Vol. 431 No. 4
11 Mr. Rabbitte asked the Minister for Tourism and Trade if, in regard to the allocation of £11.42 million in the Estimate for his Department for export guarantee arrangements, he will give a list of the main sectors to benefit from this cover; the arrangements in place to ensure that taxpayers' money is not exposed to unreasonable risk; and if he will make a statement on the matter.
(Donegal South-West): The policy in relation to the provision of export credit insurance is to assist Irish companies in the sale abroad of Irish goods and services, while at the same time operating the scheme at no net cost to the Exchequer, over time. This means that it is necessary to adopt a prudent approach to underwriting, balancing very carefully the needs of Irish exporters against the risk of non-payment by their foreign buyers, which would result in the payment of claims from taxpayers' money.
Short-term policies were issued or renewed in 1991 which had a potential liability of some £127 million in respect of sales of goods and services where the credit period did not exceed one year. No medium term policies, which relate to longer term contracts for the sale of capital goods and services with a credit period of up to five years were issued in 1991. The State ceased to provide cover for short term commercial risk at the end of 1991 and, as a result, total cover under short term policies issued and renewed in 1992 reduced to £1.66 million. One medium term policy covering just under £8 million was issued last year.
The allocation of £11.42 million in the 1993 Departmental Estimate provides for repayment to the Central Fund of advances made to meet net liabilities which arose in the perid 1 April, 1991 to 31 March, 1992 and does not relate to any cover which will be written this year.
Of the £11.42 million, almost £6 million related to claims paid in respect of pharmaceutical, electrical and healthcare services and most of the balance was made up of two large claims, one in respect of food and drink exports, and one in respect of a construction contract.
Regarding the question of an EC scheme to support credit, while measures to harmonise export credit schemes in the member states are under examination, I would consider it unlikely, having regard to the views of many member states, that an EC scheme will be developed, at least in the foreseeable future. We, of course, continue to press for the introduction of such a scheme, at every available opportunity, as the Irish export credit scheme, due to its small scale of operations compared with most other EC state export credit schemes, will never be capable of competing with what they can offer.
Is there any cover provided for what are known as high risk countries and is any of the £11.42 million in this year's Estimates for contracts with high risk countries? These are countries such as Iraq which it is expected will not pay as a result of failure of one kind or another.
Is the Minister in a position to indicate to the House who benefited from the claims in the case of the food and drink contract and the construction contract and what countries were involved in the contracts concerned?
(Donegal South-West): A substantial amount of the £11.42 million would relate to high risk countries; £6 million would relate to Iraq. There are other countries involved, such as Nigeria and Canada. The Department of Tourism and Trade categorises the different countries and this can change from period to period. It is not customary to indicate the names of the countries involved.
It may not be customary, a Cheann Comhairle, but we are spending a considerable amount of money in Dublin Castle trying to get to the bottom of various events which relate directly to this question of the export credit insurance scheme and it would be useful for the House to know who is getting taxpayers' money. If the business is legitimate, as I am sure it is, there is no reason this House and the public should not know who those companies are. This is an insurance scheme and, therefore, one must assume that premiums are paid. What proportion of the payouts is covered by premia? For instance, in relation to the £6 million on the contracts to Iraq, which one must presume were for beef, what premium was paid by the company concerned for that kind of cover?
(Donegal South-West): The overall question of the premium would depend on various factors, such as the country involved and the assessment of short term risk. There is no rule of thumb as to the amount of premium paid. The risks and the company's previous business record are taken into consideration. I am not trying to withhold this information from the Deputy but I do not have the actual amount of premium in relation to any of them.
In view of past experiences with Iraq, are exporters to that country still covered by export guarantee arrangements?
(Donegal South-West): It is a matter for a company to apply to the Department. If there is a short term political risk that scheme covers consumer goods. If the money is not coming on stream then it is possible to withdraw the cover. Medium term risks are a bigger problem, but no country is ruled out. It is a matter for the Department of Tourism and Trade to consider each application on its merits.
It is extraordinary that the Minister does not know the premium paid by the company that managed to acquire £6 million of taxpayers' money for sales to Iraq. The Minister stated that the scheme is intended to have no net cost, presumably to the Exchequer, over a period of time. How is that working given the length of time this scheme has been in operation? Is there a net cost to the Exchequer?
(Donegal South-West): The Department and the Government strive to ensure that there is no net cost over a period of time. Of course, this assistance is made available to exporters to enable them to create jobs. It is important to recall that this scheme was introduced as far back as 1953. We have had sales of approximately £5 billion during that period and the deficit is in the region of £30 million.
