I am standing in today for the Minister for Enterprise and Employment, Deputy Richard Bruton, as he is unavailable and he has asked me to convey his apologies to the House.
The purposes of the Bill before the House are to amend the Industrial Development Act, 1993, in order to remove unnecessary restrictions on the operations of Forbairt and IDA Ireland in regard to the acquisition, holding and disposal of property; to enable Forfás, Forbairt and IDA Ireland to establish subsidiaries; to allow Forbairt and IDA Ireland to invest moneys in funds aimed at the development of industry, as opposed to investments in specific companies; to increase the aggregate limit of grants that may be made to SFADCo to enable it to discharge its industrial development functions and make other minor amendments to the Shannon Free Airport Development Company Acts, 1959 to 1991; and to provide statutory authority for the payment to county enterprise boards, out of moneys provided by the Oireachtas, of grants to meet their administration and general expenses and to discharge the obligations and liabilities arising out of the performance of their enterprise support functions.
Overall the provisions of the Bill will enhance the abilities of operating agencies to respond to the needs of industry thereby adding to the policies aimed at increasing employment and reducing unemployment. Over the period 1994 to 1996 Ireland is forecast to have the strongest performance in terms of economic and employment growth in the EU and OECD countries. According to OECD forecasts as of June employment in Ireland will grow by an average of 2.3 per cent over this three year period, while the EU and OECD averages will be less than half of 1 per cent. Economic growth over the same period is forecast at 5.6 per cent in real terms for Ireland, while EU and OECD averages will be 2.8 per cent.
No matter how good our record growth is, whether in comparison with other countries or historically, the economy must achieve higher employment for our economic growth if we are to make inroads on the general unemployment problem but also, in particular, on the stubbornly high numbers of those who are long-term unemployed and who have not by and large been reached by the growth in employment.
A number of initiatives have been taken in recent months specifically geared towards dealing with the long-term unemployed. The numbers who benefit from community employment have been restored to an average of 40,000 for 1995. The recommendations of the task force on unemployment, which arose out of the National Economic and Social Forum's report on long-term unemployment to which Members here contributed, have been proceeded with and a new unit has been established in my Department to oversee the operation of this service. The local employment service is being introduced initially in the 12 established partnership areas and two non-partnership areas, and Clare and Limerick have been chosen for this.
In each area a local management committee has been set up to oversee the drawing up and implementation of the overall plan for the provision of services for the long-term unemployed in the area. Plans for four areas have already been approved and assessment for a further seven are at an advanced stage, and approvals on these should be forthcoming over the next couple of weeks. We are getting the local employment service up and running in line with the planning which was promised in the task force report.
In parallel with this process an examination of employment strategy is being carried out in my Department to ensure we are doing our absolute best to increase employment and reduce unemployment. To this end a policy review in the areas of foreign direct investment, indigenous industry and labour market interventions is in the process of being finalised. We must all raise our sights higher to ensure that people who are unemployed can be reintegrated into the labour market. It is not a simple task; it is highly complex but is fundamental to tackling unemployment, in particular long-term unemployment.
Government policy on employment has many facets. It is first important to have appropriate macroeconomic policies that encourage sustainable economic and job growth. Business confidence and investment depends on a positive macroeconomic framework and the Government is strongly committed to maintaining and building such a framework. In relation to competitiveness, the House will be aware that a new task force for industry adjustment was established to identify areas of business at risk from competitive forces and to propose competitive strategies. This task force was involved in a process aimed at bringing about changes, particularly in the traditional manufacturing sectors, to encourage firms to prevent job losses and secure existing employment. The task force, which includes ICTU and IBEC as well as the State agencies, is developing a strategy aimed at areas where avoidance of job losses requires major change and adjustment. I hope they will have completed the process shortly.
In addition, IDA Ireland and Forbairt already work closely with their existing clients to identify at an early stage Irish or Irish based companies that are in danger of becoming uncompetitive. There are a number of ways that IDA Ireland and Forbairt can help companies improve their competitiveness, including working with companies to achieve ISO accreditation, introducing world class manufacturing standards, establishing research and development functions, working with companies to keep overheads down to ensure the cost of manufacturing can compete internationally, and close intervention with companies which wish to become sub-suppliers to major multinational enterprises. However, Forbairt also provides significant support to indigenous companies under the management development programme.
I established earlier this year a new unit in the Department to deal with the whole project of partnership in delivering change. If Irish companies are to meet the challenge of the inevitable changes in the marketplace and the production process, that has to be achieved through partnership of everybody in the company, from the shop floor up to the top. This unit on partnership in enterprise is working to ensure that Irish companies can mobilise all that their employees bring to work — their brains and their hands — so that the enterprise can deliver in a co-operative way the kind of flexibility and adaptability necessary to anticipate and manage change. Our future ability to compete will depend on our ability to manage change.
The operational programme for industry, 1994-99, sets out an overall target of 20,000 gross new jobs per annum. This target was exceeded by Forbairt, IDA Ireland and Shannon Development in 1994. We are confident that these agencies will maintain that excellent performance in 1995 and over the remainder of the decade. It is good to see us attracting world class companies and we hope that there will be a good spin off.
While the last operational programme had significant successes — it achieved its 20,000 gross jobs on average per annum target and saw Ireland achieve the highest growth in output and employment in manufacturing in the EU — it also showed up important continuing weaknesses. These include the static Irish share in EU markets and the continuing high level of job losses — 87,000 over the last operational programme — which almost wiped out the jobs created. In the indigenous sector 60,624 new jobs were matched by 59,043 job losses, leaving only a meagre 1,600 extra at work in that area over the five years. There is a wide discrepancy in performance of the high tech, mostly foreign owned sector and the traditional sectors. There is also a difficulty in increasing the Irish economy purchases by overseas industry.
The new operational programme is setting itself explicit targets, not just of gross job creation as in the past but other targets which must be achieved if we are to make our industry competitive. We want to increase indigenous exports by 66 per cent in value, almost twice as fast as the overseas sectors for which we have set a target of 35 per cent. We want to increase our share of world trade by 20 per cent, from 0.7 per cent to 0.84 per cent; to increase the share of raw materials used by foreign companies sourced in Ireland by 15 per cent, from 27 per cent to 31 per cent and to increase the share of GDP devoted to R & D by 30 per cent, from 1 per cent to 1.3 per cent.
The gross job target of 20,000 is the same as for the last operational programme, although the greater emphasis on strengthening the long-term capability of Irish industry will help reduce job losses and give a more secure long-term employment base. The operational programme should make it possible to double the net annual jobs outturn from 2,400 over the last programme to 5,000 jobs on average per annum up to 1999.
The small business and services sectors have a major role to play in the drive to increase employment and reduce unemployment. The recently launched operational programme on small business is the Government's most recent response to the needs of small business. Under this programme more than £53 million is being made available in targeted supports in partnership between the State, the EU and the private sector. The programme complements and underpins Government policy for the small business sector.
In particular, it will help small businesses and service firms obtain access to low cost long-term finance. In this regard a new access to finance scheme, which was announced separately recently, is already operational and builds on the success of the initial pilot scheme with the following major improvements: the fund size is more than doubled from £100 million to £208 million; the interest rate has been lowered from 6.75 per cent to 6.5 per cent; the minimum loan size has been reduced from £40,000 to £20,000; there is nationwide delivery via almost 1,000 bank branches and the service sector has been included for the first time.
The programme also provides for a number of initiatives aimed at upgrading the small business share of access to public purchasing, enhancing the growth in employment potential of service firms, developing best practice among small businesses and supporting training initiatives. The small business forum, consisting of representatives of small business, Government Departments and the social partners, was also set up recently. I believe that the forum will have a useful ongoing role in the development of small business policy.
The launch of the small business programme follows the launch earlier this year of the local development programme under which EU funding will be made available for a wide range of local development initiatives, including the county enterprise boards. The local development programme recognises both the general role which local initiatives can play as a catalyst for local development and the particular importance of locally based measures for such development. The programme complements the emphasis on improving the business environment through measures designed to create an enterprise culture at local level. Clearly, a more developed sense of enterprise at local level would contribute to the creation of new small businesses, which, in turn, will stand to benefit from what is on offer under the small business programme.
Whereas these measures will create additional jobs, I am conscious of the need to ensure that all members of society, particularly the young and the unemployed, have access to these new opportunities. As I said, we have been successful in creating jobs over the last couple of years, but we have not tackled successfully the problem of ensuring that a fair share of those new jobs go to the long-term unemployed, who have not been reached so far by our mainstream economic development.
We are committed to pursuing a range of active labour market measures to improve access to jobs, which include the provision of work and the development of job related skills. Enterprise initiatives on their own are only part of the answer to tackling unemployment. In addition to the local employment service, my Department is working on the White Paper on Training which will address the role of training in a competitive world.
It is clear that a strong and sustained national effort is required to remedy the unemployment problem. There is not one simple answer as it is a multifaceted problem and we need to move on a number of different fronts. Our job policies are being reviewed in the light of changing trends, opportunities and threats to ensure the solutions we pursue represent the best strategy for the future.
Against this background, I wish to turn in more detail to the provisions of the Bill. The Industrial Development Act, 1993, which established the three new agencies in January 1994 — Forfás, IDA Ireland and Forbairt — confined to Forfás the power of the former IDA to acquire, hold and dispose of land and other property. While the original intention was to give Forfás, Forbairt and IDA Ireland the basic power to acquire, hold and dispose of land and other property, paragraph 1 (2) of the First Schedule of the 1993 Act confines this power to Forfás only. This had two main effects: neither Forbairt nor IDA Ireland can hold land either for their own administrative purposes or for industrial development purposes, and neither of them can acquire or hold shares in their respective client companies. Section 3 of this Bill rectifies this anomaly by allowing Forbairt and IDA Ireland to acquire, hold and dispose of land and other property.
Section 3 also provides for the transfer of the existing property portfolio from Forfás to IDA Ireland and makes provision for the agencies to dispose of property for purposes other than industrial use, subject to the express consent of the Minister and there being no industrial interest in such property. Therefore, they can manage the property portfolio in a commercial manner if that is the best action to take.
Independent consultants and the evaluation unit attached to the Department both recommended that IDA Ireland should manage the property function in future. It was never intended that this function would remain with Forfás, which is essentially a policy advisory body. The basic rationale for it going to IDA Ireland is that the property function has a greater importance in supporting its promotional role. As Forbairt and IDA Ireland clients are frequently intermingled in industrial estates within specific properties, it would not be feasible to break the property portfolio between them in any effective and efficient way.
However, I wish to stress that there is no question of this decision having adverse effects on the provision for Forbairt's property needs. Forbairt was consulted fully on it and is quite happy that its requirements will be adequately catered for. To ensure that this happens, arrangements are currently being put in place and discussions are taking place between the agencies and my Department. These arrangements, when in place, will be kept under periodic review to ensure their continued effectiveness.
Section 4 is related to section 3 and provides for the transfer of shares in client companies already currently vested in Forfás to Forbairt or IDA Ireland, as the case requires. Unlike land and buildings, this property is clearly identifiable and therefore could be more easily transferred to the appropriate operating agency. Section 4 provides for the arrangements in this regard.
Section 5 makes provision for an enabling power to allow Forfás, Forbairt or IDA Ireland to establish subsidiaries for areas of activity, particularly with regard to Forbairt, that may appreciably be considered more appropriate to be carried on outside the mainstream of the agency concerned.
The creation and operations of any subsidiaries will be subject to controls exercised by the Minister for Enterprise and Employment and the Minister for Finance. Currently, the executive agencies may only invest moneys in specific undertakings on a project by project basis. However, my Department and the agencies are currently developing certain options for the creation of development funds, some specific to particular industrial sectors — for example, software — and some general in nature. Section 6 provides the necessary powers. The funds involved will include money sources, Structural Funds and EU funding sources. Activity by the agencies in this area will be subject to ministerial supervision.
An equity capital survey of Irish indigenous industry, carried out by my Department in 1993, found that 34 per cent of respondents had a current equity requirement, 58 per cent had either a current equity requirement or would have one in the next three years and 78 per cent of firms with an equity requirement considered that raising equity would be difficult. These findings, together with the other work in this area, indicate that many small and medium sized Irish manufacturing firms have difficulty raising the required equity, and the growth of such companies is constrained through lack of availability of equity capital.
Under the EU operational programme for industry, 1994-99, a sum of approximately £33 million will be available for seed and venture capital investment. The object of the fund for seed and venture capital support from Structural Funds is to provide equity and management support to growth oriented small and medium sized businesses. This support will be expected to facilitate significant growth in the investing companies that in turn will be expected to generate employment opportunities in these companies.
Financial support from EU Structural Funds will be made available to applicant organisations involved in seed venture stage equity investment in growth oriented firms. Under the scheme Structural Funds will be entitled to rank equally with private sector funding in terms of dividends and the repayment of capital. In addition, any allocation of EU support funding will be conditional on an equivalent level of matching private sector funding. Overall, during the lifetime of this scheme it is expected that equity support will be provided to many small and medium sized enterprises which would otherwise find it difficult to raise the necessary equity for their ventures. Section 6 will enable the agencies to be involved in the disbursement and so on of these funds, enabling them to set up other funds as required, using their own money in partnership with private third sector parties.
The Bill also provides for the further financing of SFADCo. Specifically, the Bill provides, under section 8, for an increase from £150 million to £200 million in respect of the upper limit of the aggregate amount of grant in aid voted annually and that may be made to SFADCo. The grant in aid moneys are applied towards meeting the company's running expenses, enabling the company to provide financial assistance to companies in the Shannon Free Zone. The proposed increase in the statutory limit of the aggregate amount of grant in aid that may be issued to the company is expected to be sufficient to cover the company's operations over the next four years.
In the years 1992-94, SFADCo has assisted in the creation of 4,350 gross new jobs in the industrial areas for which it is responsible, resulting in a net increase of over 840 jobs in the Shannon Free Zone and in Irish owned companies throughout the midwest region. In 1995, SFADCo has a target of 1,200 gross new jobs, 400 of which will be in the Shannon Free Zone. It is confident these targets will be achieved.
In 1994, the EU Commission approved an extension, to the year 2000, of the cut off date for the availability of a special 10 per cent rate for corporation tax for new international service industries establishing in the Shannon Free Zone. This will assist the company in promoting the zone and the region, where 5,600 people are employed. SFADCo also has ambitious plans for the future development of the National Technological Park, including additional capital investment of £100 million by the private sector in new industrial facilities and the achievement of 5,000 jobs in the park by the end of this century. The company will, of course, be continuing its industrial development role throughout the entire midwest region. Other technical provisions in the Bill are also proposed with regard to SFADCo concerning pension arrangements for the employees of the company's wholly owned subsidiaries and a proposed exemption from stamp duty with regard to land acquisition to align with the arrangements that are applicable to SFADCo, Forfás, Forbairt and IDA Ireland.
The provision under section 10 will give the Minister for Enterprise and Employment the power to make grants to the county enterprise partnership boards from Exchequer funds to enable them undertake activities in support of enterprise. This power has not been required to date as the boards' main function, under the direct supervision of my Department, is to manage their financial transactions during this start up phase. However, in all, 35 boards have now been established as companies limited by guarantee, and the interim phase of the county enterprise initiative is drawing to a close. It is intended that the boards will become fully operational by 1 January 1996 as independently controlled local enterprise development companies limited by guarantee, with direct responsibility for the management of their own operations, subject to the terms of this legislation, the memorandum and articles of association and operating agreement to be signed between my Department and each board.
Once they are operating on an independent basis, the county enterprise partnership boards will be in a position to provide an expanded range of services to enterprise, including financial supports and, ultimately, business advice and counselling and management development support to small firms. The capacity to deliver a full range of such services, provided for under enterprise plans, will be considerably enhanced when they commence operation on a fully independent basis. The central role in the formulation of the local economic agenda through the enterprise plans and the promotion of an enterprise culture at a local level will also be strengthened. Much of this activity will be eligible for EU co-financing under the operational programme for local development.
Already, the enterprise plans constitute a major advance in securing local input into national enterprise planning, and their existing counselling and referral services provide a valuable resource to potential entrepreneurs in existing small businesses nationwide. The enhancement of this role will have a significant effect on the development of an enterprise culture at local level and the prospects for development and growth of smaller micro enterprises.
The interim county enterprise fund grant scheme, managed by the boards to provide fixed capital employment in feasibility study grants to assist small business start ups and expansions, has provoked a major response. Boards have approved grants of over £34 million and more than 4,000 projects since their establishment, of which over £14 million has been drawn down. Projects supported are expected to create over 6,000 and 1,400 part time jobs, of which 1,776 full time and 263 part time jobs were created by the end of 1994, according to the figures supplied by the boards.
I commend the Bill to the House.
