I move: "That the Bill be now read a Second Time."
The primary purpose of this Bill is to combine, in one body, the functions which have up to now been carried out by two organisations, Córas Tráchtála and the Irish Goods Council. It is intended that the new board will be called An Bord Tráchtála — The Irish Trade Board and that it will come into being on 1 September 1991.
Córas Tráchtála is a statutory body established and operating under the Export Promotion Acts, 1959 to 1987. Its function is to promote, assist and develop the exportation of goods and services. The Irish Goods Council is a company limited by guarantee and not having a share capital. Its primary function is to assist the sale and marketing of Irish goods and services in Ireland.
The objective of creating one board is to ensue that the State provides marketing support to Irish companies from a single source. The circumstances that face Irish companies, both in the local marketplace and in the wider one outside, are changing radically. To survive in these new circumstances, and especially to thrive, our companies must develop and deepen their marketing efforts. So too must the State review the support it provides to assist them in this task. The decision to merge Córas Tráchtála and the Irish Goods Council was announced by the Minister for Industry and Commerce in his preface to the Review of Industrial Performance, published in December 1990.
This legislation is the latest in a series of significant developments which have taken place since 1987 in the restructuring of State agencies involved in industrial development and promotion. Among the most notable developments were: the establishment of FÁS to take over the functions previously undertaken by AnCO, YEA and the National Manpower Service and; the merger of the National Board for Science and Technology and the Institute for Industrial Research and standards to form EOLAS, a single agency with responsibility for the development, application, co-ordination and promotion of science and technology in Irish industry. Legislation is currently being prepared to provide for the amalgamation of the activities of NADCORP with those of the IDA.
In moving this Bill today to merge the Irish Goods Council and Córas Tráchtála I would like to reflect briefly on the history of these organisations and on the changing nature of the Irish economy, its products and its exports in which these organisations have played their part since their inception.
The older of these two existing bodies was established as Córas Tráchtála Teoranta almost 40 years ago on 21 December 1951. Its architect was the man who created many of the institutions that still today serve our industry and commerce — the late Séan Lemass. Sometime after CTT was set up, the late Séan Lemass, as Minister for Industry and Commerce, addressed its board and several of the things he said will sound familiar to us after nearly four decades. His message was that export development was now the main aim of industrial policy. "Success in this aim," he said, "is essential to secure the speedy rectification of the country's adverse trade balance and an increase of production and employment".
It is perhaps hard for us now in another generation to realise just how much things have changed since the early fifties. At that time we had an inward looking, highly protected economy — overwhelmingly dependent on the British market, which took more than 70 per cent of our very moderate level of exports. Our trade balance was chronically in deficit and our industrial base was almost entirely Irish-owned and in traditional sectors. Economic growth in the country had failed to match our political and institutional development since independence.
To indicate the relative narrowness of perspective of the period it is worth recalling that CTT itself was set up not to develop exports in general, but for a specific purpose — to increase Ireland's earnings of US dollars. That was perceived to be the most pressing need of the time. CTT was the Dollar Export Promotion Board and accordingly its first overseas offices were in North America — in New York, Chicago and Montreal. Very soon its role was expanded — first to the British market, then to export markets worldwide. Its role deepened, too — from being an ad hoc response to an emergency to being a long term development organisation, centred on the task of building market share for Irish goods in overseas markets, not just by selling and promotion but also by helping Irish companies develop in the ways that were necessary to make them producers of goods that were marketable overseas.
In order to strengthen Córas Tráchtála's ability to contribute towards the realisation of the Programme for Economic Expansion, in 1959, Jack Lynch, as Minister for Industry and Commerce, introduced legislation in this House to change CTT from being a limited company to a statutory body set up under an Act of the Oireachtas.
The Irish Goods Council was established in 1978. It was, itself, a merger of two existing organisations — the National Development Association and the working group on the promotion and sale of Irish goods to assist Irish manufacturing industry to win new business in the domestic market. The Irish Goods Council came into being at a time when Irish industry across the board faced the dual challenge of market share erosion as a result of increased competitive pressures and insufficient marketing capability to exploit opportunities. Most firms were focussed inwardly on production instead of outwardly on the customer and the market-place. Poor marketing performance was identified as the single biggest barrier to growth, particularly among indigenous firms in the small to medium sized categories.
The Irish Goods Council embarked on a long term programme of assisting firms to build up their own marketing strengths, first on a sectoral marketing basis, then by providing a series of kickstart marketing supports to companies which had commitment and potential but which were being held back, in the main, because of marketing shortcomings. One example of this is the Irish Goods Council's Marketplace programme, which places young business graduates with Irish companies as first-time marketing executives on a one-year, mutual trial basis. Since the programme was started in 1983 almost 600 placements have been made.
Over the years both the Irish Goods Council and Córas Tráchtála have worked with remarkable energy and zest at their respective tasks. Their effectiveness can best be measured in the now almost total acceptance among Irish firms of the importance of professional marketing in the widest sense and their willingness to invest, often from very limited resources, in marketing planning and activities.
Let us look at the broad changes that have taken place in the last four decades and the circumstances that now demand a further structural change: in 1951 our annual exports were £81.5 million — today they are in the region of £15 billion; the destination of our exports has shifted dramatically. In the fifties three quarters of our exports were to Britain. Today Britain accounts for only about one third of our total exports. Our trade now is overwhelmingly with the EC, which of course includes Britain. It is the EC that now takes more than three quarters of our exports; Two thirds of our people employed in manufacturing are directly concerned in exports; there are few people in Ireland today whose economic well-being is not affected by the level of our success in external trade; and in recent decades the inward looking, protectionist philosophy of the thirties and fifties has finally been laid to rest. In its place we have built an outward-looking, open economy. We are building a new tradition based on a strong belief in the unfettered movement between countries, of goods, capital and people. In the sixties we achieved free trade with Britain. In the seventies we took the great leap forward in joining the European Community.
We have heard, of course, a vast amount over the past few years about the opportunities and threats arising from the 1992 process. I have no wish to rehash them now. But a few quick remarks are highly relevant to our business here today. The first point is that there is no automatic bonanza in the Single European Market. An opportunity is just that — an opportunity. We are not guaranteed a greater market share in the EC. Market share in the post-1991 era will have to be earned. And earning it will not be easy. In fact, for a number of reasons, it will be very difficult. So Irish companies will need to work harder than before, and they will need the most effective support we can give them.
One of the reasons why growth for Irish companies in the Single Market will be difficult is that the markets that make up the new Europe are changing fast. They are changing because of the Single Market process, and they are changing because of long term European and world trends that are independent of the Single Market.
The task is to sell into markets in a state of flux. What is true of a market in the EC this month may not be true next month. Tastes are changing, distribution patterns are changing, the balance of market forces are changing, the very relationship between buyers and sellers is changing. What this means is that a company selling into this new situation — and no-one has any choice about it — must have a higher market awareness than ever before, a greater readiness, than ever before, to look beyond traditional ways of doing business and to set up new kinds of trading relationships.
The days when people export in a hands-off way were dying anyway. The Single Market is now about to kill them off altogether. It will no longer be enough to find an agent in a foreign country who will take what you produce and somehow find a buyer for it in his marketplace. Selling successfully in the new Europe means being committed to being in Europe. It means a commitment to developing close commercial links, a deep knowledge of the particular needs of the marketplace, and a readiness to tailor one's product or service precisely to those needs. All this implies a deeper commitment by companies to marketing, to quality and to product innovation.
The Single Market also means that there will be a greater need than ever before to defend our existing market share. Let me dwell for a moment on Britaon. We should be in no doubt whatever that Britain is still and will remain a vitally important market for Irish industry. It is even more vital than the overall export figures would suggest — because indigenous industry, Irish-owned industry, relies more heavily on Britain than do our exports overall.
As far as our British market is concerned, what the Single Market means is far more competition for out market share from other EC countries. Across a wide range of product sectors, the Single Market will not mean better access for us to the British market. What it will mean is that it will be easier for others to compete with us there. We could never take the British market for granted. In the years ahead, we will have to fight harder than ever before to maintain our level of sales there if not increase them. That is another part of the new reality. In fact, many Irish companies have in recent years built strong market positions in Britain, in that market's years of growth. They are now taking an aggressive stance to maintain and expand their market share so that when the British market recovers they will be in a position to gain extra business. Córas Tráchtála helped most of these firms establish their presence in this key marketplace. Its successor will help them to stay and grow there.
However, that new reality comes even closer to home — to the local market here on our doorstep. The Single Market will make it significantly more attractive for foreign firms to sell into Ireland. Many firms who were discouraged from being active here because the small size of our market did not make it worth the trouble involved, will now take an interest because it will be so much easier to penetrate.
What this means is that all Irish manufacturing firms — and indeed, many service firms as well — will for the first time find the need to be internationally competitive on their own doorstep. I am not talking about exporters now, but about companies who have been concerned entirely with the Irish market. They have not been protected by tariff barriers, but nevertheless many of them have up to now been sheltered from the full rigours of international competition. That is going to change very quickly.
The Single Market calls totally into question the distinction we have traditionally made between the Irish market and the markets outside, between home sales and export sales, between being an exporter and not being an exporter. The Single Market places every firm in the same boat — a boat in which the prerequisite for survival is the ability to be internationally competitive.
Up to now, we could operate a two-tier system. The home market was one thing, export markets quite something else. What you needed to succeed on the home market was not necessarily at all the same as you needed abroad. And for many companies who would never graduate to exporting, the need to be internationally competitive did not arise. Accordingly, we had two agencies — one agency serving firms that were developing in the home market — the Irish Goods Council — and one agency serving firms that were developing in export markets — Córas Tráchtála.
The two agencies worked together quite closely: they have shared the same building for nearly two decades, they have co-operated well together whenever it has been appropriate but the two agencies have been separate, nonetheless. This has had a number of consequences that we no longer wish to live with. I will mention just three reasons for change.
The first reason is that companies who graduated to exporting had to start an entirely new relationship with another agency: their early development was with the Irish Goods Council, and then when they moved to exporting they had to start all over again with Córas Tráchtála. Those Deputies who have experience in business will know that the success of company development through agencies depends to a very important extent on the nature of the relationship that is built up on both sides — and that building this relationship is a time-consuming process and one that involves personal commitment in both company and agency. To ask growing companies, whose resources are always stretched, to develop two relationships, where one could serve the need, is placing an unnecessary burden on companies — and one which it is now time to remove.
The second reason that we need one agency is that we want more companies to make the transition to exporting, and we want them to make it sooner. Because of the small size of our home market, Irish companies must move to exporting much earlier than companies of the same size would in, say, Britain or France. Companies there have a large familiar home market that they grow quite large in. But if Irish companies are to grow significantly, they must move outside this market at an early stage. By that I do not necessarily mean that they should export straightaway. What I mean is that their strategic focus should from the start be on a wider market than Ireland.
We do not want companies to grow with their sights fixed only on the Irish market, who start thinking about the outside world only when they need to look outside for growth. The approach means that their initial strategies will be moulded exclusively in terms of the Irish market. This increases the likelihood that they will approach exporting on the basis of trying to sell outside the country what they have done well with here. That is not the way. We want companies to be thinking about being internationally competitive from the start. If they do so, then what they do in the Irish market will be a suitable basis on which to expand abroad when the time comes. There will be no need to develop a new philosophy, a new approach.
The third main reason that we need one agency rather than two is that we have found over the years that most effective help that agencies can give is on a sectoral basis. To assist companies in the furniture business, for instance, requires professional people in the agency who have deep experience of that sector. Companies who are in the same business, even though some might be exporting and some not, have needs that are closer to one another than companies from different sectors. Specialist help is the requirement.
There are many sectors across the spectrum of industry and service and the resources of the State are limited. So what we are doing by having two agencies is spreading the available special resources more thinly than they need be spread. With one agency we can gather together the specialist sectoral knowledge in more efficient units and increase the value of the service they deliver to client companies.
I would like to turn now to the technical details of the Bill before us. The mechanism being proposed to effect the merger is as follows: Section 5 provides that the name of Córas Tráchtála will be changed to An Bord Tráchtála — The Irish Trade Board. Section 2 proposes that the new board will come into operation on 1 September 1991. Section 6 conveys to the new board functions which combine the current functions of Córas Tráchtála and the Irish Goods Council. The primary functions of the new board will be to promote, assist and develop the marketing of Irish goods and services.
I want to state at this point that a good deal of thought went into seeking a description of what the new board will be about. We have sought to give the new board a clear mandate without getting bogged down in the theoretical debates about the meanings of particular words. For example, I know that Deputies will be aware that the word "marketing" can be defined in a variety of ways by practitioners and academics. I like to take a very straightforward stance on this matter. Marketing in the broadest sense is the link between society's material requirements and its economic pattern of response.
The task of the new board will be to assist companies in identifying markets and in the development of their marketing skills to enable them to meet society's material requirements so far as is possible with Irish products. That is what the Government envisage the board will be promoting, assisting and developing. If we look at what makes a company excellent we will find that an excellent company knows how to adapt and respond to a continuously changing marketplace. The excellent company and its employees are committed to creating customers and to satisfying customers.
Sections 12 to 15 deal with the dissolution of the Irish Goods Council and the transfer of its staff, property, rights and liabilities to the new board. I want to make it clear that there will be no job losses on foot of the merger. The Government recognise that there is a major job of work to be done in improving the marketing capability of Irish industry and all the staff of the combined agencies have a key role in that work.
Section 8 of the Bill proposes that the aggregate amount of the sums which may be paid to the board for the purpose of enabling it to perform its functions will be increased to £400 million. The current statutory limit, as set in the Export Promotion (Amendment) Act, 1987, is £260 million and that figure will be reached in late August or early September this year. For this reason it is highly desirable that this Bill be passed in this session. If we cannot met this deadline arrangements will have to be made for Córas Tráchtála to undertake short term borrowings to maintain its operations until the Bill is enacted. I am quite confident that this Bill will be enacted before the recess. I should also add that it is estimated that, based on the spending projections contained in the Programme for Industrial Development, the new limit of £400 million will cover Exchequer funding of the board until the end of 1994.
The Bill is also being availed of to bring some of the statutory provisions relating to the board in line with other agencies. Section 7 provides that the Minister for Industry and Commerce will have power to give the board general policy directives. Section 10 contains a standard provision covering restrictions on the disclosure of information by staff or advisers to the board.
Section 11 extends the provisions of the 1959 Act relating to the nomination and/or election of board members and staff to the Houses of the Oireachtas to elections to the European Parliament.
Section 9 increases the number of board members from the present maximum of seven to eight, thus allowing the Minister scope to increase the spread of expertise on the new board to reflect its wider responsibilities.
This legislation will improve the cohesion of State support for the marketing efforts of Irish industry. The State must go for the optimal approach in the organisation of its support services. The creation of the Single European Market requires all commercial institutions in this country to look hard at their operations and adjust their strategies to the new demands made on them. This Bill, following the increased allocation of national resources to the marketing area, shows that the Government are also responding to the new environment. We are, in a nutshell, providing a single marketing agency for the Single European Market.
What will be the characteristics of the new organisation? I see it as having four main strands. First of all it will have a clear client group in mind. Its services will be overwhelmingly provided to and sought by indigenous companies. We are talking here mainly, but not exclusively, of Irish-owned companies, and mainly, but not exclusively, of small and medium-sized companies. Essentially what we mean by indigenous companies are those firms that have a significant amount of their strategic functions based here in Ireland, companies that have their marketing centred in Ireland, companies that are firmly rooted in the Irish economy. This includes, I am glad to say, a growing number of foreign owned companies.
CTT at the moment serve some 1,200 exporting companies on a regular basis. The Irish Goods Council have a core client base of some 800 companies, most of whom do not export yet. The aim of the new organisation will be to accelerate the sales growth of all these companies, wherever the opportunities present themselves.
CTT have, and the new organisation will continue to have, trade board functions which include the promotion of Ireland's trade in general. The new board will continue to have advisory functions to the Department of Industry and Commerce in relation to all trade and marketing matters, but in terms of its development thrust the concentration will be on indigenous companies, most of which are Irish owned, and most of which are small and medium sized.
Secondly, the new agency will concentrate initially on one central task: helping Irish industry to take full advantage of the Single Market. Again, that is not the whole task — the new organisation will, as before, have a vital role to play in the development of export markets around the world, particularly in such important areas as North America, Japan and Australia. However, the concentration must be on Europe: for those companies who do not export, to prepare them for competition from within the EC; and for those companies who do export, to help them develop markets in what will be the world's biggest trading entity.
Thirdly, the new organisation will provide financial support for marketing by firms. Both CTT and the Irish Goods Council have begun to benefit from major increases in their resources via the European Structural Funds. CTT's allocation this year of £31.25 million is almost 60 per cent higher than the 1988 figure. The Irish Goods Council's allocation for 1991, at just over £2 million, is 100 per cent higher than the 1988 figure. These resources will be available to the new board to help firms develop their markets and to help them make whatever changes are needed to compete effectively in the new international conditions. These funds offer Irish companies a once off opportunity to restructure themselves for the new world we are moving into. They will be available only to assist those companies who demonstrate that they are in earnest about the achievement of new markets and growth in market share.
Finally this agency will be the eyes and ears of many emerging Irish companies in the marketplace, not replacing but supplementing and enriching the company's own presence. Through this new agency a company will be able to get initial access to markets across the EC and to the main markets around the world. One of the great strengths of the organisation will be the combination of the deep knowledge of the marketplace available to CTT and the hands-on development skills of the IGC.
In the economic sphere, Governments of every ideological hue strive to create a favourable environment for industrial development. Characteristics of such an environment are a stable currency, low inflation and a positive balance of trade. We have arrived at such a situation in this country, largely through determined and successful efforts since 1987 to bring our public finances under control. Government and the social partners have co-operated in a unique way to achieve this vital requirement for our economic survival.
A further economic priority for this Government has been to provide the best possible institutional structures to assist industry to increase production, sales and employment. If any lesson can be drawn from recent history it is that the State cannot do everything, but what it does it must do well. The best guarantee of such efficiency is to create institutions that precisely fill the needs of the day. The Bill before us aims to do exactly that and I commend it for the approval of this House.
