Dáil Éireann díospóireacht -
Tuesday, 4 Mar 2003

Vol. 562 No. 4

Adjournment Debate. - Job Creation.

Mr. Connaughton

Last Sunday morning the people of Ballinasloe were mesmerised by a lengthy article in the Sunday Independent, written by Jimmy Guerin, concerning how their town had been bypassed again where job creation is concerned. The article spoke of how 1,000 jobs were lost to Ballinasloe by what was described as “IDA incompetence” and went on to outline that a leading US high tech company had shelved plans to expand into Galway after IDA Ireland bungling and red tape turned a dream into a commercial nightmare.

Ballinasloe badly needs an anchor industry. Two years ago AT Cross closed, Square D closed dramatically a fortnight ago and the downgrading of St. Bridget's Hospital cost hundreds of jobs. To rub salt in the wound, Ballinasloe was not even mentioned in the national spatial strategy programme a month ago. Ballinasloe did not know that an American company, Consumer Direct of America, CDA, which employs 500 people in the United States, wished to expand its services and open a call centre at the old AT Cross site. It is estimated that the US company planned to create between 400 and 1,000 jobs in Ballinasloe. The mind boggles at the importance of a project of that size and the beneficial effects it would have on Ballinasloe.

From the newspaper article it is clear that Consumer Direct of America was not a Mickey Mouse outfit. It is a Nasdaq listed company, one of the leaders in its field in the United States. However, according to Mike Barron, the chief executive officer of the company, after he and his delegation visited Ireland and were taken in tow by IDA Ireland personnel, he was happy he had made an impression. Mr. Barron seemed to be impressed by the work ethic of the west of Ireland workers and the support of IDA Ireland. The jobs created in this new project would cost €12,000 per job created, which appears to be good value. However, after the Americans returned home, there was no communication from IDA Ireland to seek further clarification on such a huge enterprise. In December the bombshell fell. IDA Ireland said it was not interested.

I have a number of questions for the Minister. Did the board of IDA Ireland consider the CDA project in detail? Is it not reasonable to expect that after the initial meeting with a potential creator of 400 to 1,000 jobs, there would be great need for further clarification and information? What contact had IDA Ireland with PricewaterhouseCoopers, consultants to CDA, given that Mr. Barron said that PricewaterhouseCoopers did not act on his company's behalf? Did IDA Ireland send any of its representatives to the US facility? Mr. Barron says it did not. Would it not be a monumental blunder if IDA Ireland did not do so?

Why did IDA Ireland then take Mr. Barron seriously after he resubmitted his application by seeking references from leading banking and other lending institutions? Will the Minister comment on why Allied Irish Banks and Ulster Bank offered credit facilities and why Eircom sent some of its executives to the United States to see the company when IDA Ireland had turned it down only a month before? Why did IDA Ireland not seek the €2 million to €3 million cash facility needed to prove the company's commitment to the project on its first application?

Why did IDA Ireland refuse to support this company? I want the honest answer. County Galway has never had to put up with anything like this before. I believe that IDA Ireland is so centrally attached to its Dublin headquarters that its regional offices only act as a type of post office. They only get what is sent to them, and in the case of Ballinasloe, it was not much.

I do not want taxpayers' money squandered and I do not want an industrial enterprise that would collapse in a few years, creating even greater problems. However, I do not want Ballinasloe or County Galway to be treated shoddily. It should get the same treatment other towns have got over the past ten years.

I am disappointed the Tánaiste is not present. She was in Ballinasloe last Thursday but there was not a word to the 400 people who are losing their jobs about the 1,000 jobs that seem to have been messed up by either her or IDA Ireland.

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

Responsibility for promoting and marketing Ireland and its regions as a location for new foreign direct investment is statutorily charged to IDA Ireland. Despite the global economic downturn, the level of foreign direct investment in Ireland, relative to the size of the economy, remains one of the highest in the world.

According to the IDA Ireland year-end statement issued on 6 January 2003, the number of overseas investments secured by IDA Ireland during 2002 was up over two thirds, with 55 new projects in manufacturing and international services being successfully negotiated by IDA Ireland during the year compared to 33 in 2001. In addition, IDA Ireland also had considerable successes during the year in convincing existing overseas companies located here to invest nearly €120 million in research and development activities, thus adding higher value activity to their operations in Ireland and raising the calibre and status of these companies significantly.

Consumer Direct of America, CDA, is a US mortgage broker which operates a marketing centre in the US focused on two main areas of business, financial services and direct marketing services. The company employs approximately 350 people and approached IDA Ireland in September 2002 regarding the possibility of establishing a 1,100 person operation in Ballinasloe. Approximately 50% of the proposed employees were to be engaged in outbound telesales activities selling mortgages to the US, east coast, retail consumer market, with most of the remaining jobs arising in associated processing and customer services activities.

IDA Ireland arranged and hosted a visit by senior CDA executives and their advisers to Ireland in late September-early October 2002 and discussions covered various issues, including the approval process for submissions to IDA Ireland seeking financial assistance and the contents of such submissions. In addition, IDA Ireland provided the CDA executives and their advisers with guidelines on preparing a business plan that would assist them in seeking IDA Ireland financial assistance. On 18 October 2002, IDA Ireland received a proposal from CDA to establish an operation in Ballinasloe. According to IDA Ireland, CDA's submission fell considerably short of the business plan that it would normally expect to receive from a potential investor. In particular, it contained no historical financial information, despite this being clearly identified by IDA Ireland as one of the primary pieces of information to be provided, and provided limited background information on the group. In addition, the basis for the financial projections made was unclear.

IDA Ireland responded to the CDA proposal on 29 October 2002 with a comprehensive list of issues requiring additional clarification and information. This response highlighted the need for the provision of appropriate background information on CDA and audited financial statements for the previous three year period. A copy of IDA Ireland guidelines on the preparation of a business plan was again sent to the company. While CDA responded to some of these issues on 18 November 2002, it did not address all the issues raised by IDA Ireland. In particular, no financial information was provided. Following an e-mail from IDA Ireland to the company on the same day, the chief executive of CDA, a Mr. Barron, said he would send a complete financial package after the release of the company's third quarter results on 20 November 2002.

On 20 November 2002, IDA Ireland's San Jose based representative visited CDA's call centre operations in Las Vegas to obtain a first-hand impression of CDA's existing operations. This visit and the discussions that took place with senior management, including Mr. Barron, did not provide a positive impression to IDA Ireland of either CDA's existing operations and the level of activity in the Las Vegas call centre or its plans for an Irish subsidiary. As no financial information was forthcoming from CDA, and IDA Ireland had considerable reservations regarding the detailed plans for an Irish operation, IDA Ireland decided on 3 December 2002 that no financial support would be available at that time for the project in question and it advised CDA of this. IDA Ireland based this decision on financial information obtained from sources other than CDA, their assessment of information presented by CDA relating to the proposed investment and direct discussions with senior management of the group.

On 9 December, CDA requested IDA Ireland to review its decision based on a smaller project. IDA Ireland responded on 12 December and agreed to this request on the basis that certain specific information be provided to it, but most of the information requested was not received.

While CDA's third-quarter results were released on 20 November 2002, it was not until January 2003 that CDA provided IDA Ireland with historic financial statements. IDA Ireland indicates that financial statements for the nine-month period to 30 September 2002 showed CDA making losses of $1.3 million. Between its inception in May 2001 and 30 September 2002, the group had accumulated losses of $2.3 million against shareholders' equity of $3.1 million. IDA Ireland informed CDA on 25 February 2003 that it had decided to maintain its original decision not to offer financial assistance to CDA's proposed operation in Ireland.

As I have pointed out, the promotion of Ireland as a location for foreign direct investment is an operational matter for IDA Ireland and the day to day promotional work continues apace. IDA Ireland also has a value-for-money remit in relation to public funds and, clearly, not every company which approaches it would fulfil the criteria. I am confident that the continuing commitment of the Government to enterprise and regional development will bring positive results in terms of suitable industrial development projects.