The purpose of this Bill is to raise the statutory limit on the borrowing powers of the Industrial Credit Company and to bring up to date the formula for converting into their equivalent in Irish currency borrowings by the company in foreign currencies and guarantees of borrowing in foreign currencies given by the Minister for Finance.
The Industrial Credit Company was established in 1933. Its function is to provide industrial credit mainly of a long-term nature. There has always been a statutory limit placed on the extent to which the company may borrow in the conduct of its operations, and this limit has been extended from time to time as occasion required by amending legislation. The existing limit on borrowing is £75 million. Outstanding borrowings now total £72 million and are rising rapidly as the company's business continues to expand. On the basis of firm commitments already entered into by the company it is probable that the statutory limit will be reached by mid-November, 1977. It is essential, therefore, that the present limit be raised to enable the company to continue its very useful work.
The new limit proposed in section 2 of the Bill is £200 million. An increase of £125 million may be considered to be very large. ICC business is, however, steadily growing and is at present at a level of above £30 million per annum and it is likely that this growth will continue. Lendings of £30 million would involve borrowings by the company of some £25 million. Hence an increase of the limit on borrowings to £200 million should suffice to enable the company to borrow its requirements for a further four to five years before Oireachtas approval has again to be sought. This is the normal period which elapses before legislation of this nature is amended. I do not think that Senators will regard this period as too long.
The legislation applying to the Industrial Credit Company has incorporated in it a formula for converting foreign currency into Irish currency for the purpose of determining to what extent any particular borrowing in foreign currency counts against the statutory limit referred to above which is expressed in Irish currency. This formula provides that the basis for conversion shall be the International Monetary Fund parities in operation at the date of borrowing. The formula is no longer appropriate because of the increasing number of exchange rate changes and the prevalence of floating rates at present, and it is proposed to update the formula in the manner set out at section 2 (b) of the Bill. A similar updating is necessary in the case of the formula for converting into Irish currency borrowings in foreign currency which are guaranteed by the Minister for Finance pursuant to powers conferred by existing legislation. The new formula is to be found in section 3 of the Bill.
The company has budgeted to provide financial facilities totalling £30 million for industry in the current financial year. In the previous year— that is, to end of December, 1976— the company disbursed £27 million which was in itself a record figure. Of the £30 million which the company will advance up to December next, £5.3 million relates to loans for the building of new vessels within the country and will be provided by its subsidiary company, Shipping Finance Corporation. The balance will be disbursed by the ICC itself for the benefit of industry in general. Most of the capital needed by the ICC is secured from non-Exchequer sources, and it is hoped that this position will continue. The capital required to enable Shipping Finance Corporation to provide loans for ship-building is made available by the Exchequer as it is relevant at a subsidised rate of interest.
The Industrial Credit Act of 1933 conferred wide powers on the company enabling it to underwrite capital issues, to provide issuing house facilities and to make long and medium-term capital available, particularly for the establishment of new industries. While the Industrial Credit Company operates as a commercial undertaking and has been a profitable enterprise since its establishment, its primary aim is to contribute to national economic expansion. It examines sympathetically every project brought to its notice having regard particularly to economic soundness, employment potential, importance to the proposed locality and utilisation of indigenous raw materials and of the services and products of existing industries. Its facilities have been availed of over the entire range of industry and in all parts of the country by large, medium and small undertakings.
Over the last decade the ICC has considerably expanded its activities. The company has extended its services to include the provision of hire-purchase facilities for plant and machinery, equipment leasing and finance for distribution. In addition to the provision of capital, the ICC has also a subsidiary company, Mergers Limited, which specialises in the field of mergers and takeovers by undertaking share evaluations and by advising in negotiations for mergers between firms. As I have already mentioned, it is also concerned with shipbuilding finance through its other subsidiary company, Shipping Finance Corporation.
In view of the need for higher industrial investment to promote economic growth, there will be a continuing and increasing demand for the facilities provided by the company, particularly in the climate of great optimism which is currently manifesting itself. I am most anxious, therefore, that the company should be in a position to contribute to industry the fianancial and organisational expertise which it has built up over the years in addition to financial assistance. The proposed legislation when enacted will enable the company to maintain an appropriate flow of funds to industry.
Because of the probable high rate of demand for industrial finance over the next few years as industrial investment continues to recover and because of the capital intensive nature of modern industry, it may not be easy for the company to procure without recourse to the Exchequer all the funds which industry is likely to require. In seeking funds from the Exchequer, the company's requirements would have to be balanced against demands on behalf of other important services. It is hoped, therefore, that the initiative shown by the company in the past in raising capital from non-Exchequer sources can be maintained and intensified.
For over 40 years the ICC has been to the fore in the financing of Irish industry. Many of the successful indusries established over that period started from modest beginnings with the assistance of finance provided or arranged by the company. Facilities are provided for the establishment of new industries as well as the expansion of existing firms and the company has a tradition of giving special attention to proposals in regard to small projects. The continuing increase in the demand for the company's facilities is proof that its importance has in no way diminished with the emergence of present-day financial institutions in the private sector. The present legislation will enable the company to continue its important role in the development of the economy and I confidently recommend the Bill for the approval of the House.