Deputy Desmond O'Malley gave me notice of his intention to raise on the Adjournment the subject matter of the operation of the export credit insurance scheme in relation to beef exports to Iraq for the years 1987 and 1988.
Adjournment Debate. - Beef Exports to Iraq.
A Cheann Comhairle, thank you very much for allowing me to raise this matter tonight. I raise the matter because it has now become clear, as a result of a long series of questions which I and my colleagues have addressed to members of the Government in recent weeks, that some very disturbing facts have come to light in regard to the export credit insurance scheme and, in particular, to its operation in relation to beef exports to Iraq.
There are good grounds for believing that a substantial abuse has occurred, that the actions of some of those involved were deliberate, that as a result there is a risk to the Irish taxpayer of a liability currently measured at not less than £56 million and potentially much more and, most important, that this state of affairs has come about as a result of a series of steps involving governmental and ministerial intervention and responsibility.
The scale of the abuse and of the potential liability of the State is unprecedented. We have waited four weeks for an explanation from the Government without result so far. We may or may not get some belated attempt at explanation tonight but, even if we do, the absence of it for so long is in itself a serious scandal. Two incontrovertible facts now emerge. These are: (1) at different periods during 1987 and 1988 between one-fifth and one-third of all the available export credit insurance provided by law for all Irish exporters of all goods to all countries was, in fact, made available to two companies in respect of one product, beef, being exported to one country, Iraq. Of that very extensive cover the great bulk of it — more than 80 per cent — was made available to a company which was part of the Goodman organisation; (2) the amount of beef in respect of which the State has provided insurance cover on its sale to Iraq in those two years exceeds the amount of beef actually exported from the Republic of Ireland to Iraq according to official CSO figures by a figure of approximately £57 million.
This is an enormous discrepancy which has not been explained. Tentative explanations were offered. They were then abandoned. It now appears to be clear that the only reasonable and credible explanation for the discrepancy is that beef from sources other than Ireland was given cover under the Irish export credit insurance scheme operated by the Minister for Industry and Commerce at the risk of the Irish taxpayer. By definition such cover is in breach of the scheme. I have no reason to doubt the accuracy of this widespread belief, which I share. I need hardly say that the provision of export credit insurance cover by the Irish taxpayer for goods which emanate from another State is a flagrant abuse of the export credit insurance scheme and cannot be described as other than a fraud on the Irish taxpayer.
To deal first with the proportion of export credit afforded to certain beef exporters to Iraq I want to point out that the figures have all been given to my colleagues and myself by the relevant Ministers in reply to Parliamentary Questions over the past month or so and are derived also from the speech of the then Minister for Industry and Commerce, Deputy Reynolds, in this House on 21 June last when introducing a Bill to extend the cumulative limit of the Minister's liability under the scheme.
In the years up to and including 1986, the amount of export credit insurance afforded in respect of beef exports to Iraq was extremely small. In the year 1986, for instance, it amounted to less than 30 per cent of our total beef exports to that country. On the change of Government in 1987 there was a dramatic change of policy and the cover afforded was increased to substantially more than the amount of beef exported. This trend became even more pronounced in 1988 and huge potential liabilities were undertaken at the expense of the Irish taxpayer and not, as some people seem to think, at the expense of European Community funds. Suddenly the scheme was withdrawn at the beginning of 1989 because of the size of the cumulative outstanding liability and the bad experience.
The scheme is a valuable one because it enables exporters not just to insure against non-payment of export contracts but also enables them to raise attractive cheap finance in respect of sums due to them where the credit has been insured. It is, in effect, a State aid to exporters by virtue of which the risks under any export contract are under-written by the taxpayer. The larger indemnities afforded by the scheme are, from the information available, decided by the Minister for Industry and Commerce personally. I have evidence that in the case of Iraq, the Government as a body acting collectively, discussed the matter and decided to set various higher ceilings in respect of insured exports to Iraq.
The great value of the scheme to any exporter is underlined by what the then Minister for Industry and Commerce said in the Dáil on 21 June last as reported at column 1148 of the Official Report which states:
Export credit insurance not only affords protection against non-payment from abroad, it also provides access to finance from the banks at preferential interest rates.
In a particular market to provide this cover, therefore, to some companies to the exclusion of others gives the companies getting it enormous advantages as against their competitors. It effectively excludes the competitors. This is particularly favourable to one organisation if it gets 80 per cent or more of the cover in a particular market.
If, therefore, a huge proportion of all export credit insurance is afforded to one company — in this case the Goodman organisation — it is of considerable assistance to that company in increasing its dominance within the Irish market and with suppliers. It puts other companies in the same sector at a considerable disadvantage. Needless to say, it puts a large number of exporters in all other sectors producing all kinds of goods and services at a great disadvantage too. How can the Government justify giving such an enormous proportion of all our insurance cover, in each of these two years, to two companies, one getting 80 per cent or more, when hundreds if not thousands of exporters and would-be exporters are left without this facility and without the indemnity and cheap finance which it provides? Is it not also remarkable that such a high percentage of our export credit insurance is afforded in respect of the Iraqi market which, throughout those two years, was well known to be high risk and not covered by other western countries because of the risks involved?
As I said, export credit insurance cover is a valuable State aid to industry and to exporters. If the IDA or CTT were to administer the funds at their disposal on the basis that two companies would get in each of the two years between one-fifth and one-third of all such funds, there would rightly be a public outcry. Why should the outcry be any less when the slightly more complex and less well understood State aid of export credit insurance is abused in this fashion. The Minister's explanation about two companies having firm contracts and having priority in time is not really credible. If there was any personal or political will to do so, there is no doubt that the highly lucrative financial facilities which are available in this scheme could and should be made available among competing companies, even if only as a matter of wise political discretion. In any event an explanation which might have, even in a far fetched way, some validity for one year cannot have any validity at all for another subsequent year.
To revert again to the second major point of discrepancy in the figures between the amount of beef afforded cover under the scheme and the amount actually exported from Ireland, I should state that in cash terms the volume of export credit insurance cover for beef exceeded actual beef exports to Iraq in the two years by £37.6 million.
However, the actual figure for beef contracts effectively covered by insurance exceeds the actual export figure by approximately £57 million, because the insurance cover was restricted to 70 per cent of the value of contracts of 18 months credit and 80 per cent of the value with 12 months credit. The gross volume and value of beef covered may, in fact, be somewhat higher because the manner in which I have done the calculations is very conservative indeed.
The Minister has been making inquiries for the past four weeks into how these discrepancies have arisen. I presume that he must have been making these inquiries for much longer because, while they came to light publicly only within the last four weeks, when we raised the matter here, his Department must have been aware of them well before that.
Notwithstanding the facilities at his disposal the Minister has as yet been unable to explain the discrepancies. My own inquiries have given me substantial and reliable grounds to believe that the chief factor in these discrepancies represents the use of beef sources outside the State to satisfy contracts, in breach of the export credit insurance scheme. This state of affairs is extremely serious from a number of points of view. First, the Irish State and taxpayer have under-written exports to Iraq at the behest of Irish companies when the goods exported were not eligible for cover. Second, banks and others advanced moneys to Irish exporters on foot of export credit insurance scheme contracts for non-Irish exports. Third, potential Irish beef exports to Iraq have failed to materialise, by virtue of the use of the scheme here to finance competing exports from other States.
The use of the scheme to cover foreign goods exported to Iraq, in these circumstances and in these quantities, amounts to serious abuse of the scheme and to a fraud on the State and the taxpayer. A substantial potential liability has been incurred by the Central Fund to finance dealings which, in part at least, were not exports at all. Would-be exporters were refused indemnity which was diverted to cover competing products sourced outside the State. In view of the fact that other beef exporters were anxious to secure this cover, but were refused, the scheme was used to exclude fair competition from within the State, which aggravates the scandal.
Allowing these two companies, of which by far the larger and more substantial is the Goodman organisation, cover, in the Iraqi market for such large sums, so considerably in excess of their actual exports to that market, as well as being entirely wrong in principle and an act of blatant favouritism, has the further improper consequence that the credit periods allowed are abnormally long. Eighteen months, or even longer, is allowed, as opposed to the normal 28 days for beef. This means that a high proportion of all the available insurance cover is tied up for a very long period and is not allowed to revolve numerous times within the one year as is the case normally.
To allow this excessive cover for an excessive length of time in respect of this particular market is especially wrong, in my view. The great majority of other countries were not providing any cover at all during the two years in question for the Iraqi market. At the same time we are providing cover that far exceeds our own exports for periods that are extraordinarily long.
Our earlier trading history with Iraq was certainly a happy one and as one who was involved in it, I am happy to acknowledge that. However, in recent years Iraqi credit has come under substantial pressure internationally as a result of a lengthy war in which they were involved.
When other countries were withdrawing credit incredibly, in 1988, we were expanding ours. Indeed, as recently as November 1988, at the Baghdad Trade Fair, I understand that a Minister of State from here indicated that we would further increase our export credit insurance limits for exports to Iraq in 1989. Happily it now appears that particular decision has been rescinded.
The matters that I have been describing all have this in common. They arose out of decisions made by Ministers, and indeed in some instances by the entire Government. Their effect has been to put the Irish Exchequer at risk of considerable liabilities in respect of the sale of goods, some of which are not of Irish origin, and to strengthen further the already strong position of the Goodman organisation as the dominant group within the beef processing and allied traders in Ireland. At least 80 per cent of what was made available in such abnormal circumstances to beef exporters to Iraq went to that group, which have already established a position of some considerable dominance.
The implications of this for Irish agriculture and for employment here are substantial. It has been suggested that controversy in relation to the beef export trade is always damaging to the interests of farmers. In this case, however, there are considerable grounds to believe that the direct effect of these abuses is to damage the interests of Irish agriculture. These interests have been damaged in the short term by the Irish taxpayer giving support to competing products from another country or countries, but in the longer term the damage will be much greater.
The greater the dominance of the Goodman group becomes, or indeed of any other single group, the more vulnerable and insecure is the position of the Irish beef producing farmer. The less effective competition there is in the beef processing trade, the less Irish farmers in the future are assured of a fair price for their output.
If the person holding a very dominant position in the Irish market is also an international trader, even the withholding of supplies from him within Ireland will make little difference if he can obtain supplies elsewhere in the world, in view of the fact that the great bulk of beef traded is as a commodity rather than as a branded product.
These developments are undesirable also from an employment point of view. There certainly has been no net increase in employment in meat factories in the last few years. In fact, if anything, there is net disemployment of full-time permanent employees in favour of seasonal and part-time employees and in favour of gangs of so-called subcontractors from Northern Ireland and Britain who are brought in for short periods. The processing capacity seems to far exceed the level of demand for these facilities, with the result that some plants have closed and others almost inevitably will. Unfortunately, these plants have almost all been aided by FEOGA funds and IDA grants.
I am particularly disturbed therefore that these unusually generous facilities, in terms of export credit insurance and what flows from them, are made available to what is by far the most dominant group within the trade to the exclusion of all others except one.
As I pointed out in this House on 9 March last, members of this present Government from the Taoiseach down, are extremely close personally to the leading figure in the group concerned. The Taoiseach personally announced a £260 million investment programme by this group in June 1987. Almost two years later none of that programme appears to have commenced. As I said then, we can hardly blame the Government. They have been generous and helpful to a fault. I instanced on that occasion their willingness to accommodate Mr. Goodman's private jet in a state military air base.
I am sorry to interrupt the Deputy, but I must say that I deprecate the reference to a particular person or company who has no redress against allegations or accusations made against him in this House, which is a privileged assembly.
In addition, we can now instance their provision of this extraordinarily generous export credit insurance support to the almost entire exclusion of everybody else in that trade and to the considerable detriment of hundreds of other exporters in other sectors of business.
The closeness and helpfulness exhibited by the Government to the group concerned in terms of export credit insurance may well be echoed in the nonenforcement by the Government of the terms of the Mergers, Takeovers and Monopolies (Control) Act, 1978, in respect of a different group, the Master Meats group.
Again the Deputy is referring to persons, companies. I said I deprecate that.
The failure to give a notification under the Act for nearly seven months and the failure to pursue the question of the beneficial ownership of that group further deepens the concern and sense of fear that many people in the country have. It is unhealthy that so much of our agriculture and agri-business should be dominated from one source to the extent that it is.
I cannot elicit all the necessary information in this matter tonight, nor, I think, can Dáil Éireann, given its procedures, ever elicit all the necessary information. The Government have shown over the last month or so how reticent they are in giving information and how it has to be dragged out of them, even in very limited quantities. It is evident that some form of independent inquiry is required in the public interest.
If a particular group, because it is so powerful and large and constitutes, in fact as it says itself 4 per cent of the Irish GNP, it then becomes a matter of public interest. Any aspect of its activities which give rise to concern is necessarily a matter of public importance. In a republic a group like that must accept that they have passed the threshold of public economic significance, which necessarily deprives them of the right of secrecy and privacy to which smaller concerns, individual or corporate, are entitled. In this context, the knowledge that there has been widespread use of export credit insurance cover in the Iraq beef export trade is a matter of legitimate public concern.
The public are entitled to be informed of the facts. They are entitled to know whether beef from outside the State is used to fill export credit insured contracts. They are entitled to a full and frank explanation from a major commercial group of this size. It simply will not suffice to adopt a "no comment" approach or to threaten litigation against those who wish to throw the spotlight of public attention on an area of serious suspicion.
The Deputy might now bring his speech to a close.
In conclusion let me say that it is important to distinguish the suspected fraudulent abuse of the export credit insurance scheme from other recent allegations of abuse of the aids to private storage. In the latter case it appears there has been a pattern of non-compliance with the APS scheme and a number of beef processors have been penalised. However nobody has suggested there was political responsibility for that pattern of non-compliance.
I am sorry, but the time has come to call the Minister to reply.
The most that has been established is that there was tardiness and perhaps reluctance in investigating the matter. Important though it was to expose and remedy any such abuses, I wish to indicate that the grounds for concern about the beef export trade to Iraq are far more grave in their implications for the Exchequer, for the question of Government responsibility and for the interests of Irish agriculture.
The records of the House will show that since March last 24 questions have been asked concerning the operation of the export credit insurance and finance schemes. These questions have ranged from a variety of technical issues relating to the mechanics of the schemes such as the average amount of cover afforded by policies of export credit insurance and the relationship between export credit insurance and finance to the operation of the schemes in relation to beef exports to Iraq specifically. In all cases I have answered the questions as thoroughly and as accurately as possible and again the records of the House will clearly demonstrate this.
In essence I am saying that almost every conceivable question has been asked and answered fully. What has come out tonight is nothing new from Deputy O'Malley. It is merely a rehash of the position and personal abuse in relation to the Government and in relation to one company. I must say I am surprised at the continuation of these reckless charges from Deputy O'Malley. One thing that came out loud and clear is that the country should really want to know and be aware of the fact that Deputy O'Malley is out to get the Goodman Group.
Answer my question.
That has come out loud and clear from his participation here tonight.
(Interruptions.)
The Deputy may charge us in relation to Master Meat and the takeover of that company. He is aware, but he did not want to put it on the record tonight, of the fact that the situation in relation to the takeover is a matter that is being examined under the mergers and monopolies legislation. That answer was given to him in the House here but again it does not satisfy his poison line to take note of it. The one lesson that comes out tonight is that Deputy O'Malley, the Leader of the Progressive Democrats, has made it quite clear that he and his party are out to get the Goodman Group.
However, I want to focus on two elements of this matter which, in the light of the exchanges so far, deserve to be stiched further into the record of this House in view of the charges made again tonight. The first concerns the operation of the scheme in the years 1987 and 1988 in respect of beef exports to Iraq. Already I have described in reply to questions why two companies obtained export credit insurance for beef exports to Iraq in 1987. In 1987 the first two companies who applied had at the time of their application firm contracts for the supply of beef to Iraq. At the same time the total amount of insurance cover sought by these two companies, when added to existing exposure on the market and allowing for a reasonable level of residual cover for industrial exports, reached the overall limit set for the market. Accordingly, it was possible to facilitate only the first two applicant companies with export credit insurance in respect of their firm contracts. This is still considered to have been the correct approach in the circumstances.
As regards 1988, I have told the Deputy of my communication in December with all seven beef companies who had expressed an interest in the Iraqi market to the effect that applications for cover would be considered as sympathetically as possible on production of a signed confirmed contract with the overall cover established for the market, which was limited. This was a statement of general policy——
The Minister abolished it on 1 January.
Let us hear the Minister without interruption. Deputy O'Malley had a very good hearing.
——I emphasise and, because of the interruption I repeat, that this was a statement of general policy in relation to all companies, that no specific company was to get particular treatment. Deputy O'Malley said there was unfair treatment in relation to companies and that others had been debarred. Let me say that one company in 1987 applied for insurance in respect of a contract for beef exports to Iraq and said they were tendering for it at that time. The payment terms were based on 18 months' credit. An offer was made to the company in November 1987 at a level of indemnity of 70 per cent of contract value, the standard level of indemnity for contracts with credit terms of 18 months. This offer was not, however, accepted by the company who sought instead to have cover at a 90 per cent level of indemnity. As this level of indemnity exceeded the prudent norms established by this market, it was indicated to the company that cover on the lines requested would not be granted.
The situation as outlined by Deputy O'Malley is of companies being excluded from cover and people being debarred from cover. Roughly £700 million worth of export turnover is insured annually under the scheme and to date approximately £5.25 billion of Irish exports have been insured under the scheme, about 450 companies employing some 40,000 people use the facilities under the scheme and a single policy may cover 150 buyers at any one time in 15 markets.
Throughout it has been my impression — and it has been confirmed tonight — that many of the questions raised on this matter have been characterised by insinuation, innuendo and hints of abuse regarding the operation of the scheme, and they have been stated here tonight.
(Interruptions.)
There are some points I feel obliged to make in response to this though, as before, I would point out that I am repeating what I have already said in some instances. First, there is no justification whatsoever for the implication in some of the questions asked, that in one form or another Iraq might have been less than committed to the development of our mutual economic relations. I repeat that Iraq has never defaulted in a trade debt to Ireland. That may not be of interest to the 6 per cent——
(Interruptions.)
All recent official contact with Iraqi authorities has been positive and constructive in terms of ways and means of continuing to preserve our unique relationship and trade payments, in common with many who would be our main competitors.
(Interruptions.)
Please allow the Minister to conclude his speech. Deputy O'Malley had a very good hearing devoid of interruption of any kind. I will insist on the same good hearing for the Minister.
My question has not yet been answered.
Deputy O'Malley, please desist.
I have answered 24 questions on this already. I have mentioned previously that this ongoing debate about a single country can cause apprehension in the minds of other trading partners about the manner in which we can discuss our business affairs with them. I can now confirm that I have already received some indications of this kind from other sources. Let me add that I have also received views from some Irish representative bodies that this ongoing public saga in relation to one country is straining our international image and giving rise to some difficulties for doing business in other countries where the State in the main is involved in the business process. It is self evident that this prolonged debate in so far as it relates to one sector can only continue to give rise to bad press internationally with potential consequences which are not pleasant to think of from a national viewpoint. Our international competitors may be happy to see Irish firms lose business. Who will take the responsibility for any loss of output, loss of jobs and loss of export earnings that follow from here? Will it be those who unnecessarily and gratuitiously make insinuation after insinuation?
(Interruptions.)
Finally, all this whispering does little but devalue the efforts of all those involved in the administration of the schemes and in the energetic pursuit of export growth and achievement. I do not, therefore, propose to offer any further comment on this matter in this context.
The Dáil adjourned at 11 p.m. until 10.30 a.m. on Thursday, 11 May 1989.