I welcome the opportunity to deliver upon the commitment I made previously in this House when we debated the Culliton report to initiate in this House the Bill implementing the recommendations which the Culliton report and the Moriarty task force report proposed in relation to agency restructuring. I hope we will have ample time to debate in full the implications of the agency restructuring set out in this Bill.
The purpose of this Bill is to create the new State agency structures which will underpin industrial development in coming decades. Three new bodies will be created — Forfás, Forbairt and the Industrial Development Agency (Ireland) — IDA. Each of the agencies will be autonomous and will have its own board. Each will have a distinct mission and goals. However, all three agencies will operate within a framework which facilitates co-operation and mutual support. Forfás will be responsible for overall policy co-ordination and administration. In addition, Forfás will play a proactive role in ensuring co-ordination in those areas of industrial development which are outside the direct remit of my Department, such as food and foreign trade. Forbairt will develop indigenous industry by bringing together the existing functions of Eolas and the IDA, and finally IDA Ireland will continue to promote the attraction of overseas industry to Ireland.
The creation of these new bodies represents a major step forward in the development and implementation of industrial policy. I will return to this point in detail later, but first I would like to place the Bill and the topic of industrial development within the broader context of Irish economic development. As the House will be aware, the boundaries of this broader area have been explored and developed through the work of the Industrial Policy Review Group, chaired by Mr. Jim Culliton, and in the subsequent task force chaired by Dr. Paddy Moriarty.
The real breakthrough in Culliton was the realisation and the acknowledgment that industrial development comes about through the harmonisation of a broad range of factors and, furthermore, that the requirements of industrial development should be the driver in many areas of economic and social activity.
In the Programme for a Partnership Government, my ministerial colleagues and I indicated our clear agreement with this approach and stated that we would: strengthen Ireland's industrial, scientific and exporting base; increase the level of directly productive activity; encourage a dynamic spirit of enterprise; put a new emphasis on building up small industry, and broaden industrial strategy to take in all the factors that affect output and productivity.
The Moriarty task force reinforced this central message and undertook, with great commitment, the difficult job of translating the need for a more co-ordinated approach to enterprise development into a series of specific tasks to be fulfilled by various Government Departments, State agencies, and the semi-State sector.
In the documentEmployment Through Enterprise, the Government has set out its proposals for dealing with the task force recommendations in the areas of taxation, energy, ports, communications, transport, environment, commercial State enterprises, education and training, competition policy, the legislative process and of course, the re-organisation of the State agencies. Taken together, the programme set out in that document represents the most concerted effort ever undertaken to address the requirements of employment and enterprise development in the State.
As far as the industrial development agencies are concerned, the conclusion of the Culliton report was that their role is an important but limited one. When reviewing industrial performance there has for too long been a tendency to believe that the agencies are responsible for job creation and also for any failure to meet this country's employment needs. Set against the broad panorama of issues addressed by Culliton this view is patently seen to be flawed. However, this broader view should in no way allow complacency to creep in. The fact is that the current agency structures are inhibiting the most efficient and effective development of industry, and we must change them.
The problem to be tackled is evident when we look at the breakdown of jobs gained and lost in both Irish and overseas firms over the six year period, 1987 to 1992 inclusive. During this period an impressive total of 118,500 jobs were created but, unfortunately, this was accompanied by total losses of 108,600. Effectively, the net change in the period was just under 10,000 jobs. What is even more disconcerting is that whatever net gains have been made have arisen through the attraction of foreign firms. In the period in question, Irish-owned firms actually managed to lose 600 jobs.
Let me be clear from the outset that the contribution which overseas firms have made to Ireland and the success which the IDA has achieved in attracting them is not to be dismissed. On the contrary, it deserves the highest possible praise. Around three-quarters of our industrial exports come from foreign firms and those same firms employ half the total work force in manufacturing. What has been happening, however — and the figures I have given the House for job gains and losses bear this out — is that our successes in the field of attracting mobile investment have been obscuring our failure to develop a sound base of indigenous industry.
The current situation, where a single agency is responsible for both indigenous and overseas firms, exacerbates this lack of clarity. This is understandable and inevitable, since any organisation will strive to present its performance in the best possible light. But the very inevitability of it means that we must change the structures to get the clarity we require. This is what this Bill is about.
The challenge of developing indigenous industry will be addressed by Forbairt. It is a challenge which will demand a different package of solutions from those which have traditionally been dispensed. In particular, it will mean changing the widespread perception within industry and the State agencies that cash grants are the main vehicle for development. If this were the case we would have solved our problems long ago. The truth is that the developmental requirements of industry are far more fundamental, and the problems more deep seated. The key issue is whether our firms have the necessary competences to produce the technologically sophisticated, high quality goods and services which international markets require; and, also, whether firms have the internal efficiencies needed to bring those goods to market on time and on budget.
At present we have two problems. Not enough of our existing firms have the necessary mix of such competences to develop and grow. Second, we are not developing sufficient new start-up firms to expand the overall indigenous sector to the levels that our unemployment problems require.
These problems are being addressed by the existing agencies. The IDA, for example, is developing capability-related programmes, focusing on company development and management development. It is also increasing its equity participation in firms and tying its financial supports to the development of strategic fundamentals in firms. At the same time, Eolas is offering technology audits, quality programmes, graduate placements and a host of other technology development facilities. However, this short list of initiatives demonstrate the piecemeal approach which the existing structures bring about. In creating Forbairt, this Bill will allow a much better planned approach to the development of indigenous industry.
We should not delude ourselves that the new structures will bring results overnight. The problems I have referred to will take time to solve. Professor Michael Enright of Harvard Business School and an advisor to the Culliton Review Group pointed out:
Firms and governments must take the long view if they are to be successful in improving their competitiveness. Industrial competitiveness is built over decades, not business or political cycles.
The objective in creating Forbairt is not to achieve a quick fix solution. It is, rather, to create a clear focus on the problem and, in so doing, to ensure that performance targets for the new agency can be set out and appraised in unambiguous terms.
The same holds true of IDA Ireland which will be mandated to maximise the return to Ireland from the attraction of mobile international investment at the minimum cost to the taxpayer. This involves more than just "selling" Ireland as an attractive location. It means being aware of movements in the business and technological environment and of being able to make a successful appraisal of the strategic fundamentals of potential client firms.
In the interests of minimising grant expenditure, it also requires that IDA Ireland should be able to demonstrate the attractiveness of Ireland in terms of other factor advantages such as the quality of the labour force, our clean environment and other infrastructural assets such as our telecommunications system. In these regards, the importance of the wide ranging reforms which the Government has instituted in response to the Moriarty Task Force recommendations can once again be seen to make eminent sense.
I also want IDA Ireland to strengthen its efforts within the Single European Market. All of the assets which I have referred to above are as attractive to European firms seeking to expand as they are to US or Japanese firms. The opportunities offered by the Single Market are also conducive to the development of joint ventures, strategic alliances and technology transfer between Irish and other European firms. This is another area which I want IDA Ireland to explore in conjunction with Forbairt.
Having just mentioned linkages between the agencies, I would like to turn now to the issue of co-ordination. As I have shown, the separation of indigenous and overseas functions will lead to a greater clarity of mission at agency level. However, we must also be on our guard that this separation will not lead to the area of overlap between the indigenous and overseas functions being ignored. This necessity for co-ordination is part of theraison d'etre for Forfás. The Programme for a Partnership Government established this point. It was further reinforced in the document Employment Through Enterprise where we pointed out that Forfás will have a vital co-ordinating role and will promote greater linkages between the indigenous and international sectors of Irish industry.
In the context of promoting linkages, it is vital to ensure that opportunities to exploit synergies between indigenous and foreign firms are exploited to the greatest extent possible. Such business linkages are of vital importance for employment creation, indigenous business development and the continued attraction of new greenfield investments. Because of the small size of the country, indigenous companies have a limited domestic market in which to grow their businesses. This is a significant drawback.
As Professor Michael Porter pointed out inThe Competitive Advantage of Nations, the size of the home market and, more specifically, the nature of home market demand, is a major determinant of the rate at which a nation's firms can develop. The opportunity to supply multinational companies based here represents a very significant expansion of the domestic market for Irish firms. It also represents the kind of challenge, in terms of buyer standards, which indigenous firms need to rise to if they are to compete internationally. By developing as successful suppliers to multinationals in Ireland these firms can develop world class standards with less investment in marketing and product development than would otherwise be the case.
The whole area of linkage development also raises the question of industrial clusters as developed by Porter and recommended in the Culliton report. The issue of cluster development is a complex one since it requires the formation of linkages between overseas and indigenous companies, and between companies in different sectors. For example, an agro-industrial cluster could involve companies in food processing, engineering companies in production equipment fabrication, and electronics and software companies in process control and monitoring. Clearly it will be difficult for either Forbairt or the IDA to implement the clusters concept while at the same time focusing on their sectoral responsibilities.
This is a perfect example of the type of area where Forfás can play a role. That role will involve developing policy for cluster and linkage development, and working with staff from Forbairt and IDA Ireland to ensure that, at an executive level, policy is implemented in a flexible and pragmatic way. For example, Forfás will need to work with the two agencies to determine the operating guidelines to be used in negotiating particular support packages with companies. The objective will be to ensure an equitable approach to overseas and indigenous companies operating in similar sectors or in competition with one another.
Another area where co-ordination will be required is company ownership changes and take-overs. The global nature of business today means ownership of companies cannot be seen as a static phenomenon. As the Culliton report pointed out, overseas companies have transferred to Irish ownership and vice versa. This is frequently in response to the developmental needs of those companies and can be a positive step. In the agency context, such transfers of ownership need to be managed to ensure full support is provided during the transitional period. Forfás will play a co-ordinating role.
This policy and evaluation role of Forfás is most important. In this regard, I see Forfás as an important link in the policy chain between my Department and the two agencies. The centralising of policy and evaluation activities of the agencies at the level of Forfás will make for more open dialogue in the industrial policy area. Since Forfás will not have direct involvement in the implementation of programmes it will be in a better position objectively to analyse the performance of the executive agencies and on foot of this to provide policy advice to my Department.
In referring to Forfás as a link in the chain, I emphasise that I and my Department will be the driving force in the policy area. The Moriarty Task Force made a number of recommendations as to how my Department's resources in that policy area could be strengthened. These are being pursued. I will be continuing my programme of restructuring and organisational development within the Department to ensure the changes proposed in this Bill at agency level will be fully reflected within the structures of the new Department of Enterprise and Employment.
I will touch specifically on the question of policy for science and technology as I know there is some concern amongst the scientific community that the focus on science and technology which has developed under the aegis of my Department in recent years will be distorted or diluted by the new structures. I am fully committed to continuing to develop the role technology can play in industrial development. I am convinced the incorporation of Eolas into Forfás will create a structure in which the technological needs of firms can be better serviced. Technology development is a vital part of company development and Irish firms are showing a growing awareness of this.
It was demonstrated by the huge demand for the new Structural Funds-supported industry research and development scheme launched by my Department last year. Under our plans for the next round of Structural Funds, Forbairt will continue to respond to industry demands for research and development support. This is entirely in line with the capability development approach I want Forbairt to pursue with vigour.
The integration of Eolas into Forbairt will bring science and technology into the spotlight, not relegate it to the shadows. I am totally committed to extracting the maximum value from the entire industrial development budget over the short, medium and long term. This means science and technology activities will be subject to the same scrutiny and performance appraisal as the other programmes of the agencies. Expenditure on science and technology is necessary; but it is equally necessary that such expenditure should provide value for money.
These sentiments also correspond with the recommendations of the Culliton report that my Department's science and technology activities should be fully responsive to the needs of industry. However, I am aware that the views of Culliton on science and technology were interpreted in some quarters as being too concerned with short term gain at the expense of a long term strategy. Such a view would be inconsistent with the need to take a strategic long term perspective on the development of industry and is not based on the facts. Under Forbairt, longer-term science and technology initiatives such as the programmes in advanced technology which are harnessing the capability of our third level institutions will continue to be supported. There is no question of this longer-term perspective being disregarded.
On the subject of policy and evaluation, I must return again to the role of Forfás. Eolas is currently undertaking a comprehensive programme of science and technology evaluation, providing a valuable input to the policy formulation process in my Department. This activity will now be integrated into Forfás and will continue. The same is true of the broader science and technology policy functions incorporated in the Science and Technology Act, 1987. In particular, I refer to the important horizontal rôle which Eolas exercises in international programmes such as the EC Framework Programme. This function extends across a number of Departments and agencies and I am anxious it continue within the Forfás context.
When speaking of interdepartmental co-ordination, I address the role of Forfás in trade and marketing. Much has been made of the fact that An Bord Tráchtála has not been merged with Forbairt. In the Programme for a Partnership Government we stated our intention to establish the new Department of Tourism and Trade which would bring a new dynamic to this area. The retention of ABT as a separate body reporting to the Minister for Tourism and Trade is consistent with our belief that export development and trade promotion should be the main focus of that organisation. The Culliton and Moriarty reports support this view.
I have reviewed the question of incorporating some elements of An Bord Tráchtála into Forbairt in consultation with the Minister for Tourism and Trade. Our conclusion was that any splitting up of the trade and marketing functions of An Bord Tráchtála would simply lead to a damaging sub-optimisation of both elements. Such an outcome would not serve the objectives of industrial development or trade development. That is why we made the decision we did.
The need for co-ordination remains and this will be achieved in the first instance through the mechanism of Forfás. To assist in this process, the chief executive of ABT will be anex officio member of the Forfás board. In addition, close co-operation already exists in the regions between ABT and IDA/Eolas personnel. This will continue and will be strengthened under the new structures. With these arrangements in place, I am confident industry will continue to be fully supported in its marketing requirements at the level of the individual firm.
As the House will be aware, the development of the food industry is of key importance. I have discussed the new agency requirements with the Minister for Agriculture, Food and Forestry. We have agreed that the current position where the industry division of IDA is responsible for all food companies, regardless of ownership, will continue in the new structures. Forbairt will have sole responsibility for the development of the food industry. I will also be ensuring the industry is represented on the board of Forfás. The Bill also provides for a general enabling provision to allow the type of co-ordination I have proposed between An Bord Tráchtála and Forfás to be extended to any new marketing body which may be established in the food area.
In matters of practical administration, I have been anxious to guard against the creation of additional layers of bureaucracy when establishing the new structures. It is my intention, therefore, that central administrative functions relating to areas such as finance, land and personnel for the agencies will be centralised in Forfás. This approach will allow for the smoothest possible transition to the new structures and will minimise the administrative overheads and costs in the operation of the new bodies.
As I have been stressing to the House, the plans for agency restructuring are part of a concerted effort by the Government to bring a spirit of enterprise and progress to all areas of economic development with a view to tackling the pressing problems of unemployment. In a related area, the establishment of the county enterprise boards will help to bridge a gap in the current support system for local enterprise initiatives. That is why I have placed such emphasis on the county enterprise boards having unequivocal enterprise and job creation objectives in those business areas not already covered by Forbairt. The operation of these boards at county level will be complemented by Forbairt's industrial development role at regional level.
It is my intention to ensure the proposed administrative arrangements for the new boards are kept simple and non-bureaucratic. The support team will be headed by a county enterprise officer who will act as facilitator, directing individual projects or local community enterprise initiatives to the existing State agencies where this is appropriate. We will thus ensure the county enterprise system picks up those worthy projects which might otherwise slip through the net but at the same time ensure that the activities of Forbairt and other agencies are not duplicated.
The county enterprise boards will draw on the skills resident in Forbairt wherever possible. In particular, the expertise the IDA has developed in project appraisal techniques will be available to the boards through the presence of a Forbairt specialist on the evaluation committee each board will be establishing. These committees will consider all project proposals and will make recommendations on the most appropriate degree and form of assistance for projects, having regard to the quality, local relevance and cost effectiveness of project proposals.
In devising the structures and organisation for the county enterprise boards, I have sought to ensure that their operations will be consistent with the need for a flexible yet comprehensive approach promoting local enterprise and economic development. The new boards will, by working closely with Forbairt and other relevant agencies at regional and national level, help to develop a local initiatives approach which generates community support for integrated efforts to promote economic development through making maximum use of local resources.
The combined objectives of Forfás, Forbairt and the county enterprise boards must be actively to foster and promote the creation of new enterprise and the growth and consolidation of existing indigenous firms. This is the central task upon which we must focus our energies and concerted efforts.
I would propose to turn now to the detailed structure and content of the Bill. The central purpose of this Bill is to enable the new agency structures to be put in place in a rapid but orderly way. The Bill, does not seek to reinvent the wheel. As I have already emphasised, the point at issue is not whether the established agencies are doing the right thing, but rather whether the existing structures within which they are operating are allowing them to optmise their approach and deliver their programmes in a way which best benefits firms. Against this background the House will, I hope, appreciate that the activities of the agencies are, for the most part, adequately catered for in the existing corpus of legislation.
This is not to say of course, that the creation of Forfás, Forbairt and IDA Ireland will not give rise to innovative new approaches to industrial development which will require to be given substance and power through legislation.
This is not to say of course, that the creation of Forfás, Forbairt and IDA Ireland will not give rise to innovative new approaches to industrial development which will require to be given substance and power through legislation. If that is the case, and I expect that it will be, then I assure the House that I am ready and willing to bring forward the appropriate proposals as and when the need arises.
In the meantime, the Bill before the House is the first step towards a new and more clearly focused strategy for industrial development. There are a number of detailed points arising in respect of the Bill which I propose to highlight.
On the question of the repeals referred to in section 4 and in the Third Schedule, I have not sought to remove any of the existing IDA or Eolas functions. The purpose of the repeals which are listed is to remove inconsistencies arising out of the bringing together of IDA and Eolas within the new structures.
In section 5 I propose to fix the establishment day for the new agencies by order so as to allow some flexibility in catering for the substantial logistical arrangements which will require to be made on foot of the transition.
Sections 6 to 9 deal with the functions of Forfás and the agencies. It is consistent with the spirit of this enabling legislation that these have been stated in general terms. In order to provide flexibility, the existing functions of the IDA and Eolas will be vested in Forfás but will, for the most part, be exercised by the two agencies subject to my direction. I would assure the House that there is no question of Forfás acting as a super agency and, in this regard, I would draw the attention of the House to the substantial fact that the provision of grants to companies by Forfás is specifically prohibited by section 9.
Section 10 provides for the normal powers of delegation of functions and for the constitution of committees or other bodies for the purposes of exercising the functions thus delegated. In this regard I refer Senators to the recommendations of the Moriarty Task Force on the need for a separate body for industrial standards. This arises out of the need to separate the certification activities of the National Standards Authority of Ireland from the consultancy activities of Eolas. I propose, therefore, to constitute the NSAI as an autonomous body attached to Forfás for this specific purpose. A similar arrangement will also be made for the Irish Accreditation Board which accredits industrial testing laboratories, if required.
Returning to the question of autonomy for the agencies, I would refer the House to section 11 which provides that Forfás and each agency will have separate grants-in-aid, thus ensuring their financial autonomy.
In section 13, the provision of the 1986 Act for carrying out a review of industrial performance has been restated and expanded to include a review of industrial policy. This is in line with the recommendations of the Culliton report that the policy activities of my Department should be strengthened and is one of a number of initiatives which I am currently examining in this regard.
The transitional provisions in the Bill which are dealt with in sections 14 to 21 provide for the normal transfers from the existing agencies to the new structures and for the dissolution of IDA and Eolas.
The First Schedule, provides for the appointment of boards for Forfás and each agency, for the conditions of office applying to board members and for other matters such as the provisions for annual reports and accounts. This schedule contains the normal provisions applying to the members of the existing IDA authority.
The Second Schedule deals primarily with matters relating to the staffing of Forfás. In this regard I would ask the House to note my concern that the minimum disruption is caused to staff of IDA and Eolas in the establishment of the new structures. The Bill provides that all staff of the new agencies will hold their contracts with Forfás but will be seconded to the agencies as appropriate. Staff will effectively be able to move from one agency to another, bringing their experience and expertise with them. This interchange of staff will create a dynamic, open and pro-active culture which is required for the development of industry in the 1990s and beyond.
I conclude by once again recalling to the House that this Bill forms part of an overall long term strategy for tackling the industrial development and employment generation problems facing us. The agency structures for industrial development will usher in a new era which will be marked by a greater clarity of mission and a strengthened emphasis on catering to the real needs of indigenous firms. It will also promote better value for the taxpayer in the moneys expended on attracting overseas investment and it will maximise the benefits to be derived from linkages between the overseas and indigenous sectors. All this will lead to a new dynamic in Irish firms and I commend it to the House.