JOINT COMMITTEE ON ENTERPRISE, TRADE AND EMPLOYMENT díospóireacht -
Tuesday, 23 Mar 2010

Horizon 2020 Strategy: Discussion with IDA Ireland.

Chairman

I welcome the delegation from IDA Ireland: Mr. Barry O'Leary, chief executive officer, who has been here on a number of occasions; Mr. John O'Brien, corporate secretary; and Mr. Brendan McDonagh, manager of planning and EU policy affairs. I thank them for their attendance.

Before we begin, I draw witnesses' attention to the fact that members of this committee have absolute privilege but this same privilege does not apply to witnesses appearing before it. Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

I now call on Mr. Barry O'Leary to make his presentation.

Mr. Barry O’Leary

I thank the Chairman and members for the invitation to address the joint committee on the new IDA Ireland strategy, Horizon 2020. IDA Ireland's mission is to win foreign direct investment and to maximise its impact on the transformation of Ireland into a global hub for innovation and commercialisation. Clearly this brings new employment opportunities and economic benefits to all our people. In collaboration with other stakeholders, IDA Ireland will ensure that Ireland remains a uniquely attractive environment in which multinational clients can grow.

Foreign direct investment companies account for €110 billion of exports and in terms of total exports, the percentage is in the high 70s or low 80s. It provides about 240,000 jobs in total, accounting for 50% of all corporation tax, €7 billion spend on payroll and €19 billion spend in the economy. Foreign direct investment companies account for 73% of all business expenditure on research and development.

In terms of market share, foreign direct investment by the leading multinational companies of the world is very high. In the ICT sector, eight of the top ten companies in the world have a presence in Ireland. Likewise in the pharmaceutical area, we have 15 of the top 25 medical devices companies and half of all of the world's leading financial institutions.

When considering a new strategy for IDA Ireland, a number of key considerations were to the fore. The last time we looked at our strategy, unemployment was in the region of 3.8% to 4%, so clearly that was not a key priority, whereas today, with unemployment at 12.4%, it is now the number one consideration.

We also have to consider balanced regional development. Some areas have been hit badly in the current downturn. However, there have been improvements in some areas. Competitiveness has improved in terms of the cost of land, buildings, rent, labour, energy, hotels and restaurants. This improvement has made Ireland a more attractive proposition although there is more progress to be made.

Consider the relative improvement in competitiveness, particularly associated with the growth in services globally. Ten years ago, 20% of the revenue of the big IT companies pertained to services and 80% pertained to hardware. That has practically reversed now. There is considerable growth in the services sector globally. The improvement in our competitiveness should help in that regard. The developments associated with eBay yesterday serve as a good example.

Owing to the large market share of foreign companies in Ireland, we recognise fully that it is very important to keep them here and to do more to ensure they grow here. We are conscious there are new sources of foreign direct investment to be addressed in terms of new markets. A challenge arose for Ireland's reputation in the international marketplace, particularly last year. We must ensure our strategy is very much in line with the smart economy strategy. Bearing in mind how we defined "foreign direct investment" historically, we are mindful that there is a broader definition in respect of which we intend to become active.

As part of the strategy for examining the activities of the major corporations of the world, including IBM, General Electric, Siemens and United Technologies Corporation, we must ask what is influencing their investment decisions. It is very much a question of mega-trends. Urbanisation is such that practically 50% of the world's population is living in cities. By 2050, this is to rise to 70%. Siemens has set a target of having 70% of its business associated with the urbanisation drive by 2012. Similar trends arise in respect of population growth, transportation, energy, health and longevity. These factors present business opportunities for the world's largest corporations. They are all driven by technologies, on which Ireland has a strong position.

Slide No. 6, which I have shown to the members, shows the evolution and future of foreign direct investment. Ireland's success has derived from constantly evolving and changing the areas it pursues. In the 1970s and 1980s, we were involved in clothing, textiles and consumer products. When Intel set up in Ireland in the late 1980s and early 1990s, the largest foreign direct investment employer in Ireland was in the clothing and textiles sector. The International Financial Services Centre did not exist at that time.

It is important to consider the interventions in terms of training for the software industry, the 12.5% corporation tax driving the financial services area, the investments of Science Foundation Ireland driving research and development and a number of new areas, services innovation, cloud computing and convergence. The trend for the past five years alone indicates the growth of a biopharmaceuticals industry, which did not exist on any scale heretofore, and a digital media sector. The challenge is always to identify the new areas. The slide identifies new areas, such as health informatics, financial analytics, digital lifestyle management, smart buildings, and so on.

The next slide shows we target six core business areas. There is huge competition around the globe for foreign direct investment. We have carried out an exercise considering the evolution of the different sectors. Intel, for example, was basically engaged in PCB assembly and badging computers when it came to Ireland in the late 1980s. Today, having invested €7 billion, it has some of the most sophisticated manufacturing facilities in the world. It is a matter of achieving constant evolution.

We have examined in particular what we are targeting now and what we will target in the period 2010 to 2014, and we have examined what will arise in 2020. We do not intend to disclose our findings in our strategy documents because we have no intention of handing competing countries such as Singapore and Switzerland the menu of areas on which we will concentrate. I just wanted to give the members a flavour of our approach.

Arising from our approach, we have set some high-level goals for the five-year period, targeting the creation of 62,000 new jobs in foreign direct investment companies, both existing and new. The impact of this in the economy will be the creation of 105,000 jobs. Indecon has done some work for us that shows the multiplier effect is approximately 0.7 in respect of every new job created. We want to deliver half of all investments to the area outside Dublin and Cork, which have benefited most to date from foreign direct investment.

We are conscious of the emerging growth markets. While we continue to do very well from the US and European markets and want to continue in this regard, we have not made the breakthrough in areas such as Asia, Russia and Brazil. Therefore, we are setting a target of having 20% of all new greenfield investments derive from those emerging markets by 2014.

In research and development, the plan is to grow the annual spend by multinational companies to €1.7 billion. To meet this target, we must win approximately 640 investments.

The questions of how we are to do this and how our approach will differ from that adopted heretofore are best articulated by the "Ten Steps to Transformation". I do not propose to refer to them all and the members have been given a list. The transformation agenda is the most important. It is very important that the multinationals in Ireland at present, which comprise a strong base, transform their activities over the next five years. If they do not, they will be in trouble or will not be here. There are several ways of supporting company-wide initiatives to transform their operations. We will support technology uplift, skills uplift, process development, energy improvement, feasibility and research and development. The set of measures must be worked on jointly by IDA Ireland, local management and corporate management.

There are new areas of foreign direct investment that we will target in respect of convergence, cloud computing, innovation in services and cleantech. There are new forms of foreign direct investment. Bearing in mind multinationals that are only servicing the Irish market or traditional sectors such as insurance, banking and wholesale, and considering public contracts, setting up centres of excellence in terms of developing, test-bedding and internationalising on foot thereof, there is a wide range of broader areas that we will also target.

With regard to emerging companies, we have done very well in respect of the big multinationals, which have many operations here. We are focusing in particular on life sciences and technology and on companies with under 200 employees and under $20 million in revenue. We are addressing the branding of Ireland as part of the strategy to raise awareness of the country. We are running a television programme on CNBC and Bloomberg and using the major media and on-line media. We are doing live television interviews on the positive developments in Ireland, including those of last week. We will move to an open innovation organisation. In looking at the change of pace in the technology and business areas, we realise that alone we will not be able to grasp the opportunities. From a global perspective, we need to, and will be, tuned into these networks.

With regard to Ireland's value proposition, people often ask what makes Ireland attractive. There are a number of factors associated with every investment. These are the available talent, technology capability, attractive tax rate and, above all, Ireland's very successful track record with foreign direct investment, in addition to the ease of doing business here. Depending on the sector, there are usually five or six other factors of importance. In the biopharmaceuticals sector, for instance, it is a matter of having strategic sites and a good regulatory track record. One should bear in mind the investment of €57 million in a new national institute for training and research. There is a series of enhancements to the value proposition.

IDA Ireland is one organisation that will win foreign direct investment but it must be on a partnership basis within what we call "Team Ireland". There is a wide variety of stakeholders. Bearing in mind the international competition it is imperative that we have "Team Ireland" and that all organisations are working in the agreed direction in order to win the best investment for Ireland. Policy enablers are necessary to make Ireland an attractive place and to improve it from an FDI perspective. We need a constant focus on competitiveness, improvement in the tax regime, the next generations of networks, NGNs, for future business, in particular the growth in services, energy infrastructure, education, which is becoming more important, and the regulatory environment.

The sectors on which we concentrate are constantly evolving. They include digital media, for example, which did not exist approximately five years ago, and life sciences, pharmaceuticals, biopharmaceuticals and medical devices, information technology, financial services, the content industry, consumer and business services, engineering and diversified industries and cleantech. We have partnered with companies to create the message about Ireland in our advertising campaign in the United States. Google, Facebook and Boston Scientific are three of them. One will see an advertisement in airports around the United States about Google searching the planet for the perfect location for its business and it came up with Ireland. This country has the second largest global centre for endorsing Ireland as a location. While there is much negative reporting about Ireland and its competitiveness, it is important to recognise the world competitiveness report by the renowned IMD organisation in Lausanne has this country at No. 1 in the world for availability of skilled labour, financial skills and corporate tax, third for flexibility and adaptability of people, third for being open to new ideas and fourth for labour productivity. They are important factors for people making FDI decisions as distinct from other things that are going on in the economy.

It is also important to recognise that FDI is continuing even in the downturn. We had announcements from Dun & Bradstreet yesterday and from LinkedIn today. Other companies to locate in Ireland include Maxim from California, which made an announcement in December, Facebook, PayPal, Hertz, Zurich, Warner Chilcott which came to Dundalk, PPD to Athlone, Gala from Japan, and Blizzard Entertainment came to Cork with jobs for approximately 800 people. Dun & Bradstreet set up an international operations centre while the Swedish group Vattenfall is working on research and development in wave energy. Sita has located in Donegal. The strong message from brand names around the world is that they are still continuing to invest in Ireland.

Winning foreign direct investment for Ireland is a competitive business. We in our organisation strive to be the most competitive foreign direct investment agency in the world and to ensure we have the appropriate skills for that because it is a job where one is dealing at the highest level with corporations around the world. That is a flavour of the main elements of the strategy recognising that we are not going into the fine detail of the six main areas for competitive reasons. I am happy to take questions.

Deputy Deirdre Clune

I thank Mr. O'Leary for his presentation and wish him well with his ambitious targets. He indicated that Ireland's reputation suffered last year. Could he expand on the impact that had in terms of the work he was doing? Many members wish to ask questions. Is it realistic to expect to create 62,000 new jobs over the next four years, or is that just a target figure? I know he cannot give us specific details.

The press statement refers to change in how client companies and the IDA operate, a catalyst for change, and change also in terms of how multinational firms partner with indigenous firms and continuously adapting ecosystems. Today's presentation is all about change. Will Mr. O'Leary address the question of existing companies? There is much investment by the pharmaceutical industry in Cork. There is concern about the way the global pharmaceutical industry is changing and the amalgamations that are taking place. What effect does Mr. O'Leary consider that will have on this country? I accept IDA Ireland's target is to create 62,000 new jobs but I am sure Mr. O'Leary must have an idea of what we can expect in terms of job losses and what we can expect in the coming years. I invite him to address the matter in a broad way.

Mr. Barry O’Leary

On the question of reputation, it is clear that reporting last year about Ireland in the United States in particular, and the United Kingdom and Germany, which was mainly driven by the local domestic banking crisis, spilled over because people that are at a distance do not differentiate between local banking problems and the way the rest of the foreign direct investment community is operating. The fundamentals for the FDI companies have not changed. If anything, they have improved from a competitiveness point of view, but if one is an executive that does not know Ireland and one is reading an article about the Irish economy, the drop in GNP and the banking crisis then the first element that could be hit is foreign direct investment. That is one of the reasons around September when it began to cool down a bit we commenced an advertising and branding programme to raise this country's profile around the nine airports, television stations, and in newspapers such as The Wall Street Journal. That is why we also used Google, Facebook, Boston Scientific and five other companies to row in behind Ireland’s reputation. I referred to the advertisement about Google searching the world for the perfect location. That was to address the reputation issue. More needs to be done in that regard. The reporting on Ireland has been quite favourable in recent times but an occasional negative article appears such as that on the BusinessWeek website recently but last week there were a lot of positives in various publications in the United States.

As regards the 62,000 jobs, we have broken it down between the six business sectors on which we are concentrating. It is not a question of dividing the 62,000 by six and finding that it is the same for each sector but we are not going to disclose, for instance, what is the biopharmaceutical subset, the medical devices subset or the subset for digital media.

Deputy Deirdre Clune

Is IDA Ireland working on a definite area?

Mr. Barry O’Leary

Sectors are one aspect of the matter but what is really important is the three areas on which we are concentrating, namely, global services, research and development and high-end manufacturing. In terms of the pharmaceutical industry, especially from the Cork perspective, there will be some pain given the mergers and acquisitions that are taking place. Some of the biggest companies in the world are coming together. At the same time those companies do not have enough new products coming on-stream and they are losing out. The sector will be under pressure but there is great opportunity in services in the pharmaceutical area, including shared services, supply chain management and intellectual property. One might see the mix within certain sectors. From an employment point of view, services overall will be the largest part of it and that is right across the portfolio, regardless of whether it is in the digital media or the technology sector. Services also encompass European operation centres, international headquarters and technical support. If one takes the broad services sector, the bulk of the growth and new jobs will be in services.

Deputy Deirdre Clune

Will there be a loss in other areas?

Mr. Barry O’Leary

Yes.

Deputy Deirdre Clune

Is it a case of 62,000 jobs being created minus however many jobs are lost?

Mr. Barry O’Leary

I cannot predict that. One of the reasons for the new strategy is to drive the transformation agenda. The more successful we are in doing that, the fewer the jobs that will be lost. That is an important point. Suffice to say, every single one of the multinationals that operate in this country has too many plants in its network — that is a statistical fact — and the ones most at risk around the globe are the high-cost locations. If some of those are in Ireland, they will be under definite pressure and some of them are in Ireland. Some of them are——

Deputy Deirdre Clune

Is Ireland considered a high-cost location?

Mr. Barry O’Leary

That is not what I said. I said that some of the plants for historical reasons had let their costs go out of control — not Ireland specifically, more they themselves. Some companies are fine with their cost base but we are aware of some that are under pressure. When that happens they will be the most vulnerable in the plant rationalisation.

Members will have seen that this is not something that happened overnight. We started about five years ago recognising that the traditional pharmaceutical industry would reduce and be replaced by the new biopharmaceutical area. In Cork alone there are companies such as Centocor and Schering-Plough in that area. Ely Lilly is investing approximately $600 million. That is also part of the change.

Deputy Leo Varadkar

I have two comments and five questions. I welcome that there are targets in this plan. Deputy English mentioned this issue many times. We do not necessarily intend to hold IDA Ireland to those targets because many factors are well beyond its control. However, it is useful to have some form of targets and benchmarking.

Regarding the world competitiveness rankings, the representatives of IDA Ireland will know as well as we do that all sorts of groups carry out all sorts of competitive rankings. It is probably remiss that the report does not acknowledge some of the areas in which we do very badly, including infrastructure, public sector and Government services, banking, and ethics. If I were preparing a plan such as this, I would be big enough to acknowledge that we are weak in many areas and that our competitiveness has declined and not improved in the past ten years — at least, no international agency has reported that it has improved in recent years. We need a national competitiveness action plan that identifies where we are strong and where we want to stay strong, but also those many areas where we are weak and getting worse, and how we are to catch up to become average or good in those areas. Those are the areas of infrastructure, public sector, banking and ethics. Those are my comments.

Regarding regional policy, the representatives of IDA Ireland probably saw an article in the Sunday Tribune written by some DIT lecturers about the regional policy aspects of this plan. It referred to some parts of the country being identified for FDI and others not, such as Sligo, Derry — which is in a different jurisdiction — Kilkenny and others. When I read the document from cover to cover I could not find reference to any particular town. I ask the representatives of IDA Ireland to clarify why that Sunday Tribune article seems to refer to Horizon 2020 and then does not seem to do so. While it may just be bad journalism, perhaps they might be able to answer that question on regional policy.

When I read the ten steps of transformation, I get the feeling that I am reading a bunch of old hat. The first five points refer to things IDA Ireland is doing already anyway. It will simply do it in a different way and catch up with things as they are. The second five are old news — stuff we already know about, including new generation networks, and education and tax policy. I do not find it particularly inspiring.

Regarding the BRIC countries, we need an entire new Asian strategy here. By 2030 China will once again be the largest economy in the world. It has been the largest economy in the world for most of the past four centuries, so we are really just going back to normal. The GDP of the BRIC countries will be more than 50% of the world GDP. I note IDA Ireland identifies these countries as sources for new FDI. If it is serious about doing that and if it is serious about having Indian, Chinese and Korean companies coming to Ireland to open their European headquarters, which is what we want them to do, it will need to become a different agency. At the moment IDA Ireland has six or seven centres some of them quite big in the United States but it has only one in Brazil, one in India and one in China, and they are quite small. Does it have any plans to significantly expand its on-the-ground operations in the countries of the future? America is still important but it is fading fast. It is Asia that will matter for the next 20 or 30 years. For many reasons Ireland should be the gateway to Europe for Asia in the way that we were the gateway to Europe for America in the past.

What is the status of the strategy? Obviously not having ever been in government I find difficult to understand. Is this a strategy that has been signed off by Government or is it just an agency strategy? I wish to pick up on Deputy Clune's point about the number of jobs that will be delivered from FDI. There has been mention of 62,000 direct jobs and perhaps 40,000 indirect jobs. Companies come and go and we cannot hang on to every job all the time. No matter what one does even in terms of innovation some companies, particularly low-cost operations, will continue to leave. If I use the standard figures for the rate of attrition and job loss in recent years, I come up with approximately 60,000. Therefore, by my calculations — which may be incorrect — implementing this strategy will result in a net increase in FDI jobs of approximately zero. I ask for comments on that.

Mr. Barry O’Leary

The Deputy asked about the world competitiveness report, IMD and why we did not acknowledge in the report where we are doing badly. IDA Ireland is a marketing organisation selling Ireland throughout the world. It is not imaginable that we would put into a document what would be critical about Ireland. The competition is enormous.

Deputy Leo Varadkar

IDA Ireland could have put something in the strategy document. If I were considering investing in Ireland, I would be more impressed by an agency that points out our strengths and also acknowledges our weaknesses and points out how we will become strong again.

Senator Mary M. White

That is ridiculous.

Deputy Damien English

It is a known fact. Deputy Varadkar makes a good point. It is not ridiculous at all.

Mr. Barry O’Leary

If the Deputy looks at the strategy document, he will see that we mentioned the things about competitiveness, tax and next generation networks. The report highlights them as areas in need of focus. Realistically when selling Ireland it would not do Ireland any favours to talk about the negatives. The Deputy should remember there are many positives and it is positives that tend to win the business. He can see the leading multinationals are still doing it. I would reject that.

I saw the article by DIT lecturers in the Sunday Tribune. I saw no mention of Derry in it.

Deputy Leo Varadkar

It was for bulk industry, for media and for——

Mr. Barry O’Leary

That is the map.

Deputy Leo Varadkar

That has nothing to do with Horizon 2020.

Mr. Barry O’Leary

It has nothing to do with IDA Ireland. It is always a challenge that incoming companies look to locate in big urban areas. The only big urban area in Ireland from an international perspective is Dublin. We cannot ignore companies such as Primerica, UnitedHealth, Zeus or SITA in Donegal. We cannot say that we will not try to promote. The first priority is to win for Ireland and the second one is where in Ireland. People compare Ireland with Singapore, Switzerland and other locations. I cannot really comment any further on——

Deputy Leo Varadkar

I presume IDA Ireland has no plans to promote Derry. I can understand how it might promote Letterkenny.

Mr. Barry O’Leary

None. In fact Letterkenny is involved with project Kelvin, the telecommunications project.

The Deputy suggested that the ten steps of transformation were uninspiring and that we are already doing the first five. I am afraid that is not true. I am not sure how much time we have here. We are not doing new forms of FDI, which is third on the list. Second on the list is employment in intensive services FDI. Services innovation is brand new and an area of major growth. We have not gone after the transformation agenda in an aggressive way before. The insights the Deputy has are different from the ones we would have in the inside.

The Deputy asked whether we were serious about BRIC countries. We have formed a brand new team in Asia and in Ireland. We have offices in Mumbai, Shanghai, Tokyo and Taipei. We now have somebody in Brazil and somebody in Moscow. We have a team in Ireland dedicated exclusively to only delivering business from these new emerging markets. They need to drive that 20% by 2014. What is different is that members of the Asian team — apart from the director for Asia — are all hired locally, whereas in others we have mainly used people from our head office to go out. Clearly we will need to develop that market over time. I would not take any focus away from the US. It is to increase what is coming out of the BRIC countries or other areas.

Deputy Leo Varadkar

The point I was making is that IDA Ireland has six in the US and five between the BRIC countries. Does it have any plans to open additional offices or to expand or reduce the number?

Mr. Barry O’Leary

We are currently looking at the Gulf. We have a team of three people in Mumbai and feel that is probably all right for now. We are focusing on two specific areas in India, IT and farming. Although there is a fair bit of foreign direct investment coming out of China, a significant amount of that is going into commodity investment around the world and one does not find a significant number of Chinese companies involved in direct investment. India would have more international brands. We review the situation constantly. Our Mumbai office is only open less than two years and Shanghai is open only three or four. Moscow and Brazil only opened in recent years. We constantly monitor new market opportunities.

With regard to the status of the strategy, it is not approved by Cabinet, but must be approved by the Minister for Enterprise, Trade and Employment.

Deputy Leo Varadkar

Has that been done?

Mr. Barry O’Leary

Yes, it has.

Deputy Leo Varadkar

By what mechanism is the strategy approved?

Mr. Barry O’Leary

By letter. We sent a letter to the Tánaiste and she was involved in the announcement of the strategy.

Deputy Leo Varadkar

I have never served in government, so I do not know what is involved. Is an initial draft sent to the Tánaiste for approval and does she comment on it?

Mr. Barry O’Leary

Yes. I would have met the Tánaiste towards the end of last year or early this year and run through the main elements of the strategy document with her, using a document similar to the one committee members have been given. A few weeks later we would have sent the proposed text document, approximately 95 pages. This is the first time we have published our strategy as it has not been published in the past. The document members have before them is meant more to give an understanding of the direction of foreign direct investment rather than the detail behind it. This is for confidential reasons. The Tánaiste announced the strategy two or three weeks ago.

Deputy Leo Varadkar

She announced this document, which is approximately 20 pages in length. However, Mr. O'Leary says there is another more detailed document that is approximately 100 pages in length, but that it is confidential.

Mr. Barry O’Leary

Absolutely.

Deputy Leo Varadkar

Did she sign off on that by letter?

Mr. Barry O’Leary

I do not know if she signed off by letter. Perhaps my colleague will know that.

Mr. John O’Brien

It was signed off by letter. We had comments from the Tánaiste. Let me be clear, from a legal point of view, about who approves the strategy. Under the code of conduct principles for State bodies set down by the Department of Finance, there is a requirement that each State body has a strategy, which is reviewed every three or five years. This is our strategy for the next five years, with detailed targets and objectives. Under the guidelines, we are required to inform the relevant Minister and take his or her input into account. The guidelines are very clear that the strategy and the achievement of the strategy remain the responsibility of the board of the organisation in question. This is the IDA strategy. We have taken into account the views of the Department and the Tánaiste, but the strategy remains the organisation's strategy and the board is committed to the Government to carrying out that strategy and meeting the targets contained in it.

Deputy Leo Varadkar

Is the strategy the 20-page document published with the picture of the Tánaiste on it or the 90-page one that is not published?

Mr. John O’Brien

The 90-page document that is not published.

Deputy Leo Varadkar

Do I understand correctly that the Minister just comments on that, but does not sign off on it and approve it?

Mr. John O’Brien

The guidelines provided by the Department of Finance state that the State body in question must submit the strategy to the relevant Department and Minister for their comments and observations and that, where possible, the board in finalising the strategy should take into account those comments and observations. However, the guidelines make it clear that the strategy remains the responsibility of the board and executive of the organisation.

Deputy Leo Varadkar

The board has the final call, rather than the Minister.

Mr. John O’Brien

Yes, within the broad framework laid down by the Minister for Finance. This ensures that boards cannot derogate from their responsibility and vice versa. The Minister and the Department lay down the broad policy framework within which the board works. This is not true just for the IDA, but for any State body.

Deputy Leo Varadkar

What happens if the Minister disagrees with the strategy or an aspect of it? What would happen if there was a change of Government and the new Minister disagreed with it?

Mr. John O’Brien

The Minister could request the organisation to review its strategy and present it again.

Deputy Seán Power

The Chairman could arrange a private meeting for Deputy Varadkar later.

Senator Mary M. White

An internship.

Mr. John O’Brien

The reason I wish to clarify this is that it applies to all State bodies, not just the IDA.

Deputy Leo Varadkar

What is the projected net increase in the number of FDI jobs, based on the current rate of attrition?

Mr. Barry O’Leary

It is impossible to predict accurately how successful the transformation agenda will be with the companies involved. We have the scenario where last year was a problematic year throughout the world. Therefore, there was a fair amount of tightening up in corporations. It is worth noting that the majority of job losses last year were in companies that remained in Ireland and these companies will probably ramp up again. However, I would not make any prediction on the target for job losses.

Deputy Leo Varadkar

I understand the point that the object of the transformation is to reduce the rate of attrition.

Mr. Barry O’Leary

Precisely.

Deputy Leo Varadkar

If the rate of attrition was similar to what it has been in the past, the net gain will be zero.

Mr. Barry O’Leary

Probably not. It would not be as high as that or cancel out the gain. It is important to recognise, regardless of whether they are IDA companies, Enterprise Ireland companies or small businesses, job losses are a fact of life in every economy. We can do two things about this. We can recognise we will lose jobs, but maintain a firm focus and do what we can for the ones that we have and ensure we bring in the new world leaders all the time. We are firmly focused on that to get the best net effect.

Deputy Arthur Morgan

I welcome Mr. O'Leary and his team here and appreciate the opportunity to tease these matters out. I acknowledge the IDA has been very successful over previous decades. My first question relates to the geographical spread for the ambitious target of 105,000 jobs between now and 2014. Mr. O'Leary said he wants 50% of those jobs to be outside of Dublin and Cork, yet he acknowledges the infrastructural deficit that exists in the regional areas. How will the IDA persuade the Government to deal with those infrastructural deficits? It will be extremely difficult to get companies to come to Ireland in the first place, but even more so to get them to go to a region where there is a significant infrastructural deficit. That will be a significant challenge for the IDA.

The issue of jobs is making headlines and some 436,000 people have a vested interest in the matter. Last year some 18,000 jobs were lost in IDA supported industries. I do not suggest the IDA is to blame for that; it is a result of the current situation. Looking at the figures from 2005 to 2009, the IDA created 12,000 jobs in 2005, 12,000 in 2006, 10,000 in 2007, 9,000 in 2008 and 4,500 last year. This is a total of approximately 48,000 in a period that included at least three of the main Celtic tiger years. However, the IDA now expects to more than double that in the coming years. That seems unrealistic. I know I will be told this is the target, but it seems a target that does not match with the experience to date. I sympathise with the IDA in this matter and share the concerns of Deputy Varadkar, who asked who had approved the strategy. It smells completely political to me, rather than based on hard-nosed business considerations. I commend Mr. O'Leary for his gross understatement when he said the IDA was in a very competitive business. We recognise the huge challenge it faces.

Would Mr. O'Leary accept that there has been over-reliance on the IDA in the past decade? Over-reliance may be attributable to the success of the IDA in the previous decade but may have led to under-recognition of indigenous enterprise. A balance needs to be struck in this regard, though the IDA and I might disagree on the precise nature of that balance.

The IDA has several offices abroad, including in New York, Boston, South Carolina, Shanghai, Tokyo and Mumbai. Is there any reason it does not share offices with Invest Northern Ireland, the equivalent of the IDA in the Six Counties? Can the IDA give any indication of the cost savings that might be made by sharing offices? Is there a political obstacle or is there an organisational obstacle? What needs to happen to arrange for both bodies to share the same offices? Both speak the same language and are based only a few miles apart. I do not think the two bodies would fight but could co-exist reasonably well together. That is just one example of cost savings. I do not suggest sharing with other agencies which are in the media for misappropriating funds and do not attribute such activities to the IDA. My suggestion is based on hard-nosed efficiency for the benefit of the taxpayer.

Mr. Barry O’Leary

The Deputy asked about the deficits in Ireland. On a positive note, the motorway infrastructure, which will be finished this year, is exceptionally helpful but next generation networks are not proceeding at the pace we need. When we are hindered by such issues we make direct representation to our Department and other appropriate Departments. It is a challenge to make the system fully aware of what we need to attract foreign direct investment.

The Deputy also asked about the main Celtic tiger years and referred to the numbers in the strategy. There is ambition in this plan and that is what Ireland needs. However, the plan also needs to be realistic because two major things are taking place. In the Celtic tiger years costs in Ireland expanded and made the country uncompetitive but that is now changing so we will be more competitive. In addition, there is global growth in services and there is good reason to think that, with a combination of better competitiveness and that growth in services, together with a great workforce, we can capitalise. The plans are meant to be ambitious and to stretch the organisation and more of that is needed.

The Deputy also asked if we had over-relied on FDI as compared to indigenous enterprise and that is always a point of discussion. Foreign direct investment, because of its scale, has a bigger profile but we need strong FDI and a strong indigenous sector — it is not a case of preferring one to the other.

Invest Northern Ireland is not part of our mandate so I do not have any comment to make on the Deputy's suggestion in that regard.

Deputy Arthur Morgan

There would be substantial cost savings if it were done. I assume Mr. O'Leary accepts that.

Mr. Barry O’Leary

I would not accept that. Relative to the business volumes we are getting I would not have thought major savings could be made. Invest Northern Ireland has a smaller team throughout the globe and we win substantially more foreign direct investment than Northern Ireland. Our role is to provide foreign direct investment for the Republic of Ireland. That is our mission and we have no basis for operating outside that unless requested or directed to.

Deputy Michael Fitzpatrick

I compliment IDA Ireland for the work it does and for what it has done in the past. I compliment Mr. Barry O'Leary for the way he is leading the organisation at this very difficult time. He said there was a target of 50% for investment outside of Dublin and Cork. I do not know how the IDA defines the cities in question. Does it mean just the city and county areas, so that Kildare, Meath and Wicklow would be excluded from Dublin? Is the policy guided by the regional planning guidelines? Does the Department tell the IDA how it has to do its business and, if so, is that the right way to proceed? Now that we have our new roads it would be appropriate to direct more businesses to rural areas and to the centre of our country. If, however, a business wants to locate in Dublin the policy should not be to prevent it from doing so and to send it down the country.

Does the IDA use St. Patrick's Day to promote Ireland? The policy of sending Ministers and departmental officials abroad to promote Ireland has been criticised. We are probably the only country in the world with an opportunity to promote ourselves in this way and I believe it is an excellent policy. I would like to hear the comments of the IDA on that matter.

We have strong national industries such as the horse industry and the agricultural and farming industry. Does the IDA play any role in promoting those industries abroad?

Mr. Barry O’Leary

We certainly regard Leixlip, where Hewlett Packard and Intel are located, as part of the Dublin area for the purposes of investment. We are oriented to the national spatial strategy and we look at gateways and hubs for that purpose. The IDA has a substantial property portfolio but all our investments are targeted at the national spatial strategy and we will continue to have that focus.

In trying to secure investment, the rule is "Ireland first, location second". We do not lose investments by telling companies where they should locate in Ireland as they must make the choice based on what it is best for them. Abbott Ireland, for example, has nine facilities ranging from Sligo to Longford, Clonmel and Donegal and likes to be a big player in towns that are not too large. Individual corporations differ in their approach in this regard.

Another question was on the usefulness of St. Patrick's Day in selling Ireland from the point of view of foreign direct investment. We have an office infrastructure in which people engage in cold calling and build up networks. We win some contracts within six or 12 months of contact but we win others after 20 years. The aim is to ensure that Ireland Inc. has a relationship with potential investors. The presence of Ministers, the Tánaiste or the Taoiseach enhances the selling message. It is never that their presence makes a deal but, directly targeted, they are very useful. Companies generally welcome their presence and it helps to gain access to the highest level of the leading corporations in the world.

The horse industry, farming and agriculture are not within the remit of the IDA.

Deputy Damien English

I am delighted the IDA is making predictions in its strategy. I understand it has always done that and I was disappointed when the Tánaiste told us, a few weeks before the strategy was published, that the IDA did not do predictions. That is not the case and I was annoyed at the time but I am even more annoyed to learn that she knew about it before telling us. If she met the IDA towards the end of 2009 or early in 2010 she would have known the organisation would make predictions. An agency such as the IDA has to make predictions, both for losses and projections. I understand it does not want to go into the losses. I accept that. It has done that in the past. There is no harm in that because it means we can get the true figure. I will have to question the Tánaiste on this again at another stage because I am concerned that she may not have read the 99 page document.

In the past the IDA has been good at paying its own way, and has not relied that much on Government contributions in the good years, through good management. However, the version of the strategy document provided to the committee clarifies that IDA receive adequate resources and support from Government. What is that about? That is a very important point. Is the IDA seeking more resources and does it need more resources? Are these jobs subject to X, Y and Z received from Government? If so, we need to know, so that we can factor it into our budget statements.

The IDA said its document is based on the spatial strategy which was published in 2003. However, in his speech, the then Minister, Deputy Cowen, said all these plans for investment are subject to growth continuing as we plan over the next number of years, which was 4%. We know what happened with that spatial strategy.

The spatial strategy is a flawed document on which to work because we have never had a chance to debate it in this House. I do not think all the other State agencies are using it. I do not believe it is used it all. It is referred to now and again but recently it is referred to more frequently. It was published in 2003 and I have not seen any real delivery arising from it. The spatial strategy skips over the greater Dublin region — Naas, Navan, Bray, Drogheda and so on which is a key area for Government investment and an area in which the IDA could operate. The IDA target is to reach 50% of businesses outside of Dublin. That has been the target for several years. How is it being delivered? There is no point in having a target if it is not realistic. Past performance will indicate whether it is commendable. What are the main barriers that prevent a company from moving out of Dublin? There must be one of two we can work on if the witnesses are allowed tell us.

I understand the IDA is targeting about 640 investments which I accept is probably existing companies as well as new companies. What was the level of investment in the past five or six years or ten years? I am not asking about the number of jobs because investment can deliver two jobs or 100 jobs. The IDA says it does not want to publish the bad news. That is acceptable. We have a facility where we can have committee meetings in private. Perhaps it would come back some day to go through these issues. In this committee we want to try to solve some of the problems that prevent creation of jobs. The IDA is probably the best placed to advise the committee on that. I hope it does that behind closed doors with the Ministers. As a committee we would also like that advice because we cannot change anything if we do not talk about it. We can talk about it here. I give the witnesses my word that anything discussed in committee does not go outside of here. That discussion should be had at some stage. If the witnesses cannot go into details, what are the three issues that need to be changed as a country to ensure this strategy and other strategies will work in the future? This is the only jobs strategy we have.

Chairman

I asked for questions. I did not ask for comments.

Deputy Damien English

They are questions.

Chairman

They are not. The Deputy has made many comments.

Deputy Damien English

The last point was that we have not lost any business. Is it true that we have not lost a company by trying to get it to locate elsewhere?

Mr. Barry O’Leary

Yes.

Deputy Damien English

This is my last question. In regard to President Obama's comments before he became President and his plans for business in his area, at the time the IDA said it was not that concerned. A year into his job as President, there is no major panic yet. Is the IDA concerned that were he to implement some of the plans he announced during his election campaign it could have an effect? I accept the IDA is moving to other countries but we are still heavily linked with US companies.

Mr. Barry O’Leary

There was a great deal in the Deputy's contribution and he may need to help me with some of the questions. On adequate resources and support, we stated a fact — we need to have the right number of people, and the right budget, particularly in the transformation agenda. It will eat up more in budgetary terms, but cases will be made on an individual project basis.

Deputy Damien English

Has IDA Ireland got the budget it needs and to which it is committed?

Mr. Barry O’Leary

We work on a multi-annual basis. We get our budget each year based on the commitments we make over a three to five year period. We are signalling that we need them. On the five to six years investments, it ranges from 107 to 130 per year. The Deputy said the spatial strategy was a flawed document. I was not quite sure what the Deputy meant. We are working to the national spatial strategy. For example, Warner Chillcott, an international pharmaceutical company, went to Dundalk recently, and PPD went to Athlone, both of which are very much in line with the spatial strategy. We want to get 50% by numbers of investments. Clearly the job impact may not be as great, it might be disproportionate.

Deputy Damien English

Has 50% been the target in recent years?

Mr. Barry O’Leary

No.

Deputy Damien English

Has IDA Ireland reached it?

Mr. Barry O’Leary

No. Last year we reached 46%.

Mr. Brendan McDonagh

That is fair enough.

Deputy Damien English

On the spatial strategy, Athlone and Mullingar are good examples. The plans for developments to make them attractive places for gateway projects are on hold. That is the reason I say it is a flawed document. Those gateway places might not be such exciting places to go as planned in the spatial strategy. It is flawed because it was never properly debated or discussed. That is not the concern of the delegates but ours.

Mr. Barry O’Leary

Perhaps I should respond to the issue about Athlone. Kinetic Concepts from San Antonio in Texas, PPD from Atlanta and Teleflex are all companies that have gone into Athlone in recent years. Therefore a number of the NSS towns are getting investments. The Deputy asked about the three issues where change is needed. Competitiveness is one, the Next Generation Networks is another, and the regulatory environment can work as a positive element, particularly in areas such as the life sciences. The Deputy mentioned President Obama and tax concerns. Any company that uses corporation taxes has to be mindful constantly. We are using Ernst and Young and we have a person in Washington along with the embassy. The threat which has been there for 30 years will not go away. We have to be constantly active to get the right result. The Deputy's final question was about not covering some of the deficits in Ireland. We most certainly go directly to the Ministers in the various Departments but I would not like our Singapore counterparts——-

Deputy Damien English

I accept that as long as it is done. Are the delegates prepared to come along to a private session?

Mr. Barry O’Leary

Sure, yes.

Deputy Damien English

It is important that we all hear these things and we can all try to find solutions. My final question referred to the main barrier to people not going out to the regions beyond the gateways to, say, Donegal or the west.

Mr. Barry O’Leary

It varies greatly. Airport connections are very important if one is doing international business out of Ireland. Also important is the population base and the diversity of skills one needs particularly if there are strong language skills. The general feeling among larger companies to which one goes, where there are established clusters and a skill pool is that access has improved greatly but nonetheless the attraction of the larger cities continues to play strongly in the minds of multinationals.

Senator Mary M. White

I welcome Mr. O'Leary and his team. I congratulate them on keeping optimistic when the atmosphere in the country was very pessimistic and negative. It is amazing in such a short time that the message on awareness of our improvement in our competitiveness has got out. I am surprised it happened so swiftly. In his recent speech, Craig Barrett stated that we were only average in the PISA rankings for mathematics, whereas 20 years ago when Intel first located here it came because of the knowledge levels of the graduates and the skilled workforce. I found his presentation compelling and I spoke about it at the Fianna Fáil Parliamentary Party meeting before the Taoiseach and the Minister for Education and Science, Deputy Batt O'Keeffe. We have a very serious deficit with the level of mathematics at primary, secondary and higher level. Mr. O'Leary has said that the majority of our businesses will be in the services industry with added value products that will require cognitive thinking and being able to apply the study of mathematics to problem solving in industry. At the end of the day it is all about trying to solve problems and being better than the competition.

I am concerned that we have dropped the ball in that regard and about how quickly we can get back up to scratch. Apparently 48% of our mathematics teachers are not qualified to teach the subject not to mind that they do not have mathematics as their main subject. They are not qualified to teach what is required for the new nano-technologies.

I am also concerned about the work ethic. In China, India and other countries in the Far East there is a hunger for knowledge and success. There has been a slippage in the past 15 years in wanting to be the best. If we are to compete in getting FDI into Ireland, we need the people who are going to get the jobs in development in for example Intel. I am concerned about holding on to such companies given that we are up against Israel, China and India which are really fired up the way we were as a nation. We are looking for inspiration and leadership in wanting to be the best.

Mr. Barry O’Leary

The Senator is quite correct in terms of the speed of the message on competitiveness getting out there and it needs to be more widely spread. I attended at Farmleigh and the Mansion House where Mr. Craig Barrett gave his speeches. I am not sure that just because it was Mr. Craig Barrett who said it that it should get all the publicity. Ireland ought to be able to recognise it. One gets mixed messages about the skills pool in Ireland. This time tomorrow the Senator might want to look at an announcement to be made tomorrow morning about a significant project concerning a major multinational setting up that will have some of the highest skills imaginable coming to Ireland. Yesterday, eBay announced 150 jobs. eBay and PayPal came to Ireland with 200 jobs in 2004. This will bring them to 1,750. Mr. Clive Davies, the Scotsman running it, spoke glowingly about the availability of talent in Ireland, so it is quite mixed.

Dun and Bradstreet, Bentley, Maxim and Vattenfall are all new arrivals. They are all coming highly influenced. It is often the relative. Craig Barrett would say that he would say that to every developed country in the world. We must also remember that the Irish recruitment market is not just the 4 million people in the Republic of Ireland. We have a great labour pool of 500 million.

Senator Mary M. White

I heard Mr. O'Leary say that two weeks ago. When IDA Ireland makes such an announcement it would be useful for the people to know what group of people are getting the jobs. When I hear about eBay or Google I wonder what level of jobs we are getting.

Mr. Barry O’Leary

Yesterday's press release by eBay contained the website leading to the careers. The Senator will see more and more of those when they are announced with the link from the recruitment. I believe LinkedIn announced it this morning. It identified six categories of jobs in which it is seeking people.

Senator Mary M. White

What does Mr. O'Leary think about what I said about mathematics?

Mr. Barry O’Leary

It comes back to the skills. There are different views. Perhaps — I do not know this for definite — because we have many of the big brand name multinationals they may be getting a disproportionate share of the better students. People like to work for a company like Google, IBM, or Johnson & Johnson. That may be a reason. The companies listed in the pack supplied to members could not possibly decide to invest in Ireland if Ireland was not the right place. Clearly skills represent a major factor. There are mixed messages about it.

Senator Mary M. White

It would be a good idea to have a private session where people could talk and both sides of the House could learn about what is happening below the radar in the education sector and how we can improve.

Chairman

Horizon 2020 is an excellent document, which inveigled me in to read it completely. I believe it is the first time IDA Ireland set out its strategic plans in such comprehensive detail. It is a roadmap outlining opportunities. Like every roadmap it signifies the changes we must make to capture those opportunities which is important in an evolving environment that is not static. We may well need to change our education system to accommodate some of those things in the next five to ten years and we should not be afraid to do that. Notwithstanding what Mr. Barrett or anybody else says, I stand four square behind our education system. It is one of our selling points and will continue to be. If we need to make changes to ensure that more people are attracted to do higher level mathematics and science subjects in the leaving certificate examinations by offering, for example, greater points, that is a matter that can be addressed at a policy level. I am sure IDA Ireland would salute that. Those changes can be made. We should not resist those types of changes and become so dogmatic. We should not be influenced by anybody else and should see the positive way forward.

I salute IDA Ireland on the efforts it has made. In an extremely competitive environment it still stands out there like a beacon and does exceptional work. Oliver Goldsmith, who wrote The Deserted Village, lived only three miles away from where I live. Mullingar feels like the deserted town. We have a 70-acre industrial park, 27 acres with planning permission, right in the centre of the country. It is on the intersection between the N6, N4 and N52. Mr. O’Leary need not talk to me about infrastructure.

Deputy Damien English

Mullingar a gateway town.

Chairman

It is a gateway town. We are actually part of the ATM region — Athlone, Tullamore and Mullingar.

Deputy Leo Varadkar

Every town is a gateway.

Chairman

We are part of the triangle.

Deputy Leo Varadkar

The Chairman need not feel special.

Chairman

I feel very hurt that Mullingar has been overlooked. It is a tremendous town that has been a market town over the years. I know that Mr. O'Leary and Mr. Kevin McCarthy are doing their best. We have a good education system, tremendous recreational facilities, good leisure facilities, a splendid road network, and a very good train service. Everything is available. Work is under way to develop a major sports centre, which is an important outlet in terms of attracting people to a major town. We have equestrian facilities and some of the best golf courses. The Mullingar scratch cup is one of the premier competitions in the country. I could go on for ten minutes advocating Mullingar.

We are delighted to see Athlone doing so well. I commend the IDA in that regard. Synergies and links have been developed with Professor Ó Catháin and others in the Athlone Institute of Technology. Mullingar is only 20 miles down the road from Athlone. It would be remiss of me as a Member of Parliament for Longford-Westmeath, representing the town of Mullingar and north Westmeath in particular, if I did not express our deep disappointment at being overlooked. I accept the IDA is active in the area but, as Deputy English inquired, we would like to know if something is missing. One can get from Mullingar to Dublin in 45 minutes. That is a quick turnaround. At times one would not make it to Dublin Airport from O'Connell Street in 45 minutes. Mullingar is closer to the airport. We will have to make an all-out effort this year. I say that in the context of balanced regional development. I was delighted to see reference to that in Mr. O'Leary's document. I am not like Deputy Varadkar. I heard such reference previously and I met Mr. O'Leary previously. What did we do wrong in Mullingar that we cannot attract industry? We have not had any investment to date.

Deputy Leo Varadkar

The town did not vote for Deputy Mary O'Rourke, it voted for the Chairman, Deputy Penrose.

Chairman

I do not believe that is the case. Mullingar has many attributes as a commercial centre and in many other respects. Westmeath County Council has been to the fore in promoting the regional park at Marlinstown near Mullingar. It is a well-appointed centre with everything going for it. I could not let Mr. O'Leary, as chief executive, leave the meeting without saying something in that regard. Being a wise head, he probably knew it was coming. Mr. Kevin McCarthy is very much aware as well. I make a cri du coeur that the IDA would ensure 2010 is the year Mullingar is recognised again.

Mr. Barry O’Leary

I thank the Chairman. We have invested in the landbank and infrastructure in Mullingar. If we were attending a committee meeting three years ago and the Chairman of the committee was from Carlow he or she would have been saying exactly the same thing. We had a park in Carlow for up to nine years and we were not making progress there but within a matter of weeks Unum insurance company and Merck Sharp & Dohme, the big pharmaceutical company, acquired the whole business park of 65 acres, which shows it is a matter of persisting.

Chairman

I have confidence in the chief executive. I thank Mr. O'Leary, Mr. O'Brien and Mr. McDonagh for their assistance in today's deliberations. Everyone acknowledges the important contribution foreign direct investment makes and has made to the economy since the 1960s. In some ways we are too dependent on it. Deputy Morgan made a point about the need to develop indigenous industries in tandem with foreign direct investment. It is important that we do not lose focus. As a committee we must focus on that.

Reference was made to regional development but some small towns will never get IDA investment and if we forget about them they will never move forward. That said, there is no denying that we need to welcome investment from multinational and foreign investors. We must do everything we can to attract such companies to our shores and keep them in tough times. The loss of 1,900 Dell jobs in Limerick was a severe blow to the economy and highlights the importance of constantly replacing such losses with new additions to our industrial portfolio. I acknowledge the role played by the IDA in that regard. Companies it supports account for two thirds of our exports and half of our corporate tax revenue, which is significant. As Mr. O'Leary indicated, the companies pay out approximately €7 billion in wages and approximately €19 billion in total spend in the economy. It is a job well done but in the current climate we need more. I hope Horizon 2020, which is the roadmap in that regard, can deliver.

We have tremendous advantages in this country and we need to utilise them if we are to secure employment for the hundreds of thousands of people who are unemployed. It is important that we are open to new ideas. If we have to change our education system, let us change it. Let us not set up another committee to postpone an inevitable decision. Let us do it and use our skilled, educated workforce to maximum effect. Notwithstanding what Mr. Barrett said, I still stand behind our education system. It is as good as anywhere. I have travelled abroad with others and they recognise that. We cannot afford wastage and unnecessary losses in terms of the allocation of scarce resources. Having listened to the IDA representatives I know they will do everything they can to achieve the objectives set out in Horizon 2020. I wish them well in their efforts in that regard.

Mr. Barry O’Leary

The final strategy document that tightens up a few areas will be available in approximately one week to replace the statement that was issued to the press in recent weeks. We would be happy to circulate it.

The joint committee adjourned at 2 p.m. until noon on Tuesday, 30 March 2010.