a difficult market for Irish consumer exporters because of market requirements, competition from other Asian countries and, if dealing at the top end of the consumer market, the need for an internationally known brand name. Because of Hong Kong's relatively small population, other Asian markets such as South Korea are currently showing more promise for Ireland's producers of industrial goods. South Korea was recently the target for a successful Irish trade mission.

Córas Tráchtála will shortly open an office in China and the potential of other areas such as Hong Kong is constantly under review. This market was visited earlier this year by the chairman and the chief executive of Córas Tráchtála. In view of Córas Tráchtála's increased concentration on the South East Asian region the organisation will be researching further the most appropriate form of representation in the area.

Deputy O'Connell spoke of the IDA allegedly creating difficulties in the way of small firms getting grants. I would point out that the IDA has recently simplified very much the application form for assistance under the Small Industries Programme. A number of other measures are being taken to accelerate job approvals under this programme. The upper limit on fixed assets for qualification under the programme has recently been increased from £300,000 to £400,000 and there is an extensive programme of construction under way of advance factory units for small firms. There is every expectation that the IDA's ambitious job approvals target for small industries of 6,000 will be exceeded by about one-third. Of course, in the mid-western region SFADCo's efforts over the past 18 months in regard to small industries has been especially successful.

I have endeavoured to reply as fully as possible to the points raised in the debate and I conclude by again thanking Deputies for their interest in, and understanding of, the role and functions of my Department and its affiliated bodies and their comments in relation to them.

Mr. O'Toole

I would like to welcome the Minister back to his Department, to congratulate him on his reappointment and to wish him success.

Mr. O'Malley

Thank you.

Vote put and agreed to.