My Department's Estimates are coming before the Dáil at a time when the basic economic climate is healthier than at any time since the seventies. We are confronted in this country by major economic challenges. The first and most important of these, as far as the Government are concerned, is to come to grips with unemployment and to provide jobs for our people, particularly our young people. That cannot be done unless there is in this country a climate which favours enterprise, individual initiative and strong industrial growth. By these criteria, the economic climate — thanks to the work of this Government and thanks to its nerve and courage in confronting unpalatable realities — is healthier now than it has been for many years.
This change for the better has come about because the Government in the national plan, Building on Reality and in the White Paper on Industrial Policy analysed our economic problems, decided their priorities and got down to work. Short term political popularity was not among those priorities. The national interest, our long term economic security and the future of our young people were the priorities which we chose.
Since the late fifties when the first Programme for Economic Expansion was issued many plans and programmes have been issued by various administrations. It has been the fate of many of those programmes and plans that, following a flurry of publicity when they were launched, they quietly faded away to gather dust on departmental book shelves. How many of these ambitious and vaunted programmes are now remembered? In contrast, the national plan and the White Paper on Industrial Policy are being put into practice. They are the work manuals which already guide the day-to-day activities of those engaged in the work of administration. It is because this is so that the way is now clear in this country for steady and enduring progress in the growth of industry and exports and for the creation of jobs that will be real and that will last.
Let me list some of these achievements. I will discuss them in some detail later on.
—Inflation, which only 3 years ago was almost in orbit at 17 per cent is now down to 5 per cent. This is lower than the British figure and the lowest we have seen in 17 years.
—In 1984 merchandise exports were up 28 per cent over 1983. Again this year, we expect a further increase of 18 per cent over that record 1984 figure.
—Industrial output grew by 13 per cent.
—Last year over £800 million in new industrial investment was negotiated by the IDA. That is double the figure for 1983.
—Last year over 500 overseas companies visited this country to investigate the possibility of investing here. That is 11 per cent up on the 1983 figure.
—An industrial area of great importance for our future — small industries —last year brought 565 new projects, an increase of 10 per cent on the previous year and the pace of activity is being stepped up in 1985.
—Tourism, a major foreign exchange earner and source of jobs shows very encouraging growth — an 11 per cent increase in US visitors in the first four months of this year. There are very welcome indications of recovery in the British tourism market. Inquiries from British tourists about holidays in Ireland are up 45 per cent on last year.
All these are clear indications of a new dynamism in the Irish economy. They also reflect the new sense of realism in all sectors of the economy and a new realisation that success is not a God-given right but something that has to be earned and won in a competitive world. The Government have charted the course ahead. These figures that I have just quoted demonstrate that this country has shaken off the lethargy of depression and taken the first sturdy strides towards a better future.
The Estimate before us this morning provides for gross expenditure of £300.264 million for the year 1985 as compared with an out-turn of £273.2 million for corresponding services in 1984, an overall increase of £27.064 million.
The Estimate contains the major share of the public expenditure allocations to the development of industry and tourism. It represents 4.6 per cent of the total Estimates for the Public Service and can be broken down under four main headings: Departmental administration accounts for 4 per cent; tourism for 9½ per cent; industry for 80 per cent and other items for 6½ per cent. The biggest single item in the Estimate is the grant-in-aid for IDA grants to industrialists. This will come to £142 million, or nearly 60 per cent of the total expenditure in the industry area.
While the total increase of 10 per cent in the Estimate over 1984 is similar to the average for all the Public Services Estimates, there are some important changes within the gross figure. These changes reflect the implementation of the policy framework in the national plan, Building on Reality and the more detailed strategy outlined in the White Paper on Industrial Policy. The Estimate provides for significant increases in the areas of marketing support and tourism promotion and it provides for the establishment of the National Development Corporation.
The key objective of the national plan is to tackle the problem of unemployment by ensuring that the economy is put on a strong and vibrant path of growth. Manufacturing industry and tourism are key sectors in the achievement of this objective.
The environment faced by manufacturing industry has been difficult during the first half of this decade. These difficulties originated with factors both outside and within our control. Abroad, the opportunity to attract new foreign firms was adversely affected by the decline in the amounts of new foreign investment, in particular from the US. Added to this, the deteriorating economic performance in Europe served to increase the competition from other European countries for the investment that was taking place extra-nationally.
The difficult international conditions, which are likely to endure for some years, accentuated the importance of indigenous firms and firms already established in Ireland. These firms faced two major obstacles to their competitiveness. First, there were excessive domestic cost pressures. Secondly, many firms were structurally ill-equipped to compete on international markets. Many Irish firms were weak in areas such as product development, technology and marketing. Over the last three years there has been major progress in addressing these two obstacles, cost price structures and structural deficiencies. There has been an unprecedented improvement in our domestic cost situation. Inflation which was over 17 per cent during 1982 is now close to 5 per cent. While this decline is very welcome in itself, its benefits are even greater for two further reasons.
First, we have effectively wiped out any disadvantages associated with rates of inflation higher than those of our main trading partners. In 1982 only Greece, of all the EC members, had a higher rate of inflation than Ireland. At that time our rate of inflation was more than twice the rate faced by British firms.
Our rate of inflation is now lower than that of Britain. In fact, within the EC, only Germany, Luxembourg and the Netherlands have lower rates of inflation.
A second and perhaps even more beneficial effect is that firms can now invest and plan with greater certainty. Last year, the national plan set down targets for low inflation for the period of the plan. These targets are being met and investments can be made with confidence that the targets will continue to be met.
The growth in industry that we are looking for is ambitious. In other countries there are reference to de-industrialisation and the gradual decline of the industrial sector as a whole. We cannot adopt this attitude if we are to address the employment problem faced in a period of rapid structural change and continued fast growth in our labour force. We must continue to have ambitious targets for the growth, not decline, of manufacturing industry, both in output and employment terms.
The removal of excessive cost pressures is a necessary condition for this industrial growth. It will not, of course, in itself be sufficient. Successes in this area must be accompanied by measures to address the key weaknesses of and constraints faced by Irish industry.
The White Paper outlined a strategy for the more selective allocation of State assistance to overcoming these weaknesses. The Estimates which I am putting before you today contain concrete provisions for this selectivity. There is an increased allocation for initiatives aimed at strengthening the marketing skills and capacity of firms. These include the market entry and development scheme. A pilot scheme for 1985 has already commenced. The employment support scheme provides grants for recruitment of marketing personnel.
Later this year, I will be bringing the Industrial Development Bill, 1985, before the House. This will give a legislative basis to the shift of IDA assistance from blanket grants for fixed assets to the more selective focusing on aid for the establishment of key business functions in Ireland. Already, the IDA are operating within the spirit of this approach.
Already, we have witnessed a strong recovery in the growth of industrial output, reaching an annual rate of over 13 per cent in 1984. The main contribution to this growth has come from the new high technology sectors of electronics and chemicals. The very high levels of productivity recorded in these sectors has meant that there has not yet been an overall increase in total manufacturing employment, although there have been related increases in employment in the services sector.
There are now signs that the recovery in industrial output is becoming more broadly based and this will act to improve the employment situation within manufacturing industry. To take full advantage of the opportunities there must be a continued structural change in industry, particularly in indigenous firms.
The key structural weaknesses in Irish industry identified in the White Paper could not be remedied overnight. Initiatives taken in areas such as linkages, marketing and the Company Development Programme take time to bear fruit.
There has been a decline in the rate of job losses in manufacturing industry. Up to last year, however, loses were still greater than the new jobs coming onstream and there was an overall net decline of 6,000 in the numbers in manufacturing industry.
The outlook is now more favourable. The opportunities include not only the renewed growth in our export market but also in the potential growth of the domestic market. Currently, Irish industry depends on imports for a disappointingly high two-thirds of its raw material and component needs. It can do much better in terms of purchasing locally. The Government has set out, both in the White Paper and in the national plan, targets for manufacturing employment. In the White Paper an increase of between 3,000 and 6,000 jobs per year in manufacturing employment over a ten-year period is envisaged. The National Plan, Building on Reality, envisages an increase in net employment of the order of 12,000 to 14,000 in manufacturing industry by 1987. These targets are attainable and I and my Department will ensure that the IDA and other agencies give them primacy amongst their objectives.
An improvement is not there for the asking. It is there for the winning. It will be won by Irish firms which can ensure the consistency of standards, quality and reliability demanded of modern exporting firms.
The year 1984 marked a turnaround for industrial growth in Ireland. Output increased by 13.5 per cent and exports grew by 17 per cent. The bulk of these increases have resulted from an increase in output by new overseas firms located in Ireland but there has also been an increase in output in the more traditional sectors such as food and clothing, albeit a modest 2.5 per cent.
During the year some 10,000 jobs came onstream in IDA-supported industries. While the numbers employed in manufacturing industry decreased, the rate of decrease was one-third that of 1983.
In terms of new investment the outlook is very good. During 1984 over £800 million in new investment was negotiated by the IDA. This is double the equivalent planned investment of £400 million in 1983. In addition, over 500 companies visited Ireland.
The renewed optimism stems from a good performance during 1984 in almost all sectors of industry. In particular, it is pleasing to note the continued good performance of the small industry sector. I have already given the figures. A great boost to the small industry promotional effort was provided by the regionalisation of the programme in Cork during 1984. In the Cork pilot area, which comprised Cork city and east Cork, over £4 million was committed by 93 new and expanding small industries during the period July 1983 to December 1984. This represents a 50 per cent increase in investment. From January of this year the decentralisation programme has continued and is now almost complete throughout the whole country.
Another indication of the buoyancy of small industries at present can be gleaned from the 800 feasibility grants approved by the IDA for investigating new ideas during 1984, coupled with early indications of a high conversion rate of these studies into actual projects creating jobs. Other sectors to do particularly well during the year were electronics and international services.
During 1984 the IDA negotiated investment on a number of highly significant projects which are designed to put Ireland to the forefront as an electronics producing country. An added bonus to this investment is the fact that a number of these projects are concentrating their R and D and marketing efforts in Ireland so that the Irish operations are more and more becoming stand alone projects which will be able to operate almost independently of their overseas parents. The strategy will intensify this year and new industrial development legislation will empower the IDA to provide technology acquisition grants towards the cost of acquiring new product or process technology from abroad for Irish resident firms.
Some 135 product and process development grants were approved in this sector alone, representing over 30 per cent of the IDA's commitment to R and D in 1984.
In order to provide key infrastructural support for the rapidly developing micro-electronics industry, the National Micro-electronics Research Centre was established at University College, Cork, in 1981. The centre was able to commence its operations very quickly because of the very considerable expertise in this area. The centre, which receives funding from both my Department and the Higher Education Authority, has three main activities: education and training, co-operative projects with industry, and contract research. In a relatively short period of time, the centre has made considerable progress in developing these activities. On the educational front the centre caters for undergraduates in electrical engineering and also runs MSc and PhD degree courses in microelectronics.
The centre has also built up strong links with industry and can offer design and development tools which would be beyond the scope of many individual companies working in this field. Further developments are planned for 1985 in the application-specific integrated circuit area which will be of particular benefit to small indigenous firms.
It is a measure of the stature which the centre has achieved that it now sources a considerable proportion of its current income from research contracts, people who put their own money into the centre in Cork. These contracts have been undertaken for industries and research institutions both at home and abroad.
One of the areas in which the NMRC are particularly involved in is the development of Gallium arsenide, a new material for use in chips in place of silicon. I understand that is one of the technology areas identified in the Eureka programme being considered in Milan at the moment by the heads of State. I hope this will mean that Ireland will be able to avail in a big way of the opportunities arising in the Eureka programme through the work of the NMRC in Cork.
International services which are seen as an area with great growth potential throughout the world, with a projected annual average of 23 per cent per annum over the next five years in the computer services sub-sector alone. In this sector the IDA agreed to back 35 projects during 1984. The IDA have also set up a special section within their International Services Division to deal exclusively with domestic companies so as to provide the essential catalyst to maximising of growth in international services among indigenous operations.
Another area in which Ireland, and in particular the IDA, will be concentrating its efforts in the coming year with the new incentives outlined in the White Paper is technology transfer. During 1984 the IDA sought through their overseas offices foreign companies who were interested in setting up joint venture and licencing arrangements with Irish manufacturers. Over 80 companies visited Ireland and over 80 Irish companies travelled overseas under the IDA aegis during 1984 to discuss joint co-operation. Although these projects generally take considerable time to start up, it is very encouraging to note that from the initial contacts 25 licences or joint ventures have been finalised during 1984 and a further 20 are under serious negotiation. These span the full range of sectors. Particular interest has, however, been shown in engineering, agri-business, consumer products and small industries sectors.
The Government, as set out in the White Paper, are committed to a national linkage programme. This is now being implemented by the IDA and it will concentrate initially on the electronics industry which it is estimated has an annual raw material component requirement of £400 million.
The IDA expect that the increase in the pace of investment proposals from Irish and overseas sources will be sustained in 1985. However, much will depend on the rate of recovery in the US and Europe. It is reasonable to expect, with the increase in output and exports, an improvement in the trend in industrial employment and a significant increase in service jobs.
In moving the Estimates for 1984, I referred in detail to the White Paper on Industrial Policy which was then about to be published. As the House is aware, the White Paper identified employment growth in industry and the maximisation of value-added as the primary objectives of Government policy in this area. In giving priority to the problem of unemployment, the national plan Building on Reality acknowledged the importance of the White Paper strategy. Specific measures to achieve these objectives were: more selective application of State aid; exploitation of the potential for linkages; more rapid development of natural resources based industries; and increased private investment. As I said earlier, the Government's job targets are now the primary objectives of all job creating agencies, and all strategies must and will focus on these targets. It is against these targets that the success of the State agencies will be measured.
My primary task during 1985 is to ensure that the White Paper decisions are fully implemented. In order to do this and to ensure co-ordination of the activities of the various industrial agencies involved, a management committee on industrial policy was established under the chairmanship of my Department, comprising the chief executives of the principal industrial development agencies and a senior representative of the Department of Finance. The committee has reviewed a wide range of activities such as the company development approach and the linkage programme and has made good progress in many respects.
Much emphasis was placed in the White Paper on co-ordination of activities of State agencies. I was, therefore, anxious to see the one stop shop concept in place as quickly as possible. This is the idea of providing one place in each region for all the services of the various agencies which are available. The management committee was given this task. This turned out to be quite difficult. A nationwide network of phase 1 of these shops, which provide under one roof, comprehensive information on State aid and services for small manufacturing industries, has been in operation since 1 April this year.
The "one-stop-shop" centre as currently operated will make it easier for people who want to start up their own small industries to find out what help they can get from the various State agencies without making a pilgrimage to various offices in Dublin. By providing as much information as possible in one office, people will be saved the frustration of running around trying to find out what help the next agency can offer.
The centres will be staffed by people with a knowledge of the services and incentives available to small manufacturing business from agencies such as the IDA, Shannon Development, AnCO, CTT, IIRS, ICC and IPC.
It is envisaged that the centres will arrange for staff from the different agencies to attend at pre-arranged times to meet people interested in setting up small industries.
Finally, in relation to these centres I would again stress that the foregoing is only Phase I. It is my intention that the executives dealing with small industry in the agencies for which I am responsible will, in the foreseeable future, be housed in one building in the regions, all the staff as far as possible, this being Phase II of the operation. I hope to have that implemented by the end of this year or in January 1986 with one or two exceptions where there are problems with leases and so on.
In order to give effect to the new policy directions and incentives for industry set out in the White Paper, I propose to publish the Industrial Development Bill, 1985. This will provide for new selectivity criteria for grant assistance to industry; the provision of technology acquisition grants for industry; and three yearly reviews of industrial performance.
The Bill is also being availed of to consolidate all existing legislation relating to industrial development into one single comprehensive code. There are 20 Acts dealing with industrial development on the Statute Books and it is my intention to rationalise these Acts so that information about our industrial incentives will be easily accessible to the industrialist, potential entrepreneur and perhaps solicitors and others who want to consult them from time to time.
An important element of the Government's policy for industrial development is the encouragement of a greater level of equity type risk investment in the productive sectors of the economy. My Department are at present pursuing a number of important initiatives aimed at stimulating and increasing the flow of venture capital type funding to industry. The business expansion scheme, introduced in the Finance Act of 1984, provides a very generous incentive to individual to invest in manufacturing industry and to internationally trading service companies. This has been an important initiative and a new departure in terms of past activity.
The scheme has an enormous potential to contribute to the financing needs of Irish industry. The incentive has been greatly enhanced by the introduction of some key amendments in the 1985 Finance Act. In particular, the change being introduced to allow investments by brothers and sisters — one would hope to have a wealthy brother or sister — and other relatives will provide a major boost to the scheme.
In addition, legislation to remove investment funds established for the purposes of the scheme from the scope of the Unit Trusts Act, 1972, is currently before the Oireachtas and will be enacted with the co-operation of the opposition, before the end of the present session. We have responded willingly and constructively to the demand for such changes and I am confident that we will now see an upsurge of interest in this scheme.
As part of my overall examination of the problems of industrial investment, I asked consultants employed by my Department to undertake a study into the development of an active market in the stocks and shares of Irish industry. In doing so I was promoted by the need to create a greater liquidity in our capital markets. Arising out of this report I have already called for the setting up of an over-the-counter market in order to provide a mechanism for trading in the shares of small industrial companies. I think this would be an extremely desirable development as many small companies have neither the resources nor the maturity to contemplate a listing on the Stock Exchange. I would like to emphasise, however, that I fully recognise the importance of a thriving Stock Exchange to the development of a healthy equity base in Irish industry. I am pleased to say that the Exchange have responded positively to my call for new initiatives and I hope to have discussions with them in the very near future in order to discuss further our mutual objectives.
The consultants also recommended an amendment to company law to allow companies to buy back their own shares. I am very much in favour of such a move. I hasten to add, however, that this is an extremely complex area of company law and will have to be carefully examined before amending legislation can be introduced. Initially I thought it would involve a one or two section Bill but I understand it will require a Bill of 15 or 20 sections. We are in the process of carrying out a series of reforms in company law and I intend to give this a high priority in the programme.
As part of my Department's programme for the promotion of venture capital generally, I propose to renew the dialogue I have had previously with major institutional investors such as the pension funds, the insurance industry and the venture capital community. I want to review progress in the past 18 months or so since my initial meeting with them and to discuss the potential for new initiatives to promote the growth of venture capital in Ireland. I hope to meet these people in the summer.
The major venture capital markets are, of course, in the US, and to a lesser extent in the UK, and I consider it important that we keep a close eye on developments in these countries and in Europe in order to maintain a progressive and enlightened policy in the development of our venture capital business.
Legislation to establish the National Development Corporation is at an advanced stage and will be introduced in the very near future. I am confident that the NDC can be a significant source of equity capital for new and developing companies and a major force in the Government's battle against unemployment.
I am also anxious to see the development of profit sharing and employee shareholding schemes on a wide scale in Irish industry as I believe that this would greatly enhance our prospects for an efficient and profitable industrial base capable of competing sucessfully on world markets. Winning out on these markets is vital if we are to maintain existing employment and generate the new jobs urgently required by our young population.
By giving workers a direct share in the ownership of industry and thereby ensuring that part of their income comes to them in the form of dividends, we can build a sound foundation for the successful development of industry. There will be greater commitment and innovation in an industry in which the workers and management share a joint financial interest, as all will want to ensure the profitability of the firm to consolidate employment and to maximise their dividends.
If Irish workers are to share in the prosperity of industry, they must be able to derive their income from it not only in the form of wages but also in the form of dividends. The profit sharing scheme which the Government have introduced represents a major opportunity for business and employees to come together in a common endeavour to make this country more prosperous. I intend to discuss these matters with employer and union bodies when the profit sharing study, which is now being finalised by the NESC, is published. I commissioned that study a year ago.
The provision of £1.7 million in my Department's Vote for 1985 in respect of Clondalkin Paper Mills arises from my obligation to carry out refurbishment of the mills in preparation for the resumption of paper manufacturing.
As Deputies are no doubt aware, the agreement reached in November 1983 between IDA, FMI Ltd. and myself, provided not only for the establishment of a paper conversion operation at the mills, in an area leased to the company for that purpose but it also gave FMI an option to purchase all the mills assets if they could convince the IDA of the viability of any proposals submitted in respect of paper manufacturing.
The Government recently approved the commencement of paper manufacturing at the mills and the refurbishment of the relevant assets to that end. That is now commencing.
I am particularly pleased that the new project allows for participation by the workers, through ownership of 10 per cent of the company shares. As I said earlier, worker shareholding has a key role to play in the regeneration of Irish industry. Clondalkin is a good example of this.
I should now like to turn to the subject of international trade and in particular to the question of exports which are so crucial to the Irish economy.
As 70 per cent of our exports go to the the EC, it is appropriate to say something about that market. The key point is that further exports to that market are hampered by the failure to free up the internal market of the EC and bring about the single large market that was the objective so long ago of the founding fathers of the EC. While general progress has been achieved on many fronts, the failure by member states to develop the internal market is a significant blot on the character of the Community. Members of the House should be in no doubt that, so far as trade is concerned, the EC is not a very cohesive entity. National markets divided by differing standards, bureaucratic customs procedures and nationalistic procurement policies are much in evidence.
One statistic that is not in my script but which I might mention is that about 7 per cent is added to the delivered cost of goods merely for the purpose of complying with the customs formalities in relation to movement from one EC country to another. One can imagine how much more competitive Europe could be if those formalities could be dispensed with.