I am glad to have the opportunity to discuss the Food Harvest 2020 report in the Seanad. Food Harvest 2020 is an ambitious but realistic strategy for growth in the agrifood sector in the next ten years. It builds on the work of the agri-vision report, the focus and strategies of which the Department and State agencies have implemented very successfully in the three years up to the end of 2009. The effect of these strategies is borne out by the current capacity of the agrifood, forestry and fishing industry to compete on its own strengths on the world market
Before I speak on the key messages of Food Harvest 2020, I would like to spend some time setting out the importance of the sector, its diversity and capacity for further development. We are the largest net exporter of beef in the northern hemisphere and virtually all of these exports go to higher value EU markets, guided by Bord Bia's beef promotion strategy. We are home to some of the world's best known premium drinks brands. In the dairy sector the development of functional ingredients is a notable feature of the industry. Ireland accounts for 15% of the world market in infant formula production. The fact that this industry is located in Ireland demonstrates international confidence in our food safety systems and the huge investment we have made in food safety and quality. It is no accident that Ireland has dynamic dairy and food ingredients sectors. The food and drinks industry is, increasingly, a knowledge industry. The development of our sophisticated prepared food industry, including seafood, has been assisted by the emphasis in recent years on research, development and innovation. This area was relatively unknown to Irish processors a decade ago, but currently these exports are valued at over €1billion and the United Kingdom remains our largest market. Through close industry and Bord Bia co-operation, the strategic target of doubling the value of food and drink exports to Asia by 2009 was achieved two years ahead of target.
The transformation this multi-million export industry has undergone in the past decade has been remarkable. In the early 1990s the agrifood sector was largely commodity based and underpinned by market support mechanisms. Today it is market-led and a more consumer focused industry adept at capturing market share for value added produce. The agrifood, forestry and fisheries sector plays a critical part in the economy and is particularly important in fostering rural employment and regional development. I am confident it has a valuable contribution to make to our planned national economic recovery. It remains our main indigenous manufacturing industry, accounting for over 6% of GDP and approximately 7% of national employment. Importantly, its 600 plus food businesses, over 90% of which are small and medium-sized enterprises, have a greater regional spread than other manufacturing industry. These entrepreneurs are critical to maintaining rural employment levels. Overall, the sector has a gross annual turnover of the order of €24 billion. More significant is the fact that the sector is embedded in the economy in that it domestically sources 71% of its raw materials, compared to 41% for total manufacturing industry.
In the past two years the agrifood and fishing sector has faced the same challenges as other industries. It has clearly been affected by the global economic downturn, unfavourable exchange rates and issues around environmental sustainability. However, as its strength lies in its substantive export base, it has the capacity to weather the economic storms better than other industries. This is borne out by the facts that even in 2009 agrifood export volumes only decreased by 3%, far less than other sectors. Recent estimates indicate that the value of farm output in 2010 will increase by over €300 million compared to the figure for last year.
I am very conscious that enormous opportunities have been opening up in EU and global food and drink markets. The agrifood sector has repeatedly shown its capacity to compete in the toughest marketplaces. To a large extent, that is why I used the earlier part of this debate to press home in an emphatic manner the sector's capability and capacity to succeed. My job is to encourage that capacity so as to ensure the sector continues to recover from the temporary downturn in 2009, grow strongly from its current base, become an integral part of the smart economy and be at the forefront of the country's export-led economic recovery. To achieve this, I recognised that a new strategic vision was needed for the changed circumstances in which we found ourselves. Therefore, from around the middle of last year, the Department and a number of State agencies started to prepare the groundwork for development. A detailed analysis of the sector and the challenges it faced was carried out. The result was that by the time I established the 2020 committee in February this year, a comprehensive series of discussion and background papers was already available.
When establishing the committee, I provided it with specific terms of reference, namely:
Prepare and present a draft strategy for the medium-term development of the agri-food, fisheries and forestry sector for the period to 2020. The strategy will outline the key actions needed to ensure that the sector contributes to the maximum possible extent to our export-led economic recovery and the full development of the smart economy.
I also asked the committee to present its report to me by July. This was a very tight timeframe, but I considered the situation demanded this level of priority. To support the committee in its deliberations, I had ensured it was briefed on the outcome of the detailed analysis mentioned and that it had access to over 80 submissions received in the public consultation process launched early this year. In addition, on my direction, the Harvard Business School had engaged with key industry leaders and small and medium-sized industries to seek a new perspective for the sector. Their forum on Pathways for Growth fed into the work of the 2020 committee and this gave further direction and an external perspective on how to turn our natural advantages into high value exports.
I was very pleased with the report, Food Harvest 2020, which the committee presented to me in July. The report captures the considerable diversity of our agrifood, fishery and forestry sector, underlines its significant position within the economy and sets the scene for realising its potential for the next decade. It is very detailed and contains over 200 recommendations. I use this opportunity to address its main focus. The direction of the report is articulated in the caption, "Smart Green Growth".
Before I deal with the implementation process, I would like to spend a minute or so clarifying the main points of the new policy document and strategy. The growth targets set by the committee in its report include that by 2020 the sector would increase the value of primary output in the agriculture, fisheries and forestry sector by €1.5 billion — a 33% increase compared with the 2007-2009 average; improve the value added in the sector by €3 billion — a 40% increase compared with 2008; achieve an export target of €12 billion for the sector — a 42% increase compared with the 2007-2009 average; increase milk production by 50% and add 20% to the value of the beef sector. In addition, Food Harvest 2020 states that we can and must improve our cost competitiveness by 20% relative to our competitors and that the industry spend on research and development must also double. These are unquestionably ambitious targets but, as I stated in the Dáil Chamber last week, this sector has real substance, capacity, quality products and a growing market. Based on these attributes and opportunities, I firmly believe we can achieve these targets and am fully committed to my role in realising this vision.
Like this House, I fully recognise that achieving these targets in these difficult times will not be easy and will require a high level of commitment and collaboration from all players in the sector. It is my intention to harness the commitment, ability and positivity which pervades this sector and to ensure we all do what is necessary to achieve these targets. These challenging growth targets will be progressed by our acting smarter and thinking green. Acting smarter is pivotal to our vision. We must demonstrate by our actions how agriculture fits into the Government's strategy of building a smart economy. It involves using and increasing the take-up of best practice models, being innovative, creating more effective business modelsand research and development, the latter being the accepted but quite a narrow view of what we mean by acting smart. Examples of smart initiatives would include increased take-up of the BETTER farm programmes, in particular by beef farmers, the dairy efficiency programme, which has been an outstanding success to date, the one goal challenge, the Bord Bia-UCD fellowship programme, innovation vouchers, the greenfield project, which I hope at an early date to extend to the north and west, lean manufacturing processes and other initiatives to increase competitiveness.
From an industry perspective, smart growth will require stakeholders to update their skills, processes, products, markets and relationships to ensure they can deliver long-term sustainable growth more effectively. This point was also made in the Forfás report on future skills requirements in the food and drinks sector. While the Government has consistently supported the growth and development of the agrifood and fisheries sectors and will continue to facilitate business expansion, sustainable growth and job creation will result fundamentally from the efforts of industry stakeholders. The Food Harvest 2020 committee, which was primarily industry-led, recognised the need for more effective business models. The report emphasised that consolidation and rationalisation of processing capacity was critical to maintaining competitiveness and future viability. Industry leaders recognised that reconfiguration of the primary processing sector was urgent and must take place within a relatively short timeframe.
Ireland and Irish food has always been associated with green, natural and sustainable production. This gives us a natural head start at a time when these so-called green qualities are increasingly demanded by society and consumers. We should be under no illusion that a green image is easily developed or sustained; far from it. A major task will involve a proactive and credible demonstration of our green credentials. Teagasc, the Environmental Protection Agency, EPA, my Department, Bord Bia and the third level institutes will play a significant role in developing and promoting environmentally friendly farming practices and also in establishing the scientific foundation for the green claims on which we hope to base our food production.
We already have an established green image and farm to environmental standards that go beyond the basic requirements of good farming practice. Bord Bia already employs the theme "Ireland the Food Island" for its marketing campaigns and there are good grounds for building on this image to differentiate, market and obtain a premium price for our food produce. Members may have read recent commentary in the national media in regard to the Bord Bia quality assurance scheme in the beef area and the sustainability and environmental aspects in that regard. Another proposal of note, also mentioned by the Harvard Business School was the creation of an umbrella brand for Irish food and drink. I would definitely like to see this idea developed further. A national brand, soundly based, would be another useful tool to differentiate Irish product from its competitors. It also has obvious links to food tourism and the wider tourism strategy.
I am committed to leading and driving the implementation of this report. I am focused on implementation, activation and achievement of results. Action plans, reports and so on are important but for this project these are secondary to decision taking and undertaking measures which will lead directly to results. I established and chaired the first meeting of the high level implementation committee. This group, involving the chief executive officers of Teagasc, Bord Bia, Bord Iascaigh Mhara, BIM, the EPA and Enterprise Ireland, and senior officials from my Department and the Department of Finance will primarily direct and take whatever action is needed to implement Food Harvest 2020 successfullyIt will also act as a clearing house for the wide range of issues that will arise in the development of the sector.
At the inaugural meeting of the committee on 16 September, I emphasised to the members that the key function of the committee was to direct and take whatever action was necessary to implement Food Harvest 2020 successfully. At that meeting we agreed on the processes which will best realise the sector's full potential advance. We agreed that among the areas requiring immediate action are: the development of the dairy sector; ensuring a credible sustainable agenda, including brand Ireland; improving competitiveness and promoting effective business models; prioritising and advancing innovation, research and entrepreneurship; and profitability of the beef sector. Subsequent to that meeting each of the chief executive officers took responsibility for progressing certain actions and identified who would assume the lead role for the cross-cutting issues requiring collaboration. This will facilitate the high level implementation committee to monitor progress on implementation.
The most ambitious aspect of Food Harvest 2020 relates to the dairy sector, involving a 50% output expansion and major rationalisation. The abolition of milk quotas at the end of March 2015 provides us with the opportunity for a step change in scale which must go hand in hand with structural change. When speaking about the potential of the dairy industry to grow, we must bear in mind that in the years leading up to when milk quotas were introduced in 1984, our dairy industry was growing at a rate of 8% per annum. Surely now, with a much more sophisticated industry, we can grow strongly each year.
There were extensive discussions at last month's high level implementation committee meeting on the necessary steps to advance the dairy sector. It was agreed that integrated and collaborative decisions and actions were needed on production trends, product mix and processing capacity.
To ensure the current opportunities are fully realised, I have established the dairy expansion activation group and given it a very specific remit and timetable for action. By the end of November, this small group of farmers, processors and Teagasc will submit an initial roadmap to the high level committee highlighting the key milestones from the production and processing perspectives, identifying obstacles to implementation and how these should be overcome. We have also issued a call for research proposals as a follow-on from Food Harvest 2020
The next meeting of the high level committee is scheduled for 10 November and will progress issues relating to the beef sector, brand Ireland, the sustainability agenda and competitiveness and employment impact. There is a renewed interest in our sector among the wider society and a growing recognition of the role it can play in our economic recovery. This is an important and welcome change but it also poses a challenge for us to deliver on these expectations. It is a challenge the sector is fully capable of meeting and one that I and my colleagues in Government are determined will be achieved. I fully commit myself to lead that effort.