I move: "That the Bill be now read a Second Time".
The purpose of this Bill is to create the new State agency structures which will underpin industrial development in the coming decades. Three new bodies will be created — Forfás, Forbairt and the Industrial Development Agency (Ireland) — IDA. Each of the agencies will be autonomous and will have its own board. Each will have a distinct mission and goal. However, all three agencies will operate within a framework which facilitates co-operation and mutual support. Forfás will be responsible for overall policy co-ordination and administration. In addition, Forfás will play a proactive role in ensuring co-ordination in those areas of industrial development which are outside the direct remit of my Department, such as food and foreign trade. Forbairt will develop indigenous industry by bringing together the existing functions of Eolas and the IDA, and finally, IDA Ireland will continue to promote the attraction of overseas industry to Ireland.
The creation of these new bodies represents a major step forward in the development and implementation of industrial policy in Ireland. I will return to this point in detail later, but, first, I would like to place the Bill and the topic of industrial development within the broader context of Irish economic development. As the House will be aware, the boundaries of this broader area have been explored and developed through the work of the Industrial Policy Review Group, chaired by Mr. Jim Culliton and in the subsequent task force chaired by Dr. Paddy Moriarty.
The effect of Culliton was to widen the whole industrial policy debate by pointing out that industrial development comes about through the harmonisation of a broad range of factors, many of which extend beyond the remit of my Department and its agencies. Culliton builds on this new analysis by calling for a different approach in which the requirements of industrial development would become the driver for many areas of economic and social activity.
In the Programme for Government, my ministerial colleagues and I indicated our clear agreement with this approach and stated that we would: strengthen Ireland's industrial, scientific and exporting base; increase the level of directly productive activity; encourage a dynamic spirit of enterprise; put a new emphasis on building up small industry, and broaden industrial strategy to take in all the factors that affect output and productive.
The Moriarty task force reinforced this central message and undertook, with great commitment, the difficult job of translating the need for a more co-ordinated approach to enterprise development into a series of specific tasks to be fulfilled by various Government Departments, State agencies, and the semi-State sector.
In the document Employment Through Enterprise, the Government gave its proposals for dealing with the task force recommendations in the areas of taxation, energy, ports, communications, transport, environment, commercial State enterprises education and training, competition policy, the legislative process and of course, the reorganisation of the State agencies. Taken together, the programme set down in that document represents the most concerted effort ever undertaken to address the requirements of employment and enterprise development in the State.
As far as the industrial development agencies are concerned, the conclusion of the Culliton report was that their role is an important but limited one. When reviewing industrial performance there has for too long been a tendency to believe that the agencies are responsible for job creation and for any failure to meet this country's employment needs. Set against the broad panorama of issues addressed by Culliton this view is patently flawed. However, this broader view should in no way allow complacency to creep in. The current agency structures are inhibiting the most efficient and effective development of industry and we must change them.
The problem to be tackled is evident when we look at the breakdown of jobs gained and lost in both Irish and overseas firms in the country over the six year period 1987 to 1992 inclusive. During this period an impressive total of 118,500 jobs were created but, unfortunately, this was accompanied by total losses of 108,600. Some would say that this represents a poor success rate, especially since the new job gains came from overseas companies. I dispute this overly simplified view.
Let me be clear from the outset that the contribution which overseas firms have made to Ireland, and the success which the IDA has achieved in attracting them, is not to be dismissed. On the contrary, it deserves the highest possible praise. Around three quarters of our industrial exports come from foreign firms and those same firms employ half the total workforce in manufacturing.
Over the past few years, however, the global industrial economy has been going through a recession of unprecedented proportions. Even Japan, whose industry seemed invincible during the 1970s and 1980s has started to feel the cold wind of falling orders and job losses. Against this backdrop we must consider ourselves very lucky to have been able to attract new industry and to create new jobs to replace those which succumbed to the effects of the international recession.
The danger is that we may take too much comfort from this strong overseas performance. What has been happening, in this regard, is that our successes in the field of attracting mobile investment have been obscuring our failure to really get indigenous industry moving.
The current situation, where a single agency is responsible for both indigenous and overseas firms, exacerbates the lack of clarity. This is understandable and inevitable, since any organisation will strive to present its performance in the best possible light. Its inevitability means that we must change the structures to get the clarity we require. This is what this Bill is all about.
The indigenous industry development role will be addressed by Forbairt. Before I talk in detail about Forbairt, let me pause for a moment and go back to Culliton. A great deal has been made about what the Culliton report did or did not propose in relation to the structures of the State agencies. There have been protracted debates on whether the finest points of the report are being interpreted correctly and acted upon, the more intricate the debate becomes, the more people deviate from the central point of Culliton, which was to lay down a broad strategy for industrial development and economic growth.
In the area of organisation design, many different approaches can be taken. One of the leading experts in this field. Richard Pascale talks about the constant need to achieve a balance between "fit" and "split", in other words, the need to develop organisations which are coherent and consistent in their strategies and structures, but not so unidimensional that they stagnate and become hidebound by size and bureaucracy. In the structures which this Bill will establish, I am fully confident that we have struck the right balance between these two opposing forces. In this regard, I would say with some force that I am much more concerned with getting this balance right than with conforming to some abstract notion of adherence to a precious text.
The challenge facing Forbairt will demand a different package of solutions from those which have traditionally been dispensed. In particular, it will mean changing the widespread perception within industry and the State agencies that cash grants are the main vehicle for development. If this were the case we would have solved our problems long ago. The truth is that the developmental requirements of industry are far more fundamental and the problems more deep seated. The key issue is whether our firms have the necessary competences to produce the technologically sophisticated, high quality, goods and services which international markets require and also whether firms have the internal efficiencies needed to bring those goods to market on time and on budget.
At present, we have two problems. First, not enough of our existing firms have the necessary mix of such competences to develop and grow. Second, we are not developing sufficient new start-up firms to expand the overall indigenous sector to the levels that our unemployment problems require. These problems are being addressed by the existing agencies. The IDA, for example, is developing capability-related programmes, focusing on company development and management development. It is also increasing its equity participation in firms and tying its financial supports to the development of the strategic fundamentals in firms. At the same time Eolas is offering technology audits, quality programmes, graduate placements and a host of other technology development facilities. However, this short list of initiatives demonstrates the piecemeal approach which the existing structures bring about. In creating Forbairt, this Bill will allow a much better planned approach to the development of indigenous industry.
However, we should not delude ourselves that the new structures will bring results overnight. The problems I have referred to will take time to solve. As Professor Michael Enright of Harvard Business School and adviser to the Culliton Review Group pointed out:
Firms and governments must take the long view if they are to be successful in improving their competitiveness. Industrial competitiveness is built over decades, not business or political cycles.
The objective in creating Forbairt is not to achieve a quick fix solution. Rather it is to create a clear focus on the problem and in so doing to ensure that performance targets for the new agency can be set out and appraised in unambiguous terms.
The same holds true of IDA Ireland which will be mandated to maximise the return from the attraction of mobile international investment at minimum cost to the taxpayer. This involves more than just "selling" Ireland as an attractive location. It means being aware of movements in the business and technological environment and of being able to make a successful appraisal of the strategic fundamentals of potential client firms.
In the interests of minimising grant expenditure, it also requires that IDA Ireland should be able to demonstrate the attractiveness of Ireland in terms of other factor advantages such as the quality of the labour force, our clean environment and other infrastructural assets such as our telecommunications system. In these regards the importance of the wide ranging reforms which the Government has instituted in response to the Moriarty task force recommendations can once again be seen to make eminent good sense.
I also want IDA Ireland to strengthen its efforts within the Single European Market. All of the assets which I have referred to above are as attractive to European firms seeking to expand as they are to US or Japanese firms. The opportunities offered by the Single Market are also conducive to the development of joint ventures, strategic alliances and technology transfer between Irish and European firms. This is another area which I want IDA Ireland to explore in conjunction with Forbairt.
Having mentioned linkages between the agencies, I should like to turn now to the issue of co-ordination. As I have shown, the separation of indigenous and overseas functions will lead to a greater clarity of mission at agency level. However, we must also be on our guard that this separation of functions will not lead to any overlap between the indigenous and overseas functions being ignored. This necessity for co-ordination is part of the raison d'etre of Forfás. The Programme for Government established this point. It was further reinforced in the document Employment through Enterprise where we point out that:
Forfás will have a vital co-ordinating role and will promote greater linkages between the indigenous and international sectors of Irish industry.
In the context of promoting linkages it is vital to ensure that opportunities to exploit synergies between indigenous and foreign firms are exploited to the greatest extent possible. Such business linkages are of vital importance for employment creation, indigenous business development and continued attraction of new greenfield investments. Because of the small size of the country, indigenous companies have a limited domestic market in which to grow their business. This is a significant drawback.
As Professor Michael Porter pointed out in his book The Competitive Advantage of Nations, the size of the home market and, more specifically, the nature of home market demand, is a major determinant of the rate at which a nation's firms can develop. The opportunity to supply multinational companies based here therefore represents a very significant expansion of the domestic market for Irish firms. It also represents the kind of challenge, in terms of buyer standards, to which indigenous firms need to rise if they are to compete internationally. By developing as successful suppliers to multinationals in Ireland these firms can develop world class standards with less investment in marketing and product development than would otherwise be the case.
The whole area of linkage development also raises the question of industrial clusters as developed by Porter and recommended in the Culliton report. The issue of cluster development is a complex one since it requires the formation of linkages between overseas and indigenous companies and between companies in different sectors. For example, an agro-industrial cluster could involve companies in food processing, engineering companies in production equipment fabrication and electronics and software companies in process control and monitoring. Clearly, it will be difficult for either Forbairt or the IDA to implement the clusters concept while at the same time focusing on their sectoral responsibilities.
This, then, is a perfect example of the type of area where Forfás can play a role. That role will involve developing policy for cluster and linkage development and working with staff from Forbairt and IDA Ireland to ensure that, at an executive level, policy is implemented in a flexible and pragmatic way. For example, Forfás will need to work with the two agencies to determine the operating guidelines to be used in negotiating particular support packages with companies. The objective will be to ensure an equitable approach to overseas and indigenous companies operating in similar sectors or in competition with one another.
Another area where co-ordination will be required is in the area of company ownership changes and takeovers. The global nature of business today means that the ownership of companies cannot be seen as a static phenomenon. As Culliton pointed out, overseas companies have transferred to Irish ownership and vice versa. This is frequently in response to the developmental needs of those companies and can be a positive step. But in the agency context such transfers of ownership need to be managed to ensure that full support is provided during the transitional period. Here again Forfás will play a co-ordinating role.
The policy and evaluation role of Forfás generally is very important. In this regard I see Forfás as an important link in the policy chain between my Department and the two agencies. This centralising of the policy and evaluation activities of the agencies at the level of Forfás will make for a more open dialogue in the industrial policy area. Since Forfás will not have a direct involvement in the implementation of programmes it will be in a better position to objectively analyse the performance of the executive agencies and, on foot of this, to provide policy advice to my Department.
In referring to Forfás as a link in the chain, I want to make it clear that both myself and my Department will be the driving force in the policy area. The Moriarty Task Force made a number of recommendations — for instance, how my Department's resources in the policy area could be strengthened — and these are being pursued. I will be continuing my programme of restructuring and organisational development within the Department with the objective of ensuring that the changes which are proposed in this Bill at agency level will be fully reflected within the structures of my Department.
I would like to touch specifically on the question of policy for science and technology as I know that there is some concern among the scientific community that the focus on science and technology which has developed under the aegis of my Department in recent years will be distorted or diluted by the new structures. I would like to make it clear that I am fully committed to continuing to develop the role which technology can play in industrial development. Indeed, I am convinced that the incorporation of Eolas into Forfás will create a structure in which the technological needs of firms can be better serviced. Technology development is a vital part of company development and is something of which Irish firms are showing a growing awareness.
This was demonstrated by the huge demand for the new Structural Funds supported industry research and development scheme launched by my Department last year. Under our plans for the next round of Structural Funds, Forbairt will continue to respond to industry demands for research and development support and this is entirely in line with the capability development approach which I want Forbairt to take up with vigour. As I have said, the integration of Eolas into Forbairt will bring science and technology very much into the spotlight, not relegate it to the shadows. But I am totally committed to extracting the maximum value from the entire industrial development budget over the short, medium and long term. This means that science and technology activities will be subject to the same scrutiny and performance appraisal as the other programmes of the agencies. Expenditure on science and technology is necessary; but it is equally necessary that such expenditure should provide value for money.
These sentiments are also in line with the recommendations of Culliton that my Department's science and technology activities should be fully responsive to the needs of industry. However, I am aware that the views of Culliton on science and technology were interpreted in some quarters as being too concerned with short term gain at the expense of a long term strategy. Such a view would be inconsistent with the need to take a strategic long term perspective on the development of industry and is not based on the facts. Under Forbairt, longer-term science and technology initiatives, such as the programmes in advanced technology which are harnessing the capability of our third level institutions, will continue to be supported and there is no question of this longer-term perspective being disregarded.
On the subject of policy and evaluation, I must return again to the role of Forfás. Eolas is presently undertaking a comprehensive programme of science and technology evaluation which is providing a valuable input to the policy formulation process in my Department. This activity will now be integrated into Forfás and will continue. The same is true of the broader science and technology policy functions which are incorporated in the Science and Technology Act, 1987. In particular, I would refer to the important horizontal role which Eolas exercises in relation to international programmes such as the EC framework programme. This function extends across a number of Departments and agencies and I am anxious that it should continue within the Forfás context.
When speaking of interdepartmental co-ordination, I would like to address the role of Forfás in relation to trade and marketing. Much has been made of the fact that An Bord Tráchtála (ABT) has not been merged with Forbairt. In the Programme for Government we stated our intention to establish the new Department of Tourism and Trade which would bring a new dynamic to this area. The retention of An Bord Tráchtála as a separate body reporting to the Minister for Tourism and Trade is consistent with our belief that export development and trade promotion should be the main focus of that organisation. As far as the question of incorporating some elements of An Bord Tráchtála into Forbairt is concerned, I have reviewed this matter carefully in consultation with the Minister for Tourism and Trade. Our conclusion was that any division of the trade and marketing functions of An Bord Tráchtála would simply lead to a damaging sub-optimisation of both elements. Such an outcome would not serve well the objectives of industrial development or trade development. The need for co-ordination remains, however, and this will be achieved in the first instance through the mechanism of Forfás. To assist in this process the chief executive of An Bord Tráchtála will be a member of the Forfás board.
In addition, there already exists close co-operation in the regions between An Bord Tráchtála and the IDA-Eolas personnel. The IDA's Irish industry directorate has on-going liaison with An Bord Tráchtála as part of its activity in assisting indigenous companies to structure and implement company development plans. This activity involves day-to-day interaction between IDA and An Bord Tráchtála project executives at headquarters and in the regions. This "on the ground" interaction will be complemented by Forfás which will work to ensure that common criteria and negotiating guidelines are applied by both companies when dealing with their client firms. With these arrangements in place I am confident that industry will continue to be fully supported in respect of its marketing requirements at the level of the individual firm.
In the training area, the main recommendation of Culliton was that there should be a clear division of roles within FÁS so as to ensure that the distinct training needs of those in work and those out of work were properly catered for. This recommendation has been addressed by the establishment of a new industry division within FÁS. The objective of this division is to improve the quality of training for Irish business and to increase the amount of training undertaken. The division will work closely with industry and business to identify training requirements and assist in the design and implementation of training programmes. It will be assisted in its work by statutory and non-statutory industrial training committees in areas such as engineering, clothing and footwear and chemicals and allied products. The new division is in the process of commissioning studies in all major industrial sectors to further assist it in catering for the training needs of industry.
The establishment of the FÁS industry division will create a clear focal point for interaction between FÁS and the new bodies established under this Act. Legislative provision already exists under the Industrial Development Act, 1986 for liaison between the IDA and FÁS and this will continue to apply to the new structures.
As the House will be aware, the development of the food industry is of key importance. I have discussed the new agency arrangements with the Minister for Agriculture, Food and Forestry and we have agreed that the current situation where the Irish industry division of IDA is responsible for all food companies, regardless of ownership, will continue to obtain in the new structures. That is to say that Forbairt will have sole responsibility for the development of the food industry. I will also be ensuring that the industry is represented on the board of Forfás. The Bill also provides for a general enabling provision to allow the type of co-ordination that I have proposed between An Bord Tráchtála and Forfás to be extended to any new marketing body which may be established in the food area.
Turning to matters of practical administration, I have been anxious to guard against the creation of additional layers of bureaucracy when establishing the new structures. It is my intention, therefore, that central administrative functions relating to areas such as finance, land and personnel for the agencies will be centralised in Forfás. This approach will allow for the smoothest possible transition to the new structures and will minimise the administrative overheads and costs in the operation of the new bodies.
As I have been stressing to the House, the plans for agency restructuring which I am presenting here today are part of a concerted effort by the Government to bring a spirit of enterprise and progress to all areas of economic development with a view to tackling the pressing problems of unemployment. In a related area, the establishment of the county enterprise boards will help to bridge a gap in the current support system for local enterprise initiatives. That is why I have placed such emphasis on the county enterprise boards having clear enterprise and job creation objectives in those business areas not already covered by Forbairt. The operation of these boards at county level will be complemented by Forbairt's industrial development role at regional level.
It is my intention to ensure that the proposed administrative arrangements for the new boards are kept simple and non-bureaucratic. The support team will be headed by a county enterprise officer who will act as facilitator, directing individual projects or local community enterprise initiatives to the existing State agencies where this is appropriate. Thus, we will ensure that the county enterprise system picks up those worthy projects which might otherwise slip through the net but at the same time ensure that the activities of Forbairt and other agencies are not duplicated.
Indeed, on the contrary, the county enterprise boards will draw on the skills resident in Forbairt wherever possible. In particular, the expertise which the IDA has developed in project appraisal techniques will be available to the boards through the presence of a Forbairt specialist on the evaluation committee which each board will be establishing. These committees will consider all project proposals and will make recommendations on the most appropriate degree and form of assistance for projects, having regard to the quality, local relevance and cost-effectiveness of the proposals.
In devising the structures and organisation for the county enterprise boards, I have sought to ensure that their operations will be consistent with the need for a flexible yet comprehensive approach promoting local enterprise and economic development. The new boards will, by working closely with Forbairt and other relevant agencies at regional and national level, help to develop a local initiatives approach which generates community support for integrated efforts to promote economic development through making maximum use of local resources.
I have mentioned before that many detailed powers and functions of the new bodies will continue to be provided for in the new legislation. I should also mention that the legislation covering SFADCo and Údarás na Gaeltachta, of course, will remain in force and these bodies will continue to exercise their regional development remit within the context of the new structures.
Forbairt will actively pursue a regional development role. In the case of Forbairt, each region will continue to exercise autonomy in the administration of the small business programme. In this regard, each regional board makes its own decisions on grant applications within the context of overall sectoral development policy. The regional offices have a wide range of functions in respect of small businesses. In addition to the area of grant assistance and business advice they also maintain close links with entrepreneurs and industries in the regions, identifying and nurturing development opportunities.
The new structures will assist closer integration between the business and technology services currently provided in the regions. In recent years Eolas has considerably increased its regional activities in areas such as technology acquisition, graduate placement and technology audits. Through its regional technology transfer officers it has been building up a hands-on relationship with firms and has been compiling an inventory of the technology needs of these firms. One of the essential shortcomings of many Irish firms is that they rely too much on their existing products and therefore lose out to competitors whose product life cycles are shorter. The integration of IDA and Eolas staff into Forbairt will enable deficiencies like this to be addressed much more effectively, with Eolas staff identifying product and technology opportunities and IDA staff providing access to the business know-how and sources of finance.
The combined objectives of Forfás, Forbairt and the county enterprise boards will be to actively foster and promote the creation of new enterprise and the growth and consolidation of existing indigenous firms. This is the central task upon which we must focus our energies and concerted efforts.
I propose to turn now to the detailed structure and content of the Bill. At the outset, I should say that the central purpose of this Bill is to enable the new agency structures to be put in place in a rapid but orderly way. The Bill, therefore, does not seek to reinvent the wheel. As I have already emphasised, the point at issue is not whether the established agencies are doing the right thing but whether the existing structures within which they are operating allow them to optimise their approach and deliver their programmes in a way which best benefits firms. Against this background, the House will, I hope, appreciate that the activities of the agencies, for the most part, are adequately catered for in the existing corpus of legislation.
This is not to say, of course, that the creation of Forfás, Forbairt and IDA Ireland will not give rise to innovative new approaches to industrial development which will require to be given substance and power through legislation in the future. If that is the case, and I expect it will be, then I assure the House that I am ready and willing to bring forward the appropriate proposals as and when the need arises. In the meantime, the Bill before the House is the first step towards a new and more clearly focused strategy for industrial development.
A number of detailed points arise in respect of the Bill which I now propose to highlight. On the question of the repeals referred to in section 4 and in the Third Schedule, I have not sought to remove any of the existing IDA or Eolas functions. The purpose of the repeals listed is to remove inconsistencies arising out of the merging of IDA and Eolas within the new structures.
In section 5 I propose to fix the establishment day of the new agencies by order so as to allow some flexibility in catering for the logistical arrangements which will require to be made on foot of the transition. Sections 6 to 9 deal with the functions of Forfás and the agencies. It is consistent with the spirit of this enabling legislation that these have been stated in general terms. In order to provide flexibility, the existing functions of the IDA and Eolas will be vested in Forfás but, for the most part, will be exercised by the two agencies subject to my direction. I assure the House that there is no question of Forfás acting as a super agency and, in this regard, I would draw the attention of the House to the fact that the provision of grants to companies by Forfás is specifically prohibited by section 9.
Section 10 provides for the normal powers of delegation of functions and for the constitution of committees or other bodies for the purposes of exercising the functions thus delegated. In this regard, I would recall to the House the recommendations of the Moriarty task force in relation to the need for a separate body for industrial standards. This arises out of the need to separate the certification activities of the National Standards Authority of Ireland from the consultancy activities of Eolas. I propose, therefore, to constitute the NSAI as an autonomous body attached to Forfás for this purpose. A similar arrangement will be made for the Irish Accreditation Board which accredits industrial testing laboratories, if required.
Returning to the question of autonomy for the agencies, I would refer the House to section 11 where it is provided that Forfás and each agency will have separate grants-in-aid, thus ensuring their financial autonomy. In section 13, the provision of the 1986 Act for carrying out a review of industrial performance has been restated and expanded to include a review of industrial policy. This is in line with the recommendations of the Culliton report that the policy activities of my Department should be strengthened and is one of a number of initiatives which I am currently examining in this regard.
The transitional provisions in the Bill dealt with in sections 14 to 21 provide for the normal transfers from the existing agencies to the new structures and for the dissolution of the IDA and Eolas. The First Schedule — Forfás and the Agencies — provides for the appointment of boards of Forfás and each agency, for the conditions of office applying to board members and for other matters such as the provisions for annual reports and accounts. This schedule contains the normal provisions applying to the members of the existing IDA.
The Second Schedule deals primarily with matters relating to the staffing of Forfás. In that regard I would ask the House to note my concern that the minimum disruption be caused to staff of IDA and Eolas in the establishment of the new structures. The Bill provides that all staff of the new agencies will hold their contracts with Forfás but will be seconded to the agencies as appropriate. Staff will effectively be able to move from one agency to another bringing their experience and expertise with them. This interchange of staff will create a dynamic open and pro-active culture required for the development of industry in the nineties and beyond.
This Bill forms part of an overall long term strategy for tackling the industrial development and employment generation problems facing us. As far as the agency structures for industrial development are concerned, it will usher in an era which will be marked by a greater clarity of mission and a strengthened emphasis on catering for the real needs of indigenous firms. It will also promote better value for the taxpayer in the moneys expended on attracting overseas investment and will maximise the benefits to be derived from linkages between the overseas and indigenous sectors. All of this will lead to a new dynamic in Irish firms and I commend the Bill to the House.
