Mary Harney
Question:30 Miss Harney asked the Minister for Enterprise and Employment his policy in relation to the payment of grants to foreign companies to establish in Ireland in direct competition with existing Irish manufacturers. [14541/95]
Ceisteanna—Questions. Oral Answers. - Payment of Grants to Foreign Companies.
Mary Harney
Question:43 Miss Harney asked the Minister for Enterprise and Employment the policy in relation to job-creation agencies under his control with regard to the payment of grants to foreign companies to set up in Ireland where these companies would be in direct competition with existing Irish manufacturers. [14437/95]
I propose to take Questions Nos. 30 and 43 together.
In the first instance, I assure the Deputy that it is the policy of the industrial development agencies under the remit of my Department not to pay grants to foreign companies whose sole intention would be to compete directly with an Irish company on the domestic market and thereby displace existing production and employment.
On the other hand, it must be recognised that all companies located in Ireland, whether Irish or foreign, must expect competition both at home and overseas and they in turn are free to compete in foreign markets. In that regard, it is certainly conceivable that a foreign company could be grant-assisted to set up in Ireland to service, for example, UK or European markets where these markets are already serviced by an Irish company with a similar product, essentially on the basis that the market concerned will be large enough to sustain both companies without disruption.
Specifically, the following tests are used by the agencies to evaluate the effect of proposed overseas start-up projects on existing manufacturers: is the market large enough to sustain the new project in addition to the viable capacity already established? Is the start-up company providing import substitution for products which the existing manufacturer is already competing against? Would the new company, in the absence of grant assistance, locate elsewhere in Europe, e.g. Northern Ireland and Wales and provide the same competition to the existing manufacturer?
If these tests are negative, and as a consequence the agency considers there is sufficient capacity to supply market demand, then grant assistance is not provided to the newcomer. To the extent that the tests prove positive, and the agency proposes to assist the project in question, this will only be done in the context of careful deliberation to ensure any impact on the existing operation is minimised to the greatest extent possible, if indeed not entirely eliminated.
In addition, of course, my Department, which is represented on each of the boards of the agencies concerned, may take a view on the matter and discuss it with the particular agency. While I am satisfied that appropriate consultation takes place between relevant agencies as the need arises, given the possibility that the separate existence of Forbairt and IDA Ireland may have created an extra degree of uncertainty in this regard, I will issue the necessary instructions to ensure that this does not arise in practice.
I very much welcome the latter part of the Minister's reply because we have two agencies — one with a role in indigenous Irish industry and one with a role in foreign-based industry — that are now in conflict with each other on this matter. It is important that the Minister draws up guidelines to eliminate this conflict. I wrote to the Minister in the summer about a Shannon-based company in the smoke detector market. This company is the market leader in Europe and one of the four big players in the world. It has 240 employees and never been grant-aided. Would the Minister agree that it would be wrong for this State to grant-aid one of the competitors of that company with the effect of simply displacing jobs from Shannon to Fermoy?
It is the responsibility of the agencies concerned to do an assessment and impose conditions relating to grant-aid for an incoming project, designed to ensure that it would not interfere with an established viable operation. Where the possibility of grant-aid is under consideration and there might be displacement of jobs, conditions to deal with that can be applied. It is my understanding that, in the instance to which the Deputy refers, that is what occurred.
I do not know what conditions can be applied here. What the Minister is saying is that it will not be able to compete on the domestic market. There are 240 people employed at Shannon to supply the domestic and European market. Will the Minister not agree that it is wrong to use taxpayers' money to subsidise a foreign competitor to that indigenous Irish company?
The final decision on a grant package of this nature lies with the agencies. It is not a political decision. I, as Minister, create the framework within which those decisions are taken. That framework requires that the question of displacement of jobs be considered. In the case to which the Deputy refers there was detailed consultation on the subject involving both agencies. It is my understanding that as a result of those consultations specific conditions were applied to the issue of grant-aid in order to meet the concerns. It is a matter of judging what is in the national interest when grant aiding projects.
Who makes that decision?
All companies compete, be it with Irish or overseas based competitors and the agencies have to take a balanced view against the background of those criteria. I am determined to ensure there is no falling between the crevices because of the separation of the IDA and Forbairt. In the case to which the Deputy referred, detailed consultation took place as a result of which the board imposed certain conditions on the grant-aid package.
Has the Fermoy industry gone?
When a conflict exists between the IDA and Forbairt because of their different roles, who makes the final decision? How is a judgement arrived at?
In practice the board makes the final decision and is obliged to comply with certain negotiating guidelines which specifically set out the procedure for cases that might impact on the domestic economy. In addition my Department, which is represented on the board, identifies key vulnerable sectors where incoming industry might create difficulties. In such cases there are even more developed antennae for identifying possible displacement effects. The responsibility for a final decision of this nature rests with the board but if the figure for grant-aid is above a certain amount the decision is referred to the Government for approval.
As the time for priority questions is exhausted, we will deal with the remaining two questions in the time allocated for other questions.