Industrial Development (Enterprise Ireland) Bill: Second Stage.

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

Tánaiste and Minister for Enterprise, Trade and Employment (Miss Harney)

This Bill provides for the creation of a new agency, Enterprise Ireland, through the dissolution of both Forbairt and An Bord Tráchtála and the amalgamation of the relevant elements of the services to business function of FÁS.

As such it will undoubtedly provoke criticism from Members of the House that all that is involved is merely moving the deckchairs around in response to changes in ministerial portfolios. Indeed, it will undoubtedly be claimed that such benefits as will be gained will be outweighed by the disruption caused to existing operations and the loss of focus which is currently placed on marketing and technology.

I intend in my address this morning to substantively rebut such allegations. The fact is that while the Bill itself does consist of the legislative provisions to create new agency structures, it will facilitate a totally new approach to indigenous industry development policy. That approach is built around the key elements of sustainable competitive advantage and the business development model — BDM.

Sustainable competitive advantage is at the core of business growth and survival in a turbulent and changing marketplace while the business development model will be the vehicle whereby agency supports to industrial clients will be assessed and delivered in the future. What is sustainable competitive advantage? Quite simply, it is the ability to consistently and profitably deliver products and services which customers are willing to choose in preference to those of competitors. The definition may be simple but, for the individual firm or entrepreneur developing and sustaining a competitive advantage, it is by no means a trivial issue.

Success or failure at firm level is determined by a complex interaction of forces that run across the firm's value chain from its suppliers to its final customers. Among these are the inescapable facts that in the globalised marketplace input prices are considerably more volatile than in a sheltered domestic market, customer needs and tastes are constantly changing, new technologies emerge which give rise to new products and processes and new markets are opening up in Asia and Europe.

To prosper and grow firms need to constantly evolve to meet the needs of this changing environment. Failure to do so is evidenced by the fact that every one of the 113 manufacturing firms which started in the year 1974 is now closed. It is no surprise then that there is a general perception that we are strong when it comes to creating businesses but weak when it comes to sustaining them. Why should this be the case?

We can certainly gain some insights from an assessment of the performance of indigenous industry which identifies some significant strategic weaknesses and these include an excessive dependence on traditional sectors. Many firms are located in traditional industrial sectors where growth prospects are poor and competition from low cost producers is intense. Such competition will intensify further with increasing globalisation and free trade.

Levels of profitability are low. While average profitability — return on sales — has increased in recent years, it remains low in absolute terms at 4.3 per cent for the food sector and 9.2 per cent for general manufacturing according to Forfás surveys. This restricts the funds available for investment and growth.

We have a low propensity to conduct research and development. In 1996, 55 per cent of indigenous companies undertook no research and development. Of those companies that did, only 19 per cent spent more than £100,000.

There are deficiencies in human resources. There is evidence that, overall, Irish business does not invest sufficiently to upgrade the skills of workers and management. This is particularly the case for smaller firms.

There is continuing reliance on home and UK markets. Only 44 per cent; of Irish small and medium sized enterprises export compared to an EU average of 54 per cent; 65 per cent of indigenous manufacturing output is sold on the home market and, of the balance that is exported, 43 per cent is sold in the UK market. These deficiencies have persisted despite an interventionist industrial policy which featured the widespread availability of grants. In this decade alone, almost 70 per cent of the firms recorded on my Department's industrial database as being in existence in the period received a grant of some kind.

While the persistence of these deficiencies gives rise to serious concerns, they should be taken in context. On the positive side, the Irish enterprise sector as a whole is thriving. Employment in the foreign direct investment sector has grown by 32 per cent and 32,000 jobs since 1992, while employment in indigenous manufacturing companies has grown by 13.5 per cent and 16,000 jobs in the same period. Even more striking has been the growth in the services sector where employment has grown by 142,000 since 1992.

This growth, and Ireland's very rapid economic progress in the 1990s generally, has been underpinned by a commitment to getting the climate right. Prudent management of the public finances coupled with the contribution of successive partnership agreements has created a virtuous circle of rapidly growing productivity and real wage increases. The European Union has also played a major part both through the contribution of the Structural Funds and in the liberalisation of markets in the run up to EMU.

We are, therefore, faced with a conundrum. Overall, enterprise is booming. In particular, we now have a thriving domestic services sector which is capable of further significant growth as living standards continue to rise. In addition, we have arrived at the point where it is no longer necessary to grant aid firms simply to offset the effects of a dysfunctional cost and taxation environment. In the midst of all of these positives, however, the fact remains that the indigenous traded sector displays significant performance weaknesses which the traditional industrial policy model is failing to address.

Clearly a serious reappraisal of policy is needed. On coming into office, l directed my Department to undertake just such an examination with a view to addressing the concerns I have just outlined. The outcome of that review is the reason I am bringing forward the Industrial Development (Enterprise Ireland) Bill, 1998.

The traditional approach to the industrial development business can be characterised as supply driven. Under this approach the development agencies channel their cash into a wide range of schemes which they have established and the onus is largely on the firm to match its needs to those schemes.

The effect of this supply driven approach is that there are too many schemes and too little focus on the real needs of the client firm. At best this gives rise to a scattergun approach in the hope that if enough clients get support across enough categories at least some of it will hit the mark. This approach is wasteful, inefficient and less than optimally effective. Moving away from it requires a much greater focus on identifying the real needs of client firms and addressing those needs in a streamlined, flexible way. Such a move will result in better value for money, better targeting of supports and better performance from the assisted companies.

The key to fulfilling client needs is to first establish what those needs are. Historically the industrial development agencies have tended to concentrate on grants administration based on paper plans rather than on taking a hands-on approach and spending time with the client to develop an in-depth knowledge of their business and the strategic issues facing it. This approach works well in the FDI context where the majority of firms are well established successful firms who are essentially negotiating the level of cash subsidy which will be paid to secure the location of their project in Ireland and who already have the necessary internal competencies in R and D, marketing and strategy.

In the indigenous context, however, firms tend to be less well developed and their needs are more complex ranging across the entire spectrum of business functions. At present firms are faced with the prospect of having to deal with three independent agencies, FÁS, Forbairt and ABT, which are administering in excess of 45 different schemes. There are, of course, some firms which profit from the current system. Those firms which have a clear idea of their needs and the resources to exploit the system will be more successful than other less well developed firms and may thus capture a greater proportion of agency resources. In addition, the existence of separate agencies for overall business development, human resources and marketing offers firms the opportunity of using a positive decision on funding by one agency to leverage funding from the other agency. This is one manifestation of the grant mentality which has been strongly criticised for its negative impact on entrepreneurship and risk taking in enterprise. lt also diverts scarce resources from the areas of most need.

The Culliton report summarised the issue as follows: "Industrial firms are integrated business entities. The different functional areas operate together in a cohesive way. State support for the functional activities of firms, whether in marketing, training or finance, should be provided in an integrated package". The Culliton Group's key insight was to recognise that State supports relate directly to the key strategic business functions performed by firms.

My Department has built upon the Culliton view by developing a business development model — BDM — which provides the basis for assessing existing agency schemes and programmes and for streamlining them into a format which is clear, simple and directly related to business development needs of firms in the areas of strategy assessment and formulation, research development and design, production and operations, marketing, human resources and finance. The goals are simple support structures meeting real business needs and efficient client-friendly delivery. Three separate agencies operating in excess of 45 different schemes is not the way to achieve this. If we are to take an integrated, holistic approach to the developmental needs of enterprise we need to have an integrated agency, hence the creation of Enterprise Ireland.

Enterprise Ireland will bring together the business development functions of Forbairt, An Bord Tráchtála and relevant human resources expertise from the FÁS services to business function. Enterprise Ireland will have a new mission and a new approach to service delivery based on the strategy outlined here. In bringing together the key elements of Forbairt, An Bord Tráchtála and FÁS, the new agency will have access to expertise across the range of business functions required by firms and outlined in the business development model.

The following essential elements will underpin Enterprise Ireland. There will be clarity of mission, clarity of focus in terms of its client base, a close working relationship with client firms to establish their developmental needs, streamlined services which meet those needs and selective deployment of resources to achieve maximum impact on the performance of client firms. I will now outline those elements in greater detail.

The mission of Enterprise Ireland is "to help client companies develop a sustainable competitive advantage leading to increasing profitable sales, exports and employment." This mission has been devised to reflect a clear statement of cause and effect, that is, sustainable competitive advantage at the level of the individual firm which leads to the desired policy outcomes of increasing profitable sales, exports and employment. The key metrics of sales, exports and employment underpin the need for Enterprise Ireland to focus strongly on companies with the willingness and potential to trade internationally. Given the limited size of the domestic Irish market and its increasing openness in a globalised competitive environment, significant growth in sales and employment can only be achieved through exporting.

The client base of Enterprise Ireland will be comprised of manufacturing and internationally traded services companies which are genuinely Irish based and whose growth and development can be enhanced through working with Enterprise Ireland. Enterprise Ireland client companies will essentially fall into two categories. The first category will involve companies which are Irish owned at start-up and where any foreign involvement is of a purely financial nature only. My primary intention here is that Irish start-up companies which are bought out by overseas investors, often at a relatively early stage of development, should remain as clients of Enterprise Ireland.

The second category will comprise companies which are foreign owned but whose Irish management has autonomous decision-making power in relation to a majority of key strategic business functions, that is, strategy formulation, research and development and marketing. Such companies are effectively indigenous in terms of functions and, as such, appropriately belong in the Enterprise Ireland client base. Companies whose long term strategic development is determined in Ireland will fall within the Enterprise Ireland client base, while companies whose strategic development is determined by their parent corporation will fall within the client base of IDA Ireland.

I will now turn to the issue of the delivery of supports. In the context of the client base segmentation which I have just described, there will be one clear source of financial assistance for companies for each element of the client base; Enterprise Ireland and IDA Ireland will be responsible for financial assistance to their respective client groups. As regards the issue of non-financial soft supports, which are largely of an information or advisory nature, these will be directed primarily, but not exclusively, at Enterprise Ireland's clients since these companies face greater developmental challenges than IDA Ireland's clients. However, the objective of embedding foreign direct investment companies in the economy through sub-supply linkages and the location of strategic business functions, such as research and development and marketing, must also be taken into account. In that regard, the overall policy goal is that the maximum number of foreign direct investment companies should become fully rooted in the economy.

Significant diseconomies of scale would arise from splitting the provision of soft supports between Enterprise Ireland and IDA Ireland. In the new agency structures, therefore, soft supports in relation to linkage, marketing, research and development and human resources will be provided centrally by Enterprise Ireland. The main focus of these supports will be on Enterprise Ireland client companies. However, Enterprise Ireland will also provide these supports to IDA Ireland and other agency clients which have specific developmental needs and where Enterprise Ireland supports can add value.

As I have already stated, the business development model will be central to Enterprise Ireland's functions. The key strategic concept is that flexible, customised supports should be delivered to Enterprise Ireland clients as part of a structured development process involving an analysis of client needs, delivery of the supports themselves and subsequent monitoring of client performance.

Enterprise Ireland will have the necessary expertise to add value to its client base in the analysis and quantification of client needs across the six functional elements of the business development model, that is, strategy assessment and formulation, research, development and design, production and operations, marketing, human resources and finance. Enterprise Ireland will also draw on its internal resources to provide added value services which meet identified client needs. However, the agency will also facilitate third party provision of developmental services where this is the best way of meeting client needs. In order to effectively implement the business development model and the structured development approach, the following activities and associated resources will transfer to Enterprise Ireland: all of An Bord Tráchtála's functions, Forbairt's business development, investment policy and commercial assessment functions, the relevant elements of Forbairt's research and technology functions and the relevant elements of the services to business function of FÁS.

I would like to return to the issue of focus and to underscore its importance. My aim is to ensure that Enterprise Ireland is a genuinely new and focused organisation and not simply an amalgamation of the component parts and activities of the agencies involved. The business development model will provide the overall strategic direction for the refocusing and streamlining of the various schemes operated by the agency and the mechanisms through which they are delivered. My Department will work in conjunction with Enterprise Ireland to ensure that the model is effectively operationalised and that the necessary streamlining of schemes takes place. I am particularly anxious to ensure that a clear strategic direction is set for Enterprise Ireland's technology operations and to remove some of the confusion which has persisted since the incorporation of the former Eolas into Forbairt.

As part of Enterprise Ireland's overall company developmental mandate, its technology function will provide needs analysis and developmental, value adding supports to client firms. To achieve this, Enterprise Ireland's technology activities will encompass technology auditing as part of the overall client needs analysis, advice and problem solving, contract research and development where identified market failures exist, assistance and advice with licensing and technology transfer and co-financing of in-company research and development.

It must be clear that Enterprise Ireland is an industrial development organisation, not a stand alone technical institute and its technology activities must fit that brief. The corollary is that Enterprise Ireland should not be involved in public good or regulatory activities or non-developmental testing services and services where, relative to private sector providers, a competitive advantage is gained through cross-subsidisation from other parts of the organisation, either in cash or in kind.

In light of the foregoing the Government has decided that some functions currently exercised by Forbairt will not transfer to Enterprise Ireland. In this context it is intended that the existing Forbairt functions in the metrology area will transfer to the National Standards Authority of Ireland. It is also intended that the Irish Energy Centre should be constituted as a statutory agency of the Department of Public Enterprise and separate legislation will be brought forward by the Minister for Public Enterprise to achieve this.

As regards those elements of the existing Forbairt technology activities involving the third level sector, such as the programme in advanced technology and the measure 4 scheme, these will be incorporated within Enterprise Ireland on the clear understanding that they must contribute to the development of enterprise in the long, medium and short term. I conclude on this aspect of Enterprise Ireland's functions by reiterating that, where necessary, specific technology activities transferring to the agency from Forbairt will be reoriented and reconfigured to meet the agency's overall developmental mission. Where necessary, such reconfiguration will involve the discontinuation of non-developmental activities.

I want now to outline the human resources dimension of the new agency. I am committed to ensuring, as with the other elements of the business development model, that Enterprise Ireland has the capacity to address human resources development within its client firms. That capacity will be provided through the transfer of relevant elements of the FÁS services to business function. Significant elements of STB activities interface directly with the overall mission and strategic approach of Enterprise Ireland, in particular assisting companies in assessing training needs; assisting them in the development of company training plans; and the delivery of training grant schemes. The relevant staff and resources required to exercise these functions within Enterprise Ireland will transfer from FÁS to the new agency. Other elements of the function will remain within FÁS.

I want to turn to the specific provisions of the Bill and to outline its key features to the House. As I indicated at the start of my address, the main purpose of the Bill is to provide for the establishment of the new industrial development agency, Enterprise Ireland, through the amalgamation and restructuring of Forbairt, An Bord Tráchtála and certain elements of the services to business function of FÁS. Consequently, the Bill provides for the dissolution of Forbairt and ABT. The Bill also provides for the transfer of the metrology functions currently exercised by Forbairt to the National Standards Authority of Ireland.

The Bill also provides for amendments to the Industrial Development Acts, 1986 to 1995, and the Metrology Act, 1996, arising out of the restructuring, as well as certain other minor amendments to those Acts, the Shannon Free Airport Development Company Limited Acts, 1959 to 1995, and the National Standards Authority of Ireland Acts, 1996 to 1998, which are mainly concerned with the updating of certain financial limits. I intend that the new agency will be established during the month of July, and section 3 provides for the making of the necessary order to achieve this.

Section 6 provides for the establishment of Enterprise Ireland — known in the Bill as "the Agency"— as a corporate body and as an agency of Forfás. In that regard, Enterprise Ireland will come within the policy and co-ordination remit of Forfás and its powers have been expanded to allow for this in section 45.

Section 7 sets out the functions of the agency. This section provides the broad powers to allow Enterprise Ireland to implement the business development model. In addition to these broad functions, the agency will also draw on the specific provisions of the Industrial Development Acts, 1986 to 1995, to provide its client firms with a comprehensive range of advice and developmental supports.

Staffing provisions for Enterprise Ireland, and related provisions for IDA Ireland, are dealt with in a number of sections, while the provisions of the Industrial Development Act, 1993, are also relevant. Under the terms of the 1993 Act which continue to apply, Forfás is the overall employer of both its own staff and those of Forbairt and IDA Ireland. Initially, it is proposed to retain this approach in the Enterprise Ireland context; that is to say that staff will be employed by Forfás and seconded to Enterprise Ireland. This is provided for in section 39 for ABT staff and in section 40 for FÁS staff. Under the terms of the 1993 Act, the staff of Forbairt are currently staff of Forfás and, as such, the power already exists to second these staff to Enterprise Ireland.

In regard to the staff of FÁS, as I have already indicated, only certain elements of the FÁS services to business function will transfer to Enterprise Ireland. Section 40 therefore provides the powers to transfer the relevant staff. In order to allow sufficient consultation for this, the section will come into force by ministerial order.

Provision is also being made in the Bill to allow Enterprise Ireland and IDA Ireland to assume the role of employer should this prove necessary. In the case of Enterprise Ireland, this is provided for in sections 18 and 19. A similar consequential provision is being made for IDA Ireland in sections 36 and 37.

The successful pursuit and implementation of Enterprise Ireland's new mission and strategy will require a very different approach to that currently pursued by its component agencies. As such, the success of Enterprise Ireland will be critically dependent on its staff. I want to ensure that the new agency has the full scope to implement a human resources policy which underpins its distinctive mission and business needs. Should this require a change in the staffing structures established under the 1993 Act, then such change will be made and the necessary order making provisions are included in the Bill to achieve this.

Section 33 provides for an amendment to the Industrial Development Act, 1993, to allow for an increase — from £750 million to £2 billion — in the aggregate amount of grants to Forfás, Enterprise Ireland and IDA Ireland. The increase is necessary because the bodies in question are now nearing the existing statutory limit in respect of the total amount of moneys which may be granted to the bodies for the exercise of their functions. Similar provisions are made in respect of Shannon Development in section 35. It should be noted that this is the gross amount of money to be granted to the agencies and has no impact on the percentage grant aid to individual companies.

Section 34 provides for an amendment to the Industrial Development Act, 1993, to allow for an increase in the aggregate threshold — from £2.5 million to £4 million — for grants to an individual undertaking above which Government approval is required. The existing threshold dates back to 1981 and, taking inflation into account, its continued application has resulted in a significant increase in the number of projects which require Government approval.

This section also provides for a pro rata increase in a range of individual grant thresholds set out in the Industrial Development Act, 1986, above which Government approval is required, thus bringing these thresholds into line with the increased aggregate grants threshold.

Sections 49 to 51 provide for the transfer of the metrology function to the National Standards Authority of Ireland. In the first instance, the staff of the metrology function will be seconded by Forfás to NSAI. However, consistent with the provisions being adopted for Enterprise Ireland and IDA Ireland, provision is being made to allow the subsequent transfer of staff to NSAI.

I would conclude by reiterating my earlier assertion that the creation of Enterprise Ireland is not simply a case of moving the deck chairs. This Bill, the structures it provides for and the strategic thinking underlying it, which I have outlined to the House today, are part of a fundamental reappraisal of industrial policy in Ireland. It is based on a firm commitment to putting the business environment first and to critically reassessing the role of State interventions within that overall context. It is also based on a commitment to putting the customer first and to delivering streamlined supports which address real business needs.

The Bill is designed to deliver better value for the significant amounts of taxpayers money which is devoted to industrial development, and to build the kind of industrial base which will provide the impetus for the economy of Ireland into the new millennium.

A Chathaoirligh, I must apologise. I must leave the House because, as many Senators may be aware, the US Secretary of Commerce, Mr. Daly, is arriving in the Republic of Ireland with a business delegation from Northern Ireland at 12.30 p.m. in Sligo. The intention is that I will be there to meet him on behalf of the Government. I am sorry that that is the case and I apologise, but the Minister of State, Deputy Treacy, will take over. I look forward to reading the contributions of Senators and to responding to them next week on Committee and Final Stages.

I especially thank the House for facilitating such an early debate. I was anxious that this agency would be established in July. It is important, particularly for the staff, that the restructuring will be done as quickly as possible. Therefore, it was rather ambitious to be able to get Government approval and have the Bill drafted and through the Oireachtas by 2 July. As the Houses are rising earlier this year, there was a greater rush at the end than I would have wished. I appreciate the understanding from all sides of this House of the time pressures which we are under in relation to this matter.

Mr. Coghlan

I welcome the Tánaiste and Minister to the House and thank her for the comprehensive overview of the Bill. We are again happy to be understanding and I respond to her remarks in that regard on allowing the Bill to be taken here today. As she will appreciate, we only received the Bill in the last day or two. Therefore, my remarks will be of a preliminary rather than a comprehensive nature because of the lack of time for research.

This Bill creates Enterprise Ireland. One hopes that this new super agency will provide a fresher and better approach to service delivery. That appears to be the Minister's intention. The amalgamation of Forbairt, An Bord Tráchtála and the services to business section of FÁS is a major change to existing structures. Resistance to change is natural and it would be interesting to hear the views of staff and key personnel in those agencies. We have shown an ability to make things work and it is in that spirit that this new body will be established. The metrology functions of Forbairt will be taken over by the National Standards Authority of Ireland where they more properly belong.

The central purpose of the Bill is the establishment of Enterprise Ireland to allow an integrated approach to company development. It is logical to provide a single point of contact for firms. I agree with the general thrust of the Bill and I give it a broad welcome. Sections 6 and 7 form the core of the Bill. I welcome section 8 which deals with ministerial directives. We had a very good example yesterday from the Minister for the Environment and Local Government of a good use of a ministerial directive. They should be applied more often and we should be prepared to see them employed. Governments after all are elected to govern. I welcome the provision which allows for a ministerial directive from time to time as might be required.

I hope Enterprise Ireland will match the mood and reality of the Celtic tiger's success. There is no doubting the success of the IDA in attracting industry over the years. It is equally without doubt that nothing like the same has been available to indigenous enterprise where the support structures have lacked success and a proper degree of focus. We all share the Minister's hopes for Enterprise Ireland.

At the structural level there have been too many agencies and schemes. Rationalisation is long overdue. A tighter, slimmer, even meaner machine is required. Business can never rest on its laurels. We must strive for continued improvements in all areas. We need more export markets. Denis Brosnan of the Kerry Group in my own county is a shining example in this regard. We need more investment in research and development. We have the educational capabilities to fill all the necessary functions to further enhance our efforts with more focus.

The structural changes provided for in the Bill will present a challenge but they are the correct and necessary measures. Compared with the unsatisfactory situation which has developed, with three indigenous development agencies, the new approach which is client centred and has systematic identification of individual firm needs is the correct one. Very often there has been a lack of understanding, sympathy and support for indigenous industry and particularly for smaller firms. The intention of focusing on all aspects of a firm's strengths and weaknesses and of having them properly assessed is a laudable goal which will, in each case, lead to an agreed plan prioritising the client industry's needs. This will be linked to six key business functions: strategy assessment and formulation, research, development and design, production and operations, marketing and distribution, human resources and finance. Plans will be implemented through a team of client development executives who will have specialist resources available as required.

I welcome the intention to reduce the number of schemes and programmes with which companies have to cope. Firms wish to access support in the least complex way and for that reason all simplification and streamlining is to be welcomed. The new approach will, I hope, reap substantial benefits. As the Minister said, An Bord Tráchtála's overall goal is to increase exports while Forbairt's goal is to grow profitable sales. She also pointed out that independent evaluation of An Bord Tráchtála's activities found that 60 per cent of agency clients were common with Forbairt and that in many cases Forbairt and An Bord Tráchtála were grant aiding different aspects of the same project. Rationalisation is necessary. I also welcome the intention to establish a restructuring implementation task force to assist in seeing this through.

The Minister, in her speech, spoke of the need, willingness and potential to trade internationally. This is the key to our further success. She rightly said that given the limited size of the domestic market and its increasing openness in a globalised competitive environment we need significant growth in sales and employment. This can only be achieved through exporting.

I hope the Minister of State, Deputy Treacy, will respond to some of the questions I will now pose. The first is near to my heart because it concerns the lovely countryside of south Kerry. I have on previous occasions raised the matter of the vacant Pretty Polly factory in Killarney. Another industry is also promised for Killarney. I appreciate the fact that the IDA is working hard on both projects and I also stress the needs of towns such as Kenmare, Cahirciveen, Killorglin and Dingle. South Kerry has a tremendous tourism industry, thank God, but it is not an all year industry. We have a sufficient workforce and we are badly in need of industrial jobs as, no doubt, are many other parts of the country. The owners of the Pretty Polly factory willingly handed the premises back to the State and it is now vested in the IDA. It is a huge complex and very few assets of its size and capability are available anywhere in the country. The Minister met councillors from Killarney many months ago and outlined her hopes for the factory and briefed us on the efforts of the IDA. She said that, all going well, a replacement industry would be in the factory by last Easter. I wish the IDA well. I think they are very close to bringing another industry to Killarney and I would like updated information on these developments.

My party welcomes the publication of the Bill but has reservations about the new super authority proposed, namely, Enterprise Ireland. The thrust of the Bill is welcome but there are issues I would like addressed in the reply to the Second Stage debate. Will the larger authority be unfocused because of its very nature? The Minister stressed that this would not be the case and I hope she is right. Is there enough emphasis in the legislation on the promotion of exports and support for exporters? Our future lies in exporting. However, exports are not specifically mentioned in the Bill. Services to business need to be flexible. Will this be possible with a large bureaucracy such as that proposed?

Will the Minister give a commitment that the same level of services will be available to small businesses? There has been an unfocused approach in the past because of the multiplicity of agencies. Will the Minister of State guarantee that the same level of services will be available under the new structure? Will measures be taken to ensure the smooth transfer and harmonious integration of staff into the new agency? The Minister said the matter would take place by ministerial order because consultation is required, but that has not yet taken place.

Ms Cox

Ireland is experiencing unprecedented economic growth. However, to continue to provide a proper environment for businesses to grow and develop, systems and structures often require to be amended. Ireland's continued growth must be developed on the back of the small and medium sized firms. Indigenous industry is part of the lifeblood of the country and small and medium sized companies are vital to Ireland's continued success in European and global markets.

Such firms have the characteristics of being small in size, often owner managed, providing family employment and being based in local rural communities. Such firms not only provide employment but stem the flow of rural depopulation. They provide employment in local areas and their contribution locally and nationally is vital. These firms are the foundation of Ireland's future. Their continued growth and development are vital to provide the resources Ireland may need in a future global recession.

In 1993 Eolas and the IDA were successfully restructured. I commend IDA Ireland on its fine and professional work on our behalf. I have had the opportunity to meet with IDA Ireland representatives in the US on a number of occasions and I have been impressed by their initiative, hard work and their commitment to Ireland. At home the IDA Ireland staff go to great lengths to do their jobs and they achieve success for Ireland in the competitive task of attracting multi-national business. The objective of the restructuring in 1993 was to create a clear focus and that was achieved. The restructuring has made a positive contribution to Ireland's success in attracting, retaining and further developing foreign investment.

We can look at the success stories to see how initial developments have continued to grow — companies such as Boston Scientific and APC in Galway and longer established firms such as Thermo King, Nortel and Digital which have made major contributions to the economy of Galway and the west for over 20 years. These companies started as small initial investments and have continued to expand and create employment. Their success is a recognition of the input of the local workforce, the various support agencies and the attractiveness of Ireland as a base.

It is acknowledged that it can be confusing for indigenous enterprises to identify the help available to them from State agencies. There are too many schemes and agencies to deal with and this causes confusion and the confusion impacts on their ability to address their development needs with State support. Their weaknesses are in areas such as sectoral positioning, profitability, traditional sector development and a strong concentration on the UK market as the only export market to be exploited.

The existing State agencies can help indigenous industry to address these weaknesses, but the Minister and the Government have identified that a new approach is necessary. State intervention should be a benefit not a hindrance or an interference. Sourcing State assistance in enterprise development is difficult at present. The services provided are driven by the agencies' perception of the needs of industry rather than by the needs identified by industry. There are problems for the recipients of the aid because the agencies drive the agenda. There is confusion among client firms, most of which are small developing companies that do not have time or expertise to identify their key requirements and needs. Such companies are busy surviving and do not exploit the opportunities available to them, opportunities which the State will try to help them to exploit. Many of the key managers in such companies are bright entrepreneurial people with drive and vision. However, they sometimes have difficulty framing their vision in a format acceptable to the funding channels. Dealing with three agencies makes it difficult for the entrepreneurs to benefit from a unified strategic approach. This lack of unity and strategic focus can impede a firm's long-term development which impacts in turn on Ireland's growth.

The Government and the Minister have recognised this difficulty and the Bill reflects their attempt to address this element of indigenous development. The existing system will be replaced by a streamlined, client centred approach as outlined. This new approach will be implemented by a team of client development executives who will be able to draw on specialised resources as required to allow them to assess client needs and to deliver the requisite supports.

Key elements of the approach include a participation process whereby client organisations seeking supports will participate in a structured development process. This will take place in association with the relevant development personnel. It will establish the position of the business, its strengths and weaknesses and the internal and external competitive forces that impact on it. This process will be carried out in collaboration with the development agency personnel. This process of analysis will lead to an action plan which will prioritise needs and identify the State's input into the process. Importantly, this will put in achievable, measurable targets that will have to be reached before continued State support can be received. The benefit of this process is that all parties can see pre-established targets and measure performance against them. The objective is to help companies develop a sustainable competitive advantage.

The intention is to create more growth, more jobs, increased sales and increased exports. Measuring results in terms of sales, exports and employment will underpin the focus of this new agency. Given the limited size of the domestic market, firms benefiting from State intervention must focus on export and must be willing to operate in a globalised market. An overall aim of the restructuring is to create a simple, one stop shop type environment which will be a simple support structure meeting real business needs. The agency aims to provide the best of both worlds: in-depth analysis and planning as well as a clearly defined single point of contact. There will be no more eternal knocking on doors and missing out on the correct service for one's requirements. Red tape and bureaucracy will be cut and an efficient, user friendly approach is the implementation objective.

There are a number of benefits to this new approach, and if it is as successful as the restructuring of IDA Ireland, the future looks bright for the energetic, dedicated, entrepreneurial indigenous firm. Those benefits include easier initial access to State supports and assistance by identifying and prioritising key development needs. This identification and prioritisation will help ensure that the resources available are utilised to their best advantage according to real client needs. The synergistic energy of the combined agency expertise will greatly assist and support developing organisations. It will also be easier to measure results and to review and amend programmes as success is measured. This provides for better accountability and transparency in the process.

This Bill sets the scene for the creation of a new company development agency. The goals are simply defined: a client centred approach to support provision, addressing the real needs of the business requiring support and developing a simple, user friendly, effective service. As has been said, three separate agencies cannot achieve this, and 45 schemes are too confusing and daunting. An integrated agency is the way forward in assisting indigenous industry to develop in a sustainable and competitive manner and to assist it in continuing to make its contribution to the necessary development of Ireland as an emerging market leader.

The new company development agency will bring together the business development functions of Forbairt, An Bord Tráchtála and the services to business brief of FÁS. It will have a new face, a new mission and a new way of doing business. It will benefit greatly from the synergy of its combined expertise and it will be a case of the sum of the whole being greater than the individual parts. There will be a single point of contact for client companies and there will be wide ranging expertise available in one organisation. As I have said, this will be an integrated, user friendly approach. The central agency seems a natural progression for the agencies, as the groundwork for missions and shared objectives is already there. An Bord Tráchtála's goal is to increase exports and Forbairt's role is to promote profitable sales. Given the size of Ireland's domestic market, developing profitable sales must involve exports. Ireland's indigenous firms need some assistance in attacking the export world. Irish firms are often too insular and lack the confidence necessary to attack markets outside their comfort zone. Irish produced goods and services are second to none and are highly valued abroad.

A Galway software manufacturing company, which is Irish owned and managed, has created its first export sale without State aid or intervention. This is not because there was no support forthcoming, but because the company's key management staff were so busy trying to attend to its everyday survival that it was unable to tap into the right source of funding. Many small firms experience the same problem. They are too busy to sift through the State schemes to see what is available to them.

This Bill sets up Enterprise Ireland through the amalgamation and restructuring of Forbairt, An Bord Tráchtála and certain elements of FÁS's services to industry. The Bill sets out the functions of that body and allows for the integrated approach that is so necessary. It provides for the dissolution of Forbairt and An Bord Tráchtála and allows for an increase in the grants and incentives that can be paid to the agencies. This has no impact on the percentage grant aid which may be paid to individual companies.

This Bill is a move into the future. The creation of Enterprise Ireland sets the scene for indigenous firms as we enter the new millennium. Enterprise Ireland will deal with genuinely Irish based companies whose growth can be enhanced with its assistance. Such organisations will generally have in excess of ten employees. Enterprise Ireland will not compete with existing structures such as the enterprise boards, area partnerships, business innovation centres and Leader programmes. The focus will be on growth companies with export potential. I hope this restructuring achieves its aim of providing direct, user friendly support to indigenous firms in a one stop shop. There should be less red tape and a greater spread of expertise on call. The future of Ireland's economy is dependent on strong exports and strong internal profitability for Irish owned small and medium sized enterprises. A place in the global market for Irish products and services is essential. The Government is providing the environment and supports necessary for that and Enterprise Ireland is an important step in that process. I commend the Tánaiste's initiative and look forward to the successful operation of Enterprise Ireland and the continued growth and development of Irish industry.

Mr. Quinn

I wish to share my time with Senator Ross.

An Leas-Chathaoirleach

Is that agreed? Agreed.

Mr. Quinn

I welcome the introduction of this Bill in the Seanad. It is unusual to have so many Bills introduced in the Seanad and I hope this is the start of a new trend. However, I do not necessarily welcome the Bill with the same enthusiasm, despite being one of the most vocal opponents in 1993 of the crazy arrangements that had export development in one Department and industrial development in another.

I am glad that that arrangement will be a thing of the past. Whether it makes sense to merge Forbairt, An Bord Tráchtála and a section of FÁS is another matter. The Tánaiste said she assumed that this would provoke the criticism that this was just moving deck chairs. She did not mention the Titanic.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

That is now a success story.

Mr. Quinn

It is a great success.

I am opposed in general to the proliferation of semi-State agencies and any overlap or duplication of effort which arises from bodies' remits impinging on one another. It is preferable as a general principle that companies in the private sector, particularly smaller ones, should have to deal with as few State bodies as possible.

However, that is not to say all mergers of State agencies are a good idea. Mergers can have disadvantages as well as advantages and are not automatically a good thing. In any given case we should weigh one against the other before deciding on a shake up. I wonder if that has been done in this case.

I am particularly worried about the disappearance of an agency specifically devoted to export development. Export development is a highly specialised task which needs specialised skills. Since the establishment of Córas Tráchtála 50 years ago we have had an agency which provided a focus and home for that specialised expertise. Our national export agency has built an identity, a sense of corporate purpose and an esprit de corps among its employees, all centred on that one export function. That specific function and mission will now be lost, and I am not completely sure that will be a good thing.

I say this in the full knowledge there has been a considerable overlap in recent years between the activities of Forbairt and An Bord Tráchtála in the field of company development. However, that could be solved simply by taking An Bord Tráchtála out of the company development business and slimming down its role to its original one of concentrating on market development overseas. Merging the two agencies completely seems an unnecessarily drastic way of dealing with a comparatively minor overlap problem, especially since an alternative approach is available which would bring An Bord Tráchtála under the Forfás umbrella but still leave it as a separate agency.

Another reservation of mine concerns Forbairt itself. It is only four or five years since we created Forbairt and that agency has painstakingly and expensively created an identity and role for itself over those short few years. That identity is now to be thrown out the window and client companies will have to get used to dealing with another completely new body. Is that wise?

We need only look at Forbairt to realise not all mergers of State bodies are painless or trouble free. The fundamental thrust behind the creation of Forbairt was to have an agency to focus on indigenous development, which was an excellent and commendable idea. However, the agency has also taken on total responsibility for scientific research and development in this country, which I think has been less successful. Some of the more long-term aspects of that activity sit very badly on an agency that is concerned mainly with developing scientific companies in the more medium term. As a result, our approach to long-term research has been weakened rather than strengthened under Forbairt. We have lost the benefits of having an agency which was clearly seen to be focused and concentrating its efforts on science and technology. There is a strong feeling in the scientific community that our national development in science and technology is not best served by the present organisational structures.

We are now similarly going to lose a sense of focus and commitment by effectively abolishing a specialised export agency. One of the problems is that once we have done it, it will be very hard to undo. It is very easy to create mergers at the stroke of a pen but it would be much more difficult to recreate an export agency in four or five years time if we find at that stage that the new arrangement has left a gap which needs to be filled. That concern has not been recognised in this Bill.

One of the reasons for the "merger mania" we have seen in the area of State agencies is that people confuse State agencies with Government Departments. When I became involved in An Post almost 20 years ago I discovered how a Department could change its functions and tasks. It is very easy to chop and change Departments because of how they are structured into divisions, each of which is run by an Assistant Secretary General. However, State agencies are organised differently and any attempts to rearrange them cause major upheaval. That was very evident in 1993 when the effort was made to create Forfás and the other new agencies.

Any rearrangement needs to be carefully evaluated in terms of advantages and, more particularly, disadvantages. I question whether that has been done in this case, despite the rosy scenario painted by the Minister this morning. What makes me most sceptical about the size of the benefits in this case is that I do not see the move arising from a clear customer need — I see it as much more driven by internal considerations. Business does not want to deal with a plethora of State agencies, but how widely has business been consulted about the need for this merger? Can the Minister give us a sense of that? Is it only being driven by internal considerations or are the changes being made on the basis of consultations with customers? To what extent is the Bill a response to the needs of the marketplace served by these agencies and to what extent is it a response to the bureaucratic need for something that is tidy, neat and more easily understood?

I think business people will not see this merger as a move which addresses their priorities. If that is true, Enterprise Ireland will have its work cut out for itself if it is to justify its existence to its customers and client base.

I visited several countries in South East Asia last week. I was impressed by the fact that some of them had succeeded while others had failed. Some of those success stories came about because of focused State agencies which set out what they were trying to achieve. Therefore, there are functions which can be achieved effectively by State agencies, as has been done so well in the past here. I trust and hope this Bill will be successful in doing that and I wish the people involved every good fortune and success.

This may not be the most sensible or necessary of measures but once we are stuck with it, it is in the national interest that it is made to work. I believe the Minister has put the necessary work into it although I question some of the motives behind it. However, I believe it can be made to work and I wish the Minister well with it.

Mr. Ross

I thank Senator Quinn for sharing his time with me. However, I think he has been somewhat contaminated by his sojourn in An Post; while I am a great admirer of a great deal he does in the area of enterprise, I was sorry to hear him pay tribute to the State sector in such glowing terms.

I am opposed to this Bill. Those who said it is simply moving the deckchairs on the Titanic are right. I am disappointed that a Minister who has shown such commitment to private enterprise and starred in many other areas of which business interests approve is introducing a Bill of this sort, which is concentrated not on a radical reappraisal of these agencies but on changing things around and not attacking the core problem.

This Bill is a means to make it easier for businessmen to obtain grants. They are confused and do not know which agency to approach for grants and the Bill makes life easy for them in that regard. This legislation will merely increase the existing dependency culture in this country. There is evidence of that in section 33 which increases the statutory limit of grants from £750 million to £2 billion. I see no reason for this. In my opinion the Minister should advocate a reduction in the number of grants, in people's capacity to obtain them and in the Government's capacity to provide them. Instead she is introducing an enabling clause which will allow the Government to provide businesses with additional grants and increase the dependency culture. The Minister is making it possible for the Government to provide additional money and she is making it easier for business interests to obtain it.

A Bill of this nature is not required in the current economic climate. What the Minister ought to have done, which would have been in keeping with the philosophy of the Progressive Democrats, was to consider the cost of operating these agencies and ask whether they are needed. I welcome the announcement in this morning's newspapers that the idea of trading houses — another disastrous and unsuccessful piece of State interference in enterprise — has been abolished. Incidentally, the name of the agency covered by the Bill, Enterprise Ireland, is a deception designed to fool people into believing it is an enterprising agency. It is not; it is a grant giving agency.

When the Minister has had an opportunity to read our contributions I hope she will state that, instead of changing things around in the way the Bill suggests, she has been considering FÁS and that she was unaware it cost £500 million per year to operate. Following next Friday's Cabinet meeting about the next budget, I hope the Minister will indicate that she has been considering the possibility of reducing the operating costs of FÁS — when in Opposition she always favoured keeping spending down — because the European Union has informed us that spending must be reduced. I hope she will also state that, as a committed member of the European Union and an advocate of the euro, there is a great opportunity to make reductions in her Department in the area of FÁS, which costs £500 million per annum to run.

Many FÁS schemes are exploited by people in employment, which costs the Exchequer a great deal of money, a large proportion of the buildings used by the agency are empty and the equipment housed in them is not being employed efficiently. When I referred to FÁS on previous occasions I received a large number of representations which convinced me that people working for the agency have little to do. As a result of some of those representations, I visited a FÁS training and enterprise centre. My hosts were extremely good, genuine, hard working and committed people and they inquired how I could make such statements about the agency. I informed them that I agreed with much of what they were doing but I inquired if it was worth £450 million and asked why certain rooms were empty 24 hours a day. That is the problem with FÁS.

An Leas-Chathaoirleach

The Senator is straying slightly from the content of the Bill.

Mr. Treacy

He is meandering.

Mr. Ross

FÁS is included in the Bill, which refers to the movement of its business development.

Mr. Coghlan

The Senator's contribution is crucially interesting on an otherwise dull day.

Mr. Ross

I do not believe it is possible to reconcile FÁS and enterprise in any way. FÁS is an agency for training people but it is also an empire.

Mr. Dardis

Just like Independent Newspapers.

Mr. Ross

Independent Newspapers is a competitive organisation which competes successfully in the private sector, much to the chagrin of many Members.

An Leas-Chathaoirleach

That organisation is not included in the Bill.

Mr. Ross

No, it is not. However, I felt I had to respond to Senator Dardis' provocative interruption.

The State agencies to which I refer are empires. They are not enterprising organisations, they merely provide grants. In my opinion, the Minister ought to radically attack the root of the problem, namely, the grant structure and the grant mentality.

I am disappointed that the process of political appointees to the board is set to continue. During her time as Minister of State at the Department of the Environment, the Minister introduced a novel way to appoint people to the board of the Environmental Protection Agency — EPA. To some extent, that avoided the trap of making political appointments. However, the Bill before us reverses the position. We have not been served well by political appointees on the boards of semi-State or Government agencies. The names of the same people crop up all the time on various boards. I do not know what they will do if these agencies are finally merged.

It would be to the Minister's credit — there is time for amendment — if she reconsidered the issue of political appointees. She should state that appointments to the boards of these agencies will not be dictated by political considerations. Above all else, grants are subject to political pressure. In the past there were unfortunate cases which gave rise to unease in respect of the allocation of grants because of the presence of political appointees on these boards. This would be a great opportunity to break that tradition, which is not practised particularly nobly in this country, and see if there is another way — as in the case of the EPA — to appoint people on merit.

Mr. Dardis

Like Senator Quinn, I am pleased the Bill was introduced in Seanad Éireann and that it will commence its passage in this House. The EPA legislation, which the Tánaiste and Minister for Enterprise, Trade and Employment introduced during her time as Minister of State at the Department of the Environment, is a good precedent in terms of legislation being introduced in this House and subsequently becoming law.

The Bill is designed to provide the statutory framework for the establishment of Enterprise Ireland and it represents a blueprint for the future of indigenous industrial development policy in Ireland. It should be welcomed by every Member of the House — I am not surprised that Senator Ross opposes it — as another important element in underpinning the Government's commitment to providing the climate to allow home-grown business to develop and progress in the new millennium.

It has been frequently stated that Ireland has enjoyed phenomenal and unprecedented economic progress during the past decade. The House recently debated Objective I status and the need for a regionalised approach to securing this for certain parts of the country. I made the point that the fact that we no longer qualify for Objective I status on the basis of our GNP and GDP figures is a matter of considerable celebration and successive Governments can take credit and satisfaction for that. When we joined the Common Market on 1 January 1973 nobody expected wealth in Ireland to approach the European average, and that is to be greatly welcomed and celebrated. That growth has been the product of a combination of factors, including the prudent management of public finances and the stability fostered by a succession of partnership agreements.

There are other factors at play, especially at political level, which have contributed significantly to growth but are frequently overlooked. It is important politicians state this, particularly in regard to changes in taxation. A decade ago the standard rate of corporation tax was 50 per cent; it is now 32 per cent. Capital gains tax on investments is down to 20 per cent. The founder of the Progressive Democrats Party, Deputy O'Malley, can take considerable plaudits for what has taken place in the area of income tax and the role he, the Tánaiste and others played in reducing the rates of personal taxation from a high of 56 per cent to 46 per cent for the top rate and from 32 per cent to 24 per cent for the basic rate.

That creates the investment climate which attracts outside industry and people to invest in indigenous businesses who will put in the effort because they see there will be a reward. For too long people who were prepared to work hard, invest in their business and work in the interest of the country were not adequately rewarded. This fundamental change in taxation has been central to creating an enterprise environment. The IDA and others can take a great deal of credit for what they have done, particularly in respect of inward investment, but those who created this environment should also be recognised.

It is up to politicians and the Government to provide the proper business climate where people can be successful and be rewarded. That pro enterprise climate has contributed to unprecedented employment growth throughout the economy in the manufacturing and service sectors. Evidence of this new climate of economic growth is to be found in the ever increasing number of foreign investment projects which choose to locate in this part of Europe; this should be celebrated also.

Ireland continues to attract more than its fair share of new projects from the United States, especially in the hi-tech industry where the amount of inward investment in Ireland relative to the rest of Europe is extraordinarily high. Foreign direct investment continues to be an important source of new jobs for the economy and our performance in attracting projects on this scale is all the more remarkable when set against the strong international competition that exists in the global marketplace for much mobile investment. The fact we are competitive in that environment is something from which we can take a great deal of satisfaction.

However, it is vital we encourage the development and growth of a strong indigenous industrial base and we simply must not make the mistake of putting all our eggs in one basket — foreign direct investment. We know how volatile some of these industries are, particularly in the hi-tech area where they can expand and decline rapidly. We must be conscious of that and underpin what has taken place with a strong indigenous base which can survive shocks to the system as a result of high profile losses in the hi-tech sector.

Unfortunately, the development of the indigenous sector of the economy raises a number of complex issues and in order to address the key deficiencies which arise they must be dealt with. In particular, we must ensure the constant availability of affordable finance to fund the capital requirements of fast growing companies and encourage firms to grow beyond their traditional boundaries. Frequently, the difficulty of securing affordable finance is one of the main impediments to the development of companies that would otherwise be vigorous and expand.

More than 80 per cent of Irish owned companies are small and medium enterprises employing fewer than 250 people while more than 50 per cent employ between 11 and 100 people. Such enterprises play a vital role in most developing economies and Ireland is no exception to that rule. It is important we recognise and cater for the special requirements of these small firms because their requirements and role in employment creation were neglected too frequently in the past. All the focus and attention has tended towards inward investment and not small and medium enterprises which provide the foundation for many jobs in the economy.

The development of indigenous industries means encouraging diversification away from traditional sectors, even though a great deal has been done in the food sector. Diversification means generating increased profitability, thus providing funds for new investment. Business is about profit and frequently in their dealings with business State agencies neglect the fact the only route to success in business is profit. "Profit" is not a dirty word and if Irish companies are profitable they will be successful. Diversification also means encouraging greater activity in research and development. A glaring deficiency in recent years is the absence of adequate research and development in companies which are the focus of the Bill. There will also be diversification into non-traditional markets abroad. We are aware of the vulnerability of the economy which has a large dependence on the UK market. In the context of the single currency, there is potential for difficulty but it is important we diversify into other markets.

Ireland's industrial base must develop in tandem with overall economic progress. Growth and survival make it imperative for firms to reduce their dependence on the domestic market. Our approach to the future development of indigenous industry must take into account these factors and provide responses that meet the needs of the client in the marketplace. This comes back to Senator Quinn's point that the focus of all these initiatives must be the client. In the past, it was often the case that the focus was on bureaucratic and administrative systems rather than on the client which these organisations were there to serve.

Enterprise Ireland should be client focused and that is why the Bill is important. A key function of Enterprise Ireland in terms of meeting the needs of client firms will be to first identify the precise nature of the requirements of those firms. This is not as much of a problem with foreign firms locating here which are more than likely already established and successful in their home markets and can be expected to have the appropriate internal financial and marketing structures already in place. The needs of indigenous firms, however, will be more complex and range across a variety of commercial activities.

Such firms are faced with the prospect of having to deal with three independent agencies, Forbairt, An Bord Tráchtála and FÁS. Between them, they administer more than 45 schemes aimed at assisting native companies. Is it any wonder people who are trying to set up and develop businesses are confused when there is such a number of schemes and agencies to deal with? In addition, there is a multiplicity of agencies at local level with Leader groups, county enterprise boards and area based partnerships and there is an urgent need to rationalise them. I understand there are different schemes and sources of European funding but it should be possible for somebody wishing to start up or develop a business locally to go to one source for a response. That is why the report prepared by the Department, which has resulted in this legislation, is welcome.

The diffuse nature of these available supports understandably leads to confusion and frustration among client firms and means the State is not providing the most effective support possible to ensure they meet their full development potential. By combining the relevant functions of the three agencies the State will be in a better strategic position to address their needs. In this regard I was impressed by the Minister's emphasis that the new agency would be in a position to meet the real needs of its client firms.

Senator Ross also made reference to the grant culture and the increased provisions in two sections regarding the amount of moneys that would be made available. However, the existing thresholds date back to 1981, even though we are concerned with 1993 legislation. When one takes inflation into account it is reasonable that the figures should be increased to their present extent. The Senator is incorrect in his assertion about the grant mentality.

This legislation should mean avoiding the old pitfalls of addressing the needs of firms on the basis of throwing a range of supports into the air in the hope that some of them reach the right spot. The emphasis will be on a narrow focus aimed at identifying real needs in indigenous firms. This new approach is to be encouraged as it seems clear it will result in better targeting of available resources and consequently a better return on the State's investment through growth and sustainable employment and better overall performance of the companies. It is reasonable for the State to expect a return on its investment.

It seems clear from the Minister's speech that significant benefits will accrue to the client firms. They will benefit from a more comprehensive and complete response to their needs and will find it much easier to access the various supports available. The expertise available in the development agencies will be brought together in a more cohesive unit, ensuring it is correctly targeted in areas of weakness where it is most needed.

With Senator Quinn I was extremely critical when legislation was passed by the House in 1993 providing for the separation of Forbairt and IDA Ireland and the creation of another layer on top of them called Forfás. As Senator Quinn said, it was a crazy arrangement and I do not see why it was considered necessary. However, I differ from Senator Quinn in the conclusion from the criticism we both made of the separation of IDA Ireland and Forbairt. I believe this legislation is a move back in the right direction in terms of bringing some coherence and cohesion into this area. The single entity approach will also allow a better monitoring of the effectiveness of individual supports, thus ensuring optimisation of the results at both departmental and agency level.

In her speech the Minister also outlined the mission statement of Enterprise Ireland. It is a refreshingly simple statement in that its aim will be to help client companies to develop a sustainable competitive advantage leading to increased profitable sales, exports and employment. This returns us to the need to ensure that these companies make profits and that Enterprise Ireland is customer oriented and not just a self perpetuating bureaucracy and administrative edifice.

The simplicity of the mission statement should not allow us to become blind to the important and complex task that lies ahead of the new agency. Enterprise Ireland comes into being at a time of unprecedented economic growth. Expectations for the future are high and the focus must be on continuing to ensure future economic prosperity for the benefit of all our people.

Enterprise Ireland will be a key element of the Government's strategy in this regard. It will be an agency with an important range of functions all aimed at improving the relative performance of client firms. The size of this task should not be underestimated but is one which the new agency will be ideally placed to undertake. It represents an important and radical change in the State's promotion of the support for indigenous industry, builds on past successes and looks to the future with confidence.

Reference was made to ministerial appointments. It is appropriate that agencies of this nature should be subject to ministerial appointment. Given the modest levels of remuneration — in many instances there is none — it is surprising that people of significant calibre and business experience who hold senior positions within companies are prepared to take places on State boards and work unselfishly and willingly in the service of the State.

Section 8(1) is a welcome provision in that it deals with what the Minister may or may not do in terms of general policy directives. Section 8(2) provides that the directives which the Minister might give

. shall not apply to any individual industrial undertaking or to giving preference to one area over others in regard to the location of an industrial undertaking otherwise than as a part of the general review of industrial policy.

That precludes the so-called political interference route in terms of locating industry in certain areas of the country.

The other provision related to this is the disqualification for Members of the European Parliament, Houses of the Oireachtas and county councillors. I have always taken the view that county councillors should not be excluded from the membership of State boards because frequently their experience and expertise can be of significant value. However, in this instance it is right that county councillors or other elected representatives should not be able to serve on the board because of the capacity which might exist to create an unlevel playing pitch and to ensure that investment goes to specific areas. That would not be correct. There should be a much more objective assessment than that.

One of the difficulties in the past has been perhaps too much attention on inward investment, even though it has been extremely important and very beneficial from the point of view of job creation. However, the indigenous sector has sometimes felt left out of initiatives taken by the State to help industry and small business. I hope this legislation will address that imbalance and that the focus will be a balanced one between the need for inward investment and the need to help develop our indigenous industries, to make them competitive and to enable them bring their products to foreign markets with confidence and to sell them there at a profit, which in turn will reflect well on the economy and the country.

I welcome the fact that certain elements of the Culliton report, which was a seminal document and should not be forgotten, are being taken on board in this legislation. I also welcome the fact that marketing, training and finance are not treated as isolated republics. Companies are doing all these things at the one time and require an overall and integrated approach when dealing with their problems in these areas. I welcome the legislation and I hope it will be passed.

Mr. Costello

I welcome the Minister's agreement to initiate this important Bill in the Seanad. It is good to see the initiation of important Bills in this House. The purpose of the Bill is to provide a merger of Forbairt and An Bord Tráchtála and to include elements of FÁS with regard to work experience training.

In her speech the Minister said she expected the proposals to be criticised on the basis that they appear only to be moving the deckchairs rather than being concerned with substantial matters. Such criticism is justified to some degree. We are all anxious to ensure that structures are in place to provide the best service with regard to research and development advice for companies trading in this country and abroad. One must examine whether the benefit of changing titles without changing the functions of organisations or merging elements of organisations and thereby depriving another organisation of one of its core areas will have sufficient effect on the operation of the companies. One must also consider whether the disruption is worthwhile in terms of the morale of the remaining staff.

How will FÁS respond to the fact that one of its critical areas regarding work training will be taken away? This is its most important area and its most relevant function in terms of its link with industry. The main complaint from the Small Firms Association in the past has been that there is not enough people with in-house skills whom they can employ. FÁS traditionally has provided this type of skills training to people in the marketplace, but this area will be removed from it. What will be its response? Has FÁS been consulted? How will it respond to the fact that this key area which it developed will be taken from it and merged with another organisation?

One aspect concerns the two organisations which will be directly affected, but what about the organisation which will be deprived of some of its staff who will be seconded initially and then, by direct order of the Minister, deployed in a fulltime capacity in the new organisation? Will staff be taken from FÁS? This is not clear from the Minister's statement.

If the purpose of this exercise is to provide a super agency which will be a one stop shop for services related to industrial development, competition, marketing and training, why did the Minister not spread her net wider? Why did she not involve the other areas of job creation or industrial development, such as the multiplicity of agencies which have been established over the years? What are the Minister's plans regarding the partnership boards which operate in approximately 38 areas? They have a role in relation to marketing and company development in the small and medium sized sector. What are the Minister's views in that regard? What are her views about the county enterprise boards? They are also involved in employment and industrial development. What is the position with the Leader programme?

The Minister has concentrated on some areas but not on others. She has concentrated on marketing, industrial development and specific skills training, but this is out of kilter with her proposals. If she wants a specific agency to replace Forbairt and An Bord Tráchtála, why did the Minister not stick to the area of development and marketing? She has extended the brief to include skills training. She has included some elements of FÁS but omitted others. FÁS will be hung out to dry. It will be without any support mechanisms and its morale will be severely dented.

In terms of mergers and the creation of a super agency, what will be the detritus? What will be the effect on morale when one element is chosen to be part of the new agency but others are omitted? The new agency may leave staff members with sore heads in relation to their treatment and also affect other agencies in terms of their functions.

The Minister said:

The mission of Enterprise Ireland is to help client companies develop a sustainable, competitive advantage, leading to increasing profitable sales, exports and employment.

However, this is the mission statement of Forbairt, the IDA, An Bord Tráchtála and every other body involved in job creation and increasing exports. It is nothing new, but the Minister presented it as if it were a bright, fresh and new mission statement that she suddenly discovered and which will be introduced to create a sustainable environment with profitable sales, exports and employment. However, Ireland has been exceedingly successful in terms of sales. If it was not selling products or marketing successfully abroad, it would be difficult for it to create the current level of prosperity.

The Minister's intention is good but her practice raises a huge number of questions. I considered the Minister would have taken a different approach in relation to putting more resources into developing indigenous industry to ensure that it is more competitive in addition to dealing with the staffing of the new bodies. The Minister has fallen on both counts.

The fastest rate of development has taken place in the computer industry and Ireland is to the forefront in the software sector. However, there is approximately the same number of people employed in small and medium sized indigenous companies as there is in multi-nationals in the computer industry. Yet there is ten times the level of productivity in the computer sector in terms of output compared to the indigenous industries. The multinationals are either performing ten times better with the same number of employees or there is a problem regarding the sourcing of profits through Ireland because of the tax régime. I ask the Minister to address this point. It is one of the conundrums facing that rapidly developing industry at present.

In terms of the development of indigenous industry, the key area is investment and the provision of money for research and development. The Minister said that 55 per cent of small indigenous companies are not involved in research and development. However, has this area been supported? What contribution has the Minister and the Government made to research and development? It is difficult to expect small and medium sized companies to put money into research and development when, by definition, they have a low level of profit and a limited number of staff.

One cannot expect them to be pro-active in that area because they are by nature parasitic industries. They feed off and into larger companies. They will not provide the seed funding for research and development unless the Government is prepared to put a package together to assist them. This is the key area on which we should concentrate rather than creating new names for a new agency.

I attended a conference recently on the EUREKA project. I doubt if many Members have heard of it. Perhaps the Minister of State or his advisers heard of this but I was not aware of it and I doubt anyone else in the Chamber was. The EUREKA project consists of 26 countries across Europe who are involved in research and development. Ireland is one of those countries but we have only made a small contribution to facilitating our small and medium sized industries to become involved in this area. EUREKA operates specifically for that purpose; if a private company has a research and development project, the State provides a funding element and partners in another country help to defray the cost. It is an ideal way to conduct research and development and to meet markets abroad, yet the most Ireland has contributed has been £1 million and we have few projects — since it started about six years ago we have averaged two projects a year.

How can the Minister talk about a new super agency which will do so much work when the existing framework is under-resourced? Surely she is putting the cart before the horse. She has this wonderful idea of merging our flagship agencies — Forbairt, An Bord Tráchtála and FÁS — but she is denuding FÁS of its major component and is trying to make a name for herself by creating a super agency from the other two, without any indication that the disruption will not be greater than the benefits which will arise. If we want to concentrate on indigenous industry we should supply the support mechanisms. The Minister decried the grant system but that has served us well in attracting industries from abroad and it has been well used. In this changing climate, unless we put resources into research and development and are pro-active with funding and advice we will not get anywhere. Creating a new title, which seems to be the Minister's response, will not work.

There is little or no awareness among the Small Firms' Association and ISME about the EUREKA programme. How is it advertised? It is not seen on the television or in the newspapers. How are the small industries who could avail of this to establish research projects and develop their workforce being informed? What level of funding is the State prepared to put into projects? I understand it is quite low. There is an awareness problem and existing mechanisms are not being used to the maximum. The Minister should address that point before embarking on another titular policy direction without an indication of the substance behind it.

The Minister has also put the cart before the horse in the staffing of the new agency; I am worried about sections 18 and 19 which cover this area. Staff will initially be seconded to Enterprise Ireland from the two current agencies and under section 18 the new agency will assume the role of employer and employ the staff directly. However, section 19 provides that the Minister for Enterprise, Trade and Employment will establish by order that staff will be transferred to the new agency. She will assume the role of dictator and determine that staff will be deployed from the two bodies to her new, super, shining organisation.

This is supposed to happen after collective bargaining but when will that take place and why has it not happened already? The staff of the agencies do not know what is happening. The new chief executive officers, Mr. Dan Flinter and Mr. Pat Molloy, will have to deploy staff and deal with redundancy packages before they can consolidate the organisations into a unit which will progress our competitiveness, research and development capabilities, and everything else intended. We are unlikely to have an efficient service in the short term if those matters must be dealt with initially. Why did the Minister not sort all this out before the new agency was established as a statutory body? Why have negotiations not taken place with unions and staff? The level of consultation leaves much to be desired.

I want a thriving small and medium sized enterprise sector. At the moment 50 per cent of our industries are multi-nationals and 50 per cent are indigenous, so we need to increase our indigenous sector. Resources and Government support for existing agencies are required rather than the replacement of these agencies. Too often we have expected that a new title will solve the problem when all it provides is a different name. It does not provide substance in the form of determination, commitment, resources and training. There will be so much fallout from the changes to FÁS — its interface with industry will be hived off — that it is difficult to see how it can continue in its present form. I have many queries about this legislation and I await the Minister's response.

Mr. Mooney

This is welcome legislation and I look forward to the Minister of State's response to Second Stage. He has taken a hands-on approach to his post which is similar to the philosophy behind the Bill. It reflects the Government's approach to the challenges of the millennium and beyond.

Several issues arise from the research and comment on the Government's proposals to amalgamate the various boards. During last year's British general election, the current Prime Minister, Mr. Tony Blair, was asked what were his Government's priorities for job creation and competitiveness. He said there were three —"education, education, and education". We could paraphrase that in this State by saying we need investment, investment, investment. The Government has recognised the threat to Ireland's competitive edge and the challenges which EMU and the introduction of the euro will bring. It has moved quickly to coordinate and rationalise the various State agencies responsible for job creation. It is interesting that all the information I have received from sources in the business sector indicates that Ireland is at a crossroads. We have achieved significant development and an impressive economic performance over the past few years but we are in danger of losing much of that unless we adapt to changing circumstances.

I am a believer in adapting the US style of entrepreneurship and the culture of job creation. Mr. Peter Sutherland, a man who commands enormous international respect, in a report in The Irish Times of 23 April, under the heading “Sutherland supports a US approach”, stated that EMU will mean the survival of the fittest and that we need to examine areas such as competition in the public service and computer investment. He said that the Republic of Ireland and Europe were failing in computer literacy. In the US, 54 per cent of people use a PC on a regular basis whereas the highest rate in Europe is 33 per cent. He added that with EMU approaching we need to move rapidly to address such gaps between Europe and the United States. He also said that European politicians, and by implication Irish politicians, must ask themselves the question which I have often asked as a member of the National Economic and Social Forum, why is unemployment in the US running at historically low levels while European unemployment is at unprecedented high levels? Mr. Sutherland states that “one of the reasons for this is that America has a great entrepreneurial culture, where start-up businesses are facilitated and access to capital is made easier”. He pointed out that more than 7,000 initial public offerings have been made in the United States compared to just 720 in Europe. He said also that there was the attitude to capital in Europe whereas competition in the US thrives.

The chief executive officer of the competitive council, Mr. Brian Patterson, in an interview in Business and Finance on 2 October 1997, stated that as Ireland shoots up the global competitiveness league, some are questioning the need for a new competitiveness council. A recent study shows that it costs as much to hire one Irishman as it does to hire 80 Chinese men. That is not as bad as in Europe where studies indicate that it costs the same to employ one German, two Americans, five Taiwanese and 128 Chinese men. As European economies creak under the weight of hulking social welfare systems, Mr. Patterson believes that industry in the EU is vulnerable to increasingly sophisticated and low cost countries in the Asian Pacific rim. He also refers to the availability of skilled labour and the skills shortages which are manifesting themselves in certain areas of the Irish economy.

Another issue which has arisen many times is the significant statistic that Irish owned industrial enterprises remain closely linked to the UK market. The Minister mentioned this in her opening remarks. The destination of 45 per cent of all Irish manufacturing exports is the UK. Currently we are taking advantage of sterling's strength. The competitiveness of the sector is dangerously vulnerable to another prolonged bout of sterling weakness, a real possibility in the event of the UK exercising its monetary union opt out. In spite of the best efforts of the British Chancellor of the Exchequer, Gordon Brown, and his recent positive comments on Britain's attitude to the euro, it is almost certain that it will take up to five years before the UK will enter the system. Currently all the social indicators suggest that sterling will go through another bout of weakness over the next 12 months, that sterling and the IR£ will reach parity by the end of the year and that Ireland may be trading above parity to sterling when it enters the EMU system from 1 January. This is a scenario which, according to a recent ESRI report, could see Irish industry lose thousands of jobs.

We need to retain a competitive edge. That is what this legislation is about. Mr. Patterson stated the only way we can create new wealth is by competing in international markets. Without increased wealth we cannot improve the standard of living, reduce unemployment and improve the quality of life.

In the context of the Minister's proposals in this Bill, I wish to refer to the impressive economic performance of the state of California. Why should I refer to California rather than any other state in America or any other part of the world? California is the world's seventh industrial power. It constitutes 25 per cent of total US trade and yet even in an economy of this size, it was foresight on the part of the state itself that many of the old habits which had made California the most popular state in the US throughout most of the post-war period, did not replicate in the early 1990s. The Californian political elite realised that the twin threats of Asia and free capital movement had moved the goalposts dramatically and it was up to the state to react or sink.

At the moment, to draw a further comparison between California and the EU, the EU spends only 10 per cent of its total investment bill on information systems as opposed to 25 per cent in the US. This must increase. If we look more closely at the trends in the United States, we see they would give us a better snap shot of Europe in 2010 than any number of EU summit communiqués. One of the most interesting developments in the US has been this revival of the Californian economy. In the past ten years California has survived earthquakes, the collapse of its defence industry, the greatest bankruptcy in US municipal history in Orange County and a net outflow of population. Not only has it survived, it is now the fastest growing region in the United States. The turnabout, while dramatic, offers food for thought.

In 1991 General Motors shut down its California plant, a move which coincided with the end of the Cold War. Thus the car and defence orders, the two mainstays of the Californian economy, were undercut. The industries collapsed almost overnight. California lost 730,000 jobs between 1991 and 1993. However, since 1994 all these jobs have been replaced. Last year 43,000 new businesses were set up because the state diversified away from defence related industry. There are now more than 875 firms of which half were founded in the past five years. Those firms are involved in the multimedia business.

These figures seem to suggest there is a need for some form of mechanism to be responsible for the indigenous sector in this country. There is no entrepreneurial culture in this country. Parents, because of their traditional belief that a job is for life or because of a certain snobbishness, tend to encourage their children to have more traditional occupations, such as doctors, lawyers and nurses. There is nothing wrong with that but there is a need to develop an entrepreneurial culture. This matter first emerged in the Culliton report. I am interested to know if the Minister has any views on this aspect of Irish society.

All the statistics indicate that we have an unhealthy dependency on inward investment. The number of foreign owned companies providing jobs in this economy is at an all time high. There is a real danger that the boom will be followed by a bust no matter what we try to do. We should be prepared for that eventuality and we should introduce contingency plans to ensure that indigenous Irish industry is encouraged to expand.

An interesting comment was made by a person in industry who said that because of the success of the Celtic tiger there was a growing number of BMWs in the Dublin area, many of which were bought by self-employed people with their own companies. These companies employ 15 to 20 people. When surveys were carried out to inquire of these companies what type of research and development they had done and budgets they had provided before expanding their workforce and developing new markets, the response was that they were doing all right and they had enough money to buy a BMW or a Lexus. The people who supply the Lexus in this country, which costs in excess of £50,000, exceeded their target for the year in the first quarter. If the survey had been more detailed, it would have discovered that such cars could be found along the east coast. The Celtic tiger has created an entrepreneur who is happy to generate sufficient wealth for themselves, their family and their immediate needs. Once they are able to go on two or three holidays a year and pay their 15 or 20 employees, they do not concern themselves with further expansion.

This legislation is welcome because it draws together the various agencies to ensure a more competitive edge. A recent report, of which the Minister is aware, was harshly critical of the manner in which the operational programme for industrial development was implemented over the past five years. It blamed State agencies and Departments. Although the Minister did not refer to that in her contribution, it is obvious that the key people in her Department were, on the basis of that confidential report, alert enough to realise that there was a need to address the deficiencies in the infrastructure which has been in place for the past 25 years.

The final message should be that we cannot afford to be complacent and that irrespective of the enormous economic growth which this country has enjoyed and will continue to enjoy for some years to come, there are inherent weaknesses in the grant aid and subvention structure and in the level of encouragement being given to the development of indigenous industries. As a result of that thinking and philosophy and of the warning bells which have been ringing in the Department for the past couple of years, this legislation is before the House today. I wish it well and I hope it goes some way towards ensuring that this country retains its competitiveness well into the millennium and is therefore able to sustain the prosperity we are beginning to enjoy at long last.

Minister of State at the Department of Enterprise, Trade and Employment (Mr. Treacy)

Is onóir dom teacht anseo chuig an Teach iontach seo chun freagra a thabhairt don díospóireacht thábhachtach a bhí againn faoin gcomhlacht Státurraithe nua, Fiontraíocht Éireann, atá á chur ar bun ag an Rialtas. Ba mhaith liom buíochas a gabháil do gach Seanadóir as ucht an pháirt a ghlac siad san díospóireacht thábhachtach seo.

Concerns have been expressed that in the creation of this new agency there will be a lessening in focus on the vital function of marketing which was carried out by An Bord Tráchtála. I reiterate the Tánaiste's assurance that that will not happen. Any attempt to address the problems of Irish indigenous industry must, if only because of the small size of the Irish market, have a major export led dimension as no individual company can hope to survive without proper emphasis on the marketing needed to succeed in commercial markets both at home and abroad.

Enterprise Ireland will be crucially focused on marketing, but the difference is that it will not be solely focused on marketing, training, technology or finance. Different companies have different needs, whether because of the type of market they are in, the stage of their development or the skills of their management team or owners. Some companies will need marketing assistance but they may not have the right products at a particular time or stage of their development. It may be more appropriate for them, after a joint assessment of their needs, to engage in a product development programme to enable them to move with changing market tastes.

Enterprise Ireland will have the integrated skills and resources to assist and advise the client firm on which is the right course of action. There will be no need for the company to create different applications in order to draw from the different pots of taxpayers' money, as was the case up to now. There will be no temptation for the client development executive to encourage a company to accept a possibly inappropriate targeted marketing consultancy or Measure 1 research and development grant in order to meet his internal agency targets.

As Minister of State at the Department of Enterprise, Trade and Employment with special responsibility for science and technology, I am well aware that concerns have similarly been expressed about a loss of emphasis in the new agency on science and technology. The officials in the Department, who engaged in an exhaustive round of consultations with representatives of management and unions in the three agencies, the Irish Research Scientists Association, the Irish Exporters Association and others, told me it was notable that each sectoral interest was concerned that there would be a downgrading in their particular area or interest. The response they received from us was that no such downgrading was intended and that human resources, technology, marketing and production facilities are all important but they are not all equally important at all times to every firm.

The raison d'e tre of Enterprise Ireland is not to do everything that each of its component parts was doing in the same way as before. The objective now is to focus on the integrated needs of the client firm in respect of those activities and to deliver a responsive and effective service targeted on the company's real needs rather than on specific services provided by the agency.

I want to focus on a specific concern which has been brought to my attention in relation to basic science. There has been much discussion in recent months to the effect that basic research has been pushed off the Enterprise Ireland agenda. This has stemmed from the emphasis placed on achieving focus in the activities of the new agency, so that only activities which will have at least long-term industrial benefits will be carried out by it, and on the grant approval profile of the National Research Support Board, otherwise known as the Measure 4 Board.

While the 1998 Estimates allocations to the Office of Science and Technology were as high as ever, the allocation for basic research was only sufficient to fund carryover commitments from 1997, even though we allocated £2 million for basic research alone in 1997-8 which was absorbed by previous commitments.

With regard to the first of these, the Minister and I are determined that Enterprise Ireland will be focused on activities germane to the development of its indigenous industry client base. The major benefit of the previous agency restructuring in 1993-4 was that IDA Ireland benefited significantly from such focus and, consequently, Ireland Inc. benefited completely from the change. The irony is that Forbairt, at whose clients, it could be said, the change was addressed, never achieved a similar concentration of focus.

Basically, our fundamental research can continue to be assisted by Enterprise Ireland in accordance with the industrial relevance criteria of Enterprise Ireland's strategic remit. This is a direction in which Forbairt, in conjunction with the Office of Science and Technology, has already been positively moving. I should also point out that I have clarified the future position of basic research within Enterprise Ireland for the Irish Council for Science, Technology and Innovation, the Higher Education Authority and Forbairt, all of which I met yesterday. ICSTI and the other bodies have advised me of the concerns expressed by researchers in third level colleges regarding this matter but I, as Minister of State for Science and Technology at both the Departments of Enterprise, Trade and Employment and Education and Science, must add that I have a wider responsibility than that embodied in the future remit of Enterprise Ireland. In that regard, I want to reassure all research scientists that there is no dilution in the Government's commitment to basic research per se. I have already announced an additional £500,000 in 1998 to address the specific issue of Measure 4 approvals. I am aware of the demand for further funding and I am examining the options available in this regard.

More importantly, the Government, through the Department of Education and Science, has allocated an additional £3.5 million to be awarded to basic research this year. We have provided two new funds with a gross value of £10 million for research development in innovation in Ireland this year. The core of this new programme will involve putting in place a system of competitive bidding between third level institutions for submitted research programmes based on, and consistent with, the stated research policies and strategies of the individual institutions. Therefore, not only will Enterprise Ireland continue to fund the peer review system for basic research of an industrially relevant nature under its specific remit, but the Government is significantly augmenting the overall spend on basic research to underpin the future academic excellence of our superb third level system.

This Bill is largely about the technical and logistical requirements which must be in place before Enterprise Ireland can become operational. As such it may give the impression that what we are talking about is simply more shifting of the institutional or agency deckchairs. The Minister has already clearly demonstrated to the House that this is neither the intention nor the likely result. The simple fact is that the changes embodied in this Bill will facilitate a radical change in the interface between the industrial development agency and its clients, present and future. With sustainable competitive advantage as the objective and the business development model as a framework, Enterprise Ireland will be enabled to deliver a user-friendly client focused system of supports which is geared to the real development needs of Irish companies.

Senator Coghlan sought a guarantee of the same level of services to small businesses. Subject to the proviso that there will be a clear distinction between Enterprise Ireland and the county and city enterprise boards, Enterprise Ireland will be focusing on those small and medium sized enterprises which have the potential to grow and export. The Minister has already clearly stressed that the new agency will not be merely delivering exactly the same as before, rather it will be assessing, in terms of its mandate, objectives and scarce taxpayers' resources, where its efforts can best be directed.

I assure the House that the county and city enterprise boards will continue to provide for all micro enterprise. They will continue to support and care for all enterprises with a potential job creating capacity of ten jobs or less. The success of the county and city enterprise boards has been phenomenal since their creation by us in 1992. They are locally based, properly focused and have a capacity to deliver a broader remit across all the sectors in their functional areas. Consequently I, on behalf of the Government, can confirm that the county and city enterprise boards are here to stay and will remain permanently domiciled as part of the enterprise family in the Department of Enterprise, Trade and Employment.

As Senator Coghlan acknowledges, much of the thinking behind the proposals in the Bill, not just of the Bill itself but also of the new industrial policy which drives it, is the delivery of a simple and user-friendly service to all its client companies.

Senator Coghlan referred to the vacant Pretty Polly factory in Killarney and spoke of the industrial needs of other towns in south Kerry. Enterprise Ireland will have a specific regional development mandate precisely to ensure a more even spread of projects throughout the country. IDA Ireland is offering specific premia to projects in its grant assistance package outside the major urban centres. I can confirm that IDA Ireland is actively involved in marketing the Pretty Polly plant in Killarney. It is currently in discussions regarding this project. IDA Ireland will continue to market the plant until a new project is secured for the area.

Senator Quinn shares the diagnosis behind the Bill but does not like the particular prescription. In his view, An Bord Tráchtála should essentially be confined to its overseas marketing role, but the assessment carried out in preparation for the new agency specifically had advice from senior management in An Bord Tráchtála that it was vital that there is a clear and close link between the overseas marketing information and what is done in Ireland for company development.

Forbairt has consulted extensively with its customers on the delivery of its services. The virtually unanimous response was that there are too many schemes and too many agencies and what the customers want is a single point of contact from which to source State assistance and advice. This has clearly been the message which has been given to the Government, the Minister, the Department and senior officials who have been involved in all these negotiations.

Senator Ross believes that we are too agency dependent and that we should get rid of all of these agencies altogether. I can confirm that the Minister specifically considered all these options, including a scenario without agencies, which were addressed in the departmental review. She satisfied herself that indigenous industry has not yet reached the stage where it could be totally self-reliant and that it would continue to need both advice and assistance to address the deficiencies which the Senator described earlier.

Nobody would suggest that we should cease foreign direct investment, so it would be anomalous that we continue to assist overseas industry and ignore indigenous industry. This would be economic suicide.

Mr. Costello

Minister Harney would not be able to appoint the board then.

Mr. Treacy

The Senator can be certain that an analysis of every board we have appointed will show that the members are expert professional positive people who have a track record of independent service to this nation as corporate heads, company directors or professionals in their fields. We only use the best brains to guide the State industry sector, and indeed all State bodies. That has always been the key.

Mr. Costello

I would not dream of questioning the integrity of the Minister, Deputy Harney.

Mr. Treacy

The Senator will find that the names we bring forward are well known, publicly accepted and highly respected people; and they will not be unknown people who are plucked from a little place for a particular reason. I can assure the Senator that he will never find that when appointments are made by this Government.

Mr. Costello

Certainly not by the Progressive Democrats.

Acting Chairman (Mr. R. Kiely)

The Minister without interruption.

Mr. Treacy

Regarding the increase of financial thresholds in the Bill, the fact is that there is every intention to continue the current trend of reducing grant costs per job created. This has been happening for the past ten years, with the cost per job being halved from a previous average of £20,000. This trend will be continued by all State agencies as the economy grows.

I can inform both Senator Costello and the House that there is no question of merely changing titles or moving agencies without changing functions. It is precisely through the objective of sustainable competitive advantage and the vehicle of the new business development model that a new industrial development policy will be pursued by us. There is no desire to create a super agency. We have had extensive and intensive consultations regarding this Bill. Officials of the Department have been engaged in an unprecedented level of consultation with ABT, FÁS and Forbairt officials and staff, including consultation with members of SIPTU and MSF which included another meeting with SIPTU members of FÁS over the past week.

Senator Costello expressed concern about the future of FÁS and the morale of its staff after the creation of Enterprise Ireland. Less than 3 per cent of the staff of FÁS will be involved in the move and comprehensive consultation is taking place with them on the transfer. We are all aware of the EUREKA programme and are positive participants in it. It is actively marketed by Forbairt and succesfully utilised in Ireland. If the Senator wishes to have any details of it I will be delighted to make them available to him.

The evidence is that productivity is as much related to sectoral positioning as to the ownership of the firm. Indigenous firms in high-tech sectors tend to have productivity levels which are quite close to foreign firms in the same sectors. This is the strength of enterprise, industrial development and job creation in Ireland. Focusing on our indigenous industry, observing the needs and demands of multi-national industry in our country, fulfilling the sub-supply advising needs, and caring for the creation and expansion of an indigenous industry sector will eventually ensure that we have sustained, permanent economic development into the future. If we do not make changes and re-focus, we could find ourselves overdependent on the multi-national sector and major technological and financial changes and international mobility would bring about an economic crisis. We cannot allow that to happen. All our studies and programmes involve future step-by-step planning so that our economy will continue to grow. Differences between indigenous and mult-national firms are often ones of scale. Large foreign firms which are highly automated have, inevitably, higher productivity than small and medium sized indigenous enterprises.

I am personally pleased that the Irish Energy Centre is being transferred, as a semi-State organisation, into the Department of Public Enterprise. As Minister of State with responsibility for energy I was involved in the establishment of the Irish Energy Centre. It was established in Forbairt at the request of the Department of Public Enterprise. The overall role of the Irish Energy Centre is to promote awareness in energy efficiency both in industry and among the public generally. As such, the centre provides a public service of excellent standard and more appropriately belongs in the Department of Public Enterprise than in Enterprise Ireland. This is a positive and meritorious decision.

Senator Coghlan asked if Enterprise Ireland would have sufficient focus. The Government, in establishing Enterprise Ireland, is committed to ensuring that the functions of Enterprise Ireland are fully focused on the agency's mission of sustainable competitive advantage at firm level. As the Tánaiste indicated earlier this morning, two specific functions have been identified which do not concentrate on this overall mission. They are the metrology functions of the Irish Energy Centre. The reason for taking these functions outside Enterprise Ireland is that metrology has two distinct elements, legal metrology and industrial metrology. Both functions are concerned with ensuring that weights and measures used in commerce — for example, in shops, pubs, petrol stations and livestock marts — and in industry are absolutely and legally accurate. This is a regulatory, public good function. In that context it is far better that the National Standards Authority of Ireland, which is concerned with the regulation of standards, would have control of this function. The National Standards Authority of Ireland has done excellent work. It is a tremendous State service and has great potential for future growth. It competes with powerful international organisations which have a commercial brief and remit and I am confident that its role will be refocused to give it greater liberalisation in the future. The transfer of the metrology function to the NSAI will strengthen the authority so that it can deliver a greater service across the industrial spectrum.

The past century has been one of positive progress for this country. Our State agencies have played a key role. We are now in rapidly changing times and we face a new millennium with great optimism. Political changes in this island and the attitude of people and political parties in all parts of the island create new opportunities for our country undreamt of in the past. We must be constantly aware of the changes and the opportunities that exist and we must capitalise on them. Enterprise Ireland is a new, enthusiastic and enterprising organisation with a clear remit to ensure that we have a constantly growing and sustained indigenous sector. I am confident that the opportunities ahead will be acted on by this new organisation. I hope it will have the absolute support of all political systems and politicians. Together we can ensure that the progress of today will sustain future generations.

Tá mé an-bhuíoch don Teach gur tugadh deis dom labhairt ar an mBille nua seo. Gabhaim buíochas le gach éinne a ghlac páirt sa díospóireacht. Táim ag súil go ndéanfaidh Fiontraíocht Éireann an-obair ins na blianta atá romhainn amach.

Question put and agreed to.

Committee Stage ordered for Tuesday, 16 June 1998.

Sitting suspended at 1.40 p.m. and resumed at 2.15 p.m.

Seanad Éireann debate - Wednesday, 10 Jun 1998