The purpose of this Bill is to extend, in a number of specific ways, the powers of the Industrial Development Authority. Its main objective is to enhance the capability of the IDA
—to assist the development of domestic industry, and particularly small and medium-sized indigenous firms;
—to stimulate the emergence in much greater numbers of new entrepreneurs.
In the first place, the Bill empowers the IDA to give loan guarantees and interest subsidies in respect of the finance needed for mergers and acquisitions.
Up to now the main incentive to help existing industry to become more efficient has been the re-equipment grants scheme. Our commitment to home industry suggests, however, that the IDA should also be able to take a positive and constructive part in bringing about desirable and orderly change in certain sectors. The industries most likely to benefit are composed of smaller scale firms and are for the most part not capital-intensive. Restructuring assistance is consequently unlikely to entail an outlay proportionate to its obvious benefits.
At present the existence of excess capacity in industries at a time of competitive pressure from imports is enforcing structural changes involving major costs in terms of redundancies, lost capacity and the need to create substitute employment. The Bill would set a limit of £500,000 on the amount of borrowings which the IDA could guarantee in any one case without Government approval.
It is also proposed in this Bill to provide for the giving of loan guarantees and interest subsidies to first-time industrialists in respect of loans raised to provide working capital. The new guarantee facilities will be limited to £150,000 in any one case, but the Government may permit a higher figure. Given this new power the IDA intend to launch an enterprise development programme. In Ireland the volume of new projects promoted by first-time industrialists has been disappointingly small, and it is clear that one of the main causes of this apparent lack of enterprise has been the inability of the entrepreneur to raise the necessary finance to carry him through the start-up situation. All too frequently Irish banks will lend only on the security of assets rather than on ability and enterprise. It is envisaged, therefore, that this proposal will get a response from a wide spectrum of Irish people, both at home and abroad, who have the qualifications, experience and enterprise to become successful industrialists.
The projects will generally have to be commercially exploitable within a reasonable time span, and it will be necessary also to assess in each case the ability and commitment of the would-be enterpreneur. Assistance towards working capital will be supplemented as appropriate by the existing range of benefits for fixed assets administered by the IDA.
In section 4 it is proposed formally to give the IDA power to engage, with the Minister's approval, in giving assistance of a technical or advisory nature to developing countries. There is a considerable demand for such assistance, both from the developing countries themselves and from international organisations which provide contracts for development projects abroad. While the IDA have, in the past participated to some extent in work of this kind, this Bill will formally give them the legal authority to do so.
The Bill also contains in section 5 a number of provisions designed to tidy up the ceilings on aggregate expenditure set out in the existing legislation. Financial commitments under the present Bill are brought within the appropriate limits, and expenditures on equity which formerly were not covered by any ceilings are brought within the limit on grants of a capital nature. The Bill further proposes to bring the amount of training grant which can be approved, without Government permission, into line with that for capital grants generally, namely £850,000 per case; previously there was no legal limit on the amount of training grant which could be given to any one undertaking.
The IDA have, since 1970, given grants of up to 50 per cent of the costs involved in research and development projects, subject to an absolute maximum of £15,000 per project; the Bill proposes to raise this limit to £50,000 but with the limit of 50 per cent of approved costs continuing to apply. The new limit is justified in the context of the increased costs of scientific work and the increased scale of projects now being undertaken by Irish industry and, in many cases, being delegated to Irish subsidiaries of overseas companies.
Under existing legislation authentication of the authority's seal requires the attendance, sometimes at short notice, of two members of the authority. As a practical matter the Bill gives the authority power to delegate this function to two of their senior officers.
Finally, the Bill includes a provision which will extend the shareholding powers of the IDA. Under the Industrial Development Act, 1969, the IDA are empowered to take shares in certain industrial undertakings. Legal opinion has indicated, however, that on the basis of the existing provisions the authority could be confident of having power to take minority shareholdings in existing companies only. In order to remove the doubt regarding the authority's power to take majority shareholdings and to ensure that they have adequate flexibility to operate successfully in the increasingly sophisticated financial environment, it is proposed to extend the authority's shareholding powers to enable them to take shareholdings of up to 100 per cent in suitable industrial undertakings, or in companies participating in the ownership, control or management of suitable industrial undertakings, and to enable them to form or participate with others in the formation of new industrial companies.
This is a reasonable and pragmatic extension of existing IDA powers and functions. Save in exceptional circumstances, IDA personnel will not be engaged in the actual day-to-day management of commercial enterprises; furthermore, under the terms of the Bill it will be necessary for the authority to seek the Minister's prior approval before they take a majority shareholding in any company. The Bill also provides for a limit of £1 million on the amount which the authority may expend on the purchase or taking of shares in a particular body corporate without prior Government approval.
I expect that these extended powers of participation will be particularly useful to the authority in the implementation of the new enterprise development programme. With these powers the authority would be, if circumstances so warranted, in a position to set up a company to manufacture a product successfully developed under the programme or become a shareholder in a company being set up for that purpose—for instance, in cases where the Irish party was for the time being over-burdened with technical production and marketing problems. or lacked the professional support or finance to bring the project to an early start-up.
The House will appreciate, from this synopsis of the contents of the Bill, the extent to which the new provisions are oriented towards the promotion of domestic industry, and in particular small industry. The new powers will be of considerable assistance to the IDA in their promotion of domestic industry, a task to which they are giving increasing attention, while at the same time realising the continued necessity of attracting increasing numbers of new overseas projects.
Senators will probably be aware of the series of measures taken by the authority in recent times to supplement and reinforce the main programmes aimed at domestic industry. These include a joint venture unit, which will seek out a suitable overseas company to go into partnership with an Irish company who wish to expand or to develop a new project. There is the project identification unit which take the initiative in identifying new manufacturing opportunities for Irish firms, whether arising from the establishment of large foreign industries in this country or supplying existing Irish firms with materials which are currently imported.
There is a product and process development grants scheme whereby the IDA may make a grant available towards the cost of research involved in improving an existing product or developing a new one, or improving a manufacturing process. Measures recently undertaken by the Government will help to increase the rate of project approvals for small Irish industries. The Minister recently announced that the small industry "cluster" concept, introduced on a pilot basis a couple of years ago, is to be immediately extended throughout the country, with a nationwide programme of nine small industry clusters. The IDA have also recently been authorised to proceed with the building of five 7,000 sq. ft. advance factories specifically for small industries. In addition, the fixed asset investment criterion for small firms has been raised from £200,000 to £300,000, a change which will enable a greater number of projects to come within the scope of the small industries programme's generous package of incentives.
These measures represent a substantial commitment by the Government to increasing the resources available to promote local Irish enterprise. Taken together with the generous financial and after-care advisory services at present available, I am confident that they will lead to accelerated growth of the small industry sector in Irish industry. The measures contained in the Bill can be seen as further promoting industrial recovery and future development. As such I am confident that they will receive your support. I accordingly recommend the Bill for the approval of the House.