Tuesday, 2 March 2004

Questions (126)

Thomas P. Broughan

Question:

205 Mr. Broughan asked the Tánaiste and Minister for Enterprise, Trade and Employment if she will make a statement on the operation of the EU’s multisectoral framework on regional aid for large investment projects which has recently come into force; and the reason the Government agreed to this framework in view of the adverse impact this may have on the work of IDA Ireland especially in sourcing external investment for unemployment blackspots in the Dublin region. [6637/04]

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Written answers (Question to Minister for Enterprise)

In March 2002, the European Commission approved new rules to establish a faster, simpler and more accountable control system of government support to large investment projects in the EU. The multisectoral framework on regional aid for large investment projects is intended to create greater transparency and reduce the overall level of subsidies granted in the EU. The new framework entered into force generally on 1 January 2004.

In November 2001, during the course of negotiations on the new framework, I made representations to the European Commission on several issues such as the number of notifiable cases, the level of aid allowed, criteria for disallowing all aid in certain cases and the publication of information on all cases of significant size. As a result of my representations, favourable changes came about in all four areas, including the removal of the aid ban on projects of greater than €100 million, which would produce proprietary products. My representations were made following consultation with IDA Ireland.

Under Ireland's regional aid map for 2000 to 2006, regional investment aid in the Dublin region is permitted up to 17.5% of project investment costs for large companies. An additional 10% is permitted for small and medium-sized enterprises. There is no change in the new framework to the level of aid that can be provided to projects with eligible expenditure up to €50 million. For projects above that level, the rate of regional aid permitted is reduced in accordance with a sliding scale related to the size of the project.

The framework acknowledges that large investment projects benefiting from regional investment are more capital intensive than smaller projects. As a consequence, a more favourable treatment of smaller investment projects translates into a more favourable treatment in assisted areas of projects that are more labour intensive, thus contributing to job creation and unemployment reduction. Since the framework has come into force, no IDA projects have had to be notified to the Commission by Ireland and no projects have been prevented from investing in Ireland as a result of the framework. In this context, it is important to emphasise that the framework is not a unilateral requirement on Ireland but applies to all member states. Therefore, there is a level playing field in terms of compliance obligations across the EU.

While the new framework that came into effect on 1 January 2004 has tightened the criteria for the granting of regional aid, IDA Ireland continues to promote foreign direct investment into Ireland, to create a pipeline of projects and to convert these projects into investment on the ground within the terms of the framework. The framework has not impacted on IDA Ireland's ability to source investment for unemployment blackspots in the Dublin region or elsewhere. This is partly a reflection of the fact that the thresholds set out in the framework are still relatively high and relate to large-scale projects. Many of the projects in the internationally-traded services area that wish to locate in Dublin and form a significant proportion of both global flows of foreign direct investment and IDA Ireland's new business, while substantive investments in their own right, are typically not of a scale that would bring the framework thresholds into effect.

Question No. 206 answered with QuestionNo. 199.