Limerick East): I move:
That a sum not exceeding £245,847,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1986, for the salaries and expenses of the Office of the Minister for Industry and Commerce, including certain services administered by that Office, and for payment of certain loans, subsidies, grants and grants-in-aid.
The Estimate before us, provides, as indicated, for gross expenditure of just under £246 million in 1986, as compared with an outturn of some £255 million in 1985, an overall decrease of £9 million. Of this £9 million, £6.3 million relates to expenditure on the bread subsidy scheme, which is administered by my Department and reflects the reduction made in the standard rate of subsidy on 6 April 1986 as a result of the Government's decision to reduce food subsidies.
The Estimate contains the major share of the public expenditure allocations for the development of industry.
Again this year, allocations for the various State agencies reflect the policy, as set out in the White Paper on Industrial Policy, of laying a greater emphasis on technology acquisition and the promotion of an improved approach to marketing. There will continue to be close co-operation between the State agencies so that the assistance which can be provided to industry can be maximised.
In 1985, industrial output increased by 2.7 per cent and industrial exports rose by 7 per cent. This was a particularly heartening performance given the fact that world trade increased more slowly than had originally been expected. Continued output growth was recorded in the chemical sector (3.8 per cent) while in the food sector, one of our more traditional areas, there was an increase of 5.1 per cent. The electronics sector grew by a slower rate than in recent years, reflecting sluggish market conditions for that sector.
In the course of 1985 some 11,000 jobs were actually created in IDA supported industries, while SFADCo created a total of 1,000 jobs in the Shannon Free Zone and in small indigenous industry in the mid-west region.
However, despite these encouraging trends, there was a net reduction in manufacturing employment of 2.9 per cent but the rate of reduction has been decreasing since 1983.
In terms of new investment £400 million was negotiated by IDA in over 1,000 projects, both indigenous and overseas. In particular the pace of investment in small industry continued to grow with an increase of 25 per cent on the 1984 level. First time entrepreneurs were evident in the new start-ups. In 1985 the regionalisation of service to small industry was completed, with 138 of the IDA's staff now assigned specifically to working with small firms.
In 1986, industrial output and exports are expected to grow by 5 per cent for the year as a whole. Investment by industry supported by the IDA is expected to continue at a high level resulting in the creation of 12,000 new jobs while in the case of SFADCo, 1,200 new jobs are targeted. This development will be encouraged by the continuing fall in inflation, reduction in oil prices and favourable currency exchange movements.
The recently published ESRI "Medium-term Outlook", 1986-1990 predicts that total employment in the economy is expected to stabilise in 1986. The industrial sector will contribute to this improved situation by its increased expenditure within Ireland in wages/salaries and through the purchase of indigenous raw materials, components and services.
The Industrial Development Act, 1986, was enacted on 7 May 1986. This represents a further important stage in the progressive implementation of the White Paper on Industrial Policy published in 1984. Moreover the new Act brings together, for the first time, in one comprehensive code, the existing body of legislation relating to industrial development and the Industrial Development Authority.
The Act gives effect to the new policy directives and incentives for industry in the White Paper and provides for:
(a) new selectivity criteria for grant assistance to industry;
(b) the provision of technology acquisition grants for industry;
(c) the provision of employment grants to small industry;
(d) three-yearly reviews of industrial performance; and
(e) the pre-payment of up to one-third of R & D grants to small industry.
The new selectivity criteria will focus on the need to develop and increase linkages between overseas and indigenous industry and in particular the development of import substitution projects and export markets. Employment creation and maintenance, in addition to the new emphasis on output growth and generation of value added within the economy, will continue to be the main focus of State assistance to industry. The new criteria will result in a shift in resources from fixed assets to technology acquisition and marketing.
Grant assistance will in future be directed to remedying perceived weaknesses in Irish industry in the areas of marketing, management, research and development and innovation. Companies approved for grant assistance will, therefore, have to demonstrate that they will comply with the new criteria, have suitable company development plans and also that the equity base-financial structure of the company is adequate. The new employment grants will allow promoters of new small industry projects, at their discretion, to avail of employment grants as an alternative to grants towards the cost of machinery and buildings. The result will be to encourage more small industry start-ups. A promoter will now have the option of using employment grants to acquire modern second-hand equipment which would not qualify for capital grants. This will be of particular benefit to industries such as clothing and engineering where there is excellent second-hand equipment available at present.
The IDA will be in a position to offer grants not exceeding 50 per cent towards the costs of acquiring new product or process technology, including patents, designs, trade marks, copy-rights and proprietary and non-proprietary knowhow. The prepayment of up to one-third of R & D grants will greatly assist small companies to undertake accelerated product and process development and greatly ease their cash flow requirements for these programmes.
To ensure that industrial policy evolves in an orderly and planned manner, and that Members of the Houses of the Oireachtas are made aware of the costs and benefits of industrial policy at regular intervals, the Act includes a new provision for a review of national industrial performance every three years. These triennial reviews and the conclusions arising from such reviews will be laid before each House of the Oireachtas. This is an important provision as I believe that Government policy in an ever-changing sector such as industry needs to be dynamic and constantly fine-tuned to maximising new opportunities and technical developments.
In fact, a policy review of developments since publication of the White Paper is already under way within my Department. The review group is addressing a number of important issues such as how direct employment can be maximised from the industrial sector and what further steps can be taken to develop indigenous industry. The results of the review will be available before the end of 1986.
The national linkage programme got under way in July 1985. The objective of the programme is to develop a successful subsupply industrial base in Ireland for larger industry. From its initial focus on the electronics sector, it is now being extended to healthcare, consumer products and engineering. In 1985 a national linkage team of experienced engineers and management and financial accountants was assembled from a number of the major State agencies. The target for 1986 is to place £40 million worth of business contracts with Irish suppliers.
The company development programme involves the IDA, the IIRS and Córas Tráchtála working closely with selected companies to help them to identify and implement strategic development initiatives. The programme is designed primarily to encourage indigenous companies to develop to a point where they are capable of developing their own R & D programmes and achieving a strong international marketing position. Already many of the strategic initiatives identified by companies under the programme are being implemented. The operating target for 1986 is that 50 companies will be covered under the company development programme.
A further major step in the development of industry was taken this year when the legislation setting up the National Development Corporation was enacted in March. The necessary administrative measures to bring the corporation into existence have been completed and the corporation became fully operational on 11 June 1986. The portfolio of investments built up by the National Enterprise Agency, NEA, which as the House is aware has been replaced by the NDC, has been taken on board by the corporation. The level of funding allocated to the NEA/NDC for 1986 reflects the interim position of one and the coming into being of the other.
The National Development Corporation is a major element in the Government's industrial and job creation strategy. The corporation, with its equity investment powers, will be a potent force in the establishment of job creating enterprises with good profit potential, either on its own initiative or in partnership with other investors.
In the past many new employment creating projects have failed to get off the ground because the level of capital funding required, the length of the payback period or the element of risk were all greater than the private sector on its own was willing to bear. By demonstrating a willingness to share the risk associated with such projects, the NDC can also be the catalyst in generating greater private sector investment in industry. As this sharing of risk will be on a commercial basis the NDC will also share in any profits.
At this point I should like to refer to the provision made for further assistance in relation to Clondalkin Paper Mills. Deputies will be pleased to hear that the State's role in respect of the resumption of paper-making at Clondalkin Paper Mills is nearing completion.
Under various legal agreements involving myself, the IDA and FMI International Ltd., to whom the mills assets have been transferred, I am having a programme of refurbishment carried-out at the mills to prepare the assets for paper-manufacturing. The refurbishment programme encompasses all relevant aspects of paper-mill operation, including, for example, plant and equipment, services, effluent control and disposal, and factory cleanliness. The programme has been substantially completed and I am very pleased to say that the company is at this moment producing and selling paper.
I want to take this opportunity to wish the company well in its endeavours, and to congratulate all the parties involved in bringing about what I hope and expect will be the successful revival of paper-manufacturing in the location where it has traditionally dominated the industrial landscape.
I have referred to the perceived weaknesses which exist in Irish industry in the areas of research and development and innovation. I would like to develop this point in the context of the contribution which can be made by science and technology to industrial development by way of the introduction of new products, the improvement of existing products and the improvement of processes and, above all, in the aggregation of these various elements, by increasing the competitiveness of our industry. There are three elements in our approach to research — the universities, the research institutions and industry itself. The efforts of all must be adequate and must be integrated into a highly efficient total national effort. Coupled with the research side is the need to promote technology acquisition, a point I have referred to earlier. The Government have various measures in train to optimise the national effort in science and technology in all these respects.
On a wider plane there is a need for Europe itself to narrow the competitive gap vis-à-vis the United States and Japan. It is important for us, therefore, to tackle this matter at two levels, the closing of the leeway between Ireland and the more developed countries of Europe, who are, of course, at this level, our competitors but also, in turn, to make our maximum contribution to Europe's effort to close the gap with its competitors. In this regard we are attempting to optimise our participation in various multinational programmes under the European Economic Community, the European Space Agency, the new EUREKA programme and bilaterally. All these efforts are directed towards raising the technological level of Irish industry, not just by way of the development of new high technology industry but also by improving the technological base of industry generally. This is essential to competitiveness. We can get all the other elements right but still fail, if technologically, we cannot compete with the leaders in the areas which we have chosen as priorities.
The appreciation by other countries and by Europe generally, of this need is evident from the exhortations of the Prime Ministers at the European Councils extending back several years past but, more particularly, in that it appears now to be central to the approach by our EC partners generally to the Community Second Framework Programme for Science and Technology which is to cover the years 1987 to 1991'
The inclusion of industrial research in the programmes of the community is a comparatively recent innovation and, one has to say, is due in no small measure to the efforts of smaller countries like Ireland who have pressed continuously for a major effort in this area, looking particularly towards the needs of small and medium sized enterprises.
The success of this effort is evident in the fact that the major element in the second framework programme is to be various programmes directed towards the importance of the competitiveness of industry and services. These programmes will cover a wide range, running from the more obvious information technologies and telecommunications technologies to generic technologies for manufacturing industry, to biotechnology, materials science and technology, but also covering, more particularly, two new initiatives of special interest to this country — in marine science and technology and agro-industrial technology. It is our intention to fight for the maximum appropriations for this very welcome expansion of Community activity in these key areas and also to ensure maximum participation and benefit for Ireland.
I would like now to advise Deputies of some developments with regard to the comprehensive report on the food industry completed by the Ministers of State Food Group in July, 1985. This report was submitted to the Ministers for Industry and Commerce, Agriculture, and Tourism, Fisheries and Forestry. The Ministers of State, in compiling their report, had regard to a substantial number of written and oral submissions from a number of agencies and organisations closely involved in the food industry. In the light of the report's conclusions and recommendations, the Taoiseach, when announcing details of the Cabinet reshuffle, included the appointment of Minister of State Hegarty, as a Minister of State at the Departments of Agriculture and Industry and Commerce, with special responsibility for food. The Minister of State for Food is the Chairman of a permanent Food Committee, instituted following his appointment, comprising representatives of the relevant Departments and State agencies.
The appointment of Minister of State Hegarty, and the establishment of this committee, is an indication of the strategic importance which the Government attach to the food industry. A start has already been made to try and maximise efficiencies in the food sector, in terms of the mobilisation of State resources, and an orderly development of the industry to the benefit of all.
My Department are currently examining proposals, prepared by SFADCo at my request, for an intensification of the food processing development role which was assigned to the company under the Government's White Paper on Industrial Policy. As I stated, during my Second Stage speech in the Dáil on the recent SFADCo amendment Bill, the Government have assigned to SFADCo the very important role of conducting a pilot project on the development of the food processing sector. The priority areas for action by the company include:—
—Increasing the number of highcalibre entrepreneurs operating well structured firms in the food processing industry.
—Stimulating the development of quality new products.
—Developing and testing initiatives and programmes which, if successful, will be applied on a national basis.
The food processing and agri-business sector is one of the country's largest employers with approximately 20 per cent of the total workforce. The industry is well diversified in processing techniques and products. Additionally it is well dispersed throughout the country giving it economic and social importance of national dimension. However, compared to other food processing countries our efforts are mainly concentrated in commodity opportunities. I strongly believe that to advance we need to produce high value added process products for specific market niches. To achieve this we need a major expansion of the population of creative food firms producing quality products for carefully researched markets both at home and abroad, but particularly abroad. The task given to SFADCo is to find the ways to achieve this goal.
The current Multifibre Arrangement, MFA III, which regulates world trade in textiles, expires at the end of July 1986. The EC have adopted a negotiating mandate which supports the renewal of the MFA with more flexibility in its application. I am satisfied that Ireland's particular concerns are adequately taken account of in the Community's mandate. Discussions under the GATT auspices, on the future of the MFA are now entering an intensive phase. I must point out that it is clear from the stance being adopted by the developing countries, whose agreement is essential for the renewal of the MFA that negotiations will prove to be difficult.
The Irish Goods Council are particularly active in assisting Irish firms to meet competition from abroad, through such measures as the promotion of trade shows, provision of marketing advice and assistance and, the development of the industrial sub-supply sector. I should like to comment on two of the schemes currently promoted by the council. The council's marketing initiative "Marketplace" continues to operate successfully and the Council hope to expand it in 1986. Under this scheme, young graduates in sales/marketing are placed for a minimum period of one year with a small firm who could not ordinarily employ such a person. The scheme is funded by the YEA, who pay up to 60 per cent of the placee's salary in the first year, and operated by the IGC. Already over 100 graduates have been placed under this scheme.
I am also pleased to report a further innovative programme launched by the IGC at the end of 1985. Entitled Salesforce it is intended to provide groups of 4-6 companies in a related product sector with the full time services of a sales executive. The programme is operational on a pilot basis with four Irish clothing firms and preliminary results are encouraging.
As a small open economy, Ireland has a crucial dependence on export trade which sustains two out of every three jobs in industry. As the House is aware, we were for many years dependent on the UK as an export market. Today, however, less than 30 per cent of our exports go to the UK and trade with our European partners has grown to the extent that the European Community as a whole accounts for 70 per cent of our export trade. While the rest of our exports are destined mainly to the other developed countries, such as United States, Canada, Japan, Australia and New Zealand, Ireland has also established valuable footholds in the markets of the newly industrialised countries and those of the less developed countries.
Consequently, the health of the world trading system is of vital importance to Irish economic growth and job creation. The General Agreement on Tarriffs and Trade — GATT — is the multilateral treaty which lays down rules for the conduct of international trade and since its establishment in 1948 has succeeded in maintaining a high degree of stability in the world trading system. Since acceding to the GATT, Ireland's trade has grown steadily down the years and I am happy to point out that 1985 was an historic year as we recorded a trade surplus of over £300 million — the first since joining GATT.
Strong pressure from protectionist policies arising from the slowdown in growth of world trade in the seventiesearly eighties has pushed nations worldwide to press for a new round of multilateral trade negotiations, which it is expected will be launched in September of this year. Ireland has been to the forefront in supporting this move. I believe that a new round of negotiations is essential for the further expansion and strengthening of the world trading system. I am confident that a new round will provide increased trading opportunities for Irish exporters and encourage investment in export oriented industries. Preparatory work is already underway for the launch of negotiations and Ireland is working within the Community to ensure that our interests and objectives are included in the Community's negotiation mandates.
I had the opportunity in April of this year to engage in discussions on the new round with other trade Ministers at the OECD annual meeting. I can assure you that Ireland will play a full part in the forthcoming negotiations. I will personally lead the negotiating team at the launch of the new round in September and I intend to see to it that the maximum benefit is obtained for Ireland.
My hope is that a new round of negotiations will help combat protectionism and aid the resolution of disputes between contracting parties. I have in mind particularly the strained trade relations between the Community and the United States. As Deputies will be aware, the US has experienced unprecendented trade deficits in 1984 and 1985 and this has brought forth calls from both industry and Congress for protectionist measures to cushion sensitive industries such as agriculture and steel from imports of foreign goods. This trend towards protectionism has given rise to a number of disputes between the Community and the US. The latest dispute concerns the accession of Spain and Portugal to the European Community. I am glad to say that both parties are engaged in negotiations in GATT to resolve this.
I have referred to our trade surplus in 1985. This was achieved at a time when export growth slowed somewhat in 1985 and weaker than ancticipated growth in world trade and a slow-down in the performance of exports from new manufacturing industry sectors meant initial forecasts, made earlier in the year, proved to be over optimistic. The growth of 9.5 per cent in value and 5.4 per cent in volume terms represents a solid and significant performance. Merchandise exports were valued at £9,744 million in 1985 compared with £8,897 million in 1984.
On the broader international scene, the volume of world trade is expected to grow by about 5 per cent this year compared with 3 per cent last year. In the OECD countries, which account for about 90 per cent of Irish trade, economic growth this year should be about 3.2 per cent. An upturn in world trade is being forecast by most international commentators, with the expectation that this will occur in the latter part of 1986.
In 1986 I expect that exports will top the £10 million mark for the first time ever, fuelled by a strong performance in the second half of the year. I expect that the volume growth of exports this year will be over 6 per cent with a value increase of between 3 per cent and 4 per cent.
For the first five months of 1986 we have recorded a trade surplus of £178 million compared with a deficit of £130 million for the same period last year. Import and export figures are slightly lower in value terms than for the same period last year. This is due to a number of factors, including the strength of the Irish pound against sterling and the dollar, the low rate of inflation in Ireland and the drop in oil prices. In the past 20 years or more the value of exports has risen faster than the volume. This year, however, the volume of exports is expected to grow faster than the value. The unit price index of exports is expected to decline by 2 per cent to 3 per cent in 1986. Exports currently represent over 50 per cent of gross national product compared with a western European average of 25 per cent.
In recognition of the critical role of exports in our economy the Government have allocated £25.336 million to CTT to enable them to carry out their activities in 1986. Of this, £24.536 million is being allocated to CTT's ordinary and White Paper related schemes and £0.8 million, to the market entry and development scheme. The overall allocation for 1986 represents an increase of over 214 per cent compared with the 1980 allocation of £8.06 million. It is an increase of almost 8 per cent over the 1985 allocation of £23.464 million which is quite a substantial increase given the level of resources available for distribution among the various State agencies. Over £5 million of CTT's allocation is being used to expand the schemes launched following publication of the Government's White Paper on Industrial Policy. These schemes address weaknesses in the area of product development and marketing skills and techniques. All the schemes are being continued and expanded in 1986.
While a final evaluation of the schemes cannot be realistically made for a number of years, I am satisfied that all schemes are well underway and are proving to be successful in developing a strategic marketing approach among Irish exporters and redressing the more fundamental lack of an international marketing orientation among firms. Marketing in its full sense must, of course, embrace a wide range of activities including the definition of customer requirements, the development of products and services to meet those requirements and the pricing, promotion, sales and distribution of products and services. For a business to be successful, this strategic marketing dimension must be at the centre of the firms' overall development plans. Schemes have been introduced in the areas of market entry and development, market research, group marketing for small exporters and building marketing strengths in firms.
Apart from their new strategic developmental work, CTT continue to assist firms at the operational level. They help companies to maintain and expand their present export business and to maximise the potential of their product range. CTT offer assistance to firms in relation to travel and participation in trade fairs and also assist with advertising and preparation of sales literature. They also assist exporters through their general trade missions, buyer airlifts, group marketing projects and handling of trade information queries.
There are other areas in which direct assistance is provided to exporters. Under the export credit insurance scheme the Government provide Irish exporters with the facility to insure against non-payment for exports due to political or commercial risks in the buying countries. This scheme is a valuable weapon in enabling exporters to break into new market, particularly the more difficult world markets, and to compete in existing markets. The scheme is required to break even, taking one year with another.
Under the medium term finance scheme, exporters of capital goods can obtain finance at concessionary interest rates on the security of an export credit insurance policy. In turn, the exporter is able to offer credit at low interest to foreign buyers. The interest rates are agreed internationally under an arrangement known as the "Consensus" administered by the OECD, and the scheme is of assistance to Irish exporters in maintaining competitiveness against foreign suppliers. The Government pay an interest subsidy to the banks to cover the cost of providing the concessionary interest rates as against the actual cost of funds. The subsidy may not apply to intra-EC trade as the Treaty of Rome prohibits State subvention of this trade.
The short term finance scheme caters for non-capital goods. Again, funds are made available at preferential interest rates on security of export credit insurance policies. The scheme is of considerable help to exporters in meeting their working capital needs. There is no State subsidy involved.
I would like to report now to Deputies on certain plans and developments in the competition and company law areas. Legislation is to be introduced shortly to revise and strengthen the existing arrangements relating to competition and consumer protection.
The new Fair Trade Commission will have greater powers to inquire into anticompetitive and unfair trading practices. The powers of the Director of Consumer Affairs will be widened to include fair trade. Competition legislation will be extended to new sectors, including banks, electricity and transport. Because of the significant reduction in inflation which has been achieved as part of the greater emphasis on promoting competition through the economy, detailed price controls have been allowed to lapse. However, the powers to impose price controls will be retained and they can be used if that proves to be necessary
The Companies (Amendment) Bill, 1985, which deals with the preparation and publication of accounts of public and private limited companies, is currently before the Seanad. A further Bill, containing detailed proposals for the reform of company law in order to deal with the abuse of limited liability status, is now being finalised.
This further Bill, which now contains around 190 sections, will represent the most comprehensive updating of company law since 1963. The work involved in preparing the legislation, both by my Department and by the Parliamentary Draftsman, has necessarily been both thorough and time consuming. I am confident that, as a result of this work, the proposals contained in the Bill will significantly improve the conduct of company affairs. This improvement will inspire a greater degree of confidence by investors and customers of such companies without, at the same time, stifling genuine entrepreneurial activity. The income from fees paid to the Companies Registration Office in 1985 was approximately £1.191 million, an increase of 10 per cent on 1984.
I have more to say but I presume I will get a chance to say it when I am winding up the debate and I can also reply to the points made by Fianna Fáil Deputies if they cover the areas I did not have time to reach.
