Vol. 576 No. 5
63 Mr. Gogarty asked the Tánaiste and Minister for Enterprise, Trade and Employment the measures in place to assist Irish companies maintain back office functions such as sales and accounting functions here, even if their manufacturing operations are transferred to another location. [29959/03]
The strategy of the industrial development agencies is to focus on supporting the development in Ireland of those elements of a company's operations which best fit Ireland's competitive characteristics. The rapid development of the economy in recent years has resulted in a need to outsource some production activities in order to maintain competitiveness. On the other hand, other competitive factors such as the increasingly well-educated and skilled nature of the labour force makes it feasible for us retain and attract higher value-added activities such as the back office functions.
The development of Irish-owned enterprise and its funding support is geared to the expansion of existing companies and the establishment of new high potential companies through innovation and internationalisation. Enterprise Ireland's support is provided through a planned, structured development process designed to strengthen all aspects of a client's business which are critical to achieving accelerated profitable growth.
Considerable attention is focused on developing the areas of marketing, finance, human resources, research and development and business strategy, which usually involve a significant amount of high-value activity and often form the bulk of back-office functions. Many Irish-owned companies have employed or are considering competitive outsourcing as a key part of an internationalisation strategy necessary to enable them to grow and develop and, in some cases, to survive. Enterprise Ireland assists such companies to identify opportunities abroad for outsourcing production, but only in the context of the retention of the higher value-added back-office activities in this country. This often involves maintaining time-sensitive or specialised production here, alongside development, design, marketing, finance and customer service functions.
In respect of overseas companies, IDA Ireland targets a wide range of activities undertaken by clients, including shared services functions such as sales and accounting, as part of its drive to attract new investment and embed existing client companies more firmly in the Irish economy. This reflects a recognition that such activities can have a cost-skill profile which is better suited to Ireland's circumstances than some manufacturing functions, particularly where its basic manufacture is, by today's standards, of relatively low technology products.
I thank the Tánaiste for her reply. She stated that the rapid development of Ireland led to the necessity for certain companies to set up manufacturing outside the economy. However, the rapid inflation which came in the last three or five years, particularly of the previous Administration, was the key factor. The lack of competitiveness was the issue rather than excess development.
Will the Tánaiste supply more detailed specifics as to what exactly Enterprise Ireland can do? I realise it is a difficult job, particularly when an agency, which is responsible for trying to locate manufacturing here, is now recognising the reality that we will lose many of those manufacturing jobs. It is seeking to assist companies in relocating manufacturing, so long as they maintain back-office functions here.
Will the Tánaiste give some more detail as to where the responsibility lies for this issue? Does it lie exclusively with Enterprise Ireland or does IDA Ireland have a role in the process? Are financial, training or overseas support programmes and systems in place for companies or is advice just being given by Enterprise Ireland?
Will the Tánaiste supply specific information regarding the restructuring of Enterprise Ireland and State industrial development agencies to deal with the situation whereby, due to our high inflation and lack of competitiveness, we will lose between 80,000 and 100,000 jobs in the manufacturing sector in the next three or four years? The only strategy in terms of retreat in that area is to try to retain some of the associated back office functions. Is it purely the function of Enterprise Ireland to assist in the retention of these functions or does IDA Ireland have a role to play? Is the Tánaiste in a position to refer to specific programmes, rather than merely stating the general advice she has been given?
Most of it would be by way of identifying contacts for companies. Some companies have done this on their own and have never approached Enterprise Ireland. A number of Irish companies have outsourced manufacturing and I am aware of one successful textile company, which began life six generations ago, that employs more people now than it did when all its production was done here. The latter has outsourced the making of its products and retained the design, finance, logistics and marketing functions in Ireland. The same applies to some of our electronics companies which have done so essentially using the overseas offices and contacts of Enterprise Ireland. Companies are often put in touch with partners that can facilitate them in terms of taking over some or all of the manufacturing aspect. Production-sensitive or time-sensitive manufacturing is usually retained in Ireland.
We must be flexible in terms of how we assist companies. However, our job is not to help to grow other economies, our job is to help to sustain Irish companies operating out of Ireland. The latter is foremost in the mind of those who run Enterprise Ireland, who have exclusive responsibility in this area.
We recently established a competitiveness fund which contains a small amount of money to help companies overcome particular competitiveness challenges. Sometimes it is merely a question of whether a company will survive. If we can retain brands and all the work associated with developing them in Ireland and move other activities elsewhere, that could be a recipe for success.
In the event that there is a misunderstanding, this policy is only pursued where there are no alternatives. We still remain extremely competitive but we have the second highest wage level in the eurozone. Where wages are a high cost of production, as is the case in labour-intensive sectors, it makes sense to move labour-intensive activities elsewhere and many companies are doing so. Some software companies are outsourcing software development to, for example, India, where software engineers are paid the equivalent of between €5,000 and €6,000 or $5,000 and $6,000 per year. It is difficult to compete with countries in which those are the wage levels.
