I move:
That a supplementary sum not exceeding £10 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1984, for the salaries and expenses of the Office of the Minister for Industry, Trade, Commerce and Tourism, including certain services administered by that Office and for payment of certain loans, subsidies, grants and grants-in-aid.
This is to enable the transfer of £12 million from subhead K3, which is for IDA's building operations, to subhead K2, which is for IDA capital grants and to provide an additional £7 million for capital grants from savings elsewhere in the Department.
The IDA's capital budget is divided into two subheads — capital grants and building operations. The capital grants subhead is used for the provision of industrial grants, equity participation and loan guarantees, and the building operations subhead is used to finance IDA's building activities.
For the year ending 31 December 1984 IDA were approved grant-in-aid of £104.5 million for capital grants. In addition IDA were permitted to avail of £12.5 million of their own resources made up of grant repayments and reimbursements from the European Social Fund. The IDA's approved expenditure, therefore, on this subhead is £117 million.
The IDA now require approval for total expenditure of £152 million on capital grants, an increase of £35 million. This has arisen because of the increased level of grant claims amounting to £25 million, mainly in relation to training and new industry grants, and because of a change in accounting practice which has been recommended by the Comptroller and Auditor General whereby £10 million has to be paid from the capital grants subhead to the building operations subhead. I am proposing that this £35 million shortfall on capital grants be met as follows: £12 million — Already approved for building operations, and not now required, to be transferred to capital grants; £11 million — Surplus own resources on building operations to be transferred to capital grants; £1 million — Additional own resources on capital grants being realised from the European Social Fund and grant repayments; £4 million — Borrowings — IDA will be allowed temporary borrowings of £4 million; £7 million — Additional grant-in-aid for which I am now seeking the approval of the House.
With regard to the building operations subhead, the IDA were allocated £12 million grant-in-aid and were also authorised to retain a maximum of £10 million own resources, giving a total budget of £22 million for building activities. In the event, IDA's own resources are now likely to reach £36 million — £26 million greater than expected. This has arisen because of the strengthening of the US dollar which has made it more attractive for American companies to exercise purchase options on factory buildings and because of the payment of £10 million from the capital grants subhead to the building subhead on the advice of the Comptroller and Auditor General to which I referred earlier.
Because of the increased level of own resources in the building operations subhead, the £12 million grant-in-aid already approved by the House is not now required. I propose, with the approval of the House, to transfer this £12 million to the capital grants subhead. For technical accounting reasons only £6 million of this may now be transferred, the remainder being found from the subhead dealing with the National Development Corporation.
The IDA require approval for an additional £3 million expenditure on building operations, bringing total expenditure to £25 million. This £3 million is necessary to commence work on three enterprise centres. One of these will be located in Cork and the other two in Dublin at Tallaght and East Wall. I regard these enterprise centres as an important development. I particularly welcome the centre in Cork because there have been a number of closures recently in Cork which have had an initially demoralising effect. I use the word "initially" advisedly because I believe that since then there has been an increasing realisation on the part of the people of that city that their future is in their own hands and minds and that they are looking for opportunities to set up Cork owned enterprises to provide employment there. The establishment of an enterprise centre in Cork is, therefore, a major step forward in recognising the climate of enterprise that now exists in the city.
I must also draw the attention of the House to the location of the other two centres, which are in Tallaght and the East Wall area of Dublin. The East Wall area has been the victim of industrial decline, being an area of long established industrial and trading activity, some of which is being replaced by automation in the port and elsewhere. This enterprise centre will provide an opportunity for people, some of whom will be using the enterprise allowance scheme, to set up enterprises for the first time. It follows the considerable success of a similar enterprise centre on the other side of the river at Pearse Street where there has been a notably large number of people availing of that very valuable facility.
The other centre is in Tallaght, which has also been considerably affected by unemployment and, while there are quite a number of industries in the area, many are employing people who are not from Tallaght and who commute long distances. There is a need to establish enterprises which will employ Tallaght people in Tallaght. These three strategically and well chosen enterprise centres will represent a major contribution towards assistance by the IDA to native Irish enterprise, which is the main but not the only route towards a solution of our employment problems.
The additional £3 million will also allow for capital contributions in regard to IDA's Ringaskiddy property and for modifications to factories for clients in a number of areas throughout the country.
This still leaves IDA with a surplus of £11 million own resources in the building operations subhead. I also propose to transfer this £11 million to the capital grants subhead as outlined earlier.
The savings elsewhere in my Department's Vote, to provide £7 million additional grant-in-aid to IDA's capital grants subhead, are as follows:
SFADCo grants to industrialists, £1 million: Of the total allocation of £5.75 million for these grants in the current year, there will be a saving of £1 million on expenditure.
National Enterprise Agency — capital expenditure, £2 million: Only £300,000 of the allocation of £3 million for the NEA has been drawn down to date and anticipated commitments are such that no more than £1 million in total will be utilised in 1984. This is due to the NEA only recently becoming operational with a view to progressing opportunities appropriate for investment by the National Development Corporation.
National Development Corporation — capital expenditure £1 million: An allocation of £7 million was provided for the NDC in 1984. As indicated in the national plan, legislation to establish the corporation will be presented shortly. However, the NDC are unlikely to be operational for some months and so savings will be made under this subhead, £1 million of which will go to IDA's capital grants. For the technical accounting reasons I have mentioned earlier I also need to transfer temporarily an additional £6 million from the NDC to IDA.
Bread Subsidy — £3 million: Savings of £3 million are anticipated on bread subsidy requirements in 1984 as a result of the decision to halve subsidy rates and because of a downward trend in rates of claims from bakeries.
In the White Paper on Industrial Policy the Government set out the direction which future industrial policy is to take. The IDA have been given a challenging role in this policy and if they are to meet this challenge and to continue to stimulate the growth of industrial output and international services with the aim of creating viable jobs in the economy, then it is essential that these additional funds be made available.
Unfortunately, 1983 saw a further decline in the overall level of manufacturing employment, but the performance of the manufacturing sector was marked by a significant growth in the volume of output and in the level of industrial exports. The total value of the output of Irish industry has risen to £11,500 million of which £8,000 million represented expenditure in the Irish economy. The increase in output of 7 per cent represented the highest growth in the EC. Industrial exports increased by 14 per cent in volume to £5,400 million.
I wish to draw attention to the figure which I have just quoted. The total value of the output of Irish industry which takes place within the Irish economy is £8,000 million of the total of £11,500 million. There is no doubt that there is considerable repatriation overseas of some of those profits but it is important to note that eight-elevenths of the money generated by industry here remains in this country. It is also worth noting that a number of Irish companies have subsidiaries overseas and that they will be repatriating profits to Ireland from their overseas subsidiaries, so it is a two-way process.
The very encouraging feature of the recent industrial scene has been the dramatic increase in the numbers of feasibility studies and research and development projects approved. The increase in the approvals of these type of grants reflects the growing awareness in the Irish industrial community of the vital importance of investment in these areas of activity if Irish manufacturing is to remain competitive.
In future there will be fewer grants available for fixed asset investment and for machinery. Our future prosperity will be based on using grants and incentives in areas that will result in the largest increase in incomes and employment in Ireland. This will come about by introducing a much more selective approach when considering cases for grant assistance. Grant aid in years to come will be confined to firms which are either exporting or producing substitutes for materials which are already being imported unless they provide high technology inputs for internationally trading firms.
I have already referred to the decline in the overall level of manufacturing employment in 1983. The White Paper has set a target of 3,000 to 6,000 net additional jobs in manufacturing for each of the next ten years. I am aware that this target is very ambitious when considered in the light of events in other countries where the number of jobs in manufacturing is actually falling, such as Japan and the US. However, I consider that the targets are realistic in view of our success to date. It is important to remember that we continued to have an increase in manufacturing employment right up to 1979 when practically every other industrialised country had been experiencing decline. We have shown an ability to beat the trend and there is no reason to believe that we are not capable of doing it again in the next decade.
It is clear therefore that we are trying to achieve significant increases in the numbers of people employed in manufacturing industry. It would be a significant achievement for Ireland if we were able to achieve better results in this area than our European partners. This is what we are aiming to do in the White Paper on Industrial Policy.
I am looking to the future with optimism. The decline in manufacturing employment is being halted. Site visits throughout the country by industrialists from abroad are almost one third higher in number so far this year than for the equivalent period in 1983. I consider that this is quite significant in the context of assessing trends in investment from abroad.
I commented earlier that there would be a move away from reliance on capital grants. In the past the view was taken that the best way of securing a project — and consequently jobs — was to get people to make a large physical capital investment which we would grant aid and which they would not be anxious to walk away from. While that remains true to a good extent, what holds people in a country is the level of technology they are using which gives them a domination in the market place and the level of specific training and job experience of their work force, which cannot easily be replicated in other countries because processes are becoming so complicated. It is a welcome trend that the training level and competence of the workforce is becoming a critical factor in both attracting and retaining industry. This is an area in which Ireland has significant advantages over practically any other country in Europe because of our young, educated and, might I say, English-speaking population which offers opportunities in Ireland to firms who wish to invest and have access to the European market which they cannot obtain in any other country in Europe. I include the United Kingdom in that because their workforce is not as young and adaptable as ours.
With regard to investment from abroad, I wish to refer to the controversy about the repatriation of profits by foreign companies located here, arising from a leaked internal Central Bank Report. There was nothing in this report which was new and the issues raised were dealt with when the Government were examining the revisions they needed to make to the balance of payments statistics. The leaked paper was completed before the information incorporated in the balance of payments statistics was to hand and if the author had had access to this information he would not have reached the conclusion he did.
However, it did give rise again to questions about the worth of overseas investment in Ireland. I must emphasise the importance of overseas industry to our industrial development. There are 800 foreign firms located in Ireland employing about 80,000 people. These companies spent £2,000 million in Ireland in 1983. This compares with IDA grant expenditure at £76 million in 1983 on foreign industry.
Repatriated profits of overseas companies in Ireland amount to approximately 13 per cent of the sales revenue of these firms and 55 per cent of the profits earned by these companies in Ireland. The balance, that is 45 per cent of their profits, is re-invested in Ireland. It must be remembered that the so-called profits earned in Ireland by an affiliate of an overseas company are not necessarily profits actually earned by the Irish company. In many cases the so-called profits associated with any overseas company established in Ireland are absolutely necessary to offset the development costs incurred abroad for the products being manufactured in Ireland, without which those products could not have been manufactured here.
Thus, so-called profits for the Irish subsidiary are not all profits in the books of the parent company. Before any industry is established here by a foreign company there has to be a very large amount of research and development expenditure. Usually that is undertaken using borrowed funds acquired by the parent company in a location other than Ireland. Once the factory is established here those borrowings have to be repaid. The money comes out of Ireland to go towards their repayment by the parent company. It appears in the Irish books as if that money is profit leaving the country but it is money which the company must have in order to repay loans incurred for development costs. If such costs had not been incurred there would not have been a project in Ireland. They are not profits in that sense.
Likewise in many cases there are foreign industries in Ireland who maintain a marketing sales force throughout the world to sell their Irish products. That sales force is paid for by company headquarters outside Ireland and appears as a cost in the books of the parent company. The money which must necessarily go out of Ireland to pay for the marketing of the products manufactured here appears in the Irish books as profit leaving the country but it is not profit to the company. It is money the company must get if they are to pay for the marketing of the goods produced in Ireland. These two examples — research and development and marketing — illustrate that not all of what appears to be profit is in fact profit in the hands of the company sponsoring the project in Ireland. It is important that those facts should be known and Deputies should not put forward criticism based on an inaccurate foundation.
The fact that Ireland is a profitable location for overseas companies is a major element of the IDA's overseas promotional programme. If this were not generally the case we would not attract these companies to Ireland in the first instance.
I referred earlier to increased site visits by industrialists from abroad this year. I consider that this is significant in the context of assessing trends in investment from abroad. Grant approvals for small industry have also increased significantly on last year's performance.
The IDA have a key role to play in the achievement of the Government's objectives in relation to job creation and the maximisation of value added in the Irish economy. This is in addition to the challenging target of doubling manufacturing output over the next ten years. The additional funds which I am providing for the IDA will greatly assist the authority in achieving the goals set for them.
While I have pointed out in this contribution the importance to this economy of foreign investment, I would like to say that the whole thrust of the Government's industrial policy over the next ten years will be to maximise native generated industry. This is being done by providing funds for the type of cost factor that inhibits native as distinct from foreign industry from establishing here. For example, we will be providing for the first time technology acquisition grants and new forms of grants for marketing abroad. In most cases foreign companies already have their technology — they have generated it abroad — and in most cases they already have a well established marketing operation, so they do not need grant assistance. On the other hand if a small Irish company, or a large Irish company with a less than high profit level, is to break into the international market, it needs to acquire new technology in its manufacturing process either by joint ventures or by simply buying into a licensing arrangement so that it is producing a product which is the best that market can offer. Equally such a company needs to spend considerable amounts of money on marketing because most Irish manufacturing companies have tended in the past to rely either on the Irish market or on the Irish plus the British markets.
This is a very unwise strategy for Irish industry although in many cases it is a strategy they had little choice but to engage in, for a number of reasons. By putting all one's eggs in the sterling basket one is exposing oneself to fluctuations in the relationship between the Irish £ and the British £. Whereas if one can spread one's export portfolio over a number of areas, including the EMS countries where the relationship with the Irish £ is more stable, the company is in a much more strategically strong position and can afford to take temporary losses for currency reasons on one market, say the sterling market, because of the successes on the EMS market or vice versa. If companies are to get into that strategically strong position they must make a major marketing effort. We are putting special emphasis on providing additional funds for Córas Tráchtála Teoranta next year to enable them to help Irish companies to diversify and develop significant market strength.
That is a very important point because the two major features in the industrial White Paper — the technology acquisition grants and the three new schemes for marketing — are specifically designed to help native Irish industry to develop into an internationally trading operation and to become strategically strong companies. We will also be providing in the legislation for the National Development Corporation so that it may have a role, if necessary, of investing equity in certain strategically strong Irish companies, to add another brick to the construction of strategically strong Irish companies.
I realise that for some small Irish companies this approach is beyond their ken because essentially they are serving a local market and in the short term future it is hard for them to see themselves getting into even the British market. What can we offer them? We have been working very hard with the major supermarket groups — I will be meeting some of the wholesale trade in the next few weeks — to try to get them to stock more Irish goods. I do not approach this by telling them that it is their duty to stock Irish goods because they are Irish or are working in Ireland and making a profit here. That is a good appeal to make but it can only get one so far, because if people find that by stocking more Irish goods they are losing money, they will stop.
What we are trying to do is to get the supermarkets to develop some sort of a long term contractual relationship with small Irish suppliers, particularly in the food area, so that if in the initial few months the suppliers' quality of production or delivery schedules are not up to standard, for perfectly understandable technical reasons, the supermarkets would have patience with the suppliers and help them so that within a reasonably well defined period they can reach a stage where they are as good as any other producers. This approach is particularly important to the development of the food industry in Ireland.
There has been a lot of talk about the fact that we have a tremendous asset in the form of our agricultural raw materials which we are inadequately using to develop the food industry. There have been some notable examples of people who have been very successful in this area — one such example is represented in the House at the moment — but we would all agree that there are too few successes of this kind. One of the reasons for this is that many of these producers do not have the initial capital to get over the first year when they are getting rebuffs from retailers and so on, with the result that their businesses collapse and large quantities of our agricultural produce go into intervention, which, while it is welcome, is ultimately the worst way in which we should be disposing of our goods if we are interested in value-added. We are trying to get a more positive attitude from the retail supermarkets, many of which are international, who have very substantial resources and are making substantial profits here, to use some of those profits in their own interests to develop native Irish supplies and to provide access to their retail outlets in Britain and elsewhere for their Irish products, once the Irish product has developed a quality image in the chain operating in Ireland. I would like to commend the work of the Irish Goods Council in supporting these initiatives.
There is another area where Irish suppliers do not fully realise the opportunities that exist for them. I am thinking in particular of the retail trade. Increasingly as margins are getting tighter and interest rates are high, retailers do not want to carry large stocks. If one is importing goods, say shoes from Taiwan, one must import them in very large quantities, otherwise one will not get a consignment. This means that somebody, the wholesaler or the retailer, has to carry at considerable cost large stocks of these imported goods. If, on the other hand, they buy their goods in Ireland, where they can be produced almost to order as they are sold, so that within a week or two the manufacturer can produce what the supplier needs, there is no need for the retailer, the wholesaler or the manufacturer to carry large stocks. This is particularly important at a time of inflation and high interest rates when carrying stocks costs a great deal of money. I urge any Irish manufacturer in a small segment of the market who is not capable of responding to all these initiatives, to use this sales point in regard to stocking levels and to point out to retailers the wisdom in stocking Irish goods — because they will not have to stock as much and they can buy as and when they need, rather than buying in large quantities. This is something which is important and which should be sold by anyone who has an opportunity of influencing the trade.
If we are to have the industrial revival we need, that will not be achieved by management alone. I tend to endorse the views attributed to Mr. Edwards, who worked formerly in British Leyland, when he blamed — in the case of Britain — most of the problems of British industry on British management. He said that in his experience most trade unionists were perfectly reasonable so long as they were spoken to reasonably. That is probably fairly true in Ireland also. Two things are wrong here. The first is an attitude of management in traditional industries which looks on the manager's role as giving orders and other people's role as fulfilling them. It is an almost military style approach to management and it reduces the role of the individual worker to that of a surrogate machine. In other words, the worker has a certain number of hand movements to perform and as long as he does that reasonably well he will be retained and if he does not he will not be retained.
The idea that a young, educated workforce in Ireland can be reduced to the role of a surrogate machine performing relatively routine actions on a repetitive basis is impossible to conceive. Therefore, we must have a different approach to management which through discussion draws on imaginative qualities, intelligence and ability. This can be very laborious and time-consuming for management but it is essential if we are to get a better industrial output. This approach to management, which is a co-operative, teamwork approach rather than a directive approach, is one that can and must be underpinned by a system of workers having a shareholding in industry. If workers own part of an industry through a shareholding scheme, for which the Government have offered generous tax incentives, then almost automatically there will be a transformation in management practices and in the practices of the workers.
There have also been problems on the workers' side in the sense of artificial job demarcation in many industries, where one person says he will not do another person's work even though both people know that they are probably jeopardising their jobs. That continues because workers are ill-advised in many cases. That attitude has to change and if it changes there is a great future for Ireland in industry. We have what other countries do not have, namely, a young, educated and English-speaking productive workforce situated within the largest market in the world, the EC. Those are advantages very few other countries have.
If we look at our opportunities and our advantages, if we accentuate them sufficiently and give ourselves confidence in one another, I have not the slightest doubt that we can overcome the many problems we face today. I believe that criticism has a role to play in this House and elsewhere so far as Irish industry is concerned, but in whatever criticism we have to offer I hope we do not demoralise the public who are working. They are looking to this House for a message of confidence by the politicians in the people, one that accentuates what we have and what we can achieve if we make greater efforts than we have been making in the past. That is an approach which I have noted in some of the contributions from the other side of the House and it is one I endorse heartily. The only way forward, if I may use that phrase, for Irish industry is one of confidence, of investment and of seeking to build strategically strong Irish companies based on good marketing programmes, good technology and our existing assets of the best educated, youngest and most adaptable workforce in the world.
