The main objects of the Bill are:—
(i) to increase from £1,500,000 to £3,000,000 the aggregate amount of the shares in the Shannon Free Airport Development Company Limited which the Minister for Finance may take up;
(ii) to increase from £500,000 to £1,250,000 the aggregate of the grants which may be provided for the company; and
(iii) to provide for the issue by the Minister for Finance of repayable advances to the company to meet one-half of the expenditure by the Company on the provision of dwellings for workers employed on the Industrial Estate established at Shannon Airport. The aggregate amount of advances shall not exceed £400,000.
The Shannon Free Airport Development Company Limited was incorporated as a limited company under the Companies Acts on 28th January, 1959. The main function of the company is to promote the increased use of Shannon Airport for passenger and freight traffic and for tourist, commercial and industrial purposes. To that end, the main activities of the company have been concentrated on attracting industrialists to set up factories in the Customs Free Airport area. Under the provisions of the Finance (Miscellaneous Provisions) Act, 1958, industries established in the Customs Free Airport enjoy certain taxation privileges, in particular, total exemption from income tax and corporation profits tax until 1983 on profits derived from export business. To facilitate prospective industrialists the company has undertaken a factory building programme, and factories can be provided for industrial undertakings at Shannon in the following ways:—
(i) The undertaking may lease a site from the company on which to build its own factory and for this purpose a building grant from the company may he negotiated;
(ii) The company may build a factory to a special design to be leased to the undertaking;
(iii) The undertaking may lease one of the company's standard factories.
As an adjunct to the factory building programme, the company has also undertaken the provision of housing accommodation for a proportion of the workers employed on the Industrial Estate. A scheme of houses and flats, for renting to tenants, is in hands.
The company's main sources of finance are provided under the authority of the Shannon Free Airport Development Company Limited Act, 1959. The Act authorises:—
(i) The Minister for Finance to subscribe for shares in the company up to an aggregate limit of £1,500,000 and
(ii) the provision by way of grant-in-aid voted annually of sums which in the aggregate shall not exceed £500,000.
The capital is being used by the company to acquire revenue-earning assets such as factory buildings and dwellinghouses, the income from which will go to supplement the company's grant income. The grant-in-aid is applied by the company towards meeting its running expenses and providing financial assistance to new industrial undertakings at the Airport. Capital issued to the company up to 30th June, 1961, amounted to £1,358,000 and payments by way of Grant-in-Aid to £402,500. It will be seen that these figures are approaching the existing statutory limits. Accordingly, it is now necessary to increase these limits so that the company may continue its operations. Of the share capital expenditure up to 30th June, 1961, £939,000 was expended on factory buildings and £394,000 on dwellings.
Up to 30th June, 1961, 15 factory bays had been completed together with a special factory of approximately 53,200 square feet constructed by an industrialist with the aid of a grant from the company. Including the special factory mentioned the total area of factory floor space provided as at that date was 285,340 square feet. All the factories are, of course, situated within the Customs Free Airport area. At present five factory bays are under construction. Ancillary services such as water, sewerage, electricity and boilerhouse have also been provided. The company has almost completed 10 houses and a scheme of 137 flats is nearing completion. Plans are in hands for the construction of a further 100 houses.
As at 30th June, 1961, eight factories were in operation in the Industrial Estate and the total number of workers employed was 724. Of these, 64 per cent. are male. A good number of skilled craftsmen have immigrated to Shannon. Among the commodities being manufactured are transistor radios, floor maintenance machinery, knitted jersey fabrics and knitted garments, wire gauze for industrial purposes, precision threaded fasteners and miniature capacitors, pianos and record players and radiograms, tungsten carbide inserts and diamond drilling equipment. All these industries are primarily export industries and are not in competition for the home market with other Irish manufacturers.
The company is in active negotiation with a number of potential industrialists and I am happy to say that there is every reason to be confident that this Estate—the first industrial estate in the world to be situated in an airport—will succeed and will continue to develop. The industries already established have given a very considerable fillip to air freight traffic at the Airport and it is estimated that by 1965 over 5,000 tons of air freight will be generated annually by the factory operations now established or planned at Shannon. It is abundantly clear that industrialists are attracted to the estate by reason of the availability of the convenient air freight facilities.
The company, on my direction, is concentrating its efforts on the creation of an air freight industrial community and is seeking new industries of a kind likely to make the fullest possible use of the air freight facilities. The examination of inquiries made by industrialists about the Shannon Estate, and the origin of these inquiries, make it quite clear that the great majority of these firms are interested in this aspect. A major advantage in the regular use of air freight is of course that the manufacturers can avoid having to tie up a large proportion of their capital in maintaining large stocks of materials, while the finished goods can be dispatched all over the world in a matter of days—sometimes of hours.
The economic rent of the factories has been calculated on a basis of recovering the capital investment in 40 years together with interest at the rate of 5½ per cent. per annum. An addition of 1 per cent. per annum of the capital cost is also included for the cost of external repairs and maintenance. Some of the factories have been let at the full economic rent, but in some cases the factories have been let at less than economic rents for a limited number of years. It is hoped that at the end of the initial period, all factories will be let at economic rents. The lessees are responsible for rates and internal maintenance.
All the indications are that factories can be leased as soon as they can be built. Apart from the five factory bays now under construction plans are being prepared for the provision of a further 32 factory bays over the next four years. Capital expenditure during the current financial year on the development of the industrial estate is estimated at about £550,000. It is difficult to forecast the probable capital expenditure after that date because this is naturally related to the continuing success of the company's efforts to attract industrialists. If the rate of capital expenditure to date is maintained the increase of £1,500,000 provided for in the Bill would sustain operations for perhaps three to four years.
The Bill also provides for an increase from £500,000 to £1,250,000 in the aggregate amount of the grants which may be made to the company. These grants are to cover the running expenses of the company and to enable the company to do such things as are calculated to encourage the establishment of commercial, industrial and trading enterprises at the Airport. Receipts by the company up to 30th June, 1961, amounted to £422,000, made up of grants-in-aid of £402,000 and £20,000 in other receipts. The company paid out £202,500 in running expenses and £216,000 in grants to industrialists. The latter figure is made up of grants as follows:—
machinery and equipment |
£120,000 |
factory premises |
£85,000 |
training of workers |
£11,000. |
It emerged at an early stage of the operation of the company that the provision of suitable type housing was an integral part of the industrial development. The Airport is somewhat isolated from existing communities and industrialists already in production and firms about to commence production urged that housing should be provided in the immediate vicinity of the factories for a proportion of the workers. As I have already indicated, expenditure on the provision of housing at the Airport up to 30tht June, 1961 was £394,000. Here again, precise estimation of probable expenditure is difficult because expenditure will, of course, be related to the demand for housing which in turn will depend upon the rate of increase in the number of workers employed in the industrial estate. However, it is estimated that expenditure on housing in the current financial year will be of the order of £580,000. The cost of housing will be met as to one half from the company's share capital, the other half being met by way of repayable advances under this Bill.
These advances will be on the same basis as loans from the local loans fund, both as to rate of interest and repayments. The rents proposed for the housing accommodation are such as to amortise the total capital cost over 35 years including interest at an average rate of about 3½ per cent. per annum. The rent also includes provision for repairs, maintenance, insurance, ground rent, administration and caretaking. The tenants will be liable for rates. After making a most thorough investigation into housing requirements for the industrial estate the company reached the conclusion that, subject to constant re-evaluation, up to one-third of the workers would seek housing accommodation adjacent to their work.
In view of the many factors involved it has, however, been decided to limit the first stage of the housing estate to 250 houses and flats and to have a full reassessment of the housing problem from every aspect before reaching any decision to proceed further. The scheme for the 100 houses now being put in hands will cater for the needs of workers requiring accommodation at lower rents than those which can be charged for the flats now in course of completion. The industrial expansion at the Airport has also led to consideration by local authorities and private interests of house building programmes in adjacent towns and this is a development which I am sure all of us will welcome.
The work being undertaken by the Shannon Free Airport Development Company Ltd. is unique in the Irish economy and is probably without parallel in the economy of any other country. It is an experiment which involves considerable financial risk for the State but from the encouraging progress made so far I am satisfied that the State should continue to finance the operation. The company has shown commendable enterprise, vision and enthusiasm in attracting industrialists to Shannon and I feel that I must take this opportunity of congratulating the directors and staff of the company on the results already achieved.
I recommend the Bill for the approval of the House.