asked the Minister for Industry and Commerce his views on a recent IDA finding that indigenous Irish firms showed an average profit of only 2.4 per cent of sales, as against 24.9 per cent for overseas firms; if he has satisfied himself that the existing set of incentives is appropriate to achieving an improvement in the profit performance of indigenous firms; and if the IDA have set themselves any qualified targets for improved performance by indigenous firms.
Ceisteanna—Questions. Oral Answers. - Indigenous Irish Firms.
35.
The profit performance of indigenous Irish firms as shown in the IDA's Irish economy expenditure surveys is disappointing, being equivalent to 2.1 per cent of sales for firms employing over 29 persons in the period 1984-86. I believe that the reasons for this poor past performance are many and include the unfavourable cost environment over the period in question and the depressed state of the domestic market where these companies still sell 60 per cent of their output. Weaknesses in management resulting in insufficient attention to product and market development were also contributory factors.
The reorientation in the industrial incentive programme for the development of the indigenous sector announced earlier this year, involves greater emphasis on new product development and acquisition, a continuation in the move away from support for fixed assets, a switch in grants for operative training to management development and greater support for strategic market-led initiatives by Irish companies. These changes together with the improved cost environment reflected in lower interest rates, low inflation and reduced public utility charges will further strengthen the competitive position of Irish firms and help to improve profitability.
There will be an increased focus by IDA on indigenous industry in 1988 in line with the priorities in the Programme for National Recovery. The Deputy will be aware that a new IDA Directorate devoted to the development of internationally competitive Irish companies has been established since the beginning of this year. The primary objective will be to stimulate an increased volume of significant international development initiatives from existing Irish industry and emerging Irish growth companies. In this connection, a key focus will be on working intensively with the high potential companies identified during 1987.
The priority attaching to indigenous industry development will be reflected in an increasing share of the total IDA budget being earmarked for Irish companies and a shift in IDA's personnel and financial resources away from marginal and incremental investments towards substantial development initiatives aimed at achieving significant growth in sales and employment.
Could the Minister answer the last part of the question?
We are asking the IDA to quantify targets for improved performance by Irish industry. Is that the last part the Deputy is referring to? The whole cost environment I have referred to, the changes in emphasis in policy and the redirection of the IDA will clearly head in that direction.
Have the IDA set themselves any quantified targets in this area?
Quanitifed targets and profitability are a matter for the management of each individual company. What the Government can do and are doing is improving the whole cost environment for industry, reducing the cost of interest rates, inflation and public utility charges. All that will contribute in its own way to restoring profitability.
Non-profitability.