I understand the Minister proposes to reply to the questions together. I shall call on Members in the order in which they submitted their questions, first, Deputy Hogan.
Private Notice Questions. - Kilkenny Industrial Project.
asked the Minister for Enterprise and Employment the need for him to clarify the reasons an American company has withdrawn from the Kilkenny area.
asked the Minister for Enterprise and Employment how he can justify the premature and inaccurate announcement of 460 new jobs for the former Fieldcrest factory to the people of Kilkenny; and if he will make a statement on the matter.
asked the Minister for Enterprise and Employment if he will make a statement on the announcement by a United States company that it will not be proceeding with a factory on the premises of the former Fieldcrest factory in Kilkenny; and the proposals, if any, he has to replace the project with another company.
asked the Minister for Enterprise and Employment the reason the major job project which he announced for Kilkenny now appears to be lost; the efforts, if any, he has made since the original announcement to ensure that the project will come on stream; and the plans, if any, he has to intervene in an effort to save the project at this stage.
At the outset I must express my dismay at the decision by Chic by HIS not to proceed with the project. I share the deep sense of disappointment felt by the people of Kilkenny and elsewhere.
When I announced the project on 25 February last, which was attended by the company's head of European operations, there was no indication that certain problems would arise in completing the finer details of the proposal which had received the approval and full support of Government. Planning permission for the facilities had been received and tenders for construction work were about to be sought.
In completing the legal aspects of the proposal, as is the normal procedure, certain difficulties arose between IDA Ireland and the company. The main issue was the insistence by the company that the grants be paid at the start of the project rather than on a phased basis as job targets were met. The House will appreciate the need to ensure that adequate safeguards exist in relation to the use of taxpayers' money. In this case IDA Ireland could not accede to the demands of the company. Despite further detailed negotiations, including a personal intervention by me, it was not possible to change the company's decision that they were not proceeding with the investment.
I very much regret the loss of such a major investment but wish to stress that every avenue was explored in the efforts to secure the project.
I assure the House and Deputy Pattison that IDA Ireland will continue to work closely with all interested parties with a view to getting an alternative project for Kilkenny.
Does the Minister agree that this is a major embarrassment for IDA Ireland and the country in view of the fact that an announcement was made on 25 February that a potential 460 jobs in a manufacturing facility was to be established in Kilkenny without any contract having been signed between that company and IDA Ireland? Would the Minister agree that such inward-investing prospectors, such as this company, are at a tremendous advantage once such an announcement is made and a contract not signed since in this instance the company sought extra special facilities and aid in order to advance this facility for Kilkenny? It was allowed do so through the strategy of IDA Ireland and the Minister of making announcements, without contracts being signed, to the effect that everything will be in order whereas the finer details should have been teased out before the announcement was made.
I do not believe it is a major embarrassment to either IDA Ireland or myself. What is at issue here is the safeguarding of taxpayers' money. A contract was signed, to the extent that approval in principle was signed and agreed by both sides, subject to the legal details being worked out, as in the normal practice with every IDA project over the past ten years. The normal practice was followed in this instance.
Regrettably, late in the day, long after Mr. Milan Danek, the chief of European operations, who participated in the announcement in Kilkenny, had indicated that they were coming to Kilkenny, the company and its representatives sought certain requirements, some of which were met. However, IDA Ireland, with my full support, was not in a position to break its standard practice of ensuring that job targets would be met by grants approved.
Would the Minister accept that it is reckless and irresponsible of a Minister, or any other Government spokesperson, to announce new jobs before contracts have been signed? We are aware of the premature announcement of 2,000 new jobs in the south east in recent months which have been lost to the region. Will the Minister accept that this practice undermines the negotiating position of IDA Ireland and erodes confidence among prospective job-creating investors in this coalition Government?
I reject utterly what Deputy Quill said, this was not a premature announcement. This announcement was authorised by the company when its chief of European operations was present. This agreement had the approval of the board of IDA Ireland and the Government. IDA Ireland is sending a clear signal to Irish taxpayers that their money is well guarded and is sending an even stronger signal to the international investment community that, while Ireland remains the best location for investment in Europe, we will not be taken in by anybody.
That is not the point.
I reject what Deputy Quill said. The company participated in the meeting in Kilkenny when the announcement was made and changed its mind afterwards. Having got this publicity — planning permission was obtained — they attempted to use the announcement to force IDA Ireland and, subsequently, the Government, to acquiesce to what were unreasonable, reckless demands involving taxpayers' money. We simply will not acquiesce.
I am not concerned one iota — and was glad to hear the Minister express a similar view — about the embarrassment of this but I am concerned about the severe, cruel blow to the people of Kilkenny and surrounding areas whose hopes had been so raised. As the Minister will be aware, the former Fieldcrest factory closed more than 12 years ago. A portion of the premises was taken over and provided good employment, but a large part remained vacant in which it was hoped this company would be accommodated.
Can the Minister give the House an assurance about a replacement industry since the people of Kilkenny have been waiting for more than 12 years with high hopes of the finalisation of this project? Those hopes have been dashed. Can the Minister soften the severity of the blow this disappointment has dealt to the people of Kilkenny and surrounding areas?
I fully appreciate and share the Deputy's concern in relation to how the people of Kilkenny and the surrounding area must feel about this announcement because they had been led to believe by the company that it was coming to Kilkenny. They would much prefer the situation which has arisen now than one in which a company did not commit itself properly or provide the safeguards that are normally required by the IDA and which the IDA is getting from all the other inward investing companies here. The balance of the Fieldcrest facility which is owned by Forfás, on behalf of the IDA, will be vigorously promoted by the IDA. There is much more interest in inward investment in the Irish economy and every effort will be undertaken by the IDA to get a replacement project, as soon as possible, for Kilkenny.
Why did the Minister decide that what was sought in this project was bad value for money, given the newspaper reports that the cost per job was less than £10,000 which, by the standards which the Minister usually applies, would be roughly half that sanctioned in other cases? I know the Minister does not like to be reminded of the Clonmel and other projects. Will he agree that if you announce a project without a watertight agreement you are inviting gazumping and upping the bid, particularly when the international environment for mobile projects is so hotly contested? If you do not have a watertight agreement and make an announcement you are open to pressure. The lesson to be learnt from this experience as well as from the other experiences is that you must not make any announcement until the legal contracts are signed.
I regret the Deputy is hopelessly misinformed. He seems to think that the Clonmel Project was lost. The Clonmel project was not lost.
It was lost to Clonmel.
The Clonmel project went to Limerick.
The Taiwan factory went to the North.
Please allow the Minister to respond.
Please do not tell me that you will dispute between Clonmel and Limerick. In respect of the AST project which was coming to Clonmel, the company changed their minds because they acquired the Tandy Corporation. They closed down the Tandy Corporation in Scotland against very strong efforts by the Scottish Development Corporation and decided to transfer everything to Ireland. They found that the only available location of 400,000 square feet was in Limerick so that there is no comparison and no connection whatsoever. The project was not lost.
Why was it announced for Clonmel then?
The company changed their minds because, unknown to the IDA, they bought the Tandy Corporation at the same time.
So the announcement for Clonmel was premature.
No announcement was made in respect of Clonmel.
The Deputy's colleague announced it.
To respond to the second part of the Deputy's first supplementary, it is not a question of value for money but rather a question of safeguarding taxpayers' money. The money being given out is not mine or the IDA's private money. This is not a private venture capital group which is examining projects and investing money. These people sought the payment of the grants up front in advance of job targets being delivered. Over many years the IDA has established good practices and procedures precisely to safeguard taxpayers' money to ensure if a deal is made with an inward investment company that it relates to the cost per job. Deputy Bruton is correct in saying that the relative cost per job is cheaper because of the capital infrastructure related to the number of people being employed, but under no circumstances could the IDA be expected to pay, in the first month, all the moneys related to jobs supposed to be put in place over a three year period. How could they guarantee that those jobs would be created? The normal business practice is not to pay for the goods until they are delivered. These people sought cash up front with no guarantees. We will not use taxpayers' money in such an irresponsible and reckless fashion. I support what the IDA did. These conditions were on paper the first day they began to do business with us. Those conditions did not change up to or after 25 February. Subsequently they sought to change the conditions and other matters related to guarantees and undertakings about taxpayers' money. We will get good investment into Ireland but I will not sell this country and the taxpayers short.
The Minister did not answer the second supplementary.
(Carlow-Kilkenny): In view of the fact that the Minister is making a song and dance about all the difficulties in the negotiations, how is it that an agreement was announced as if it was signed, sealed and delivered despite the fact that there were obviously major difficulties involved in the financing of this business, resulting in such disaster for people who thought they had 460 jobs? Why would any Government make a formal announcement, completely unaware of what would happen afterwards? How many other companies may be in the same position?
The announcement was made. From the time Deputy Bruton's brother was Minister for Industry and Commerce it has been the practice to make an announcement once approval is given by Government and heads of an agreement between both sides, through the IDA, have been arrived at. The matter becomes public knowledge when the company applies for planning permission or seeks employees. This has been normal practice during the past ten to 15 years. The company, which was well aware that the conditions and requirements negotiated would be signed up after the formal announcement, changed its mind and sought to change conditions which were on the table at the outset. The announcement was made by the company. Mr. Milan Danek came from Munich to Ireland and spoke to journalists. Some Deputies were present and heard what he had to say and why he thought Ireland was a good location. He had nothing but praise for the treatment he got from the IDA and so on. No new conditions were introduced by the IDA or the Government. Changes were sought afterwards by the other side which had the effect of asking us to be less mindful of taxpayers' money. Neither I nor the IDA was prepared to agree to that. Most important — and in some respects I am glad of the opportunity to debate this matter — I am not prepared to be blackmailed in public by the suggestion by Deputy Quill that to avoid political embarrassment we might have acquiesced to the demands of this company.
That is not what I said.
Under no circumstances would political embarrassment allow us to become irresponsible or reckless with taxpayers' money.
That is not what I said.
We must bring this question to a conclusion. I call Deputy Hogan after whom I will call Deputy Quill.
Unfortunately it is a major embarrassment for the people of Kilkenny and they are very angry about it.
It is an upset but it is not an embarrassment.
Deputy Hogan, without interruption.
It is an upset and an embarrassment. The reality is that the Minister should know what is going on in the IDA and in the company. The company has pulled the wool over the eyes of the IDA by the manner in which they have negotiated this contract and by getting the Minister and the IDA to announce this facility for Kilkenny. They forced the Minister into a situation where he had to increase the aid on offer to the particular American firm. It was a grand strategy by the company which worked to their advantage in this case in a competitive international environment for inward investment. Will the Minister change the practice in light of this experience and in light of the fact that the company nominated for Clonmel went to Limerick?
The facility at Clonmel transferred to Limerick but in this instance I understand the facility may not stay in the country. What special initiative will the Minister take to overcome the upset and embarrassment of this unique situation and fill the vacant space of 80,000 square feet in the former Fieldcrest plant?
This is not a case of embarrassment. It is an attempt by a company to squeeze more than was originally on the table. I fully understand and share the upset caused to the people of Kilkenny on learning that the company which had informed them it was coming to the city was not now coming. The company had hoped perhaps that because of the publicity the Government would be forced to deviate from sound commercial principles. Anyone in business knows that you do not do business in this manner and do not pay cash up front for goods when you cannot be certain of delivery. That simply is not smart.
I will not change the policy. I believe the IDA has been right and any other serious investors considering this country will recognise they are dealing with a professional agency and a serious Government that will not be forced into panic decisions because of the pressure of possible embarrassment. Neither will I change the policy on announcements because when the heads of an agreement have been arrived at and approved by the Government, following the IDA's board assessment of the project, the matter very quickly becomes semi-public knowledge because of applications for planning permission and advertisements for employment. Instead of information being imparted in a haphazard form it is better, as has been the practice, to announce projects approved by the company, the IDA and the Government. That is exactly what happened in this instance and I do not propose to change that procedure.
Does the Minister accept it was extremely bad judgment on his part to allow this company to determine the date of the formal announcement when it is evident, from what he said, that it did so to give it leverage to blackmail the IDA into meeting its conditions? Does he agree that, as Minister for Enterprise and Employment, the buck stops at his desk and that he bears responsibility for this major débâcle and the huge disappointment of hundreds of young people in Kilkenny and the regions who would have applied to that company for jobs?
We are having repetition.
This major débâcle will inevitably undermine the negotiating position of the IDA. Will the Minister concede that the buck stops at his desk and that this practice must stop?
I fully accept responsibility for industrial policy and recognise that the procedures that operate have to come through my desk. In this instance the company negotiated with the IDA and the IDA board, following detailed negotiation, agreed the heads of an agreement in respect of that company, which came before me for sanction. I sanctioned it and subsequently brought it to Government and recommended it. Members heard Deputy Bruton say that in comparison with other projects on a cost per job basis it is very good value — and the Government accepted it on that basis. This is in line with normal practice and procedures.
I do not agree that the IDA's position has been weakened as a result of this incident. The fact that the IDA refused to budge on what must be interpreted as unreasonable changes in position on issues never raised by the company prior to that agreement being reached clearly sends a signal that the IDA is a serious operation backed by a competent Government which will only do business with serious investors. We are not here to facilitate people who think we may be a soft touch.
Most Members are aware, like the Minister, that at least one month or more before the Minister came to Kilkenny the local paper had banner headlines about the proposal. The dogs in the streets knew about it months in advance of the official announcement.
That is correct.
It is inaccurate for Members to talk about premature announcements. Will the Minister agree that what happened strengthens the case for putting Kilkenny at the top of the list for a major industry?
I am happy to reply to the Deputy because he reminded me of something I had forgotten — because Forfás had requested the existing temporary tenants in the Fieldcrest factory to vacate it, news of this project became known, hence the reason for making these announcements as soon as the heads of an agreement were arrived at. I agree with Deputy Pattison, I met the deputy vice president of the company in October in Atlanta, Georgia, and at that stage he was talking in firm terms of coming to Kilkenny. That facility has been off the IDA's books for other potential investors because it had every reason to feel sure that it had secured an inward investor.
The IDA will put the facility actively into play for the very positive number of inward investment inquiries. I am told by Kieran McGowan of the IDA that it is looking at its best year ever in inward investment projects. I am delighted to tell Deputy Pattison that Kilkenny will be vigorously promoted by the IDA.
(Carlow-Kilkenny): Do not forget Carlow.
Will the Minister confirm that it is not the policy to make substantial up-front payments and that in no cases does the IDA offer agreements of the type sought in this instance? Will he confirm also whether the company received a more attractive offer from another international agency or if there were other reasons for its decision?
I will answer the second question first. We are not aware — I spoke to Mr. Rosenberg last Friday and we have been in touch with him since — that the company is going to another location, but if it is neither we nor the IDA have been told and we have been in continuous contact with it.
The IDA has a standard policy for money coming on stream as job targets are met although it may vary in certain circumstances. I am not aware of any such deviation but I presume — I will have to come back to the Deputy with the accurate information — there must be some room for manoeuvre because, clearly, in negotiations there has to be such room if that margin will secure a particular project.