Seanad Éireann debate -
Thursday, 9 Jul 1987

Vol. 116 No. 16

Export Promotion (Amendment) Bill, 1987: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Mr. Mulroy

In addition, the consignor may very often appoint an international vetting agent, such as Bureau Veritas, to visit the factory, examine the quality of the goods and advise a packing specification which is usually very onerous and expensive and very often not taken into account at the time of tender. Due to inexperience, when they receive a letter of credit, companies fail to analyse immediately the terms and conditions which are often contradictory and impossible to comply with, and to request immediately the necessary alterations. They only discover this when the documents are submitted to the bank for payment and the goods are on the high seas.

The procedure then is that the bank will advise the customer that the documentation has a number of discrepancies and the customer's reply is not to effect payment until the goods have arrived at their destination and have been inspected, which could be many months later. The manufacturer is now in the unenviable position that (a) he has a cash flow problem and (b) should the customer fold up or decide to reject the goods, he has no guarantee of payment.

Irish companies are competing on a world market and many of our foreign competitors are in a position to offer long-term credit, up to two years in some cases, supported by Government backing and insurance cover to guarantee payment. In many instances, these facilities are available to Irish companies. It is now possible to check the creditworthiness of companies all over the world at very short notice, to get a credit rating on any particular company and to take out export credit insurance cover which guarantees payment in the event of the foreign company failing to honour the contract.

I am taking time to highlight these points because the majority of small companies are not aware of the pitfalls or of the support available for the simple reason that they have not the time or the manpower to research them. I know of companies who have opted out of exporting because of the trauma of trying to negotiate difficult and cleverly worded letters of credit and as a result had to wait many months for payment, simply because they had not got the necessary expertise within their company.

Also, to be successful in overseas markets requires a continuous presence in these countries and small marketing companies just cannot afford to maintain a full-time presence in the market place, and they rely heavily on CTT travel grants to subsidise their expenditure in sending sales representatives to these markets. To maintain a full time overseas technical sales person could cost as much as £100,000 per year and, for the majority of Irish companies, this is just not on.

The establishment of the special trading house will, I am sure, fill the vacuum that exists in the marketing of the products of small Irish companies throughout the world and provide the missing link to help firms cope with some of the problems I have just outlined. The special trading house would need to offer a service where they would have representatives who would visit these markets on a regular basis and build up personal contacts with different companies. I can assure the House that many orders are won, particularly in the Middle East, on a man to man basis, and if you are not a regular visitor and are not prepared to make time available to entertain the customer, your competitor will. This is where the order is often won or lost. Many companies had success in the past, but because they were not in a financial position to call on a regular basis and allowed contacts to go stale, they lost out on a very lucrative market.

I am pleased the Minister stated that the special trading houses are not being established to take over the work of CTT but to complement it and that Irish firms may continue to avail of CTT services if they so wish and will be given the same support in the future. I am pleased the Minister has increased the money allocation for the running of CTT to a more realistic figure of £260 million because often the travel grant or other financial support from CTT enables small Irish firms to continue to explore foreign markets. Without this support many small firms would just concentrate on the home market.

I mentioned earlier the need to finance foreign orders. I am pleased to learn that the financial institutions have responded to the scheme in a very positive manner and are fully supportive of it. The special trading houses is a major Government initiative and will undertake the marketing for Irish companies who lack the expertise to do so themselves. I understand that the Minister intends to appoint a small number of high quality trading houses with financial reserves, expertise and plans to help to deal with the marketing bottleneck which undoubtedly exists.

While it is recognised and agreed, as indicated in many reports, that marketing must be improved, many Irish companies, while maintaining steady employment, are not expanding. The reason for this is that these companies are using old machinery and old methods, mainly because they were set up initially to fill a need in the home market, and because this is, comparatively speaking, a small market, they did not realise the necessary profits to invest in research and production and to update machinery. Small viable firms must be identified and given computer-based modern machinery to allow them to manufacture competitively priced, high quality products which will sell on the more accessible European and British markets. The days of relying entirely on the home market to maintain a firm are gone, as indicated by the Minister. The home market is wide open to foreign competition from companies who can offer lower prices through a vast scale of economies. These Irish companies cannot be protected but they can be helped and the special trading houses will play a big part in this.

The introduction of modern technology and machinery has, in the past, created industrial disputes because workers believed that the introduction of such machines would do the work of perhaps five men and would result in redundancies. For small Irish manufacturing firms the opposite applies because these firms are at present serving a small domestic market and, with the assistance of modern machinery and methods, they can manufacture a more efficient and high quality product which will sell and will give the firms access to the EC market, the largest and one of the richest in the world. By identifying these indigenous Irish companies and with the help of the special trading houses to do the marketing we could in a very short space of time go a long way towards solving our serious unemployment problem.

The services of CTT, AnCO, National Manpower and other State bodies must be reviewed, co-ordinated and directed to assist the many Irish companies to maintain and increase the pace of their exports. It is essential to approach our most important national business of exporting in a much more professional and intensive way.

I congratulate the Minister on his initiative in introducing this welcome Bill which will go a long way towards solving the serious blackspot in regard to marketing small Irish companies. I look forward to its speedy enactment.

Mr. Ferris

I join the previous speakers in congratulating the Minister, Deputy Brennan, on his appointment to a very imaginative and important role in the stimulation of our exports. I have been watching the Minister's progress with interest. He has been applying himself to an area in which there was an obvious need to heighten the consciousness of people involved in manufacturing to the importance, for their survival, of stimulating and increasing their exports and looking for new markets. I am pleased with the Minister's progress to date. This Bill is another stage in that progress of dedication to the task at hand. On behalf of the Labour group I wish the Minister luck in his appointment and hope that his efforts will meet with success, which will then further stimulate employment. If exporting companies can improve their expertise they will provide further employment and the economy as a whole will benefit from the Minister's efforts.

This Bill, in addition to increasing the limits that the Houses of the Oireachtas can make available to CTT by some £100 million, also brings before us this interesting and welcome concept of the special trading houses. The first part of this legislation deals with increasing the figure from £160 million to £260 million. I take it that that additional grant-in-aid the Government may make available to CTT is as a result of their concept of what will be required over the next three or four years in this area. Although it does not commit the Government to the immediate expenditure of that amount I take it that CTT, from their contacts in this area feel there is a necessity for this additional facility to allow them to carry out the work they have been doing, with a large measure of success, in the past.

I knew some of the previous people involved in CTT and I also know some of the present management board. I have often attended their seminars and projects. They have had major success in bringing potential buyers to the marketplace. That was a tremendous initiative, successfully achieved. They helped Irish industrialists to sell their goods on the export market. Much satisfaction has been expressed by external buyers regarding the level of expertise already existing in Irish industry.

The Minister mentioned in his speech the present level of exports and their value which is about £10 billion according to current figures. That is a substantial amount of money for a small country. We are extremely fortunate in that we are more than self-sufficient in most products particularly in the food area. We are self-sufficient and should be in areas where there is an overlap of exports, particularly in the agricultural area. It is a pity that so many people avail of the imported product when any Irish product is available. That means the Irish producer must meet that challenge and satisfy not only the export market but the home one also. From the agricultural point of view no other country can guarantee its products, their purity, quality and naturalness as can Ireland. As the Minister for Tourism and Transport, Deputy Wilson said last evening, replying to the Second Stage of the Tourist Traffic Bill, the quality of our food is the saver of our services industry. No other country world wide — with the possible exception of Australia and New Zealand — can guarantee the same level of quality of food free from contamination from radiation as can Ireland. Apart from the one or two isolated animals discovered following the Chernobyl disaster, the vast majority of our food products are of the highest quality. That is an indication of our success in the agricultural food export market.

The other area in which we have been extremely successful is that of the pharmaceutical industries, technology and computers, software and all the other technological products produced by multinationals here. There are many located in my constituency in south Tipperary, supplies of pharmaceutical and technological products. They have been a shining light or inspiration in that area. They are experts in the export trade generally. That is why they located their plants here, in order to benefit from tax reliefs allowable on their exports. The fact that they located plants here is to be welcomed.

I am pleased to note that in accordance with the Minister's concept of special trading houses these will be confined initially to Irish-owned companies and that emphasis will be placed overwhelmingly on that aspect. There is no doubt that there are many successful Irish manufacturers who are incapable of competing on the export market. As Senator Mulroy said they do not have the necessary finance. They may have the expertise but they do not have the necessary finance, even with the benefit of feasibility grants, to entertain the possibility of going abroad to identify markets and manufacture the products sought. The concept of trading houses will be of tremendous assistance to smaller Irish companies who make products which could be sold abroad, with some assistance and a correlation of all efforts in this regard. Even if there is an element of competitiveness in their dealings with other larger exporters so much the better. It will keep everybody on their toes. There is nothing wrong with that and it will not affect the Minister's concept in this regard.

We have been making significant progress here in creating an awareness in the minds of manufacturers and exporters of the necessity to broaden their market bases worldwide. With our accession to Europe those markets are continuing to expand beyond our wildest dreams. It had been my hope that the recent ratification of the Single European Act — although there is no such evidence to date — would remove some of the barriers and deterrents obtaining in the area of border frontier controls and taxes, leading to a cohesion of the whole market place within Europe. It is our hope that the provisions of the Single European Act, when implemented, will assist everybody, particularly within the European context.

We have made a considerable impact by way of exports to the Middle East. They have been proven to be of tremendous value, particularly in agriculture. As Senator Mulroy said, this constitutes a whole new area of trading. I welcome the recent establishment of the Irish-Arab Chambers of Commerce to assist in the process of exporting to the Arab world. There is a potential to be tapped there not easily perceived from here even as a member of the European Community. We must ascertain how best to deal with these people who have a culture not dissimilar from ours but who have certainly a different method of trading. One must understand those methods of trading and of payment. This must be understood and known in advance. Otherwise we could encounter difficulties by way of payment. Certainly it has been found in the area of trade with Libya, that this has been proven to be payment in kind; one does not always receive cash. Sometimes it can be oil. Unless one is in the oil business there is no point in being paid for one's products or exports in oil. One might then be forced to purchase a tanker, put it on the high seas, get into the spot market in Rotterdam and elsewhere in order to convert their payments in kind into cash. In the past that created problems for some of our exporters to Libya when there was a sudden collapse of the oil market and what may have been a valuable consignment of oil as a payment in kind for agricultural exports ultimately turned out to be considerably less valuable because of the crisis in the oil market. This means that exporters to that area must be extremely cautious and be aware of the pitfalls. I would hope that these trading houses would overcome or iron out some of those problems that can arise for our exporters in an area in which they may have no expertise whatsoever. They may be unable to provide marketing sales people at the source of supply or consumption of such products.

The whole concept is a good one. I will monitor its operation. I am sure the trade union movement will give it wholehearted support, seeing it as an incentive to additional manufacturing employment here. Obviously our services industry will improve and do well in the future as a result of the promotion of our tourist industry and our competitiveness in that area. This means our manufacturers can produce something for tourists that relatively few other countries can provide. Even our weather is an attraction for some international tourists, particularly Americans. They love the mist on the mountain; they like the breath of fresh air. They do not necessarily come for sunshine.

The future looks bright for the service industry. Manufacturing industry has had its difficulties in the past and warrants every possible assistance in the future to ensure that it will expand and go on to better things. Our economy as a whole would benefit from an improved manufacturing base at home, with a secure market abroad. It would improve our balance of payments by way of trading with other countries within and without the EC. Ultimately such can only be to the benefit of our economy and employment generally. I welcome the concept. I wish the Minister luck in his task. On behalf of the Labour Party I should say I am glad to be here as a guest in this Chamber. The provisions of this Bill may augur for better things in the future for all of us.

Professor Hillery

I wish to extend a warm welcome to the Minister of State at the Department of Industry and Commerce with responsibility for Trade and Marketing, Deputy Seamus Brennan, to this, his first meeting of the Seanad. He is no stranger to the Seanad. He was a Member of the Seanad and a colleague of mine from 1977 to 1981. I congratulate him on his new and very challenging post and wish him every success in the years ahead.

It is already clear that there is a widespread welcome for this Bill on all sides of the House and I propose, therefore, to comment only briefly on the two main objectives of the Bill, namely, the creation of a licensing system for the special trading houses and, secondly, the raising of the ceiling on Córas Tráchtála's level of grant-in-aid. Let me first take the grant-in-aid. This Bill will provide Córas Tráchtála with additional money, the fuel by which the organisation work, in order to enable them to continue their efforts in the crucial field of export promotion and development.

Córas Tráchtála are doing a good job but, like any organisation, their policies should be, and need to be, reviewed from time to time. I welcome, therefore the Minister's statement that he is now reviewing the policies of Córas Tráchtála and critically evaluating their current strategy. This review will be likely to result in changes in the future, some of which may take legislative form. We can look forward to further legislation in this respect.

Policy review is, of course, a primary function of a Minister. I welcome the Minister's emphasis on the importance of strategy and his urgent desire to accelerate strategically planned marketing. If there is one characteristic that distinguishes excellently managed companies from others it is the quality of their strategy. This is not confined only to the field of marketing. My own speciality in UCD is in the field of human resources management. A strategic approach to human resources management is of critical importance, just as it is in marketing and in other functions of business. A strategic approach can be developed through educational and training activities designed to improve marketing skills in Irish companies. This is, indeed, one of the functions of An Córas Tráchtála. They have been at that for some time.

I might add, since I am referring to the university sector, that the study of marketing is now part of the curriculum in third level institutions generally and quite specifically in UCD we have a number of undergraduate and postgraduate programmes in marketing where there is considerable emphasis on a strategic approach to marketing. There are now many UCD graduates in marketing working in the Irish economy and abroad as well.

I am glad to note from the Minister's speech that the restructuring of our export effort is, indeed, one of the main planks and one of the main tasks he has set for his Office. On the question of exports, we are an island people with a very small home market. We have a number of companies, that are, if you like, locked into the situation of only supplying this small home market. Exports are of the first importance. They are essential to economic recovery and to national development generally and the creation of jobs.

It is heartening to see the exceptional achievement in exports to date this year and we should take confidence from that achievement. The estimate that exports this year will account to a record of £10 billion is particularly encouraging. However, there is no room for complacency. Impressive as the export figures are, they disguise a major weakness in domestic firms in that only 20 per cent actually export. Marketing is a major weakness among domestic manufacturers and this is confirmed by reports of the National Economic and Social Council and the White Paper on Industrial Policy. Indeed, statistical surveys of domestic manufacturers themselves confirm the very weakness that has already been underlined in official reports.

Given that there is this serious deficiency, what then are the Government doing about the situation? Quite a lot. The Government are committed to increasing exports, especially exports from domestic firms. They are tackling marketing deficiencies. This commitment is reflected very visibly in the establishment, for the first time in the history of the State, of an Office of Trade and Marketing headed by the Minister, Deputy Séamus Brennan. This Office has responsibility for Córas Tráchtála which, in turn, are concerned with improving the marketing capability of Irish firms.

More needs to be done and this leads me to the second objective of the Bill, namely, a licensing system for special trading houses which would ensure that the 10 per cent tax concession, a very valuable concession, will apply to these trading houses that will engage in creating new exports for Ireland. Why do we need special trading houses? Foreign owned companies here make a very important contribution to the economy, as underlined in the Minister's opening statement, not least, of course, by accounting for most of the exports from Ireland. Indeed, one of the main incentives for the location of foreign industry here is the access which our membership of the European Community provides to the teeming markets of Europe.

What we need, however, are more Irish companies and the Minister has emphasised this. We need more Irish companies participating in the export drive and special trading houses are designed to complement the range of initiatives already provided by An Córas Tráchtála. In other words, the special trading houses are being introduced to fill a structural gap in our marketing effort. We need export-led growth, foreign and domestic, in order to generate sustainable employment.

This Bill is of direct relevance to the main economic and social problem facing the country, namely, unemployment. Special trading houses will undertake marketing for Irish manufacturers who themselves lack the expertise to do the job. This raises the question of how people with considerable export marketing experience — and they do exist in the country — can be actually attracted into this line of business. How do we get them to invest and to establish special trading houses? This year's Finance Bill provides, as I have already said, the concessionary corporation tax rate of 10 per cent for the trading houses. This concession has been confined almost entirely to manufacturing companies up to the present time. This is an important new departure by way of an incentive.

Investment in special trading houses will also qualify for income tax relief under the business expansion scheme. This should directly help in securing the start-up capital that is necessary for this type of enterprise. The considerable resources and experience of Córas Tráchtála will also be available for special trading houses on the same basis as if they were manufacturing the goods they are exporting.

Turning very briefly to a few specifics in relation to special trading houses, it is obvious that certain minimum conditions must be met before licences can be issued. While I appreciate the necessity for these minimum requirements, it is vital that no undue delay be encountered when an application is being processed. The Minister has anticipated this possible hurdle and he is obviously keen to ensure that the licensing system will be simple, fair and fast and not handicapped by unnecessary bureaucratic procedures.

I am glad to know that Córas Tráchtála will assist the Office of Trade and Marketing in evaluating applications. They have on the ground experience and they are in a position to complement the assessment made by the Department. It will be evident from what I have said that I think special trading houses are an excellent idea. They constitute an imaginative Government initiative, which is agreed all around. It remains to be seen, however, how they will work out in practice. It is noteworthy already that the financial institutions are fully behind the scheme. It is also promising that a number of interested parties, people with suitable background, have already been identified as being interested in investing in these new trading houses.

There is one issue I do want to raise in this context. Clearly, there is a need for specific marketing assistance for domestic companies. There is no question about that. It is also clear that special trading houses will fill this gap. I would hope, however — and I have some concern here and the position needs to be monitored — that the special trading houses will not actually take over entirely, if you like, the export marketing function of these companies.

If I could draw an analogy from my own field of industrial relations, one of the main reasons these special trading houses are being introduced is to provide assistance for small companies in small economy. In the field of industrial relations, very often small or very small companies rely on an employer organisation to conduct negotiations for them on pay and conditions. In due course some of these small companies may grow and therefore they in turn will need their own marketing expertise.

I would not like to see a situation where the special trading houses would prevent the growth and development of the marketing function within the companies that are being assisted. That is something that should be monitored as the scheme develops. I assume, therefore, that the Office of Trade and Marketing, together with CTT, will monitor the performance of the special trading houses to assess how they work out in practice. It is very important that the trading houses get off to a good start. It is probably preferable that only a small number of high calibre trading houses will come into existence who would have the special resources, experience and the plans to tackle the export marketing needs of domestic companies.

Statistical data provide an important base for policy formulation at Government level. Equally, of course, statistical data provide a very important base for company policy formulation. There is a scarcity of data in respect of exports by domestic manufacturers and this has already been documented. Data deficiencies are not peculiar to the field of exports. Perhaps the Minister might give us his views on how the statistics position should and could be improved in the future.

I warmly welcome the Bill and wish it a speedy passage through the House. I congratulate the Minister, Deputy Séamus Brennan, for the speed with which he has brought this innovative measure before us. It augurs very well for the future.

Mr. Manning

Like other speakers I welcome the Minister to the House and congratulate him on his appointment. My association with the Minister goes back to the middle seventies when we occasionally played squash together. He usually won. At that stage he was in the marketing business. He had a slightly more difficult product to market in those days. I suspect that at one stage I may have been part of his target market in a fringe way. He had great success in that project and I hope he has similar and perhaps even more sustained success in his new office.

Mr. S. Brennan

We are still open for you, Maurice.

Mr. Manning

The Minister has probably the most exciting job in Government. It would be very good if we had some form of power sharing in Irish politics or a scheme whereby Opposition spokespersons could perhaps go in for a month or two months every year to change places with Ministers. We have not quite got the preconditions yet for that sort of arrangement in Irish politics but if it did exist the Minister's job is the one that I would like to have the chance to have a go at, even for a number of months. Like Senator Hillery, I commend the Minister on the speed with which he has moved to bring in this Bill. It is a simple measure but it will have beneficial consequences.

In his speech today, the Minister was right to emphasise the essential importance of developing our exports. Unfortunately in the past all of us have heard exhortations to our manufacturers to export or perish, export or die. Too often these exhortations have been counterproductive because they have not been supported by practical measures which take account of the very real problems facing Irish firms and especially small Irish firms.

We have all seen examples over the past number of years of indigenous Irish goods of high quality coming on the market. Our first reaction has usually been that these goods should be exported and they should do very well on foreign markets. Far too often we have seen what we regarded as a good product failing to establish itself in the export area. For a variety of reasons things have gone wrong. These are usually to do with marketing, occasionally to do with delivery date, slackness or a bad run which destroys the image and the credibility of a range of products. Far too often what we have regarded in the home market as an exportable product has failed when it has been put to the test.

The Minister is absolutely right to take seriously the restructuring of CTT. Yesterday we had probably the best debate of the current session in the Seanad on the question of tourism and Bord Fáilte. In the course of that debate the point was made that Bord Fáilte are around so long that they have virtually become part of the establishment. Any organisation who are not constantly open to new ideas, who have not have to constantly face the challenge of justifying why they need to exist, who are not constantly striving to meet new targets and who do not have new challenges foisted upon them on an annual basis are not going to perform to their full capacity. I hope that in restructuring CTT and looking in a root and branch way at the reasons for their very existence, the Minister will not in any way be hindered or sidetracked and that he will take in the widest range of use possible. I hope especially that he will do something I know he is very good at and that he will go out to the marketplace to talk to the practitioners, go to the small firms who have failed and those who have succeeded; go out of the country to see how CTT work on the ground in other countries and that he will take into account the views of those who are involved at the coal face and not rely solely on the experts. I know the Minister will take this approach.

One very striking point in the Minister's speech and one very depressing aspect of our export performance is the disparity in success between Irish firms and foreign firms. Foreign firms are far ahead of Irish firms in their exporting success. We welcome their success, the jobs they create and the income they earn for the country but we also must ask ourselves some very serious questions as to why Irish firms have not been so successful. I am very glad that the Minister in trying to sort out this problem did not rush in and say: "The State must spend more and the State must become more involved." Obviously sharing a constituency with Deputy John Kelly for the past number of years has to some extent rubbed off on the Minister. I am particularly impressed with the Minister when he says that we cannot and indeed we should not do the job of these companies for them and no State should be in the business of mollycoddling private companies who are not prepared to make an effort for themselves. Ten or 12 years ago that statement might not have been made as clearly as it is made today. There was a greater belief in the role of the State and in the duty of the State to get involved a short number of years ago. We must be very careful as to when and where the State should be involved, the extent of State involvement and when the State should pull out from being involved. The State should not be in the business of helping firms who are not in there fighting and who have not developed products which will sustain themselves in the export area. Whether I can give credit for this to Deputy John Kelly, certainly the Minister is adopting the right approach in this area.

A recent survey by the Small Firms Association asks why so many of our smaller firms were not exporting. The reasons given were not all that surprising. Clearly the first and, for many firms, the biggest reason was our distance from the major markets and the transport costs involved. That is not directly within the brief of the Minister and it is something perhaps over which we do not have a great deal of control. A second reason given by many firms as to why they were not even thinking of exporting was their belief in their own lack of competitiveness. They did not believe that the products they were producing were sufficiently competitive in price and sometimes in quality to stand a chance of making an impact on foreign markets.

There are other factors which inhibited the willingness of many of our small firms to get into the export market. One of them apparently — it is surprising in 1987 — was that among many firms there was simply a lack of interest. They were not interested in getting into foreign markets. They did not see it as something that was possible or as part of their business. They were content with their share of the local market. In many cases I believe — the survey showed this also — that the lack of interest was a front for what was, at a deeper level, a lack of confidence, a lack of belief in themselves that they were good enough to go out and compete with a similar firm in Germany, Birmingham, France, or wherever and that they were good enough to compete with the hope of success.

Other factors included — Senator Hillery mentioned one of them — the lack of marketing expertise in so many other smaller firms. In spite of the growing number of marketing courses available, either full time or made available through seminars and so on, it still appears that a great number of our smaller firms simply lack basic marketing expertise. Lack of funding is also a factor which inhibits many smaller firms from thinking of getting into the export market.

Another factor, which surprised me, was the belief in many small firms that the amount of management time devoted to exports was excessive and did not justify the reward. I presume time spent in travelling and seeking out new markets tended to take the management away from what they saw as their main function of running the business at home and that, when they balanced the possible gains in the export market against the dilution of managerial control at home, it was probably not worth their while getting into the export business. Half of the firms in this survey — this brings me back to CTT — complained of the lack of appropriate and easily understandable information concerning the range of advice and assistance which CTT were offering. They felt CTT to be remote from them. There was some sort of a credibility gap or a gap of understanding between them. This may not be CTT's fault. I read much of their literature and I find it understandable. I found in many conversations with people in CTT that it is possible to get hold of that information. Nonetheless, from the small firms' survey it appears that many firms do not have that contact with CTT and do not seem to have the confidence to make it.

While I am dealing with the question of surveys, I should mention also that another recent survey carried out for the Small Firms Association — I think the Minister is familiar with it; I saw his photograph in the paper today with that excellent Director of the Small Firms Association, Mr. Frank Mulcahy — showed that for smaller firms the availability of export credit insurance was the key factor in the development of their exports and that at present export credit insurance was difficult. They found it difficult to avail of; they found it expensive; it was not well marketed; information was frequently out of date and the cost of administration was too high. I should like the Minister to comment on that.

I am very grateful to the Small Firms Association for so much material for my brief contribution today. The point is made in the newsletter of the Small Firms Association, Volume 3 No. 5, 8 June 1987, that there are over 1,500 exporting firms in Ireland of which some 600 are Irish owned — roughly what the Minister said in his speech about the dominance of foreign owned exporting firms. The point was made that the central thrust of the industrial policy, as stated by the Minister, is to foster the development and diversification of established export orientated Irish firms. In support of this drive there are more than 20 institutions and organisations supporting and checking on progress. These bodies employ more than 3,500 people which, according to this article, equates to a ratio of six employees to every one exporting indigenous firm. It makes the point that this multiplicity of organisations, duplication of effort and disaggregation of support seriously limits the operational effectiveness of the support available. Collectively, it is claimed, these organisations have committed the cardinal sin against marketing. They have failed to communicate effectively the range of support available. That is a very strong statement. It is obviously made from the point of view of the small firms, but it is a point of view on which I would like to hear the comments of the Minister.

In conclusion, one of the key sentences in the Minister's speech is that exporting is not easy. Again, we are back to a situation where the criticism of those who fail to export is often based on a misconception that it is easy to get out there and export. Well, clearly it is not. The range of preconditions necessary for successful exporting are wide and diverse. There is no single key to success, but there are a number of factors to which the wider community could be turning its attention. Again, Senator Hillery mentioned the growing number of schools of marketing, studies of marketing and marketing courses which are available in the third level institutions. I suspect, however, that we are only at the beginning as far as marketing is concerned and I wonder if we yet have the range of expertise available in sufficient numbers to ensure that the marketing is of a high quality fairly universally. I suspect from looking at some marketing courses they are not of the highest level and we may have people coming out with poor qualifications in marketing where, in fact, more harm than good may be done. Nonetheless, I obviously support the growth in marketing courses.

Languages are an old hobby-horse as far as export success is concerned. We still have not the commitment to the study of modern European languages in our secondary schools and universities. We could do a great deal more. In this I am going to be parochial and commend the president of University College, Dublin, for one section of the development plan for the college which was exclusively reported in the Irish Independent today. He proposes to give emphasis to the development, within a business and a technological context, of Chinese and Japanese studies. We have been almost totally negligent in this area and clearly we will need to establish bridgeheads into China, Japan and Taiwan.

As a person who has been to Taiwan and who is aware of the diplomatic complexities of the subject, I would like to see us establishing a stronger trading relationship with Taiwan where, I believe, there is a willingness to invest in this country and where there is a market for some of our goods. I am digressing slightly. We need to develop this area of expertise in Chinese and Japanese studies. Those who control educational policy in this country should be left in no doubt whatsoever of the national need to concentrate resources in this and similar areas.

I congratulate the Minister on the Bill and wish him success in his very exciting and challenging portfolio. We on this side of the House welcome and support the Bill.

Mr. McGowan

I welcome the Minister of State, Deputy Brennan, and congratulate him on making it from the Seanad to the post he now holds. I wish him success in the future. He has a fairly sizeable job and one in which everybody in the country is interested. Our future depends, to some extent, on how successful the Minister is in his campaign. I am basically interested in this matter. For our survival we must be interested in selling.

On one occasion when I was on a trip to America I saw what I thought was best in selling. Somebody said in the House yesterday that we should employ foreigners, or people in foreign countries, to sell tourism on our behalf and the thought crossed my mind that this is not what the Japanese would do.

During my trip to the US a group of us noticed that the Japanese succeeded in America when they rented shops and manned them with their own personnel to sell their transistors, watches and all the electrical gear the Japanese are so good at producing. They did not entrust the task to American agents or to any other agents. They had highly skilled personnel from Japan. They went to a country where their goods were being sold and they adopted the best tactics. The success of Japan in selling to the world has been largely due to their technology and their ability to sell. In many areas we have the capability of producing good products that are wanted abroad but we fall down on our ability to sell. All of us join with the Minister in hoping he will be successful in his efforts. We will give him whatever support we can. I suggest that his campaign should start in the secondary schools.

Recently at a regional college in Donegal I said that if we can train young boys and girls to be salespersons there is no danger of them not getting a job. Any young boy or girl leaving secondary school or leaving third level college with the ability to sell will automatically be employed because there is a shortage, even in the country, of people with the ability to sell. Many of our firms are in serious difficulty because they do not have the technical know-how and expertise to sell. All too often, whether it be a breadman, somebody selling a product from door-to-door, or the man who drives a van and owns a small business he has to do the selling himself. It is not part of our make-up. Selling is not what we are best at. It is important to put emphasis and effort, as well as to have money set aside, on marketing as one of our major areas for development. I am serious when I say I will give every support and commitment to the Minister. I hope he will extend this campaign of making people aware of marketing into our schools. He should highlight the possibilities for our young people and also the dangers if we do not place more emphasis on marketing.

I would like to instance how the French sell their fruit and vegetables and farm products from Brittany. When their crop of cauliflower and other products are ready, they do not sit back and get on the telex and expect other countries to be aware of their readiness to sell. They send their representatives out in advance, whether to Liverpool or Dublin. They rent a portakabin, a telex, a telephone and hire a secretary and they are in touch with the market immediately. They do not stand waiting for the orders to come and their cauliflower to rot. The Dutch do the exact same in every country to which they export. From time to time we ask why the Dutch and French are so successful in selling their apples, vegetables, tomatoes, and all of their produce which is of a perishable nature. It has to be sold and delivered when fresh. They depend only on those trained to sell, who have the experience, background knowledge and a commitment to their country. If we do not embark on a similar sales approach I believe we are not doing the best for the country.

We have to set up shop in whatever country we intend to export to. We have probably a serious danger of duplication. I mentioned that Bord Fáilte have offices abroad in different countries. I wonder whether there could be more co-ordination and harmonisation between our embassies and trade missions and those that sell? I ask the Minister to examine the feasibility of Córas Trachtála co-ordinating our sales team in whatever country we are in in order to improve the exchange of information. The elimination of duplication and waste is important because at the end of the day our resources to support the sales campaign necessary to sustain productivity in this country are scarce and have to be well spent.

I will refer to one of the worst examples of a sales operation which I hope will soon be eliminated. We have a potato marketing company occupying two offices in Merrion Square — a very expensive office site and expensive rent. There are probably 20 people working there. We have a whole sales organisation, which I venture to say is the worst in Ireland. We export 10,000 tonnes of seed potatoes; all of which come from County Donegal, none from anywhere else. We have directors of a potato marketing company who travel from Donegal about five or six times a year to meet in the Merrion Square headquarters to decide what they are going to do about exporting potatoes that initially came from Donegal. That is the worst, the sloppiest and the most outdated method of selling. God forbid that we have much repetition of that sort of administration and sales effort.

Mr. Manning

Last year we imported £17 million worth of chips.

Mr. McGowan

Little wonder. Even though those people there have been questioned, the Departments and Government after Government have failed to recognise where the difficulties are. The Department of Agriculture and Food nominated two representatives to the potato marketing company and they were totally ineffective; I understand they are not on the board of the potato marketing company. I am not reluctant to highlight that again; I have mentioned it so many times that it is like playing a record again but it has to be played and it has to be said and it has to be brought to the notice of every Minister and every Government Department.

I think the Minister, Deputy Séamus Brennan, is serious and committed to his task of selling. I hope he does not have many companies similar to the potato marketing company in Merrion Square. If so, his task will be even more difficult than it should be. It is important that the Minister succeeds. It is important for all of us. The future for many of our young people lies in how successful we, as a country, will be in selling our goods. I believe strongly that those who lecture and teach should tell our young people that there is a enormous potential in this area that we cannot afford to neglect.

Minister of State at the Department of Industry and Commerce (Mr. S. Brennan)

I thank the Senators for their support and encouragement which I value greatly. It is difficult in political life to get a measure on which you can get cross-party agreement. It is very exciting that we have been able to do it in this business of exporting which is important for the nation. I will deal very quickly with some individual contributions and then conclude with some general remarks. I will not detain the House long.

Senator Kennedy, in welcoming the Bill for which I thank him, had a query in regard to what he called expensive tax breaks. He wondered whether, if companies did not perform it could then turn out to be an expensive tax break. I appreciate the Senator's concern, but I must explain to him very crisply that this is a "no foal no fee" approach to exporting — I know that is a topical analogy——

Mr. Manning

I hope it is better than some of the stallions.

Mr. S. Brennan

——in that, if the company do not achieve the exports, they do not get the tax break. Therefore, it can be expensive in that regard. No exports, no tax break — therefore it is totally linked. I can reassure Senator Kennedy that I am convinced it will be a success but its failure at worst would just mean that we did not get the exports. No tax would be foregone in those circumstances.

I want to tell Senator Mulroy how much I admired his very practical approach and his story about the "good luck" hotel which he told so well and his talk about the documentation and letters of credit. That demonstrates what I was trying to say. Exporting is hard work. It is difficult, not easy. Stories like that about exporting in the early days, literally dragging your suitcase around the world, almost sleeping rough in hotels such as the Senator's "good luck" one, show in a dramatic way how difficult exporting can be. I have been very impressed with the band of exporters with whom I have had occasion to travel in recent weeks. Sometimes they are referred to as junketeers, but that is a pity. These people live out of suitcases, spend weeks away from home, live in one hotel after another trying to break into markets through sheer determination and with very small resources. Their energy is terrific and I admire them greatly.

Senator Mulroy captured in his address to the House the physical and human dimension to exporting and how quickly the shine wears off foreign travel if you have to do it every Monday morning, year in year out, to try to get your exports moving. It is an entirely different type of travel from the fortnight in Portugal or Spain on the package tour, I assure anybody who wants to try it.

Senator Mulroy mentioned the question of documentation. I am told that documentation costs this economy £150 million a year. That is excessive exporting documentation. One of the things I am trying to do at the moment with the Council of Ministers dealing with the internal market on a monthly basis in Brussels is to reduce the amount of documentation to an absolute minimum. It makes sense in terms of our integration within the EC that the volume of export documentation clearly will be reducing as the internal market completes itself. I am determined to put a hole in that £150 million. It is unnecessary expense and I appreciate the Senator's views on it.

I want to thank Senator Ferris for his extremely generous compliments and welcome on behalf of the Labour Party. I know he has a particular concern — as we all have but he emphasised it rather well — about the question of employment. The reason we are doing all of this, that we are trying to get exports up and to get marketing brought to the fore, is that at the end of the day it will spin off and provide employment for Irish people. Wealth on its own, if it does not spin off into the creation of sustainable employment, sustainable jobs, is quite useless to the country.

Mr. J. O'Toole

Hear, hear.

Mr. S. Brennan

In that context I am glad to hear Senator Ferris laying emphasis on employing our own Irish people. We can do that by being successful at exporting and I hope these trading houses will contribute to that.

He commented very favourably on the inward buyer programme of CTT. I did not know too much about that until recently when I had occasion to observe it. Certainly it is an intriguing programme and I hope CTT can be even more successful at it. In that programme they fly into Ireland buyers from abroad. We have just entertained French and German buyers. They came here at CTT's invitation. They toured Irish industry. They met their counterparts in Ireland. They met Irish exporters and the State was able to say to them in an official way that we value their business. We are beginning now to get quite a volume of business from that system of bringing buyers into Ireland so that they can get the feeling of what we are trying to do here and a feeling for the kind of country this is. In many ways that has been even more successful than our own people visiting the marketplace. I hope we can improve on that and encourage it.

Senator Ferris laid emphasis on quality. I do not think that the House needs a lecture from me or anybody in regard to quality. I spent a few days in Germany and was told there by the many importers into Germany that they could and would buy a great deal more Irish products but we had to stop regarding "delivery date" as an aspiration and see them for what they are, firm delivery dates. We have to see quality specifications for what they are, firm quality specifications not "sure, it is near enough". In general Irish industry is not like that, but there are very bad black spots. These black spots were brought to my attention by some German industrialists and I have taken action in regard to those cases already. For anybody who is interested in exporting, gets the quality right and delivers on time, there are tremendous opportunities, but if you do not do that you are better off not to be in the business of Irish exporting because you are only giving the country and Irish industry a bad name. I have told that to Irish industry in no uncertain terms on many occasions.

Senator Ferris asked about the £260 million, wondering if this was the correct figure. I will take the opportunity to explain that this Bill is not giving money to CTT. It is just enabling the Oireachtas to vote money to CTT on an annual basis. Therefore, the figure of £260 million is, I suppose, a "guesstimate" of the funds which CTT may require over a number of years. It is just an upper limit and ties nobody's hands in any way. It does not vote money; the money is voted by the Estimate debate, not by this Bill. That is just an enabling section. The substantial part of this Bill deals with trading houses.

Senator Ferris asked me whether we would license foreign companies in regard to trading houses. He said he was glad that only Irish companies would be licensed. I should clear that up with the Senator because that is not actually the case. We will consider for licences any company incorporated in Ireland. I do not believe we have the option of being specific in regard to the nationality of the owner of the firm. The important point here is that whoever owns the firm, if it is incorporated in Ireland, buys Irish manufactured goods and exports Irish manufactured goods, it is doing the State a service and as such we will certainly consider it. We would be foolish to rule out foreign involvement because very often they have the international links in the marketplace which a successful trading house might require. I want to clear that up for the record because it would be wrong to give the impression that only Irish companies would be licensed.

I want to thank Senator Hillary for his welcome and his compliments. He talked about the need for a review of CTT and particularly the need for a strategic approach. I say to him that that is precisely the path on which I am going at the moment. I think everybody agrees, and CTT themselves agree, that they are not really interested in the exporter who drops in for a quick grant, a quick trip to Japan or the US. That is not the way we want to support Irish exporters. We want to support them on the basis that they have a strategic, worked out, thought out approach to a marketplace over a long period, not looking for the quick fix trip at the expense of the Irish taxpayer. That is not to say that has been going on to any great extent, because I suppose very often in business you have to take a risk and you have to take an initiative based on some gut feeling that you might do something at the end of it. We cannot remove that instinct from CTT's armoury but, at the same time, they have to behave in a strategic way and they have to support serious Irish exporters. In that regard I should say to the House now that CTT will support serious Irish exporters but only serious Irish exporters. They will not support any organisation or individuals who are not serious about the task of exporting.

Senator Hillery spoke about the marketing courses. I had the privilege of visiting UCD recently and discussing with the people there the progress and performance of their marketing courses. At the moment I am having a close look at the whole business of marketing education and training. There are a number of institutions and third level colleges, NIHE, IMI and AnCO, in the business of marketing education. Over the summer I hope to conclude a study of how best we can co-ordinate all of these courses and activities so that they support Irish marketeers. A number of other Departments are involved in this because the institutions report to different Ministers. I will be talking to my colleagues about how we can pull the marketing training and education business together.

Senator Hillery had some specific questions. He supported the view that the application of the trading houses should be simple, fair and fast. I assure the Senator that is why we are introducing this measure so quickly and why over the summer months we hope to get a small number of high power trading companies into the marketplace and have them trading before the year is out. That is the target and I hope the procedure will be simple, fair and fast. That is why I have gone for a very small Bill rather than one that was tied down in detail. I wanted to avoid particularly the problems that arose with the business expansion scheme a couple of years ago. When the Bill was brought in it contained a number of pages stating who could and could not apply. It was so tied down in red tape that in the end the whole business expansion scheme had to be rejigged and loosened up. It is now beginning to work but in its early days the instigators of it were so cautious that nobody took it up. I do not want that to happen to this measure. It is a measure that is tax-led and I want to keep it nice and simple and get it up and running quickly.

The licensing system will ensure that people play the game and do not abuse the system. As I said in my speech, I do not want this to become the plaything of accountants lying on the shelves of tax experts as part of their tax shelter information to their clients.

That it certainly will not become. Neither will it become a haven for cowboys who decide that this is another area of corporate development that they should be involved in. We are very keen to watch the number of firms that grow here and monitor them very carefully. What I am interested in is a small number of well financed companies headed by experienced competent people who will increase Irish exports over what they are at present rather than taking the other approach and having this as part of someone's tax toolkit. That I will not let it become.

Senator Hillery was also worried that it would take over from small manufacturing companies. That is a risk we have to take just now because Irish manufacturers by definition are production led. If exporting is the major national priority now, which I believe it is considering we do not have the option of pump priming or reflating the economy by throwing money into it, the only way we can grow is to increase exports. If we leave it entirely to the small manufacturer to do that it will develop at too slow a pace for us to get the exports we need. A manufacturer can learn a lot from a trading house if the house is trading successfully and the manufacturer is selling to it. That is a reason for the manufacturer to get into exporting and not to give it up and leave it entirely to a trading house. We can run a dual system very quickly. The Senator is right about the scarcity of statistical data and as a result of his comments today I will institute an inquiry into that. We find it difficult to get information from small firms in regard to much of their activity. Perhaps a lot of the Fourth Directive information and so on will start to come through now in that regard. Statistics are very scarce in regard to exporting by small companies and I hope to make some progress on that over the summer.

If Senator Manning is really keen on doing this job there are some days when I would be delighted to let him have it because it can become difficult. The Senator quite rightly talked about the role of CTT and the need to restructure it. One of the difficulties with an agency like CTT, just like Bord Fáilte, is now to measure their performance. CTT's budget last year was of the order of £23 million. The key question we have to ask is, if CTT were not there and we did not spend that £23 million would our exports still be £10 billion? From what I have seen to date I do not think they would have grown to that extent. CTT's role down the years has been very valuable and very pivotal. It is great to go into a marketplace where you are totally unknown and find an Irish representative who can introduce you to possible purchasers and can play that pivotal role. CTT's role is necessary and essential. What I have to do is try to restructure and refocus it in such a way that, with scarce resources, it can get the maximum exports for us.

The Senator also spoke about the role of the State. In that regard I had a very quick thought in setting up these special trading houses. I had a look at a previous experience that was tried about 1957 or 1958. The State had an involvement in it but it struck me that that failed, and it failed for many reasons which are well documented. I do not think it would be appropriate just now to set up a trading house or any kind of an activity in which the State would take an equity share because it would be too bureaucratic and too slow to move. There are many Irish entrepreneurs in the woodwork still. If we can point them in the direction of this tax break they will come out and get the exports for us.

The Senator also spoke about the question of Chinese and Japanese languages. I have been lecturing Irish industries in recent months to try to do something about the state of languages. We should extend our horizons beyond European languages. The growth in the marketplace is not just in Europe. In that regard I led a trade mission recently to Singapore and Malaysia where there is a strong Chinese influence. There are tremendous opportunities there and it would be flattering for those people if our exporters were able to converse with them in their own languages. We are having a close look at what we can do to try to get people to be serious about learning the languages.

Senator McGowan is a very practical businessman with a lot of experience. He certainly knows what he is talking about when he says that we should start at secondary schools to make people conscious of the necessity to sell, market and export. That is something about which I will be talking to the Minister for Education, Deputy O'Rourke, over the summer. Senator McGowan raised the question of potato exporting and the marketing board. I am very interested in what he said; I was not aware of that and I will have a very close look at it over the next few days to see whether that operation can somehow become part of the marketing review which we are carrying on over the summer. I want to thank Senators for the comments they made in the course of the debate today.

To conclude in a general way, the whole concept behind the trading house is to bring into the business of exporting people who are not already in that business. It is too important a job to be left just to Irish manufacturers. That is too narrow a base. In that regard I should point out that two-thirds of all our exports at the moment come from multinationals and the other one-third comes from our own companies. Eighty per cent of Irish companies are not exporting. That is a very vulnerable situation which can only be redressed if all of that one-third of Irish companies get into the exporting business. With only 20 per cent of them in it at the moment it is much too vulnerable and much too narrow a base. I came to the conclusion that we needed some special new initiatives to try to grow that one-third area and that is how we came up with the idea of trading houses.

The Japanese are very successful in this regard. Their trading houses are based on more of a conglomerate idea where they have financial services in banking and all sorts of activities involved. Ours are starting out very small, just on exporting, but I would not place any limit to their movement or to their march. Perhaps they might appear on Irish stock exchanges some day and might grow to be truly international trading houses in the model of those in Japan and some European countries.

We should be conscious of the diversification of our exports at the moment. One-third of our exports go to Britain, one-third go to Continental Europe and one-third go elsewhere. That underlines the question of languages that Senator Manning spoke about. It also underlines how diversified our effort now is. While the EC is important to us, it is not the only marketplace. There are markets beyond the EC which we should not ignore just because we are members of the EC.

I am looking carefully at the question of earnings by CTT. While CTT have funds available to them to run their operation, I am talking to them at the moment about trying to self-finance a number of their activities. If CTT successfully help a company and that company are very satisfied, get increased exports and become so successful that they are considering stock exchange quotations and the like, I wonder whether it might not be appropriate to ask that company to pay CTT for their consultancy advice, support and activity. Successful business people will respect that kind of thinking which is based on the notion that, if CTT are successful in helping them and they are able to measure that success, the least the Irish taxpayer and CTT should be entitled to is to recoup some of the funds.

I have to stress that that is just thinking out loud at this stage and we have not advanced it any further. It seems to be an idea I should be looking at very carefully because, if an ordinary company consult ordinary consultants they usually end up paying them, whether they are successful or not. We should look particularly at successful cases but we must be careful not to rule out existing help to small, fledgling companies or make them feel they will have a large tab to pay at the end. I do not think that applies to successful companies. I am having a close look at that, particularly the type of revenue it would raise and the type of relationship it would lead to between the Irish Export Board and the exporter.

I want to thank Members of the Seanad for their very generous welcome for this Bill, and to say that this is an experiment which tells Irish entrepreneurs that if they export Irish goods they can get the same tax break the Irish manufacturer gets. That means anybody who exports gets the same thank you from the State, whether they are manufacturers or trading companies. We watch them very carefully and make sure they are up and running as quickly as possible.

This country at this time does not have the option of pump priming and reflating the economy. It only has the option of getting the books right on the one hand and, in a parallel fashion, growing by exporting. If that is the national priority, these kinds of measures, with no absolute guarantee of success, have to be tried to see whether we can boost exporting and Irish marketing. One objective I have is to take the soft edge off the question of marketing. It is not a fuzzy subject; it is the cold face of what Irish business should be doing. In that regard I want to take the soft edge off the concept of marketing and put it where it belongs which is at the cold face of Irish industry.

The Office of Trade and Marketing is an ideas office. I will take ideas from any party, Senator, Deputy, or any member of Irish industry. I am touring Irish industry at the moment collecting those ideas to see how we can make them work. This is an ideas office which is open for ideas and we will implement them as quickly and as sharply as possible but they have to be hard nosed, workable and business like. Broad generalisations, lectures and exhortations will not get us anywhere. We have to have hard nosed, workable ideas. My door is open for those ideas and I will implement them as quickly as possible.

In the few short months I have had the honour to hold this post, I have come to one conclusion, that is, that there are terrific opportunities all round the world for Irish goods and services and the only thing stopping us availing of them is our own internal organisation and our own determination. The business is definitely out there. There is enough business out there to make sure that nobody needs to leave this country and nobody needs to be unemployed. All we have to do is to go out there and get it. I hope these special trading houses will set about doing that immediately.

I thank Senators for their warm welcome for this Bill and I commend it to the House.

Question put and agreed to.

An Cathaoirleach

When is it proposed to take the next stage?

Mr. S. Brennan

Now.

Agreed to take remaining Stages today.