Vol. 763 No. 2
6Deputy Mick Wallace asked the Minister for Jobs; Enterprise and Innovation his views on figures presented in the most recent quarterly bulletin from the Central Bank of Ireland which show that in 2010 15% of inward direct investment and 20% of outward direct investment moved between Ireland and Bermuda; and if he will make a statement on the matter. [20950/12]
18Deputy Mick Wallace asked the Minister for Jobs; Enterprise and Innovation his views on the impact of multinational investment in Ireland in relation particularly to companies located here for tax purposes in view of the fact that, as observed in the latest Central Bank of Ireland quarterly bulletin, while these types of companies have large balance sheets, their contribution to the local economy in terms of employment tends to be limited; and if he will make a statement on the matter. [20949/12]
I propose to take Questions Nos. 6 and 18 together.
The latest Central Bank Quarterly Bulletin contains an article on the statistical implications of the corporate structures of multinational companies. The decision of a multinational company to locate headquarters in Ireland can have a very substantial impact on reported direct foreign investment. Its balance sheet, its lending activities to subsidiaries and its corporate earnings all affect the Irish balance of payments and the Irish recorded foreign assets. The author points to the limited usefulness of this direct investment data for analytical purposes as a result. This must be borne in mind in interpreting the data. The article indicates that this data shows Bermuda as a source of significant inward investment to Ireland and a focus for outward investment. There are a number of reasons for this. First, Bermuda is an internationally recognised centre for the global insurance industry. Many of the world's leading insurers and reinsurance companies have operations there. As a result, IDA Ireland regularly visits Bermuda to engage with these companies to encourage them to establish a presence in Ireland to serve their European customers.
Second, the data in the quarterly bulletin captures, in part, the normal flow of investment capital from these Bermudan companies to their Irish operations and from their Irish operations to Bermuda. This is a standard feature of international trade and of intra-corporate capital flows. Following increasing international scrutiny of corporate tax arrangements, several companies based in Bermuda, which has a 0% rate of corporate tax, decided to re-domicile and establish offices in jurisdictions that actually charge corporate tax. A number of these companies selected Ireland for its transparent, internationally recognised and competitive 12.5% corporate tax rate. Bermuda is recognised as a global centre for insurance.
IDA goes to Bermuda every year to encourage companies to set up offices in Ireland and has been successful in that many such companies have set up here in Ireland. IDA stresses that these are companies employing staff and not "brass plate" operations.
The Minister must admit that some companies do funnel money through the country. This is borne out in the figures. The pharmaceutical industry, accounts for 34% of our total exports - which is just short of €57 billion - and employs only 2.6% of our workforce, which works out at €1.2 million per worker of export sales. If this were a reality, it would be magnificent. It would mean our workers were super human. The three largest multinationals here, Johnson & Johnson, Microsoft and Google export €24 billion between them but only employ 0.3% of our workforce. I welcome that they are creating employment here.
The Government continually says that the creation of jobs and tackling unemployment is its priority. The Minister must admit that until the Government addresses the problems of the domestic economy, wherein most people, 68% in SMEs alone, are employed there will be no resolution of the unemployment crisis. There are huge problems to be addressed. Things have not really improved much. Deputy Tóibín mentioned the Government received legal advice to the effect it could not touch upward-only rents, despite its promise to do so, because of contract law. I know the banks do not want upward-only rents to be touched because most commercial rents are now going directly to the banks. Will the Government consider the introduction of a special tax on upward-only rents that would allow the moneys in question to work their way back to the tenants who are affected by such rents? That might help to keep the tenants' companies alive.
The Deputy has raised a number of points. While aggregate sales from foreign-owned companies are very large, it has to be recognised that the impact of such companies on the Irish economy is also very large. Even though the wage percentage might be small, total foreign direct investment accounts for almost 250,000 jobs in the economy. The companies in question spend €19 billion on Irish-sourced goods and services and have a €7 billion payroll. They have a substantial impact on the Irish economy. They have helped us to develop clusters of expertise. The presence in Ireland of companies like Microsoft, which was mentioned by the Deputy, has helped to create an ecosystem, as it is described in California, in which many other small information technology companies have developed. Ireland is the envy of many countries for its success in building clusters in areas like pharmaceuticals, information and communications technology and medical devices. These clusters are playing an important part in driving both the foreign-owned and indigenous export recovery.
I fully recognise there are issues in the domestic economy. Most of the initiatives on which we are focusing in the action plan for jobs relate to the needs of domestic companies. I refer, for example, to initiatives relating to access to finance, various elements of the cost base, various development capital needs, mentoring and supports of different kinds. There is a recognition that this country needs a strong international economy in which foreign and indigenous companies can complement each other. It is not a case of one or the other. We need to use that to develop a stronger domestic economy as well.
I agree we need both. I suggest the domestic economy needs more help than the other side mentioned by the Minister. I was interested to read what the Nevin Economic Research Institute had to say about this matter the other day:
The current levels of unemployment are unacceptable and constitute a serious threat to social cohesion and not just the sustainability of future public finances. Failure to make serious inroads on the level of unemployment will cost more in the long-run than any short-term savings in public expenditure arising from further fiscal austerity. The biggest single obstacle to creating employment is the depressed state of the domestic economy in both parts of Ireland.
I accept it is not easy to drive the domestic economy. I know from my own business that access to money continues to be a problem. The fact the banks are practically closed for many people is killing demand. The fundamental lack of demand is a serious issue across the domestic economy.
I will give an example. I have a site with planning permission for 28 houses. I cannot sell it for €15,000 per unit at the moment. Not only is there a lack of demand, but there is also a lack of access to money for anyone who might want to buy such a site. Planning fees are almost as high as current site values. I do not think we have seen the bottom of it. When people ask me whether prices have reached the bottom, I tell them I do not think they have. They will not reach the bottom until we tackle some of these serious problems. Similarly, house prices will continue to fall until we deal with the mortgage crisis. If someone asks me tomorrow whether they should buy a house, I will tell them to wait for another while because prices will continue to fall until these issues have been dealt with.
The Deputy is raising issues that go well beyond the subject of his question. The Government is acutely aware of the problems in the banking system. The Minister of State, Deputy Perry, has been engaged in a roadshow with the Secretary General of the Department of Finance, Mr. John Moran. Deputy Wallace is aware the Department of Finance has received a commitment from each of the two pillar banks to lend €3.5 billion to small and medium-sized enterprises over the coming year. The Department is taking that commitment seriously and holding the banks to account in that regard. As part of the roadshow, we want to get closer to business and identify where problems are arising. We are seeking to equip businesses when they submit applications to banks and ensure the banks are in a position to act as bankers to business rather than as bankers to the property sector as they were in the recent past. Enterprise Ireland is working with us on the latter issue. The Deputy is aware the Credit Review Office, which was established by the previous Government, offers a valuable service. People whose credit applications have been turned down have the right to appeal to the office. A number of initiatives, such as the microfinance and loan guarantee scheme, are being developed. Legislation on those initiatives will be presented to the Oireachtas soon. We are acutely aware of the problems associated with access to finance and we are seeking to resolve them.
7Deputy Timmy Dooley asked the Minister for Jobs; Enterprise and Innovation the future he anticipates for advanced manufacturing; the steps he will take to support manufacturing; and if he will make a statement on the matter. [20927/12]
Ireland has built a strong reputation for quality and efficiency in a range of areas of the manufacturing sector, which employs more than 158,000 people in direct full-time jobs and the same number again in indirect employment. This sector is a key part of our economic recovery, growth and job creation strategies. Manufacturing in Ireland spans a wide range of sectors. We have particular strengths and advantages in some sectors, such as food and drink, information and communications technology hardware, medical technologies, pharmaceutical bioprocessing, engineering and industrial products, including green and cleantech products. Ireland is and can continue to be competitive in these high value manufacturing sectors, especially in terms of exports, expenditure in the economy and jobs. The manufacturing sector is increasingly dynamic, sophisticated and innovative. It invests hugely in research and development and drives productivity. It is moving further towards integrating services into its business models.
For these reasons, the action plan for jobs has a clear sectoral focus on manufacturing. It sets out a range of specific actions, to be pursued across Government in the current year, that will build on the sector's strengths and support employment growth. Challenges addressed in the action plan for jobs include issues around scale and increasing productivity, the need for specific upskilling and management development and the need to develop the sector's capacity further to engage in research, development and innovation. A key deliverable for my Department in the second quarter of this year is to articulate the Government's clear commitment to manufacturing in Ireland. The Department will elaborate on the range of initiatives and supports that are to be put in place to demonstrate this commitment. We are also committed to establishing a manufacturing development forum to assist the Government in identifying the needs of manufacturing enterprises and to progress a transformation agenda in this area.
Manufacturing, particularly advanced manufacturing, is crucial to the future of the economy. As the Minister indicated in his reply, in terms of direct employment, manufacturing is responsible for less than 10% of all employment but more than 30% of gross domestic product. I appreciate that the Government has specifically recognised the importance of manufacturing by devoting a considerable section of its action plan for jobs to the sector.
I want to ask the Minister about two specific commitments in the action plan. He will be aware a general report on future skills needs in the economy has been published. The Government has given a commitment to the production of a detailed assessment of manufacturing skills needs. It has also committed to putting in place a strategic plan for manufacturing. When can we expect those two initiatives to be taken? What is the timeline for them?
A number of immediate actions are being taken. We have commissioned a report from Forfás on the manufacturing sector which will focus specifically on the issues that have been raised by the Deputy, including future skills deficits, research and development needs and the adequacy of our technological support. When we prioritised research expenditure, we identified the segments of high value manufacturing where we believe the best opportunities lie. The Department is working with Science Foundation Ireland on the refocusing of priorities. As I mentioned in my reply, we are setting up a forum of manufacturers to work with the Government to identify the areas in which we can build and to bring to the table their experience of existing limitations. There is a sense among some manufacturers that theirs is a forgotten sector. Perhaps it was such during the boom, during which period those who would normally have gone into manufacturing entered other sectors. There is a need to refocus on manufacturing. The future skills report to which the Deputy referred identified some of the areas in which we need to develop stronger traineeships and focus on specific opportunities.
The Government has focused on particular sectors, as is proper, but, as has been said, there is a pressing need to focus on manufacturing because of its benefits. Approximately 2.5 jobs come with every manufacturing job and 0.7 jobs with every service job. The Minister referred to competitiveness being regained by the State vis-à-vis other states.
Deputy Wallace claimed the State is very much focused on computer services and pharmaceuticals with regard to exports. If these two sectors were removed, it would change the balance of payments in a massive way. The imbalance creates vulnerability for the State. We had an economy built on one sector in the past and when that sector collapsed, the economy collapsed. What strategy has the Government to ensure diversification from computer services and pharmaceuticals?
The Deputy is not correct. There are always elements of sectors that rise and fall. If the Deputy is pronouncing the end of ICT as a driver of change in our economy, I could not agree with him. The IT sector is here to stay and there are huge opportunities therein. There are massive skills shortages and job opportunities that could be availed of. The IT sector is one in which Ireland has a competitive edge, and this is recognised. We should not take the view that a sector in which we have been singularly successful is one regarding which we should get cold feet. Some of the most ambitious and exciting companies are picking Ireland as the location of preference in which to develop information technology. It is a very important sector.
The same can be said of pharmaceuticals. While products come and go and patents expire, there are considerable opportunities in the health sector. Increasingly, there is a convergence regarding pharmaceutical, medical and ICT devices. This is where we have an edge because we have strength in all the relevant sectors. There is an opportunity to future-proof all those sectors by being the test bed for the converging technologies. We have future-proofed the sectors by being at the cutting edge rather than getting nervous about the balance. I am just stating the counterargument to that of the Deputy. The sectors in question are very important to us and we have a competitive edge therein. We need to maintain and improve that edge.
Given that Ireland has, probably for the past 30 or 40 years, ignored indigenous manufacturing, will the Government now emphasise it?
Absolutely. Manufacturing comprises a sector. All the sectors have a mix of indigenous and foreign-owned companies, which is very often their strength. The medical devices sector comprises a perfect example. We have some wonderful international manufacturing companies but, equally, we have built a seedbed with NUIG around Galway that is developing many young indigenous companies at the leading edge. The mix is what really creates a cluster of strength. It is not a question of being anti-indigenous and in favour of multinationals; it is a question of balanced sectoral expansion in the relevant areas.
8Deputy Charlie McConalogue asked the Minister for Jobs; Enterprise and Innovation the reason targets were missed in the Action Plan for Jobs; if there will be consequences for missed targets; and if he will make a statement on the matter. [20937/12]
19Deputy Seamus Kirk asked the Minister for Jobs; Enterprise and Innovation his plans to deal with missed targets in the Action Plan for Jobs; and if he will make a statement on the matter. [20934/12]
I propose to take Questions Nos. 8 and 19 together.
The Taoiseach, Tánaiste and I were able to report last Friday, in the first quarterly progress report on the implementation of the action plan for jobs, that 96%, or 80 out of 83 measures which were scheduled to be completed in quarter 1, were delivered. I regard this as a significant achievement for the Government and an indication of its success in dealing with the issues.
Some important deliverables already achieved under the Action Plan include the development of the partial credit guarantee scheme and the publication of legislation to bring it into effect, the launch of the Succeed in Ireland initiative, the design and launch of Enterprise Ireland's development capital scheme, the enactment of pro-jobs measures in the Finance Bill and the establishment of a new education and training fund.
Only three of the 83 measures were not fully completed, and these relate to the launch of a new women-in-business start-up drive, the development of an approach and a programme to support industry-led clustering, and the development of a cloud-computing strategy for the public service. While these three measures were not fully completed on schedule, significant progress has been made on them, and I fully expect them to be finalised during the second quarter.
The Government is committed to ongoing monitoring of the action plan. A monitoring committee, comprising representatives from the Department of the Taoiseach, the Department of Public Expenditure and Reform, my Department and Forfás, has been established to track the progress of each of the quarterly targets to be met.
Targets are designed to be realistic but ambitious. They are being pursued vigorously and rigorously monitored. Those who are assigned responsibility are expected to overcome obstacles and will have to account to the Taoiseach with quarterly reporting dates to maintain momentum. This is the central priority of Government and each Minister has bought into the central national importance of this process.
Would it not be a good idea to have external monitoring of the Government's success? The Government sets itself up as its own examiner and gives itself an A+. Despite the claimed success rate, 97%, the unemployment rate remains stuck at 14.6%. The Minister referred in his reply to the credit guarantee scheme. The scheme is not yet in place and is a long way from being so. Not only have we to pass the legislation, we must also put in place a mechanism. The micro-finance scheme is not yet in operation and commercial rates have not been tackled. The Minister for the Environment, Community and Local Government has written a letter to local authorities which, from the feedback I am getting, certainly will not have very much impact. There were further promises that were to be fulfilled by now. For example, prioritising places on the further education scheme specifically for those on the live register for 12 months or more was not achieved. The one-stop shop for micro-business support structures has not been put in place.
From now on, will the Government agree to external monitoring so we can really see what is happening? One should bear in mind the fundamental legal principle, "Nemo iudex in sua causa.”, which translates as, “Nobody should be judge in his own cause.”
We are not seeking to be judges in our own cause but to be open and accountable. We are saying what we plan to deliver and we are publishing this information on a quarterly basis. The Deputy has access to the same amount of data as I do.
The Minister is claiming he has delivered what he has not delivered; that is the point.
We are seeking to mobilise the public service across government. Fifteen Departments and 36 agencies have contributed. Not only have they said they would take action but they are willing to put their names up in lights and state they will be held to account for what they are doing. This is new for the public service. In the numerous strategies published in the past, including the health strategy, the decentralisation strategy and the national spatial strategy, which were published like confetti, there was never a statement to the effect that X, Y and Z would be delivered by such a date. This is a new discipline demonstrating that the public service is stepping up to the plate. There is accountability and data are on the website. One can read what was said and what has been delivered.
The problem is that I have looked at it.
The Deputy is free to look at it. The implementation of a particular initiative has stages. With regard to the partial loan guarantee, one publishes a Bill on a certain date and has it passed on a certain date. We are willing to commit to the publication date of the Bill and we commit to delivering by quarters. The Deputy, who has been around this House for nearly as long as I have, will realise the number of times Bills are not published for four years after the date on which they are due to be published. In the interests of an employment strategy, Departments will stick to them and be held accountable for them. This is a significant change in the approach to delivering public service. The Deputy should be good enough to recognise that this a fresh and different approach. Clearly, we have to be accountable.
One of the problems is the timescales. In March 2011, the European progress microfinance facility became available. Since then, at least 2,000 companies have become insolvent, never mind the number of sole traders. Yet, we still do not have a start date for this programme. There is also the issue of accountability. The Taoiseach himself said he would hold Ministers to account yet we have the Minister for the Environment, Community and Local Government floundering from one crisis to another.
With regard to industry-led clustering, as has been said by other Deputies, there has been an uneven delivery of enterprise across the State both geographically and socio-economically. What principles will the Minister use with industry-led clustering to ensure better geographical and socio-economic distribution? How will he ensure disadvantaged areas get the businesses and the jobs to which they are entitled?
When we came into office there was no microfinance fund. It was drawn down for the First Step programme.
That was a previous programme.
The State cannot draw that down. It must set up an independent arm to draw it down which is the microfinance proposal we are developing. In the action plan for jobs we have committed for a date for it going live. We have also made a commitment on when the heads of the Bill and the subsequent legislation will be published. The Government is fronting up and stating these are target dates which it hopes to achieve which is a new approach. I, along with my officials, will be moving might and main to meet those targets. They are stretching targets and it will not be easy to meet all those that have been set. We have missed some and in the future will miss others. If we did not miss some, then they would not be real targets. It cannot be like election results in some countries that I will not name.
The geographical spread will be a real challenge. We have set a target of 50%, as had the previous Government, for industrial development outside Dublin and Cork. I am pleased this year so far that we have delivered on that target, particularly as it had not happened last year. I hope that it will be easier to get regional spread on companies in the Succeed in Ireland programme, which targets lower sized companies to pick Ireland because they are not seeking deep labour pools that are only available in cities.
If the Deputy has any further suggestions, by all means, he should send them our way. There will be an action plan 2013 just as there was one in 2012. We seek to make new approaches within the resources available.
I appreciate the Government has set targets and I am not going to be critical of it for missing certain ones. No one expects any Government to meet every single target it sets. However, it is a question of interpretation. Is it not reasonable to suggest there is some outside evaluation of these targets and that the Government does not decide whether it met its targets itself? This is particularly apt in view of the fact the Taoiseach has been very clear that Ministers, senior civil servants, senior officials and the plethora of bodies which are supposed to deliver A, B and C, should be held accountable for non-performance.
The Taoiseach is at the centre of this. He chairs the Cabinet sub-committee and has a unit in his Department that monitors progress. If the Taoiseach asks a Minister or a senior official why they have not delivered on a programme or target to which they are committed, they tend to respond. They say biting with the president's teeth. The most effective accountability, as we have seen in other countries, is when public servants, including Ministers, are brought to account by their political leader on why they have not delivered on a commitment. That is the most effective monitoring and accountability one can have in our system. It works.
9Deputy Willie O’Dea asked the Minister for Jobs; Enterprise and Innovation the progress that he has made on item 3.3 of the action plan for jobs particularly developing a mentoring programme for businesses and the adoption of small and medium enterprises by multinational corporations; and if he will make a statement on the matter. [20915/12]
Mentoring has traditionally formed part of the suite of supports offered by Enterprise Ireland to its client companies. The existing mentor network, which is refreshed regularly, was established to help companies identify and overcome obstacles to growth, provide guidance and support and build management capability. Mentors are senior executives, drawn from the private sector, with a proven track record in business. They act as a confidential sounding board, advising companies on key operational and strategic issues.
A mentoring assignment consists of ten visits over 12 months. Companies choose mentors from a short-list with relevant experience. The goals and objectives are jointly agreed at the start of the assignment. Mentors sign a strict confidentiality agreement with Enterprise Ireland. Enterprise Ireland currently has 291 active mentors on its mentor network nationally.
On foot of the action plan for jobs, and building on the existing mentor offering, Enterprise Ireland has commenced development of an international mentor-adviser programme. This involved targeting a survey at potential domestic and overseas mentors including those in the Global Irish Network, GIN. By the closing date of 18 April, 100 responses had been received, which indicates a great willingness on the part of GIN members to assist companies in developing their business strategy and making introductions. At the end of this scoping exercise, Enterprise Ireland will roll out a pilot programme.
The Enterprise Ireland and IDA senior management team meeting took place this week and examination of the issue of the adoption of SMEs by multinationals has begun.
I raised this question because the proposal in the action plan is designed to help the indigenous sector, particularly small and medium-sized enterprises, SMEs. The Minister of State referred to a pilot scheme for the mentoring programme. When does he envisage the system will be properly put in place?
Currently, there are 291 mentors in the domestic economy.
Yes, but that is an informal system.
There is a scoping exercise going on with collaboration between Enterprise Ireland and IDA Ireland on identifying the capabilities of the 100 companies that applied for the programme. I believe it is a unique opportunity.
The second part of the Deputy's question concerned small companies mentoring with larger multinationals for business development. We are confident that many of the Irish multinationals are prepared to examine how best they can encourage HPSUs, high potential start-ups, and focus on growing business in supply chains.
Will a formal system be put in place to link up these multinationals?
Enterprise Ireland and IDA Ireland will come back with a clear plan of action for the mentoring and networking supports for smaller companies. This will be in the review of the action plan for jobs. It is important we do not just pay lip-service to this. There is much potential with mentors from across the globe offering their services, as well as their contacts bases. There is immense potential this year to add jobs through encouraging indigenous HPSUs to grow their businesses and expand into export markets.
The Minister, Deputy Bruton, has targeted 1,800 new companies to encourage them to export. Multinationals will work with that cohort to expand their business through export-led growth, which is the way to create jobs.
It is estimated that multinationals in Ireland source approximately 15% of their materials in this country whereas the figure in Europe is 80% on average. Not all of the materials needed by multinationals are available in Ireland, but would it be possible to pressure them to source more materials in this country? That would filter into the domestic economy and be a great help.
Many Irish companies are also using international supply chains. I understand Deputy Wallace's point about growing capable, indigenous companies. Multinationals' domestic demand depends on timeframes and companies' ability to supply them. The Taoiseach is determined to examine the €14 billion that is spent annually on public procurement in terms of small to medium-sized enterprises, SMEs, and the rest of the private sector. We can create opportunities for SMEs to participate in the procurement process. A number of seminars were held across the region so that buyers could meet and agree contracts with potential customers.
The IDA is anxious to ensure multinationals do more business with SMEs that have the capacity to supply them. The Government would encourage such a development, as it would also create indirect jobs. IDA companies employ 140,000 people and one indirect job is created for every direct job. The same applies in the case of the 135,000 people working in Enterprise Ireland companies. This is a factor to consider when supplying to multinationals.
I thank Deputies for their questions and the Minister and Minster of State for their replies. I thank the staff of the Oireachtas for their attendance.
Written Answers follow Adjournment.
The Dáil adjourned at 8.05 p.m. until 2 p.m. on Tuesday, 1 May 2012.
