COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 5 Oct 2017

IDA - Financial Statement 2016

Mr. Martin Shanahan(CEO, IDA Ireland) called and examined.

Chairman

We will now examine the 2016 financial statement for the Industrial Development Authority, IDA. I would like to welcome Mr. Martin Shanahan, CEO of the IDA and his colleagues, Ms Mary Buckley, Ms Eileen Sharpe, Ms Regina Gannon and Ms Sarah Jane Hutchinson. We are also joined by Mr. Brian Walsh from the Department of Business, Enterprise and Innovation.

I remind members, witnesses and those in the Public Gallery that all mobile phones must be switched off or put on aeroplane rather than silent mode. I wish to advise witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. If they are directed by the committee to cease giving evidence in relation to a particular matter and they continue to so do, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against any persons or entity, by name or in such a way as to make him, her or it identifiable. Members are reminded of the provisions within Standing Order 186 that the committee shall also refrain from enquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I call the Comptroller and Auditor General to make a brief opening statement.

Mr. Seamus McCarthy

Thank you, Chairman. The primary role of IDA Ireland is to attract foreign direct investment to Ireland. It does this by promoting Ireland as an attractive location to potential investors through the payment of grant aid and through the development of industrial property which is readily available for use by potential investors. The IDA received State grants of around €155 million in 2016, representing 92% of the agency's total income for the year. Its other income streams amounted to €14 million and included profits on the disposal of assets, grant refunds and rental income.

The IDA’s gross expenditure in 2016 amounted to €160 million, including €95.6 million in grants to enterprises in support of research and development activity, capital investment, employment and training; €42 million spent on pay, pensions and administration; €12.5 million on expenses related to the property portfolio and depreciation charges; and €10 million on promotion activities. In addition to its recurrent expenditure, the IDA expended €15.4 million on property additions, including land purchases, site development and construction work on its property holdings. At the end of 2016, the IDA’s property portfolio had a net book value of approximately €152 million.

The IDA revalues property based on reviews carried out internally or by independent valuers, as appropriate, where there are indications that the carrying amount may not be recoverable. Following the 2016 review, the IDA reversed part of the impairment charges on its property portfolio which had been recognised over the period 2008 to 2013. The impairment charges reflected the effects of the downturn in the property market over that period and the reversal of the impairment charges, valued at €36 million, reflects a general uplift in property values.

The financial statement for 2016 received an unqualified opinion.

Chairman

Thank you. I now call Mr. Shanahan to make his opening statement.

Mr. Martin Shanahan

I thank the Chairman and the committee for the opportunity to present this morning. As the Chairman mentioned, I am accompanied by Ms Mary Buckley, Ms Eileen Sharpe and Ms Regina Gannon. The focus this morning is the financial statement for 2016. I have submitted a detailed statement but do not plan to go through it in its entirety. Instead, I will pick out some of the highlights.

The Comptroller and Auditor General has already outlined the functions of IDA. To focus on 2016, IDA client companies created just under 19,000 jobs on the ground during the year across a range of sectors, with every region of Ireland posting net gains in jobs. When job losses were taken into account the net increase in employment was just under 12,000. The strong net job creation performance is a result of a very strong pipeline of new investments and lower job losses within the employment portfolio. Losses as a percentage of the overall employment portfolio were at their lowest level in 19 years and IDA Ireland has endeavoured to minimise the impact of job losses through its client transformation programmes.

The number of investments secured during 2016 rose to 244 from 213 in the previous year. The number of new name investments increased to 99 from 94 in the previous year. There were 199,877 people employed in IDA supported companies at the end of 2016, the highest level in the history of the State. In addition to direct employment, IDA estimates that an additional 170,000 jobs are supported indirectly by IDA client companies, representing a significantly wider economic impact. This trades through to the overall drop in unemployment that we have witnessed, from a high of 15.2% to 6.1%, according to the latest figures published by the CSO on Tuesday.

The detailed briefing document makes reference to some significant investments in 2016. Included among these are investments by Oracle, Credit Suisse, HubSpot, Amazon and Paypal. There were also significant regional announcements during 2016. Most important in that regard is the areas involved which included Dunboyne, Nenagh, Drogheda, Galway, Limerick, Cork, Clonee, Waterford and Tullamore, demonstrating a wide dispersal of investments. This performance was produced against a backdrop of unprecedented geopolitical change, an underperforming European economy and intense competition from other jurisdictions for foreign direct investment, FDI. Many of the projects won in 2016 were capital intensive.

FDI has a huge impact on the economy, as evidenced by the exports from Ireland, which totalled €149 billion in 2015, the latest year for which data is available. Expenditure by FDI companies in the Irish economy totalled €18.8 billion, comprising €10 billion on payroll, €5.2 billion on Irish services and €3.6 billion on Irish materials. Significant research and development is also undertaken by these companies, the value of which totalled €1.53 billion in the last year for which figures are available. 80% of corporation tax comes from FDI multinationals and 10% of direct employment in Ireland is now accounted for by multinationals.

IDA has a very ambitious strategy which was set out in 2015. The target is very clear: 80,000 new jobs to be created in the economy over the period 2015 to 2019 and 900 new investments. If delivered, this will bring total direct employment by FDI companies in Ireland to 209,000 people by 2019. Last year, 2016, marked the second year of the implementation of the current strategy and cumulatively, over the first two years, the agency is well ahead of the targets in the strategy. A key element of the strategy is a focus on increasing investment into regional locations. We have set a target to increase investments in all regions outside of Dublin by 30% to 40% while also maintaining the high level of investment into Dublin. This target is extremely challenging given the global trend towards FDI favouring large urban centres. Regions which do not possess urban centres of scale pose a significant challenge in terms of attracting FDI.

Despite this, IDA Ireland is making steady progress in all regions. However, it is important to note that investors ultimately make the decision on investment location. Each region in Ireland posted jobs growth in 2016. A total of 52% of all jobs created by IDA Ireland clients were based outside Dublin while 59% of all employment in IDA Ireland-supported companies is outside Dublin. We continue to work with all regions on their offering through the development and implementation of regional action plans. As the Comptroller and Auditor General mentioned, we have a property programme where we invest in turnkey property solutions to shorten the time it takes investors to set up.

A critical element of our strategy is continued strong focus on key sectors such as technology life sciences, pharmaceutical, biopharmaceutical and medical technologies, international financial services, media and content, engineering, business services, and food. We will continue to target these sectors. I have set out in my submission some of the changes that are happening in these sectors. I do not plan to go through them now but I am happy to return to them later.

Ireland's value proposition is based on offering investors a safe and stable investment location with access to the EU market, an education and skilled workforce, an attractive environment where people want to live and work, a competitive, consistent and transparent corporate tax regime and an excellent return on investment. This value proposition remains valid, but we have to re-emphasise different parts of it and work to improve others to remain relevant in the changing global environment. There are always areas that need attention, including the current pressing issue of residential property supply. The effective and speedy implementation of the Government's action plan for housing is extremely important from our perspective. We have also highlighted some of the areas that the National Competitiveness Council has identified as requiring attention to safeguard Ireland's competitiveness.

Chairman

I will stop Mr. Shanahan there as he is about to refer to Brexit. Not a day goes by without the House discussing Brexit so we will park that. The reason I am butting in is that because of the statements in the House at 12 noon, our timetable is truncated. Mr. Shanahan was going to refer to Brexit, source markets, the organisation's performance in 2017 and its 2016 annual accounts. We will publish the full statement but we will move ahead with questions in the context of our tight timetable from members who have indicated in the following sequence: Deputy Shane Cassells with 15 minutes and ten minutes each for Deputies Peter Burke, MacSharry, Connolly, Cullinane, Kelly and Catherine Murphy.

Deputy Shane Cassells

I welcome Mr. Shanahan and his team. I pay tribute to him for the fact that IDA Ireland has appeared before the committee with a clear set of accounts. More important, however, is the work of IDA Ireland in securing investment and jobs for the State, particularly in the teeth of the recession. The organisation's work, when it demonstrated resilience during those tough times, was one of the contributing factors in pulling the country through. I am conscious that witnesses coming before the committee are often not subjected to an extreme grilling without recourse to the positives of the work they do. It is only right and proper to acknowledge IDA Ireland's work and to pay tribute to Mr. Shanahan in promoting Ireland across the globe to secure investment and to bring much needed global entities to these shores. Well done. That is the niceties out of the way.

Deputy Alan Kelly

That is dangerous.

Deputy Shane Cassells

I acknowledge the positive announcement of 200 new jobs by Microsoft Ireland last night to expand its existing operation. That is good to see in the context of expanding what is already here. One story dominating the headlines, aside from the passing of our former Taoiseach, Mr. Liam Cosgrave, is the decision of Commissioner Vestager to slap down the Government and the potential for this to become a bad apple in respect of IDA Ireland's efforts in the future. Mr. Shanahan stated one of the key tenets of Ireland's value proposition is a consistent, transparent tax regime. The decision by the Commission to initiate court proceedings against Ireland has sent shockwaves through government circles. Relations will deteriorate between the Government and EU officials. How do the chief executive officers internationally whom Mr. Shanahan deals with and the potential clients the organisation is working with who may feel threatened view this? Are future deals threatened by what has transpired? We can talk about our educated workforce, our position within the EU and the fact that we are an English-speaking nation, but, at the end of the day, as Mr. Shanahan has reflected on himself, tax is a major component of the offer on the table. There are serious concerns at senior Government level that the Commission decision will be followed by a renewed focus on our corporation tax rate. What are his concise opinions on that over the past 24 hours?

Mr. Martin Shanahan

I thank the Deputy for his comments on the organisation. One statement in my opening address that I did not get to, which I would like to mention, is that it is the team of 320 people who work with me across the globe that deliver those results.

As members will have heard from Government spokespeople and the Minister for Finance yesterday, the Government believes it is an unnecessary step. I am aware of the effort that has gone into recouping the €13 billion from Apple and the work that has gone in from both sides to setting up the framework to allow that to happen. I do not believe that anybody has been negligent and I believe that it is an unnecessary step by the Commission. I also reiterate that the Commission's initial findings were unwarranted and unfounded and its own decision in this regard was internally contradictory. This will be seen as more of the same. It is the same issue rather than a new issue and, therefore, I do not believe that there will be a great level of renewed attention on this. Our current and prospective investors are well aware of the Apple tax issue and they will see this as a playing out of this issue and the Commission's previous findings.

With regard to how that has impacted on investment, the results speak for themselves. Investment has increased and we have seen no diminution in investment since the Commission announced its initial decision in respect of Apple and Ireland. In the first half of this year, job approvals increased by 20% year on year and we have experienced the same high level of investment. There is nothing to signal that this is causing an impact.

In my discussions with chief executive officers and senior leadership teams of companies, they are well aware of Ireland's position on this issue. If anything, they believe what I said in my opening contribution, which is that we have a consistent, stable and transparent tax regime, and Ireland will continue to have that.

Deputy Shane Cassells

Is Mr. Shanahan worried that it appears to be a case of playing hardball now? As John Downing said in his column today, the amount involved is not one someone can ring Mick down the bank about. How will this play out?

Mr. Martin Shanahan

It is not minuscule money. That is why the Commission's infringement procedures are so puzzling. This is an unusual amount, much higher than in any previous decision the Commission has made and, therefore, one might have thought the Commission would have understood that it would take time to set up the appropriate framework to recoup this money.

That is the first important thing. It is difficult to see how the overall case will work out. It is now to be considered by the General Court of the European Union and we will have to await the outcome. I am not going to pre-empt that. In respect of the infringement proceedings, I understand it is a two-stage process. We are making significant progress in setting up the appropriate framework. I suspect events may overtake us.

Deputy Shane Cassells

I thank Mr. Shanahan for his candid response. Before the summer, IDA Ireland came under attack for its failure to renew ConnectIreland's contract to run a scheme of which the former Taoiseach, Deputy Enda Kenny, said he was a big fan. My party's enterprise spokesperson, Deputy Niall Collins, called Mr. Shanahan out on IDA Ireland's treatment of ConnectIreland, calling it reprehensible. Is it the case that IDA Ireland felt threatened by ConnectIreland and its success? Should it not be bigger than that? From IDA Ireland's perspective, what number of jobs were deemed to have been created by ConnectIreland during that period?

Mr. Martin Shanahan

I thank the Deputy for his question. At the outset, I refute the comments which he has attributed to Deputy Collins in respect of our behaviour having been reprehensible. It has been in no way reprehensible. A legal dispute exists between ConnectIreland and IDA Ireland. ConnectIreland lodged a dispute notice with IDA Ireland in August 2016. I will not comment on any aspect of that dispute or on any individual companies because it is a legal dispute. However, I am happy to provide factual information. The Deputy asked some factual questions. I am happy to provide context.

The first thing to make clear, and to be fair to the Deputy he did so in his question, is that this is a programme operated by IDA Ireland for which ConnectIreland has the contract. It is contracted to ConnectIreland to deliver. Succeed in Ireland is an IDA Ireland programme. We have a vested interest in ensuring that it works. Our intent was to make it work. The situation is that ConnectIreland received a commercial contract in March 2012. It signed up to that contract and to some addenda. The contract expired on 26 March this year. IDA Ireland had extended the contract by one year to allow for an orderly wind-down. The target of the Succeed in Ireland programme over the period was 5,000 jobs. As of today, there are 544 jobs on the ground. By way of information, 302 of those jobs are in Dublin and a further 30 are in Cork. That means 61% of the jobs are based in Dublin and Cork. The remaining 212 are spread across a small number of counties. We have paid ConnectIreland more than €2 million in respect of those jobs - €2,270,000 to be precise. Under the contract, IDA Ireland has also paid a termination fee to ConnectIreland in respect of 398 jobs which have yet to be created. That termination payment was €1,539,500. If all of those 398 jobs are created, it will be great. If more than 398 are created, we will pay ConnectIreland further. If they are not delivered, we will recoup the moneys which we have paid to ConnectIreland. The contract provides for all of this.

IDA Ireland has, at all times, behaved professionally in respect of the operation of this contract. We have operated to both the spirit and the letter of the contract which we had in place, as we do in all our commercial dealings. I remind the committee that IDA Ireland operates a huge number of contracts and partnerships across the public and private sectors to deliver jobs.

Deputy Shane Cassells

I will move on because I am short on time and there are some other areas which I want to address. In his opening remarks and the reports which he has submitted to the committee, Mr. Shanahan put a lot of emphasis on the regional aspect. It is an old chestnut for many public representatives and statutory bodies throughout the country. Some statistics were included in the response to a parliamentary question which my party tabled some weeks ago which showed that of the 323 IDA Ireland site visits thus far this year, 155 or 48% took place in the capital. Five counties, some of which still have excessively and stubbornly high rates of unemployment, received just one IDA Ireland visit so far this year. Two counties, one of them my own county of Meath, received none. In the sections of IDA Ireland's document, Winning: Foreign Direct Investment 2015-2019, which are specifically about the regions, it talks about the existence of clusters and critical masses of population and it sets out criteria in this regard. The big thing for major centres and provincial towns is actually to create these clusters in the first instance. If a commuter county on the edge of Dublin such as Meath is unable to achieve that, what hope is there for other counties?

When I look at the statistics and go through the list of counties which have only received one visit, I see Donegal, Monaghan, Offaly and Roscommon. The report mentions the wins which were achieved in 2016. It references Shire and Facebook. Is that the kind of thing we are looking at for the regions? Mr. Shanahan knows exactly where those locations are. They are right on the Border. They are not beside the clusters of population the development plans set out to create. Are back office facilities such as those being provided for Facebook all we can expect in the regions and the wider geographical area?

Mr. Martin Shanahan

Achieving balanced regional development is the single biggest challenge which IDA Ireland faces, but it is also the single biggest challenge which Ireland faces. We have set out our stall. For the first time in any IDA Ireland strategy, we have regional targets, including to increase investment by 30% to 40%. As the Deputy pointed out, two of the most significant investments last year, Facebook and Shire, were made in Meath. Of course proximity to Dublin helps in that regard. Site visits tells a part of the story, but they do not tell the whole story. There could be one site visit to Meath, but it could be the right site visit. We had a situation last year where one county received one site visit but got three investments. It is part of the story. It tells us that investors are interested in larger urban areas. That is the reality that I and my team face.

Deputy Shane Cassells

Will Mr. Shanahan define a larger urban area? This is a small country. What determines a larger urban area in the mind of an investor?

Mr. Martin Shanahan

To be very clear, Ireland has one city of international scale - Dublin. Everything thereafter is below that threshold. The analysis we have looked at suggests that issues arise where there are not urban populations of at least 10,000 people. We are putting this in an international context. We are competing for investment with cities like Shanghai, which has a population of 23 million, and Beijing, which has a population of 19 million. There are 35 urban areas in Europe in which more than one million people live. There are fifty in the US. That is the reality of the situation. Our strategy is to try to build clusters in the urban areas we already have. Having a population is not sufficient. An existing base, a supply of skills and third level educational institutions are all necessary. These areas need to show that they are a nice place to live and work in order that they can attract investors.

Deputy Shane Cassells

I appreciate the challenge-----

Chairman

This will have to be the Deputy's last comment. It is his last question.

Deputy Shane Cassells

I have two more minutes. In respect of what Mr. Shanahan has said, I have had several meetings with the director of economic affairs in my own county. No one outside of this country knows the name of any area other than Dublin. Mr. Shanahan's aim is to get investors into the country, but equally the focus of the pitch must be to get them to invest elsewhere in the country. If they do not know of anywhere other than Dublin then the pitch must try to tell them about the regions.

If Mr. Shanahan is telling me this is the level of competition IDA Ireland is up against, then how in God's name are we going to achieve the regional spread that IDA Ireland aims to deliver?

Mr. Martin Shanahan

No one in this committee should have any doubt but that this is what IDA Ireland is trying to do. It would make my life a great deal easier if I could achieve a regional spread, but I do not have a magic wand. Our ambition every day of the week is to do that. We have strengthened our regional teams. Since I arrived in IDA Ireland we have appointed regional managers for every region. We are working with the local authorities. We are working in the context of the regional Action Plan for Jobs, which is about helping to develop the regions and the offerings there as well as identifying the clusters we can go after. As a result, when my team and I are abroad we have a narrative around each of the regions and we have something to sell.

Deputy Shane Cassells

I have one last comment - I will finish on this. Last weekend, The Sunday Business Post reported that Uber, the hailing app company, received €2 million from IDA Ireland in February this year in respect of its operations in Limerick. Obviously, this has implications. It has been reported that IDA Ireland is looking to meet the company to discuss the matter. Will Mr. Shanahan elaborate on that? That has come on top of the fact that the National Transport Authority has slapped down the company, as has the Minister, with regard to the piloting scheme in Limerick city.

Mr. Martin Shanahan

First, simply because something is reported in the newspapers does not necessarily mean that it is the case.

Deputy Shane Cassells

That is a terrible thing to say. I am a former journalist. It is terrible of Mr. Shanahan to say that.

Mr. Martin Shanahan

We talk to our clients every day. The fact that we might be meeting Uber or any other client on any day of the week would not be a surprise to anyone on this committee. I do not believe there is a direct connection between events in London and work undertaken here, albeit the overall success of Uber is connected to what happens in all parts of its operation.

Deputy Shane Cassells

What are Mr. Shanahan's views on the NTA and its relationship with Uber here and the Department of Transport, Tourism and Sport?

Mr. Martin Shanahan

That is a matter for the NTA. The National Transport Authority makes decisions based on the information at hand and its rules, guidelines and policy views. From my perspective, Uber is part of a new wave of sharing economy. It has particularly innovative technology and a new business model. It is impossible to turn the clock back. This is where the future is.

Deputy Peter Burke

I welcome the witnesses this morning. I acknowledge the extraordinary work that team IDA has undertaken in recent years, especially during a difficult time for our country and people.

I want to ask some questions on the accounts relating to rental income. There seems to be a decline from €1.6 million in 2014 to €753,000. Given that IDA Ireland is reversing impairments in its accounts, its property is getting more valuable and it is benefitting from the uplift in the marketplace, why is rental income collapsing at such a rate?

Mr. Martin Shanahan

It is because of disposals. Our ambition always is to move our property on. Our property is dynamic. While the amount may not alter significantly from year to year in terms of our holdings, the property portfolio is dynamic. We do not want to hold property; we want to move it on. We want to either rent it or sell it. The direct answer to Deputy Burke's question is that the figure is as a result of disposals. It means that we have disposed of property within our portfolio. Obviously, we renew the portfolio. We buy or build new properties to move on again.

Deputy Peter Burke

Does IDA Ireland have a significant number of leases and tenants?

Mr. Martin Shanahan

Yes, we have significant numbers, including IDA Ireland clients and Enterprise Ireland clients. We manage the property portfolios for both.

Deputy Peter Burke

Have some of those been disposed of or exited?

Mr. Martin Shanahan

I will clarify the point with our financial officer but the diminishment of the rental income is mainly from disposals of property as opposed to disposal of leases.

Ms Regina Gannon

That is correct.

Deputy Peter Burke

The impairment has been reversed. Obviously, IDA Ireland has independent valuations to back up that. Is that correct?

Mr. Martin Shanahan

That is correct. Property is valued every six months independently.

Deputy Peter Burke

That is good to hear. The Uber issue was touched on. I understand the company is valued at €70 billion. Let us get away from that point. Can Mr. Shanahan summarise the process in clear terms in respect of how interventions are made by IDA Ireland, including financial support, to companies that come into the country? What conditions and policy does IDA Ireland have to get grant repayments back? Obviously, we are looking at the uplift in the economy again. We are seeing that the amount of repayment is reducing – I gather it fell by 86% last year and is down to €346,000. That is the figure for return of grants issued to companies. Can Mr. Shanahan set out a short summary? I realise it is complex.

Mr. Martin Shanahan

Essentially, we go out and try to win business all around the globe. Once we have identified a business, the company has to submit a business plan to us on what it is going to do in Ireland. We are most interested in the substance that they are putting in, especially the related employment but also the research and development it intends to undertake and the capital development it intends to make. Based on that plan we decide whether we are going to support the company. We must establish whether we can support a company within EU state aid guidelines and on the basis of the economic case. We do a cost benefit analysis. As a result, we may decide to support a particular company.

Typically, we give the company a grant that has conditions attached to it. For example, the company may have a plan to scale up to a certain level of employment and keep that employment in place for a certain period. In some cases there may be a requirement that the company will make a certain level of capital investment. We do not want a situation whereby grants are retrieved. We want them to do exactly that. It is not our ambition to bring those grants back in.

Deputy Peter Burke

The majority of grants are not repaid if the company complies with the conditions. Is that correct?

Mr. Martin Shanahan

Yes, exactly. It only happens in the event that the company is not successful or does not honour the conditions that we have made. Obviously, the levels were higher during the period when there was more economic turbulence. However, as Deputy Burke has pointed out, that has fallen back significantly in the past year. This means, basically, companies have done exactly what we expected them to do and what they expected to do.

Deputy Peter Burke

I have a question on advanced technology buildings. Obviously, it can be a bone of contention throughout the country. Let us consider the figures. The midlands region tends to lag behind other regions in terms of IDA-supported jobs. The relevant figure is approximately 4,000 odd. That figure has not grown significantly in recent years, when other areas have been getting a bounce. What criteria does IDA Ireland apply in terms of when it is seeking somewhere for an advanced factory building?

Mr. Martin Shanahan

There are detailed criteria. In summary, we look at population size - this goes back to the responses I made to the questions put by Deputy Cassells. We look at the skills base within the area. We look at the existing enterprise space, which could be an Enterprise Ireland, IDA Ireland or other enterprise space – it is not exclusively to do with IDA Ireland space. We look at proximity to third level institutions. We look at the general infrastructure. It is a matter of balance in ensuring that we put them into areas where there is reasonable chance of getting it to work. Moreover, we only do this where there is market failure. In an ideal world, we want the private sector to do this. IDA Ireland is the developer of last resort in this area. It is not something that anyone would want the national promotion and development agency to do. We do it because the private market has not responded. We also examine the existing offering within the region. If there is existing office space or an existing factory that is available, then we market that. We do not only market our own buildings. We market private sector buildings too.

As the Deputy rightly pointed out and as he knows well, the midlands area is challenged. Having said that, there has been some success, especially in Deputy Burke's county with Center Parcs. We are optimistic in respect of other developments over the short to medium term.

Deputy Peter Burke

I will finish up on the tax point. I note the Comptroller and Auditor General report last week. It is amazing how headlines do not tell the full picture. From pages 234 or 235 onwards, we can read the reasons there is an effective tax rate of 9%. The tax system for corporate tax is so clear; it is one of the simplest in the world. There are few or minimal reliefs involved. Does this come up much when IDA Ireland is marketing Ireland in terms of the negative publicity? It is reckless of people to put out information that is specifically and factually not true.

In regard to tax, I think anyone who is quoting the Comptroller and Auditor General's report should read the analysis of the companies that are below the actual tax rate. I note the finance committee had a number of experts before it in regard to determining what the effective tax rate of a company is, and no one can agree on it. How it is calculated gives rise to an incredible amount of disagreement. The IDA meets many chief executive officers, CEOs, around the world and I would like to know whether this negative commentary is affecting their view or whether many are aware of it.

Mr. Martin Shanahan

First, I compliment the Comptroller and Auditor General on the report last week, particularly the tax element, because it sets out that there are multiple ways of calculating the effective tax rate - I think eight of them are cited in the report. It also shows that when one does an international comparison, which the World Bank has done, we have an effective tax rate of 12.4%.

On the question of how much it comes up, it probably speaks to a point Deputy Cassells raised, which is that tax is one element of the offering and it is not even necessarily the most important aspect, although that varies from company to company. The single most important thing our clients raise with us is the availability of talent, because that is what they need. It is only if a company can set up and is operating that everything else comes into being. Talent is the single most important thing.

I was in San Francisco and San Jose last week meeting CEOs, particularly those in the med-tech sector. I would say tax probably came up as an afterthought in some of the meetings and, where it did come up, it mainly related to the taxation reform that is under way in the US and had very little to do with our own tax issues.

Deputy Marc MacSharry

I welcome the witnesses. I thank them for the presentation and for all the great work they do. The idea around the programme was that ConnectIreland was the contractee, as it were, and the IDA paid it based on its performance. How much did we pay it?

Mr. Martin Shanahan

I had outlined the figures but I will just-----

Deputy Marc MacSharry

I apologise that I had to pop out for a short while.

Mr. Martin Shanahan

That is fine. We paid it €2,270,000 for jobs already delivered and €1,539,500 as a termination payment for 398 jobs yet to be delivered.

Deputy Marc MacSharry

It basically goes around the world and generates leads or generates companies' interest in Ireland, and the IDA assists with that and delivers jobs as a result of their referral. Is that it?

Mr. Martin Shanahan

It is slightly more than that in the sense that it generates referrals and introduces us to companies, and there may still be some work to be done in that some of these companies are also supported by other agencies as they come in, whether the IDA, Enterprise Ireland in some cases or Údarás na Gaeltachta in some cases. Generally, I would accept the Deputy's point.

Deputy Marc MacSharry

I meant it in a simplified way. How many staff are in the IDA currently?

Mr. Martin Shanahan

There are 322.

Deputy Marc MacSharry

How many of those are abroad?

Mr. Martin Shanahan

Seventy-three are full-time abroad and there are many who-----

Deputy Marc MacSharry

They are over and back.

Mr. Martin Shanahan

Yes. That is a significant proportion of my colleagues.

Deputy Marc MacSharry

How many are in New York, for example?

Mr. Martin Shanahan

There are roughly 15.

Deputy Marc MacSharry

Let us say the IDA has to pay €10,000 a month in rent for an apartment for each of them.

Mr. Martin Shanahan

I do not have the exact figures. We were happy to provide-----

Deputy Marc MacSharry

It would not be far off that. Let us say €8,000 to €10,000, which would be the market value over there. Would it be reasonable to ask the question as to what our 15 people are doing? Why do we need ConnectIreland to come up with 500 jobs in the various offices throughout the world? Can we do not do what they do?

Mr. Martin Shanahan

Could the IDA do what ConnectIreland does?

Deputy Marc MacSharry

Yes.

Mr. Martin Shanahan

The IDA does this. That is why we have-----

Deputy Marc MacSharry

Why would we need ConnectIreland?

Mr. Martin Shanahan

This came from an idea at the Global Irish Economic Forum. It was proposed as a possibility at a time when, to be fair, Ireland desperately needed jobs.

Deputy Marc MacSharry

I remember it.

Mr. Martin Shanahan

It was a new idea. I think it had merit. There are elements of it which I believe still probably have merit because-----

Deputy Marc MacSharry

Sorry for interrupting but time is short. From a taxpayer's point of view, why would we pay €160 million to the IDA in taxpayers' funds to do a job and then have to pay €3 million or €4 million to somebody else to do the same job?

Mr. Martin Shanahan

I think that would be perfectly acceptable if it was achieving the targets and doing what-----

Deputy Marc MacSharry

ConnectIreland or the IDA?

Mr. Martin Shanahan

Connect. The Succeed in Ireland programme had a target of 5,000 jobs. That has not worked out quite the way we thought it would.

Deputy Marc MacSharry

It has not worked out great.

Mr. Martin Shanahan

The figures I have given the Deputy show that.

Deputy Marc MacSharry

They are not the contractee any more anyway, so are we keeping going with this?

Mr. Martin Shanahan

No, we have decided at this point not to continue with the programme in its current format. IDA has not ruled out the prospect of a variation of this programme in the future, taking some of the elements of it, but the contract with ConnectIreland, which is the contractee, is finished.

Deputy Marc MacSharry

Has the IDA made changes to training and the approach of staff who are abroad and, indeed, the 322 staff overall, to mimic whatever it is Connect does in order that we do not have to pay that kind of money to anybody in the future?

Mr. Martin Shanahan

We are developing what we do all the time. The IDA has not stood still for the last 68 years. It has developed every single year in order to-----

Deputy Marc MacSharry

It is the world champion at what it does, but it is not just about that. I am just wondering whether ConnectIreland was some superficial thing we entered into as a country that really produced nothing and which we now are going to stop or whether it was something good we will replicate. The natural follow-on question is what the 322 people are doing if we need another company to do the same thing.

Mr. Martin Shanahan

I think it is right to try new things. We partner with lots of different agencies and private sector and public sector bodies. I would never rule out trying something else which might increase investment.

Deputy Marc MacSharry

If it was Mr. Shanahan's personal call, would he have put the €3 million into some other IDA activity?

Mr. Martin Shanahan

I was not the CEO of IDA when this call was made but-----

Deputy Marc MacSharry

I know that.

Mr. Martin Shanahan

-----I think it was evident reasonably quickly that the model was not ideal, to be honest. I do not plan to replicate something that is not ideal. As I said, that does not rule out looking at new ways of doing this in the future.

Deputy Marc MacSharry

IDA owns the building which was leased to the Iranian Embassy at one stage. Is that correct?

Mr. Martin Shanahan

I think the Deputy means the Israeli Embassy, if I am thinking of the same building.

Deputy Marc MacSharry

I am sure we are not engaged in renting to too many embassies, so Mr. Shanahan is probably right. Why were we doing that?

Mr. Martin Shanahan

The building had a 65-year lease. It came into State ownership back in the 1980s. It passed from State agency to State agency, and it then passed to IDA. We did not have vacant possession. As the Deputy pointed out, it had a sitting tenant. It proved impossible to rent the remainder of that building and we exited the lease two years ago.

Deputy Marc MacSharry

The IDA has it back now.

Mr. Martin Shanahan

No, we have exited the lease. We sold the lease, basically.

Deputy Marc MacSharry

The IDA bought them out.

Mr. Martin Shanahan

No, we bought out our lease on it. The lease would have run until 2034. There was a liability to-----

Deputy Marc MacSharry

The owner was a third party in the private sector.

Mr. Martin Shanahan

Yes.

Deputy Marc MacSharry

That is fine. In some quarters projected population growth for Dublin has been put at 700,000 by 2025. On the basis of the lack of optimum levels of commercial office space and, obviously, housing, and given that Mr. Shanahan said talent is ultimately the deciding factor for FDI decision makers, what strategy and resources has the IDA employed to diversify the priority? Mr. Shanahan can correct me if I am wrong but I assume that if Marc MacSharry Limited is coming from America to set up a company in Ireland, I would probably want to be on Baggot Street - that is probably everybody's starting position - with the appropriate accommodation and whatever else. What are we doing to suggest we instead use counties Sligo, Meath, Waterford or elsewhere? What are we doing to make them real alternatives? Realistically, Dublin is bursting, and a lot of work is probably needed on this side of the room to assist the IDA in that, when we see office blocks and apartment blocks being turned down out at Dublin Airport based on traffic congestion.

Given the fact that 700,000 people are projected to come to live in Dublin, what is the medium-term strategy in terms of value for money to say we need to start using the entire building rather than 30% of it?

Mr. Martin Shanahan

They are all good points. Commercial office space is probably not a significant issue in terms of what is in the pipeline. Residential is more-----

Deputy Marc MacSharry

It is a problem unless someone is going to live in and commute from Carrick-on-Shannon.

Mr. Martin Shanahan

I appreciate that. We aim to move some of the investment outside Dublin but, more importantly, to target investment that is likely to go outside Dublin. There are certain types of investments over which we will have very little influence. As the Deputy pointed out, they will want to be co-located in a cluster of technology, possibly close to the Grand Canal. However, there are other types of investments that are more amenable to a regional location. For example, manufacturing investments are much more amenable to a regional location. Depending on where the company is coming from, it has different views as to whether it needs to be in a capital city or even in a large city so we have targeted our work at working with companies who we believe would be willing to consider regional locations. This means targeting outside the large cities in the US. We also have a diversification strategy around markets so Asia-Pacific and Europe are also source markets and we are trying to grow them more quickly than the US market.

Deputy Marc MacSharry

Following from that, what percentage of €95 million in grant aid went to regions outside Dublin or the east coast?

Mr. Martin Shanahan

I do not have the figure off the top of my head but it is significant because we cannot grant aid for certain things inside Dublin and Cork. We are prohibited from doing so.

Deputy Marc MacSharry

The east coast.

Mr. Martin Shanahan

Can we come back to the Deputy with the figure in a few moments? We will look it up here and get back to him. It is significant but I do not have it off the top of my head.

Deputy Marc MacSharry

Okay.

Deputy Catherine Connolly

Congratulations on the clear audit. The witnesses will forgive me if I do not use the rest of my ten minutes for congratulatory words but well done to the team. I was going to raise the last point raised by Deputy MacSharry but he has addressed it very comprehensively so I will not repeat it but it struck me as odd in the extreme that this money was used. Was a business case done for that? Was there any analysis or a post-review evaluation? I say this in the context of being in the Gaeltacht area in Cork Dé Luain - a comharchumann struggling for money. Yesterday, we heard a presentation from a representative of the comharchumann - the co-operatives - pointing out issues and begging for money. They create jobs and are getting a tiny amount. I know IDA Ireland does very good work - certainly in Galway west. I see what is there but the witnesses can see the difficulty for me listening to what was presented yesterday and what I saw on Monday in the Muscraí Gaeltacht and Oilean Árainn as they struggle. They are providing work. It is difficult for me.

Mr. Martin Shanahan

There are always competing options in terms of how one spends money. It is the function of Government and these Houses to decide how to do that. Regarding what is within our own gift regarding how we spend money, we provide excellent value for money in terms of the return to the Exchequer from the investments we win. In respect of the ConnectIreland and the Succeed in Ireland programmes, we have only expended money where jobs have been created but I acknowledge that there is a chasm relative to the ambition that was set out and the delivery.

Deputy Catherine Connolly

There are serious questions to be answered by the Government regarding the policy that allowed that to happen and the cost of jobs, which I will not have time to address but which I will return to. It involves the cost of the creation of jobs under the IDA Ireland programme compared with the cost of the creation of jobs with the comharchumainn. It is a debate that needs to happen.

I note IDA Ireland's figures relating to regional development are positive and that it has moved beyond the 50% from outside Dublin. I welcome that. In respect of Galway west, one side of the city has done extremely well, which has led to huge problems. Mr. Shanahan is fully familiar with Parkmore. I presume the IDA Ireland owns that park and the businesses there provide huge employment - I think over 2,000 people are employed there, but there are major problems with traffic. I have some practical questions. Why did the IDA Ireland strategy not look at the west side of the city where councillors did their job and zoned land as industrial? Why has IDA Ireland not looked at that to balance the city? How did IDA Ireland continue to invite industry, which is very welcome, into a congested site that is creating huge problems for traffic?

Mr. Martin Shanahan

I thank the Deputy for her comments and questions. Her points are well made. I would bring the committee back to the fact that in 2009, we were losing significant numbers of jobs. We had a huge spike in unemployment-----

Deputy Catherine Connolly

I have about eight minutes.

Mr. Martin Shanahan

That is fine but my point-----

Deputy Catherine Connolly

I do not need the context; I am very familiar with it and we have learned a lot through the Comptroller and Auditor General in our year and a half on the committee. My specific question concerns Galway city.

Mr. Martin Shanahan

I understand. Our focus is on building out the business and technology parks we have first. We have not ruled out where else in Galway we might develop. In fact, our plan would be to develop significantly in Galway because we see it as very attractive location for investment. My job is to attract investment. Others have a significant role in terms of planning, how the city and the county of Galway are developed and how infrastructure is provided. I regularly engage with both the city and county managers, as does my team. There is undoubtedly a need for more impetus in how we address the issue because the alternative where we do not attract investment or rather it goes elsewhere, particularly where it goes outside the country, is not a good option from my perspective.

Deputy Catherine Connolly

We are not talking about nuclear options. We are not talking about having no industry rather we are talking about sensible development. If we look at Galway city where the councillors, who were often criticised in the past and rightly so, did their job, we can see that the land was zoned industrial on both sides of the city. There is a great shortage of industrial development on the west side of the city, which means people are travelling over to the other side on a daily basis creating traffic jams. I suppose it is too late to ask how this arose. The land is owned. What proposals does IDA Ireland have to rectify that?

Mr. Martin Shanahan

In respect of the practicalities of this, when one has Boston Scientific, Medtronic, Baxter, Allergan and Fidelity-----

Deputy Catherine Connolly

I do not need a list.

Mr. Martin Shanahan

-----who have set up and who have grown, if they are growing, they might not set up a new premises on the other side or indeed anywhere else. They need to grow in their existing premises but Galway west is an option for new investment coming in.

Deputy Catherine Connolly

Galway west is an option. Is it something IDA Ireland is actively looking at?

Mr. Martin Shanahan

We are looking at all options all of the time. We are conducting a review of strategic sites and where we are locating - utility-intensive sites and business and technology parks.

Deputy Catherine Connolly

I have other questions to ask but I wish to comment on that. We need development. I am the first to promote development and a thriving economy in Galway but we need sensible balanced development. When industry is located in one area, it creates huge problems relating to traffic and housing and Mr. Shanahan knows that. Mr. Shanahan has given me a general answer. I will be following it up specifically regarding proposals for the west of the city and Connemara.

In his opening statement, Mr. Shanahan made a very strong comment about corporation tax. I have a different view. I have looked at the Comptroller and Auditor General's report. He has given no opinion but has simply highlighted the fact that corporation tax receipts are highly concentrated and difficult to predict. He goes on to point out that 70% of the receipts were paid by the top 100 and, more significantly, 13 of the 100 companies with the highest tax income had an effective rate of less than 1%. Mr. Shanahan said today that the effective rate is much higher than that. We have yet to discuss this report from the Comptroller and Auditor General and I know there are complexities, but 13 of the 100 companies with the highest taxable income had an effective rate of less than 1% reflecting the use of significant tax credits, reliefs and so on.

Mr. Martin Shanahan

In the same section of the report, Deputy Connolly will see that the Comptroller and Auditor refers to the World Bank study showing that the comparable effective tax rate in Ireland is 12.4%.

We have done a comparison across all countries. As I pointed out earlier, there are multiple ways to calculate this. I neither doubt nor dispute the fact that 13 companies have a tax rate of under 1%. There are reasons for this, which the Comptroller and Auditor General also refers to in the report.

Deputy Catherine Connolly

Absolutely. The Comptroller and Auditor General's role is simply to give us the report, and I accept that. To say that there is an effective tax rate higher than that given by the Comptroller and Auditor General, however, is not acceptable.

Mr. Martin Shanahan

With respect, I am referring to figures in the Comptroller and Auditor General's report.

Deputy Catherine Connolly

Let us go back to the notion that tax is not important when one is out looking to secure jobs. The witness is saying that talent rather than tax is the issue that comes up in this regard. Is that right?

Mr. Martin Shanahan

I think I have been clear with the committee that tax is one aspect of what we offer. I did not say that it was not important.

Deputy Catherine Connolly

Is the rate of taxation one of the major aspects?

Mr. Martin Shanahan

Everything is important when one is trying to attract-----

Deputy Catherine Connolly

Is it equally as important as talent?

Mr. Martin Shanahan

At the moment talent is more important.

Deputy Catherine Connolly

Great. The companies that the IDA is attracting would be open, then, to paying a higher tax rate in due course if necessary. It would not be a disincentive to come in here.

Mr. Martin Shanahan

I did not say that.

Deputy Catherine Connolly

I am asking the witness now.

Mr. Martin Shanahan

No, I am not saying that. I think we should neither increase nor reduce our tax rate. It is stability that matters.

Deputy Catherine Connolly

Will Mr. Shanahan clarify the issue surrounding money given to Sligo County Council for a road? It amounted to more than €2 million, I think.

Mr. Martin Shanahan

Yes. That is a contribution to infrastructure to open up the Oakfield industrial estate in Sligo.

Deputy Catherine Connolly

Does the IDA own that?

Mr. Martin Shanahan

We own the Oakfield industrial estate, yes.

Deputy Catherine Connolly

Is the road a public road?

Mr. Martin Shanahan

Correct. We made a contribution to it to ensure that the lands are serviced in order that we can attract investment into it in the future.

Deputy Catherine Connolly

Did Sligo County Council approach the IDA on this matter?

Mr. Martin Shanahan

I do not know the details.

Ms Mary Buckley

It works both ways. We got involved because we want to open up the site, while Sligo County Council is interested in having road access from the town.

Deputy Catherine Connolly

Was there a business case? Was the valuation set out for why this money was needed?

Mr. Martin Shanahan

Yes, of course. If we hand over State funds to anybody then there has to be business case for it. There has to be a benefit analysis and we have to know why we are doing it. In this case it is to open up-----

Deputy Catherine Connolly

There is a document somewhere, then, setting out the exact value.

Mr. Martin Shanahan

Of course. It would have had to have been approved by several committees in the IDA, probably including the board in this case. There is also a legal agreement in place as to what has to be delivered.

Deputy Catherine Connolly

Has all of the money been paid over? Is the road complete?

Mr. Martin Shanahan

The money has not been split up.

Ms Regina Gannon

It has not been fully paid.

Deputy Catherine Connolly

What has not been paid over?

Mr. Martin Shanahan

There are still amounts outstanding. There is conditionality attached to the payments. As the work is done, we pay over the moneys under a legal agreement.

Deputy Catherine Connolly

Were there similar payments to other local authorities?

Mr. Martin Shanahan

In 2016-----

Ms Regina Gannon

Not in 2016. In general, however, there would be contributions to infrastructure.

Mr. Martin Shanahan

Not in 2016, I understand, but this is something that we have done in the past. We have partnered with local authorities to put in place infrastructure required for serviceable business parks and lands to help us do what we do.

Deputy Catherine Connolly

Am I in trouble for time?

Chairman

The Deputy is on her last question.

Deputy Catherine Connolly

There would presumably be a trail of documents on that, if we were to ask for them, and a business case and so forth.

Mr. Martin Shanahan

Yes, and I would be surprised if the Comptroller and Auditor General has not been through them already.

Deputy Catherine Connolly

My last question concerns compulsory purchase and the Supreme Court decision on lands in Kildare in 2015. The compulsory purchase was for a general reason for the future, which the Supreme Court decided was not appropriate and that compulsory purchase could only be applied to a specific purchase. Correct me if I am wrong on this.

Mr. Martin Shanahan

That is correct.

Deputy Catherine Connolly

What was the result of that? How has the IDA dealt with that? Was there legislation? That is our role but I ask Mr. Shanahan to tell me what the IDA suggested as a result of this.

Mr. Martin Shanahan

Our parent Department is advancing proposed legislation which will address the issues raised by the Supreme Court.

Deputy Catherine Connolly

Who is advancing that?

Mr. Martin Shanahan

The Department of Business, Enterprise and Innovation.

Deputy Catherine Connolly

When was that case? In 2015?

Mr. Martin Shanahan

In 2015, yes.

Deputy Catherine Connolly

And this is 2017. Is the delay on the side of the Department?

Mr. Martin Shanahan

I do not think I said that there was a delay.

Deputy Catherine Connolly

No, but I am asking. Where is that legislation?

Mr. Martin Shanahan

My understanding is that it has not been listed yet.

Chairman

We would be much obliged if anyone could help on that one.

Mr. Brian Walsh

We are hoping to publish the legislation this autumn.

Deputy Catherine Connolly

Has that had an impact on the IDA's daily work when it comes to acquiring property?

Mr. Martin Shanahan

No, it has not. For the sake of context, that was the first time in our history that we looked to use the CPO powers. It is not something that we use regularly, so the absence of them has not had an impact in the short term.

Deputy David Cullinane

I welcome Mr. Shanahan and his team and congratulate them on their clear audit accounts and on the fantastic job done by the IDA in bringing jobs to Ireland. I commend them on the work done by the team over recent years. I have a very quick question on ConnectIreland. Starting with the witnesses' own organisation, what is the cost of an IDA-created job? When jobs are created, does the IDA do a calculation on how much it costs per job?

Mr. Martin Shanahan

The calculation on the cost per job is done on a seven-year moving average based on sustained jobs over that period.

Deputy David Cullinane

I am looking for the amount, not the methodology.

Mr. Martin Shanahan

The cost is €9,148.

Deputy David Cullinane

Is there a comparable price for a job created by ConnectIreland?

Mr. Martin Shanahan

No. The methodology does not allow for that because we do not have seven years of ConnectIreland experience.

Deputy David Cullinane

Is there a different methodology? Is Mr. Shanahan certain that ConnectIreland has not published figures or produced a cost calculation?

Mr. Martin Shanahan

I have seen some comparison drawn between the €9,148 and the €4,000 that we pay to ConnectIreland as a fee. I would point out, however, that that is an additional fee.

Deputy David Cullinane

Who is making that comparison?

Mr. Martin Shanahan

I have seen that comparison.

Deputy David Cullinane

But who is making it?

Mr. Martin Shanahan

ConnectIreland, I suspect.

Deputy David Cullinane

ConnectIreland itself. These are its figures, then.

Mr. Martin Shanahan

Yes.

Deputy David Cullinane

Does it get paid only when it creates a job?

Mr. Martin Shanahan

When there is a job on the ground, yes.

Deputy David Cullinane

I just wanted to be clear on that first. Let us talk about the actual figures. Mr. Shanahan said in his statement that 19,000 jobs were created by IDA companies in 2016. Is that correct?

Mr. Martin Shanahan

Yes.

Deputy David Cullinane

How is that calculated, and how is that then proven actually to be the case? How is it proven that 19,000 jobs actually have been created?

Mr. Martin Shanahan

This is carried out independently of the IDA by our parent Department, just as it is for other agencies. The Department does a census of all of the companies in our portfolio. It goes to ask the companies what they have created and then they verify that.

Deputy David Cullinane

How do they verify that? That is what I am asking.

Mr. Martin Shanahan

It is verified through engagement with the company.

Deputy David Cullinane

Is that solely based on information coming from the company and not on anything else? If the company claims to have created 50 jobs, does the Department just take that as 50 jobs? Is there no other verification?

Mr. Martin Shanahan

Particularly where large numbers of jobs have been created, there are meetings and further direct engagement with the company to understand what the jobs look like, what categories they are in, and so on.

Deputy David Cullinane

The reason I ask is because whenever there is an announcement, we also get a nice even figure of 100 or 200 jobs or whatever. We want to know exactly how many were created. Are we just taking these round figures and adding them all up or do we actually have a real figure for what has actually been created?

Mr. Martin Shanahan

The latter. When we announce jobs, it is a case of the company's ambition and telling the world what it is hoping to do. The only figures we use in the figures I have provided to the committee today, however, are the figures for jobs on the ground. We get these as a result of a census undertaken by our parent Department.

Deputy David Cullinane

The figures come from the companies themselves, however. We are taking what the companies say at face value.

Mr. Martin Shanahan

Yes. They fill out a detailed form.

Deputy David Cullinane

I understand that, but what I am saying is that the information comes from the companies.

Mr. Martin Shanahan

There is also subsequent checking of some of those.

Deputy David Cullinane

Will Mr. Shanahan provide us with some background information on how that is carried out?

Mr. Martin Shanahan

Yes.

Deputy David Cullinane

That is perfect. The question of regional development has been raised and I cannot let Mr. Shanahan go without mentioning issues in the south east. It is one of two problematic areas, though I acknowledge that jobs have been created in recent years. We had a much bigger problem five years ago, and we are in a much better situation now. It is still a problem, however. I am looking at the national unemployment figure of 6.4% and the figure for the south east of 8.1%.

Even within the figures there are variations and in parts of the south east the rate of unemployment is even higher. I am constantly trying to figure out why that is the case. I have talked to stakeholders, opinion makers, entrepreneurs and captains of industry in the south east and they all say the same thing, that there is no good reason the south east should have a higher unemployment rate. I am trying to figure out the solutions. This is very important because resources and infrastructure follow jobs. We need to bring jobs to Ireland Inc. and that is the primary function of IDA Ireland. Many jobs are brought to Dublin. Of course, we have to build up the capital city, but if it overheats, it creates pressures in the areas of public transport, housing and rents, etc. We need a counterbalance to it. We have to identify such areas for that purpose. Why does the south east have an unemployment rate much higher than in the rest of the State? Is it due to skills shortages? Is there a need for property solutions? Is it due to the lack infrastructure? As the hard analysis must have been made by IDA Ireland, I ask Mr. Shanahan to help me to understand why the south east is underperforming to the extent it is. I am not dismissing the good work that has been done and know that Mr. Shanahan is going to say the number of jobs in the south east has increased. I accept that, but the reality is that the unemployment rate in the region is higher than the national figure.

Mr. Martin Shanahan

I will not go through the long list of FDI projects in the south east or the Deputy's county. He acknowledged that the number of jobs created was growing. That is positive and the more we can build clusters the more jobs that will be created. We have had some very strong announcements, particularly in Waterford, and that is the starting point in building a cluster. We have to continue to improve the attractiveness of the region relative to other options across all of the areas mentioned by the Deputy, whether it be infrastructure, providing a bigger base or the availability of skills. When I use the word "relative", I am referring not to other regions in Ireland but to everywhere else.

Deputy David Cullinane

Will Mr. Shanahan help me by being specific? Taxation is important as one of the factors, but I agree with him that skills and talent are the key ingredients. That makes sense for companies, but is this a problem in the south east? We do not have a university, but what is the level of joined-up thinking to deal with this issue? IDA Ireland looks at the unemployment figures and also meets companies which have to make decisions on where they should locate. There is a need for support for the regions. Therefore, if the key ingredient is the availability of talent, is this aspect a problem in the areas where the rate of unemployment is higher?

Mr. Martin Shanahan

Yes. It can be seen in some places in the south east that where there is an institute of technology such as in Waterford, there is more investment and there has been more indigenous growth. IDA Ireland is not the only arm of the State involved in industrial development, but one can see the benefit of an institute. It is not important whether it is an institute of technology or a university, although a university has more cachet; it is what the institute does that is most important. Where there are such institutes, one can see clusters emerging. In practical terms, we had a property solution on the ground which we were able to sell to a pharma company very quickly to create jobs and we are about to do the same again. That is how we start to build a cluster and we move on from there. Other counties in the south east also have opportunities. On Monday I addressed a financial services seminar in Gorey at which some very strong players were present with which we have the ambition to build a cluster. We also need to continue to improve on other things, not just in the south east region but also across Ireland because we are competing with everybody else.

Deputy David Cullinane

How important is it that IDA Ireland's overall investment strategy and the national planning framework chime and are connected? How influential will IDA Ireland's view be in the new national planning framework? There were criticisms of previous spatial strategies, in which there was something for everybody in the audience. We are trying to move away from this in the regional cities, something I would buy into, especially in the case of the south east. It is very important in terms of the provision of infrastructure because it follows the national planning framework and a spatial strategy, thus making it easier for IDA Ireland to attract companies to other regions. As someone who represents the south east and sees that, despite the growth achieved and the positivity, we are still lagging behind, the national planning framework is an opportunity for us. How is IDA Ireland going to interact with that strategy? I will ask my final question after Mr. Shanahan has answered.

Chairman

The Deputy has one minute left.

Mr. Martin Shanahan

We see the national planning framework as critical and it is hugely important that decisions be made, but it must not be so diffuse that it means that we are trying to develop everything again because that does not work. It is about developing centres of scale, critical mass and clusters, as we have tried to do within our own strategy. We need the infrastructure to support it, as well as the educational institutions. We are heavily engaged with colleagues across government on what is happening on the ground.

Deputy David Cullinane

The issue of taxation was raised. I am not somebody who advocates increasing the rate of corporation tax. Who sets the rate?

Mr. Martin Shanahan

The Government.

Deputy David Cullinane

Representatives of the Revenue Commissioners and other organisations have come before the Committee of Public Accounts with all sorts of opinion on revenue matters. If we ask the head of Revenue for an opinion, he says it is not a matter for him but for the Government. When the head of IDA Ireland says the rate should not be increased or decreased, it is a personal opinion because it is not the role of the head of IDA Ireland to set policy. It is a clear function of the Government and the Government and politicians will decide whether we should increase or decrease it. I say this to be helpful to Mr. Shanahan because he may find himself having to work with a different Government with a different opinion on these issues and it will be his job to implement Government policy. Is that a fair comment?

Mr. Martin Shanahan

I apologise if I gave any impression other than that it was for the Government to set policy. Deputy Catherine Connolly asked for my view on the matter. I am regularly asked what would or would not help in attracting foreign direct investment. It is absolutely clear that it is for the Government and the Oireachtas to set policy positions on all of these issues. In a similar fashion, the Deputy asked me what would help to support regional development from the perspective of the provision of infrastructure, education and so on and I gave my view. I have similar views on tax matters. I am not suggesting anybody should listen to them, but that does not mean that I should not share them.

Deputy Catherine Murphy

I thank Mr. Shanahan for coming. He may be blamed for the lack of balance in the development of industrial policy, but companies decide why they should locate in a particular area. I asked one major industry in my area why it had located there and was told it was because it wanted to be located near a major conurbation with a reverse traffic flow in the city. As it is a wet industry, it requires large volumes of wastewater. It also wanted to be located near an international airport. It was probably a choice between north Kildare and Dublin or Glasgow.

It would be quite useful for that regional message to be understood, that in the absence of getting balanced regional development, we will continue to have those stories. I do not necessarily ask Mr. Shanahan to comment on that.

IDA Ireland, according to the reply to a parliamentary question of mine in June, has 100 unoccupied sites. Some of them are rented to local authorities. I presume others are in farm land use or whatever. Has IDA Ireland valued those? Are many of them realistic prospects? It is one matter for companies to visit these, but how realistic are they? What was the methodology used in buying them in the first instance? In buying them, had IDA Ireland a realistic prospect of bringing in foreign direct investment?

In addition, IDA Ireland has sites that will have closed. There is one in my own area, the Hewlett-Packard site which is a high-profile and good site. IDA Ireland will have more areas to market as well. How many locations would IDA Ireland have on its books to which it would be able to bring investors?

Mr. Martin Shanahan

The IDA has a property portfolio in order that we can market it to clients. As the Deputy points out, we own land throughout the country and that is for marketing purposes. Some of it, frankly, is more attractive than others. Where we have acquired land, it is obviously because we believe there is a possibility of marketing it and actually getting a result out of it. Some of it is developed and some of it is not developed. It changes from time to time. I am interested in this area. It is not a static portfolio. Our ambition always is to move land on and to move buildings on and to sell it to clients.

In answer to the Deputy's question as to whether it is valued, it is absolutely valued. It is valued every six months. I do not have the exact valuation of the land to hand but we can provide that to the Deputy.

Deputy Catherine Murphy

That would be helpful.

Mr. Martin Shanahan

We know exactly what we have and we can break that down. In relation to sites that close, unfortunately, it is a feature of the world we live in that enterprise fluctuates and different companies' fortunes fluctuate. Where there has been a significant industry - Deputy Murphy cited an example in her own constituency - it has developed skills. There is a site there to be marketed. There is very good property on that site, to be marketed. While the point at which a company is exiting is extremely regrettable and we make every effort to ensure it does not happen, it does give that area an opportunity to attract new investment. It puts it ahead, maybe, of some other areas where one does not have that pool of talent, property and site available. Unfortunately, we have a few of those examples throughout the country and it will be ever thus.

Deputy Catherine Murphy

I want to ask Mr. Shanahan about ConnectIreland. It has been gone through quite a bit already. Mr. Shanahan was asked about the numbers. It is the companies that determine the numbers and I would not dispute that. Is there a length of time the job must have been in place for it to qualify? Does it have to be there for six months or 12 months to qualify as a job that was delivered under the scheme?

Is the dispute under way being worked through internally in IDA Ireland? Is there a timeline for the conclusion of that?

Mr. Martin Shanahan

In answer to the Deputy's first question on whether there is a timeline for which a job has to be sustained, the answer is, yes, two years, albeit we pay ConnectIreland upfront and on the basis that it will be kept for two years. It is only if it is not that we claw back that money.

On the dispute, it is a ConnectIreland dispute with the IDA. IDA Ireland is not in dispute with ConnectIreland. ConnectIreland lodged a dispute notice, which it is entitled to do, with the IDA. There is a clause in the contract which allows for this and which sets out how it should be resolved, and it is for ConnectIreland to progress that matter.

Deputy Catherine Murphy

Is there a timeline?

Mr. Martin Shanahan

It is entirely within the gift of ConnectIreland.

Deputy Catherine Murphy

Housing was something that Mr. Shanahan referenced in his opening statement. It is a challenge, irrespective of industrial policy. There are opportunities in the likes of Brexit. Thankfully, the rate of unemployment is falling quite quickly. Successful industrial policy in which we will be investing will probably require us to bring in additional employees. This morning we heard the announcement that 50% of the announced jobs will be for people who will be recruited domestically and 50% will be for people who come in because of the language issues. How is the pressure on housing manifesting in terms of an impediment? Is it nearly top of the list? Is it making it impossible to market? Is it being asked about? Is it known about? What engagement is IDA Ireland having with Government in this regard? We probably need a much bigger workforce if we are to have balanced regional development and there probably is a requirement to grow the population.

Mr. Martin Shanahan

I have a couple of comments and responses to what the Deputy has said. First, on Brexit, there are both challenges and opportunities from an IDA perspective. It is not all upside. There will be more investment, and we have seen some of that already as a result of Brexit, but 13% of the IDA portfolio is exposed to the UK in terms of exports. Some €19 billion euro worth of exports out of our client companies is to UK. That represents a challenge and a risk. It is a two-way street, as it is, obviously, for indigenous companies.

In terms of the challenge of residential housing and the impact it is having, I would say in the recent past it has not posed us a difficulty in marketing Ireland, which I think was the Deputy's question. Ireland is still seen as very attractive, as evidenced by even just this week the number of announcements that have been made, such as Veritas announcing more than 200 jobs, Microsoft, whom the Deputy herself has referenced, announcing this morning an additional 200 jobs, and Fidelity International yesterday announcing 280 jobs.

If I just take the Fidelity International and Microsoft examples, Fidelity International has added 250-odd posts in the past 14 months, so I think the companies are comfortable that they can still scale in Ireland. Similarly, Microsoft this morning confirmed that it has fulfilled 80% of its previous recruitment drive which was announced less than a year ago for 500 people, so the evidence on the ground would suggest there are a lot of good things happening.

Undoubtedly, residential housing is an issue. The Deputy asked about our interaction with Government. Obviously, we engage with Government regularly on this. It is keenly aware of the issue. It is a priority and I have engaged directly with the Minister, Deputy Eoghan Murphy, on it.

Deputy Catherine Murphy

Looking at the educational options and the differentiation in terms of the type of education that, for example, Germany has, where there is a different approach involving half-time apprenticeship and half-time college, is that something that is considered or engaged with? Does IDA conduct skills audits on what is required? Does our education policy, from an industrial perspective, require any changes?

Mr. Martin Shanahan

First, there is significant engagement with the education system. We have people who work on skills. All of our divisions feed in the skill needs of clients to the education system. We work closely with the expert group on future skills needs to identify future skills needs. I myself am a member of the National Skills Council so I directly articulate what is needed from a foreign direct investment, FDI, perspective. There is huge merit in looking at the German model, which has a strong vocational element and apprenticeship element.

Recently, during the summer months, we did a survey of all of our clients on their satisfaction with various items in Ireland.

The feedback on education and training was overwhelmingly positive in respect of what has happened and the skills that the educational institutions are producing.

Deputy Bobby Aylward

I compliment IDA Ireland on its work in foreign direct investment. In 2016 there were 19,000 jobs created, with a net gain of 12,000. I want to ask about the 7,000 jobs that must have been lost. We are coming out of a recession now and the country is going better. How does this figure compare with the recession years of 2012 to 2014? Why are we losing 7,000 jobs? Where did we lose them and was there a reason for the loss?

Mr. Martin Shanahan

I provided the committee with some supporting slides, which answer the Deputy's question as they go back as far as 2009. The losses in 2009 were 21,200.

Deputy Bobby Aylward

That is three times the current figure.

Mr. Martin Shanahan

There are much fewer losses now than there were then. Even more importantly, as a percentage of the overall portfolio, losses are at an all-time low. That is because we work very hard with clients to make sure they are developing and are not going to be subject to closure, loss, loss of a mandate and so on. It is not just about attracting investment in but also keeping and growing what is already here.

Deputy Bobby Aylward

In what field were the 7,000 jobs, mainly?

Mr. Martin Shanahan

They were diverse, right across the portfolio. There is no one sector that is particularly identified. This is the ebb and flow of business, basically. Some businesses work and some do not. We still see some companies involved in hardware may still be exiting some of that. The losses are also spread right across the country, both Dublin and the regions.

Deputy Bobby Aylward

If a company goes into liquidation, closes down or whatever, and there are grant aid arrangements or similar, does IDA Ireland recover that? Is it on a percentage basis per annum? If a company has a ten-year programme but goes bust after five years, is that money lost to IDA Ireland? I presume the next instalment would not be paid as the company would be gone.

Mr. Martin Shanahan

We have tight legal agreements for everything we pay to a company. We require a parent company guarantee in almost all cases. It is not just the Irish subsidiary that is on the hook but also its parent body, wherever that may be, in the US or elsewhere in Europe. The legal agreement sets out very clearly what at any point in time is due back to the IDA, should the company fail to fulfil the conditions of the agreement. We recoup the money that is left over. Obviously, if a company is in liquidation or there is no recourse to the overall body, it depends on the liquidator and then the percentages and so on. We chase everything through to the end. Even in instances where that has happened - thankfully they are rare enough - the company has often given huge economic value to the State over the long period it has been here.

Deputy Bobby Aylward

On the property portfolio that is left, is IDA Ireland mostly renting the properties or does it sell the properties to companies that are coming here? Do they buy the properties outright or is the property leased? If the company goes into liquidation, what happens the properties? Who owns them afterwards?

Mr. Martin Shanahan

We have a mixture of both. We both lease and sell properties. A lot of our property is on a 999-year lease, which means we maintain control of what can and cannot be done, particularly in our business parks. We want industrial development. If a company goes into liquidation or receivership, it really depends on the circumstances and what the legal covenant is. We would work with the liquidator.

Deputy Bobby Aylward

Does IDA Ireland get the property back? Say if the company has the property bought, does it sell it or does the property revert back to IDA Ireland? Has IDA Ireland a hold on such property?

Mr. Martin Shanahan

We have in cases where we have a lease. It really depends on the circumstances with every single company. We would work with a liquidator, a receiver or the company itself to determine whether the property would come back within IDA Ireland's portfolio.

Deputy Bobby Aylward

Of course, we are all local. I am from the south east, like Deputy Cullinane. I am from Kilkenny and he is from Waterford. We work together. We have a great facility in Belview Port, which I know is high in IDA Ireland's ranking. With Brexit coming and so on, the future of Belview Port looks rosy. We have land and Kilkenny County Council is on board. We have the services there, we have the roads, and we are only an hour and a half from Dublin. We have the rail link and, when Brexit takes place, it will be the nearest port to the mainland of Europe. What is Mr. Shanahan's opinion on Belview Port?

Are we at disadvantage in the south east because we do not have a university? We have two institutes of technology but a lot of our graduates are going to Dublin, Limerick, Cork and Galway. Are IDA Ireland's businesses following graduates to where they are being educated? Do we miss out? We are behind as far as job creation is concerned.

Mr. Martin Shanahan

On the question of the institutes, skills are hugely important. My own belief is that it is the quality of the graduates and what happens in institutions that counts, rather than what they are called. That is not to say that institutes of technology should not aspire to become or to be called universities. Massachusetts Institute of Technology, MIT, is not disadvantaged by the fact that it does not have "university" in its title. Companies are interested in graduates, yes. They are interested in the flow of skills. Any region that can demonstrate that flow of skills is at an advantage-----

Deputy Bobby Aylward

So we are losing out in the south east because we do not have those graduates being educated in the region.

Mr. Martin Shanahan

The Deputy also has two institutes of technology, however, which are producing good graduates, I believe. There is the flow of skills.

In respect of Belview Port, my view is that it is an attractive piece of infrastructure. I will hand over to my colleague, Ms Buckley, on the matter.

Ms Mary Buckley

Obviously, Belview Port is very attractive. It is and has been a strategic site for IDA Ireland. It had the utilities in place, as Deputy Aylward outlined. We worked very closely with Glanbia, which has established a facility there in the last two years. It is putting a €235 million investment into the site and creating an additional 1,600 jobs. Those type of strategic sites are very important. We still have some land there as well.

Deputy Bobby Aylward

We can all nitpick about business but counties Kilkenny and Carlow seem to be behind in terms of jobs created. Talking personally, in the figures I see 802 for Carlow and 762 for Kilkenny. Meanwhile Tipperary has 3,040, Waterford has 6,000 - which I do not begrudge them - and Wexford has 2,600. We seem to be the poor relation there. Is there any reason for that? Have we landbanks in Carlow-Kilkenny and land available for IDA Ireland to bring in companies that are interested? Of course companies want services, access to roads and so on. We have those, yet we seem to be falling behind in the employment numbers. I am not doing the poor mouth here; it is just that I have to fly my own flag.

Mr. Martin Shanahan

I appreciate that. I will ask Ms Buckley to comment on what is available in terms of landbanks. Going back to my earlier response, it is a question of critical mass, co-location with institutes of technology and what is available on the ground. I can assure the Deputy that we are doing everything to market those landbanks.

Ms Mary Buckley

With regard to land, as the Deputy knows in Carlow we did have a very large, 60-acre site which we sold to Merck Sharp & Dohme, MSD, a very active and a very large employer in Carlow. Earlier this year, it announced that it was expanding with 300 additional jobs between Cork and Carlow. That site was very important at the time and it has gone to a terrific company that is continuing to grow in Carlow.

The second point about Carlow is that we plan to construct a building there next year. It will be an advanced office building and is a project under our regional building programme, which aims to either attract new investment or to facilitate an existing investment to expand.

Deputy Bobby Aylward

I was going to ask about that. Have we any advanced technology buildings in Carlow-Kilkenny? I want to ask Ms Buckley about Kilkenny too because that it where I am from.

Ms Mary Buckley

There is one on the way in Carlow, so that is the positive there. In Kilkenny, we have a business park and we work very closely with the local authority there. We have land available for marketing at Belview, as I said already. We have land available in the Kilkenny business park as well, where Bank of Ireland and VHI are.

At the Purcell's Inch industrial estate, there is a small amount of land available as well. Both of those would have sites available. We are working very closely with the private sector there as well.

Deputy Bobby Aylward

Dublin is overheating and accommodation or housing has been mentioned already. Will IDA Ireland be looking more closely at the south east, which is only an hour and half down the motorway? As I stated, we have connectivity so will IDA Ireland look to bring more people out of Dublin so as to have a balanced regional development? We have the infrastructure in place.

Mr. Martin Shanahan

My intention is to fully deliver on our strategy, which is to increase investment in the south east by 30% to 40%.

Chairman

I have a couple of questions and Mr. Shanahan knows where I am coming from. I congratulate the agency on the approximately 200,000 people or 10% of the Irish work force in foreign direct investment companies in Ireland. The payroll in IDA Ireland companies is probably a bit higher than in other local companies or the public sector. They are good employers in terms of improving the local economy. What county in Ireland has the lowest number of IDA Ireland-supported jobs? I am sure he knows it.

Mr. Martin Shanahan

I do. It is Laois.

Deputy Bobby Aylward

The Chairman knew that.

Chairman

Painfully. I will not labour the point as we are short of time. In the midlands, the figure is 4,280, which is the lowest for the regions. Laois has been one of the fastest growing counties in terms of population and the witnesses mentioned population and urban trends in the opening statement. The population of Portlaoise, as the witnesses know, is substantially higher than Tullamore, Athlone and Mullingar. IDA Ireland has not responded to the change in the demographics and the witnesses know the position. I invite Mr. Shanahan to a meeting in Laois as IDA Ireland makes an annual visit to Laois County Council. It is the usual slagging off of IDA Ireland as we know the number of visits and jobs being created in the county. There are approximately 100 jobs or something like that. It is a very small number. There is a site and Laois County Council recently purchased a site adjacent to the motorway. I am sure the councillors will speak to the agency about that. Could we arrange for the chief executive of the agency to meet council members? I will liaise with Mr. Shanahan's office in that regard. It is great to have the good news stories all the time but the agency does have an obligation to other counties. For a long number of years, Laois has been the lowest performing area for IDA Ireland.

Mr. Martin Shanahan

If the Chairman invites me to Laois, I guarantee will turn up at the meeting once we agree a suitable time.

Chairman

We can agree an appropriate schedule.

Mr. Martin Shanahan

I get to visit many counties where the matter at hand is not just an announcement.

Chairman

We will leave it at that. We are concluding the meeting because we wish to attend the Dáil. Is it agreed to dispose of the 2016 financial statements of IDA Ireland? Agreed. On behalf of the committee I thank all the witnesses from IDA Ireland, the Department and the Comptroller and Auditor General for being here and for the material supplied.

The witness withdrew.

The committee adjourned at 12.05 p.m. until 9 a.m. on Thursday, 12 October 2017.