JOINT COMMITTEE ON FOREIGN AFFAIRS AND TRADE díospóireacht -
Wednesday, 20 Jun 2012

Trade Promotion: Discussion (Resumed) with IDA Ireland, Enterprise Ireland and Forfás

Chairman

This meeting is the second in a series of meetings and other activities which the committee is undertaking with regard to the promotion of trade and the role of the Department of Foreign Affairs and Trade in economic recovery. The aim of the committee's examination is to prepare and publish a report on the strategy and response of the Department of Foreign Affairs and Trade to the economic crisis, the Department's new recognised responsibilities for trade promotion, and how well the Department is performing in respect of the programme for Government measures for trade promotion and economic recovery.

The committee commenced this process last week with a formal adoption of a scoping document and a meeting with senior officials from the Department of Foreign Affairs and Trade. Today we are meeting representatives of the key State agencies involved in trade and investment, IDA Ireland, Enterprise Ireland and Forfás. It is important the efficiency of the relationship between these agencies and the Department of Foreign Affairs and Trade be maximised if Ireland's potential as a trading partner and investment destination is to be realised fully.

The committee is particularly interested in hearing from these organisations before a delegation leaves for a weekend field visit to the United States, a key trading and investment partner. The visit over the course of six days offers the opportunity to examine the way in which the Department of Foreign Affairs and Trade operates in the new mission in Atlanta and in the well-established mission in San Francisco. It will also incorporate a visit to Houston where there is no resident mission but which may offer good opportunities for the development of the trade and investment relationship. The delegation will meet representatives of Irish State agencies, business networks and industry and will also use the opportunity to explore aspects of the Department's diplomatic work.

While on the subject of maximising efficiency, the committee has a very heavy schedule so it is important to use our time well. I propose we take each group separately for a maximum of 40 minutes in each case. Following the presentation from each group, I would appreciate it if members would ask questions rather than make statements. There will be an opportunity for members to ask supplementary questions.

The first agency to make a presentation is IDA Ireland represented by Mr. Barry O'Leary, chief executive officer and Mr. Brendan McDonagh, head of planning. I welcome both gentlemen. I met Mr. O'Leary a few months ago for an informal meeting at which I asked him to attend the committee to talk about the IDA activities which, rather than promoting trade, are concerned with bringing companies and investment into the country. However, there is an important link between both areas and these will form part of the committee's report.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If a witness is directed by the committee to cease giving evidence in relation to a particular matter and the witness continues to so do, the witness is entitled thereafter only to a qualified privilege in respect of his or her evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and witnesses are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the House or an official by name in such a way as to make him or her identifiable.

I invite Mr. Barry O'Leary to address the committee and I congratulate him on the recent jobs initiative over recent months.

Mr. Barry O’Leary

I thank the Chairman and members of the committee for the invitation to address them this afternoon. I will begin by putting foreign direct investment into the context of the wider Irish economy. The IDA has a portfolio of more than 1,000 multinational companies, of which about half come from the United States. Over 70% of the impact is provided by US companies and, directly and indirectly, these are responsible for approximately 250,000 jobs in the economy. A substantial part of Ireland's exports come from multinational companies, amounting to approximately €115 billion. Multinational companies spend about €19 billion in the Irish economy, of which €7 billion is payroll expenditure. They also account for two thirds of all corporation tax and two thirds of all business expenditure on research and development. Ireland is well associated with the big brand names, such as IBM and Johnson & Johnson, Apple and Intel, but increasingly, business is coming from what we call second tier companies, those with assets of between €100 million and €750 million. Over the past two years, IDA Ireland has initiated a new programme to bring in technology companies which are at an early stage of development. Typically these would be companies with no revenues or a maximum of €30 million in revenues but which would have been through one or two rounds of venture capital funding. Approximately 40 of such companies have come to Ireland since the beginning of that programme two and a half years ago.

Ireland and IDA Ireland tend to concentrate on a specific number of sectors, some of which have strong growth prospects and others which do not. There are four sectors which have been key over recent years and will be in the future. The first is the life sciences, which comprise the largest sector for employment, exports, corporation tax take and capital investment levels. This sector is typically composed of the pharmaceutical and medical devices areas. The second sector is the information and communications technology, ICT, area and the third sector comprises international financial services companies, such as State Street, Citibank, Bank of New York Mellon and Bank of America. These are not to be confused with the domestic banking sector. The fourth sector, which has seen large growth, is the digital media and digital content sector where, since 2004, Ireland has won the top ten companies born on the Internet. These are, typically, Google, eBay, Twitter and PayPal. Other areas in which IDA Ireland is active include, engineering, consumer products, clean tech and certain aspects of the food industry.

Despite the global economic environment, 2011 was the strongest year since 2002 for the flow of foreign direct investment. Approximately 13,000 new jobs gross and 6,000 new jobs net were created. A total of 148 investments were backed by the IDA, of which 61 were brand new companies coming to Ireland for the first time. In 2012 to date, the IDA is quite pleased with the first six months of the year because this continuing flow has accelerated in scale. There have been some higher profile announcements since January, such as PayPal going to Dundalk to employ 1,000 people, Apple in Cork employing 500 people, Mylan employing 500 people between its two locations in Baldoyle and Galway, SAP in Dublin and Galway employing 250 people, Abbott in Sligo employing approximately 175 people, and Lilly in Cork employing approximately 200.

An interesting view at the moment would be with regard to some of the wider benefits in the economy. There has been a bit of a shift in the portfolio in capital intensive projects. The IDA has backed a number of pharmaceutical plants and data centres in recent months. These all have significant construction benefits because we reckon at least 1.5 million sq. ft. of new buildings will be required to be constructed for these projects.

Although the past year and a half has been good, there are very strong economic headwinds on the global stage. The views of the United States and Asia on Europe are worrying. They do not believe it is getting its house in order and are, therefore, of the opinion that it may not be the place in which to invest. In particular and as a result of the austerity measures and lack of confidence in the European economy, demand in Europe is flat. It must be borne in mind that 80% of all foreign direct investment in Ireland is to service the European market. In the United States there is moderate growth. It is, therefore, a challenging market. When the position is that challenging, it means all other countries are upping their game to try to win mobile foreign direct investment.

That is the challenge and one of the reasons we often refer to the importance of "Team Ireland". It is not just IDA Ireland that is involved but an entire range of stakeholders which include our sister agencies - Enterprise Ireland, Forfás and Science Foundation Ireland - and Departments such as the Department of Foreign Affairs and Trade. IDA Ireland is of the view that it has excellent relationships with that Department and its various missions across the globe. These relationships vary greatly in their intensity. In our main market of the United States nearly all of our business is done at one-to-one level with "C" level executives, namely, chief executive officers and chief financial officers. When ministerial visits occur such as those involving the Taoiseach, we have involvement with the embassy. However, our engagement with it would not be as regular as that which we would have with embassies in other markets. In Europe there is very extensive engagement. Some recent examples in this regard relate to functions held at the embassies in Paris, London, Frankfurt, Berlin, Milan and Basel in Switzerland. These work well because the residences of the ambassadors act as a centre to which we can attract key executives.

In the context of where the greatest need for really close working relationships lies, the position on foreign direct investment is okay and only a small part of the overall trade agenda. In the newer markets, particularly China and India but also Korea and Japan, there is a need to develop our links further. However, there are excellent working relationships and the ambassadors and their various teams are exceptionally helpful to IDA Ireland. The brand of an embassy or ambassador or a consul actually assists us in obtaining access to certain circles. Ambassadors have facilitated a number of one-to-one meetings. Only the week before last I visited Japan where Ambassador Neary was very helpful and hosted a dinner on one of the evenings to host a meeting involving ten leading Japanese industrialists. On another evening he held a reception for 50 key existing clients in Japan and others we are actually targeting.

The intensity of our engagement with the Department of Foreign Affairs and Trade and its various missions throughout the world varies in terms of market needs but also in the context of cultural approaches to business. From a foreign direct investment point of view, engagement in Asia is exceptionally challenging. Many countries have allocated significant resources towards attracting such investment. Ireland does not have the same brand recognition as a business location there as it does in other parts of the world.

I will conclude on that point. I will be happy to answer questions members wish to pose.

Deputy Bernard J. Durkan

I congratulate our guests on the timeliness of their submission and wish them well in their future endeavours. I have been critical in respect of a number of matters relating to this area in the past and hope that criticism was constructive. What are the positives in attracting foreign direct investment to Ireland from the United States, on the one hand, and other global centres, on the other? I know our guests have been successful in this regard, but it is no harm to re-emphasise that success. We live in a world where there is a great and growing emphasis on negativity. In fact, its growth has exceeded that in all other areas in recent times. In the context of the net number of jobs created in past three years, what is the underlying trend? I am a great believer in trends and of the view that the information contained in graphs can provide a great deal of reassurance.

My next question relates to speed of access to the relevant facilities for foreign direct investors. There are a number of procedures to be gone through in this regard. How competitive is this jurisdiction with its competitors throughout Europe and globally in providing the facilities required when investment takes place? I refer, for example, to the position on obtaining planning permission, carrying out site assessments, etc. In giving this country an advantage, are we competitive in this area? If not, why is that the case?

Chairman

The Deputy should keep his questions short.

Deputy Bernard J. Durkan

I have just one more question. Before we commenced the meeting, I was discussing some very positive results provided by some of the associated bodies in recent times. In the past I have been critical of the loss of manufacturing industries from this country. For ten or 15 years I have been informed that the future does not lie in manufacturing. I do not believe this. We must also be competitive in manufacturing. Where we are, we have been very successful. What are the main issues identified as being impediments to the manufacturing and services sectors? I have a reasonable idea of what is involved in this regard. For example, Jacob's biscuits relocated to an adjoining jurisdiction just a couple of years ago. This was an indigenous and long-established firm which had everything going for it. Why did we lose it?

Chairman

I intend to take questions from two members at a time.

Senator Jim Walsh

I thank Mr. O'Leary for his presentation. I have five questions. What percentage of Ireland's exports is attributable to foreign direct investment as opposed to that generated by indigenous companies? In the context of exports and innovation - I accept this may not be within Mr. O'Leary's specific remit - what are we doing to transfer the expertise of foreign direct investors in order to develop indigenous industries? This is a matter on which specific emphasis must be placed.

On the spatial strategy, most companies obviously want to locate their operations in Dublin. There is an historical overhang in this regard, but an effort was made to encourage them to disperse their operations throughout the country. To what extent is the spatial strategy having an impact? Many provincial towns proved to be attractive locations for a great deal of foreign direct investment in the past. Now, however, they are not even on the radar. While those of us in the south east admire what IDA Ireland is doing nationally, we are dissatisfied in the context of what is it failing to do in our region.

What percentage of the foreign direct investment in recent years is attributable to existing companies expanding their operations and how much of it relates to companies setting up on greenfield sites? I am particularly interested in the number of jobs that have been created and the level of exports achieved in this regard.

What is the policy of IDA Ireland in ensuring we capture the downstream jobs created on foot of successful research and development projects rather than losing them to competitor countries? I refer to a scenario in which Ireland will have a research and development base but where the manufacturing jobs to which this will eventually give rise will subsequently be provided in other jurisdictions.

What Mr. O'Leary said about the European market was very interesting. The stagnation of the European economy is becoming a factor and the short to medium-term outlook is not good. What have we done to eliminate the deficiencies in our infrastructure in Asia in order to encourage China, Japan, South Korea and Indonesia to consider Ireland as a European base of operations?

Chairman

I will give Mr. O'Leary approximately five minutes to answer those questions.

Mr. Barry O’Leary

I count 11 questions which I have to answer.

Deputy Bernard J. Durkan

Mr. O'Leary should only draw breath once while he is replying.

Mr. Barry O’Leary

The Deputy has referred to what attracts foreign direct investment. At a top level and in order to get one's country on the list, multinationals usually have ten to 15 items on a scoring board. Always there will be the availability of talent, the country's track record - in other words, whether it is possible to identify successful multinationals which have invested here - the rate of corporation tax, which is extremely important, and technology capability. What attracts investment is at that level. Factors such as our use of the English language, EU access and the ease of doing business are all extremely important. However, that is not enough, one must get down to the sector specific level or what part of the business model is involved. If we are trying to attract, say, bio-pharmaceutical companies to invest in Ireland, nationally we must have an impeccable record with the FDA. The Irish Medicines Board controls that in this country. The regulatory environment is extremely important. These businesses need 1 million to 2 million gallons of water a day, 10 MW to 20 MW of power, and road infrastructure. We must ask ourselves whether we have those. The IDA has six particular sites.

On the question of what other expertise we have, we have invested €60 million in the National Institute for Bioprocessing Research and Training, NIBRT. That deals with the question of how bio-pharmaceuticals are manufactured and how we get the workforce. If it was in the areas of financial services or ICT, there would be another subset. It is a mixture of all those.

Deputy Durkan asked about the trend in terms of jobs. The IDA published its Horizon 2020 strategy in early 2010 and it sets out specific metrics for the period 2010 to 2014. We are half way through that now. The trend in terms of jobs has been increasing during the past two years. There was a net increase in 2010 of approximately 1,300. The increase was more than 6,000 last year and, following the downturn that occurred in 2008 and 2009, this trend is increasing. I outlined in my introductory speech the main sectors where those jobs are being created.

In terms of the speed of getting set up in Ireland, obtaining planning permission and so on, the multinational community regard Ireland as a place where the ease of doing business is very good. It scores very well, taking everything into account.

On the loss of manufacturing jobs, it would be incorrect to say that Ireland does not focus on manufacturing. Some of the biggest investments we are winning are in the manufacturing sector, but they tend to be in the very high value areas such as medical devices, pharmaceuticals and the semi-conductor industry. Within the past 18 months, with our improving competitiveness, we are seeing some mid-value manufacturing, for want of a better description. Ireland is becoming competitive again. Manufacturing capability is a factor in competitiveness. Our competitiveness will determine what type of manufacturing we can attract to Ireland.

Senator Walsh asked about exports attributable to foreign direct investment, FDI. Multinationals account for more than 80% of all exports from Ireland. On his question on the transfer of FDI expertise to indigenous industry, a number of multinationals have acquired Enterprise Ireland's clients for their expertise. In other words, there are some very fine Enterprise Ireland supported companies, particularly in technology and some of the medical devices areas. A specific aspect of the jobs strategy is improving the link between multinational companies and Enterprise Ireland, EI. There is a team of three people from EI and the IDA working on scoping that.

The Senator's asked about the spatial strategy, especially in respect of the south east. He is not impressed with the IDA's activities there. The IDA gets criticism not only from people in the south east but also from people in other areas. Even in the case of Galway, which has done exceptionally well, people will ask about west Galway or east Galway. Dublin has been doing fairly well and it got an investment in Baldoyle recently, but a person wrote in to say it needs more investment. One must put this into perspective. When people are considering investing, they consider cities of scale, and cities of scale around the world have a minimum population of 1 million people. There is only one of those on this island. We get companies to invest in various places. For instance, last year, Sumitomo, the second largest Japanese bank, located its western hemisphere IT development centre in Tralee. Earlier this year we backed Allergan to spend approximately $250 million dollars in its Westport facility. Primerica has located in Donegal, a cluster of companies are engaged in the production of medical devices, in particular in the south east, and some projects are in play in the south east Therefore, it is not as if there is will not be any investment there.

Senator Jim Walsh

Not in recent years.

Chairman

We will not get involved in parochial arguments today.

Mr. Barry O’Leary

By "in play", I mean into the future rather than retrospectively. I point to the strong investment we supported by Coca Cola, Bank of New York, Mellon and Zurich in Wexford, just to note that formally on the record.

We are there to win for Ireland. When investors are considering whether to invest in Geneva, Amsterdam or Dublin, is one going to tell them it is not possible unless they go Donegal or Wexford? That just does not work and we must be realistic. We do everything possible to assist in that respect, including incentivising them often with the provision of very substantial sums of money, but for a variety of reasons they tend to locate in some of the bigger cites.

On the question of how much of the FDI comes from new and existing businesses, two thirds to 70% comes from existing companies and 30% to 33% comes from brand new companies that come into Ireland.

We have a strong focus on research and development, especially its commercialisation. Most IDA support for research and development goes into two sectors: the life sciences and IT. In the life sciences sector, its development and manufacturing are almost exclusively co-located. By priming and supporting the development part of research and development, one almost automatically gets the manufacturing end, and that is an important part of life sciences. I would say 60% of the IDA support is given where it is linked with manufacturing or where it is linked to the full commercialisation of it. For example, Cisco systems in Galway has 200 people and it is developing new technologies. They are all engaged in research and development jobs and that product is being commercialised around the world.

Deputy Walsh's final question related to Asian markets. They pose a particular challenge. From an FDI perspective, India provides more because it has more companies that are in alignment with Ireland's strength. In the case of China, not a great deal of Chinese FDI comes into Europe and that which does comes in by way of acquisition or in sectors in which Ireland is not particularly strong. Undoubtedly, we have invested in offices in places like Shanghai, Shenzhen, Mumbai and Bangalore for the medium to long term, but it will take a while to develop them. This relates to the importance of the network, Team Ireland.

Chairman

I will take brief questions from two more members, Deputy Mac Lochlainn and Deputy Eric Byrne.

Deputy Pádraig Mac Lochlainn

I thank Mr. Barry O'Leary and Mr. Brendan McDonagh for coming in today. The IDA, in terms of the big picture, has been very successful during recent years. It is one of our success stories and is acknowledged within the business community, in domestic businesses and foreign businesses based in Ireland. There is always room for improvement, however, and the witnesses would accept that.

In terms of our traditional or strong trading partners such as Britain and the United States, and in terms of our new markets, be it the much famed BRIC - Brazil, Russia, India and China - countries, or the CIVETS - Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa - countries, of which I am sure the witnesses are aware - it seems at every corner there is an new acronym, one of the key challenges is our diaspora, particularly in the United States and Britain, where very large percentages of the communities there are of Irish heritage and very proud of it. What is our diaspora strategy in Britain and the United States? One of the points made to me and the Chairman in recent days is that a huge amount of investment in this country comes from the west coast of the United States. Our traditional relationships are with the big Irish cities on the east coast, although I accept there are connections with San Francisco on the west coast, and with Chicago in the mid-west, New York, Boston and Philadelphia. How can we develop the Irish diaspora on the west coast, in particular in Silicon Valley in terms of inward investment? Likewise, how can we do it in Britain?

In terms of the regions, I am a Donegal man and I am aware that there is a diaspora unit within Donegal County Council examining the issue. It has recently been in London. At a national level how can we look at the diaspora and link in with local authorities to help us? Letterkenny and Sligo are the two gateways in the north west. Senator Walsh referred to the south east. How can we join up the dots and focus on the diaspora?

My final point relates to embassies. The point has been made to us that if someone from an Irish embassy in a given city or region were to ask someone to help us out or to be a conduit to try to develop trade and promote this country, that if it came from the consulate it would be seen to come from the Irish people and it would be seen as an honour. The suggestion is that we join up the IDA, Enterprise Ireland and the Irish consulates in given cities and put them in the one building. We could possibly even include Invest Northern Ireland. We could put them all into the one general campus so that people could interface with the country. We could use the consulates in particular in growing economies as well as in older markets as a trade promotion interface backing up the work of the IDA and Enterprise Ireland. I would welcome the views of the witnesses on those suggestions.

Deputy Eric Byrne

I thank Mr. O'Leary and his team for attending. I congratulate his efforts and those of his partners through the years on doing a tremendous job without which this country would be in an even more sorry state.

Reference has been made to two of the issues I specifically wish to raise. I am an urban dweller and I live in a capital city. Mention was made of cities and the inevitable attraction of cities of 1 million plus for inward investment. I wish to ask two key questions about cities. The IDA is targeting highly skilled companies with high added value to come to this country. Are the organisations conscious that we must provide a vibrant, open, lively, culturally diverse and culturally tolerant city in order to encompass the diversity of the workforce that would be attracted to a city such as Dublin?

When I was in Albuquerque a local bed and breakfast owner with a swimming pool complained that Intel was consuming all of the water and said that the low water level was due to Intel. Mr. O'Leary mentioned water. Does he agree with the belief that water will be the key issue in attracting foreign direct investment into this country? I refer to a constant, permanent, clean supply of water to the areas that are preparing for future development.

How does Mr. O'Leary respond to the argument that our university sector is not yet providing the highly specialised, skilled workers that some companies require and therefore they must seek their skilled work base from abroad and bring them as immigrants into this country? Is he happy that the universities are conscious of the need to upskill to the high level degrees in particular to ensure that they can be fully engaged in employment?

My final question relates to China. We meet so many Chinese at the moment. I met a delegation of academics from Beijing yesterday. They are in and out of the Parliament morning, noon and night. I am conscious of the embassy in Beijing as Dublin is twinned with Beijing. How are we progressing our relationship with China? In particular, given the rather scary factual proposition at the outset that Europe may not be considered the most attractive region for foreign direct investment, how are we as a country seeking to attract the BRIC countries? Given the cuts, does the IDA have the linguistic skill base and resources to attract the Chinese, the Indonesians, the Russians and other emerging countries that are of crucial importance to this country?

Our future rests in Mr. O'Leary's hands. If we do not manage the economics of this country - Mr. O'Leary has been charged with aiding us in the process – then there is no future. Is the IDA adequately resourced to target the emerging markets?

Mr. Barry O’Leary

I will have to pass on Deputy Mac Lochlainn's questions about the diaspora strategy and whether Ireland has got it right and to where we could extend it. That is very much the focus of the Department of Foreign Affairs and Trade. It is responsible for the design of such a strategy.

The Deputy also referred to the west coast and the mid-west. In fact, the largest part of our foreign direct investment comes from Silicon Valley. We have two offices in California. We have a team in Mountain View and in Irvine in Orange County. There is a big Irish diaspora community working in particular in the technology sector. Our team is quite friendly with them and would have a lot of contact with them because it is a fairly compact area in the Valley. In the mid-west we have a team in Chicago, which is particularly strong in life sciences, whereas it is mainly the technology sector on the west coast and on the east coast it is a mixture of everything.

We do share a number of locations around the world. In New York, for example, the IDA, Enterprise Ireland and the consulate are located in Ireland House. In Boston, that is not the case because not all of the bodies are represented. In Tokyo, we are all based in Ireland House, as is the case in London and Paris. There are a number of such arrangements. However, it should be done where it makes sense. For instance, for Germany, Austria and Switzerland the most convenient location for us is Frankfurt, whereas Berlin is an important location for political reasons. There is a tendency whereby one can do it more and more. For instance, in Mountain View, Enterprise Ireland has recently moved into the same building as the IDA and that certainly helps. Did I miss out on any of Deputy Mac Lochlainn's questions?

Deputy Pádraig Mac Lochlainn

No.

Mr. Barry O’Leary

Deputy Byrne inquired about the scale of cities. It is an important factor. If we were competing for an IT technical support centre where the typical locations might be Barcelona, Prague, Manchester, Dublin or Cork, there is a tendency to go more and more towards cities but that does not mean to say that everyone will choose that option.

One of the successes of Dublin in terms of Google, eBay, PayPal or Twitter, is that the cultural diversity has been considered attractive. Dublin, in particular, but also Cork and Galway are centres of multilingual, multicultural operations. Google has 2,400 people in Dublin with more than 60 languages being used on a daily basis. One will find many other companies are using 20 to 30 languages. It is a niche part of the business that one can assemble those teams together.

Deputy Byrne suggested that water will one day be considered a key resource. I agree but I do not think it will be the key resource because there are many locations around the world that use water on which to build business. For instance, Singapore, which does not have a water supply, is introducing great technologies such as desalination, but it is a key. In certain sectors not only is water a key but in the case of data centres our mild temperate climate is an advantage because one does not have to use a lot of energy in cooling data centres. There are currently large investments in data centres being built in this country by Microsoft and Google.

Deputy Byrne mentioned the university sector producing high skills. First, we score very well internationally on the availability of people. There is no doubt about that. The world competitiveness report published two weeks ago showed Ireland as being the No. 1 location for skilled people for the second or third year in a row. Skilled people are in demand across the globe. Even in places such as India, there is a challenge to build up skills and there are high labour turnover rates there. However, more could undoubtedly be done because it is our view that between 40% and 45% of all FDI jobs over the next few years will have a technology element. I do not say that is just for the IT industry. For instance, a number of companies are here engaged in financial services technology as distinct from transactions and, therefore, these technology area needs to be ramped. JobBridge and other programmes will help and it will be interesting to see the placement of people coming off them.

The Deputy mentioned the BRIC countries and linguistics, etc. Whereas in North America, most of the people working for us are Irish, in Asia we use the opposite model. Although two of our team in Japan are Irish, they have been living there for 15 years and are fluent speakers. It is a must to have fluent speakers in the marketplace. One cannot do business in countries otherwise. In China, the team is 50:50 but we are going to an all-Chinese model while in Bangalore and Mumbai, although language is not the issue, how one deals with business and a culture are issues and, therefore, we try to have people fluent in the marketplace.

With regard to whether we put sufficient resources in, we are conscious we have core business volumes and metrics to weigh up and, clearly, it takes times and resources to develop new markets. At the same time, we must ensure the overall volume of FDI is still at a high level and, therefore, we have to make choices on where we place the resources and that is a fine balancing act.

Deputy Maureen O’Sullivan

Yesterday, a director of the World Bank and the director of Debt and Development Coalition Ireland appeared before the committee and the issue of tax evasion came up. Certain multinational companies are adept in this regard. Does Mr. O'Leary support a call for country by country and even project by project financial accounting to ensure companies pay just taxes? I refer to our corporation tax rate, about which it is difficult to get concrete information. I am critical of our rate being so low because it contributes to these companies not paying their just taxes at home. Is Mr. O'Leary sure that all of the 12.5% rate is being collected or are there ways around this?

He referred to identifying various new markets. Are there places the authority has identified as new markets, which do not have Irish representation at all? Are some places being considered?

It is sad that no sooner has the agency made a new jobs announcement, it is accompanied by an announcement of job losses. Job retention is vital for our country. What is the IDA's role in this regard?

Mr. O'Leary mentioned incentivising companies. I presume there is a balance between spending a great deal of money to attract them here and not getting a result from that.

Deputy Gerald Nash

I welcome the delegations and I apologise for being absent for Mr. O'Leary's opening contribution. Many have said in recent years that Ireland has suffered reputational damage and I accept that. We can see that having worked its way through the economy in recent years. There have been substantial announcements by IDA-backed companies in recent times, including by PayPal in Dundalk in my own constituency, which was welcome. I am aware that we were in serious competition with other European destinations for that investment and that says a great deal about where Ireland is currently and where we will get to over the coming years if organisations such as PayPal have the confidence to invest in such a large quantum in the country and, in particular, in the region I represent. Most of us accept there was reputational damage in recent years given the manner in which the economic crisis and collapse came about. Have views been expressed in this regard to Mr. O'Leary internationally? Is our reputation improving? What is his advice on how we can continue to improve Ireland's reputation as a place to do business and create employment?

I concur with previous speakers' concerns about the creation of low and medium skilled manufacturing jobs. Anecdotally, I come across cohorts of people time and again during my work in my constituency and elsewhere who feel they have been left behind and who feel there is little focus on their employment prospects. Notwithstanding that, a range of different opportunities are available in the context of training and employment supports and so on but what is the IDA doing to establish bases for organisations here to employ these people? I acknowledge Deputy Durkan has referred to this. Ireland is doing well in attracting high end jobs but not so well in attracting in low and medium skilled jobs. Will Mr. O'Leary comment on that?

When an organisation such a PayPal invests in a country or a region, it has a multiplier effect. How many other jobs will be supported, for example, by the 1,000 jobs announced by the company? I have heard various views on that. How does the IDA arrive at a figure for the multiplier effect?

As Deputy O'Sullivan alluded to, there is a churn effect with jobs. For example, one week the IDA makes a jobs announcement and, the following week, a substantial employer decides to shed a number of jobs. How is the IDA working with companies it has backed and that arrived here a number of years ago to retain jobs?

Deputy Dan Neville

Will Mr. O'Leary comments on the changes to Shannon Development? The IDA did not have responsibility for the mid-west region but Shannon Development has experienced profound change. How will that impact on the IDA's role? What will happen to Shannon Development following the announcement by the Minister for Tourism, Trade and Sport about its reorganisation? I often felt Shannon and the mid-west had to fight a little harder because there was slight jealousy between the IDA and Shannon Development regarding each other's successes.

Chairman

I thank members for their co-operation.

Mr. Barry O’Leary

Deputy O'Sullivan raised the corporation tax issue. The description she used at the beginning was quite inappropriate given the OECD and various other reports. In particular, the French justice ministry published a comparison of effective corporation tax rates around the globe. It showed in the case of Ireland that 12.5% is the nominal rate and 11.9% is the effective rate. It is important to look at international competition for mobile investment. If one was looking for the lowest tax rate, one would not come to Ireland. One would go to Switzerland or Singapore where one can negotiate a 0% rate. The UK is introducing a patent box for certain sectors that will have a maximum rate of 10%

Deputy Maureen O’Sullivan

When I spoke about this in the Dáil, I made the point that other countries, which are criticising us, have higher nominal rates but are using other loopholes to lower the effective rate.

Mr. Barry O’Leary

There was a question about using resources and embassies. What tends to happen is that in the US we tend to do it directly on a one to one basis.

In countries where we have no presence whatsoever, such as Indonesia and Malaysia, we use the offices of the embassy or honorary consul.

I mentioned the 13,000 jobs last year and referred to losses of almost 7,000, but it must be remembered there were gains of 6,000. It is important to put that on record. There is a transformation agenda in respect of the presence of all the big companies in Ireland. We support them in technological and skills uplifts, process improvement, research and development, and achieving energy efficiency. There is an active programme and a suite of incentives. The best example in this regard is IBM in Mulhuddart, which has 3,200 staff. Some ten years ago, it had approximately 3,000 staff, but nobody on the campus is doing the same job today. One must transform constantly, which requires much of our effort.

Reference was made to incentives and it was asked whether we are sure we are obtaining value. Bearing in mind the annual expenditure in the Irish economy of €19 billion, of which €7 billion is on payroll costs and from which two thirds of all corporation tax is derived, the economic multiplier effect is enormous. According to any economic scrutiny, it far outstrips anything that Ireland provides.

With regard to Deputy Nash's point on reputational damage, at the back end of 2010 and the beginning of 2011, reputation was a significant issue in trying to attract foreign direct investment. I am glad to say that, in the main market, the United States, reputational damage began to wane from approximately March or April last year. From a business perspective, Ireland's reputation is very strong in the United States. It is reasonably good in most of Europe but the big area on which we must work is Asia. Much reporting about Ireland in Asia concerned the crisis in 2010. Ireland is now lobbed in with Europe and people are not differentiating between countries. This is a considerable issue.

The point on low skill jobs is really difficult. We cannot attract multinational companies to provide low skill jobs because they will go elsewhere. The more high skill, better paying jobs we attract, the more money that will be spent in the economy. In a company such as PayPal, many people will be employed in the canteen and in catering, logistics, transport and other services. If one attracts the higher paying jobs, there will be a spin-off effect and a trickle. Some people use large numbers in terms of spin-off effect. In the services area, the ratio is probably 1:1. Others say the ratio is actually 2:1 or 3:1. Our ratio of 1:1 involves a big multiplier. This is not only evident in PayPal in Dundalk since Prometric recently set up in the area. Down the road is the shared-services Coca-Cola project. Our teams are always in dialogue, trying to get companies to upskill and transform. This requires a large part of our budget.

On Deputy Neville's point, we have a very good relationship with Shannon Development, especially in respect of foreign direct investment. Mr. Michael Foley from Shannon is the person with whom our man in Limerick, Mr. Sean Denver, meets a couple of times a week. Mr. Foley has been instrumental in helping the IDA in a number of areas. The Minister announced that the IDA will take over the foreign direct investment role for all the area except the airport facility. We will be involved in the marketing of the airport facilities to build the aviation sector. We must return to the Minister by the end of August with a plan as to how we are to resource the project and to identify the services we will be providing. We are certainly looking forward to assuming that role.

Chairman

I have one question because I did not ask any earlier. It may be useful for our report. How does Mr. O'Leary characterise the relationship between the Department of Foreign Affairs and Trade and the IDA?

Mr. Barry O’Leary

It is very good. It is very good in Dublin and it varies around the globe. One of the best indications is that we second a staff member to the Department on a permanent basis for two or three years, and we have somebody from the Department. That helps greatly with the close interaction between the two organisations.

Chairman

How is trade promotion proceeding in conjunction with the Department?

Mr. Barry O’Leary

One must remember that the foreign direct investment aspect is not part of the much larger trade aspect. In Asia, the market intensity is evident. In Europe, it is middling, comprising a reasonable proportion. Overall, it is very good.

Chairman

I thank Mr. O'Leary and Mr. McDonagh for attending. On behalf of the committee, I wish them well in their ongoing work. Let us hope their hard work will be rewarded with more job announcements in the near future. I understand they must leave the meeting now for scheduling reasons. We will make the transcripts of the rest of the meeting available to them.

Sitting suspended at 3.05 p.m. and resumed at 3.07 p.m.

Chairman

I welcome the delegation from Enterprise Ireland. I apologise on behalf of Mr. Frank Ryan, CEO, who was unable to be with us this afternoon due to scheduling difficulties. He is ably represented by Mr. Kevin Sherry, head of international sales and partnering, Mr. Niall O'Donnellan, head of investment services, and Mr. Paddy Hopkins, head of corporate services, all of whom are very welcome. We did well in our last session and concluded in approximately 50 minutes, which was only five or six minutes over schedule. I thank everybody for that.

Witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If a witness is directed by the committee to cease giving evidence in relation to a particular matter and the witness continues to so do, the witness is entitled thereafter only to a qualified privilege in respect of his or her evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and witnesses are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. I invite Mr. Sherry to make his presentation.

Mr. Kevin Sherry

I thank the committee for its invitation today to brief members on trade promotion and the role of Enterprise Ireland. Accompanying me is Mr. Niall O'Donnellan, head of investment services, and Mr. Paddy Hopkins, head of corporate services. Unfortunately, our chief executive, Mr. Frank Ryan, was unavailable to attend but has asked me to convey his apologies to the committee.

Given the changes in departmental responsibilities, namely, the transfer of specific trade promotion responsibilities to the Department of Foreign Affairs and Trade, it seems appropriate that Enterprise Ireland should briefly set out for the committee its role in the internationalisation of Irish companies and some of its wider functions and responsibilities before discussing specifically its activities in export trade development and promotion.

Enterprise Ireland's mission is to partner with entrepreneurs, Irish businesses and the research and investment communities in developing Ireland's international trade, innovation, leadership and competitiveness. The ultimate objective is increased exports and sustaining and increasing employment and valued added activity in Ireland. Above all else, Enterprise Ireland's goal is to sustain and grow jobs in both existing and new start-up Irish companies, which is critical for sustaining the economy. Our job is to help companies create jobs; we do not do so ourselves. For companies to grow their employment, they need to grow their international sales. Export growth provides a sustainable route for companies to grow. If companies win sales overseas, they will sustain and drive the growth of much-needed jobs in Ireland.

Enterprise Ireland client companies directly employ more than 162,000 people and indirectly support more than 300,000 jobs. It is significant that more indigenous companies than ever are regularly exporting to international markets, with the highest ever level of indigenous exports recorded in 2011. Enterprise Ireland will publish its annual report for 2011 on 27 June and we will be delighted to furnish copies to the joint committee next week. The report will highlight the very strong performance of Irish companies across all sectors and markets in 2011. Enterprise Ireland is strongly focused on working to continue to drive this strong export growth performance throughout 2012.

Developing a modern knowledge-led economy means focusing on company capabilities in research, innovation and technology and linking enterprise with research institutions and each other to deliver innovative market-led products. Equally important, however, are the leadership, management and market skills required, alongside ongoing competitiveness and productivity gains, to successfully and profitably export our goods and services. For its part, Enterprise Ireland is focused on each aspect of this process. We provide a range of business supports in an integrated and coherent manner to support companies in developing the business capabilities required to successfully internationalise. Enterprise Ireland works with client companies on a one-to-one basis and in an integrated holistic manner and supports the ambitions of each company to develop and agree a joint action plan which we then jointly implement.

Enterprise Ireland's activities, both domestically and in its international offices, are aimed at supporting companies' capability to increase export sales and associated employment. We seek to deliver against strategic and public metrics on new export sales and job creation. These are driven, in turn, by key metrics on entrepreneurship and the number of start-up companies we support; the degree to which client companies are conducting research and development; and the development of capability in terms of management development, lean business practices and so on. A core part of our work this year is to deliver on the 2012 action plan for jobs. The plan which contains more than 270 actions to be implemented this year by Departments and State agencies is intended to improve supports for job creating businesses and remove barriers to employment creation across the economy. A significant part of the plan falls to Enterprise Ireland which must implement 100 actions by the end of the year.

Enterprise Ireland teams in Ireland and overseas are integrated. The programmes and supports we provide are not delivered on an individual basis but provided for companies in an integrated fashion. We operate on a team basis, delivering the relevant suite of supports to any individual company as an organisational solution to fit its particular needs. In delivering these solutions Enterprise Ireland executives constructively challenge client companies, both in terms of their ambition and strategy to grow, and then respond to their development needs in a range of areas. This business plan approach to working with clients ensures the most relevant supports are provided for the individual company.

The vast majority of our staff are "client facing" and provide direct development support for companies. The skills base of the organisation is critical to ensuring relevant support and expertise are available. Our key team members include market advisers in our overseas offices who link companies with the marketplace, development advisers in this country, technologists and technology-commercialisation specialists. The skills of these staff are of the utmost importance because companies are only interested in working with people who have credible, relevant and current domain and specialist market expertise. In addition to our core staff of market advisers overseas, Enterprise Ireland has rolled out a "hub, spoke and pathfinder network" model overseas to broaden our reach and extend our expertise. Pathfinders, as we describe them, are effectively specialist trade consultants.

In overall terms, the skills requirements of Enterprise Ireland are such that within our overseas resource base there is a predominance of specialist locally recruited staff with strong commercial expertise, experience in a particular market and local language skills. For example, the use of pathfinders is intended to meet very clear client needs in specific markets. This approach of combining pathfinders and Enterprise Ireland staff allows the organisation to be flexible and respond quickly to where our clients need support.

Enterprise Ireland has a network of 29 overseas offices located in key target international markets. All offices are focused on the development of export business from Ireland and supporting the creation and sustainment of jobs in Ireland. The location of each of our offices in key priority markets has been carefully assessed and chosen and is under constant review to ensure that in each location in which we operate, the organisation is strategically positioned in a leading commercial hub. In this way, we are located where we can maximise the potential of Irish companies to establish and build exports to the particular market. Enterprise Ireland's overseas offices provide a range of services for companies, for example, market knowledge on a sectoral basis delivered individually to clients; incubation and "hot-desking" facilities in certain offices; introductions to buyers, suppliers and potential partners in the relevant market; market intelligence such as competitor analysis, identification of professional services and signposting on regulations in different markets; and the identification of relevant knowledge and technology. These types of services, underpinned by the skills and expertise I have outlined, are Enterprise Ireland's front line in supporting and driving the internationalisation of Irish companies.

One of the important activities of Enterprise Ireland, working with government, especially the Departments of Foreign Affairs and Trade and Jobs, Enterprise and Innovation, is the organisation and delivery of overseas trade missions and Minister-led events. This year a full trade mission programme for the year was discussed and agreed between the Department of Foreign Affairs and Trade, the Department of Jobs, Enterprise and Innovation and Enterprise Ireland. It was then presented to and endorsed by the Export Trade Council and is being actively rolled out in conjunction with the relevant Departments and State agencies. By way of example, the Minister of State with responsibility for trade and development, Deputy Joe Costello, is leading an Enterprise Ireland-IDA Ireland trade mission to Russia this week. The mission will reinforce Ireland's joint economic commission agreement which the Departments recently signed with Russia. It is a multi-sector trade mission involving many agencies.

Next week the Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, will undertake a trade and investment mission to the United States, which involves Enterprise Ireland and Bord Bia in collaboration with the Departments of Foreign Affairs and Trade and Agriculture, Food and the Marine. The following week the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, will lead an Enterprise Ireland trade mission to France. This, too, is a joint mission involving the Department of Foreign Affairs and Trade, the Department of Jobs, Enterprise and Innovation, Tourism Ireland and Enterprise Ireland. These types of multi-agency and Department trade missions which usually go under the brand "Innovation Ireland" are now the norm.

In terms of working with Government partners, Enterprise Ireland works very closely with its sister agencies and relevant bodies to achieve the objectives set for the agencies by the Government. At the core of this is the Department of Jobs, Enterprise and Innovation, as Enterprise Ireland's parent Department, and the Department of Foreign Affairs and Trade on trade promotion. Enterprise Ireland also works closely with other Departments such as the Departments of Agriculture, Food and the Marine and Education and Skills on specific sector and horizontal developmental issues. For example, we are working with the former Department on the delivery of the dairy investment fund and the latter Department on education in Ireland, which we promote overseas.

On our work with the Department of Foreign Affairs and Trade, the key forum is the Export Trade Council which was established by the Government. Our chief executive, Mr. Frank Ryan, attends the council which is chaired by the Tánaiste and the forum has a key role in fostering a collaborative approach to building Ireland's trade base. A related area of involvement is in the follow-up to the Global Irish Economic Forum which was alluded to in the context of the Global Irish Network. Enterprise Ireland is party to the interdepartmental committee chaired by the Department of the Taoiseach which met this morning and engages with the Global Irish Network to maximise its benefit to Irish companies.

The relationship between Enterprise Ireland and the Department of Foreign Affairs and Trade is really strong at all levels both here and in overseas markets. In Ireland we have a strong collaborative relationship with the trade and promotion division, led by its director general, Mr. Colm O'Floinn. The two teams interact on a regular basis in a wide range of areas, including trade missions and events; joint economic commissions, JECs; messaging overseas; annual market plans for each priority market; and others as the need arises. We also work with the new regional entities.

Overseas, there is equally strong collaboration in individual territories between the Department of Foreign Affairs and Trade's team led by the relevant ambassador or consul general. This interaction occurs in a wide range of areas, including information sharing; discussion of priorities and the focus of activities in the particular market; co-ordination of trade promotion activities; leveraging networks in as many ways as possible such as the Global Irish Network; discussion of priorities for joint economic commissions - we have JECs in four countries; leveraging ministerial visits and trade missions; and seeking to influence discussions on trade issues where they represent a real barrier to growth in bilateral trade with a particular country.

These are the main areas in which collaboration has been strengthened following the new assignment of responsibilities by the Government. Of course, as I outlined, the vast majority of Enterprise Ireland's work overseas is done on a one-to-one basis with individual client companies in conjunction with other members of the Enterprise Ireland team in Ireland. That direct core work of the organisation continues.

Enterprise Ireland is wholly focused on supporting the development and serving the needs of its Irish client companies and indigenous industries in achieving the ambitious targets set for the growth of Irish exports to international markets. The close collaboration with the Department of Foreign Affairs and Trade and other Departments and agencies is happening. Enterprise Ireland sees this as essential in order to ensure we achieve Ireland's full potential in these international markets and sustain and support new jobs in Ireland.

My colleagues and I will be pleased to answer the questions members of the joint committee may have.

Chairman

I thank Mr. Sherry for his comprehensive contribution. If members keep their questions short, we will get through the meeting quickly.

Deputy Pádraig Mac Lochlainn

I apologise to the Chairman and delegates as I will have to slip out of the meeting for about 20 minutes after asking the two questions I have to ask. However, I will be back for the next session and will read the responses given in the transcript if I do not get back in time.

I served on the board of InterTradeIreland for a number of years and think it is an excellent organisation. Enterprise Ireland works in partnership with it. I am very interested in the Fusion programme which is similar to the knowledge transfer programme in the North of Ireland. There is a three-way partnership between employers, both large and small, academic institutions and graduates who are appointed to such companies to develop their capacity to produce new products or production processes. It is a successful programme, with a great return on investment. Are the delegates considering mainstreaming the programme on this part of the island? Its operation during the pilot period under Intertrade Ireland was a great success.

Will the delegates give us their thoughts on the science and technology portion in respect of regional clusters and businesses networking together? Has there been progress on the innovation task force's report in terms of its recommendations? Will the delegates be in a position to implement them? They are of critical importance to Innovation Ireland.

I thank the delegates for coming and if I do not make it back in time, I will read their responses in the transcript.

Deputy Bernard J. Durkan

I congratulate our visitors on their positive presentations. What barriers are there likely to be to the establishment of new markets abroad, both in the European Union and the wider global economy? For a number of years I have posed the same question to various Departments to find out where we are going. It is always good to be able to measure the degree to which we can or cannot access markets, for whatever reason. What are the impediments to broadening our markets?

To what extent do the delegates liaise with the relevant European Commissioner with responsibility for science and information technology in the areas of research and innovation with a view to sourcing investment and jobs here? As regards new markets, the food and drinks sector is doing reasonably well, as are the IT and pharmaceutical sectors. A number of pharmaceutical products will be coming off patent in the near future. To what extent has the competition been evaluated? What measures can be, or have been, put in place to combat it? We always need to be able to identify the extent to which the manufacturing sector can compete in international markets and beat its competitors. In the last ten or 12 years in County Donegal we have lost about 4,000 or 5,000 manufacturing jobs, for instance, at Fruit of the Loom. We must recall that that company relocated and is now competing with companies here in international markets. To what extent do we have the armoury to dig in and compete with those companies which have put us out of business, for want of a better description, in that sector?

Deputy Maureen O’Sullivan

I have three questions. First, does Enterprise Ireland give support to small companies in procurement? Owing to EU legislation, this is a problem for Irish companies which have been losing out in that regard. Second, as the printing industry is struggling, is there is a role for Enterprise Ireland to play in that regard? Third, does it have a role to play in tourism, cultural tourism in particular?

Deputy Eric Byrne

I thank Mr. Sherry and his team for attending. I found the presentations fascinating and interesting. The lads who are going to America will be fully equipped with the knowledge they need of how to handle the American offices. I am curious, however, about a number of issues.

Mr. Sherry has said entrepreneurs are targeted at an early stage of development. He has spoken about Irish companies in that respect, but in this day and age what is the definition of an Irish company? Guinness sounds Irish, but it is owned by Diageo, a multinational company. Perhaps Mr. Sherry might explain how the concept of an Irish company can be broken down.

Is Mr. Sherry ever faced with the problem, as entrepreneurs are being nurtured and assisted to develop their businesses, that some British or American company buys them? Does this cause disappointment and is there a loss following all of the efforts made, energy spent and financial support provided? Does Mr. Sherry have a policy on what happens when an individual entrepreneur decides to make a killing by selling on to a corporation?

I am conscious that universities play an important role in innovation and building companies through research and development. Does Enterprise Ireland work closely with the universities? Does it assist in the establishment of companies attached to the universities? Many universities are now charged with the task of working with industries and presumably assisting in their development? Will Mr. Sherry remind me of three or four of the top Irish companies aided by Enterprise Ireland? They may be household names, but I would like to know which ones with which I could identify.

Deputy Dan Neville

Does Enterprise Ireland adopt a specific approach to areas on which the recession has impacted more seriously? I refer to parts of the west and south west. We had the experience in Limerick of Dell leaving, which had a detrimental effect across the mid-west region.

I ask Mr. Sherry the same question I asked representatives of IDA Ireland on changes at Shannon. He probably heard my question on the impact of the Minister's recent announcement on the reorganisation taking place at Shannon and in the mid-west region; therefore, I will not repeat it.

Mr. Kevin Sherry

First, I will respond to Deputy Mac Lochlainn's question on InterTradeIreland and the FUSION programme. We work closely on a number of aspects with InterTradeIreland and continue to partner it on the FUSION programme, which has been successful. My colleague, Mr. O'Donnellan, may want to add to this.

Mr. Niall O’Donnellan

The concept under the FUSION programme involves a graduate going into a company. We are not completely duplicating it, but we are certainly replicating it in our new initiative, the innovation graduate programme, which we are starting in the south east. In a sense, it is a response to the issues that have arisen there and to Deputy Dan Neville's last question on how we deal with areas of disadvantage. We adopt a task force approach. We join other agencies, the local authorities, etc., to see if we can focus particular initiatives on an area. In the south east we have focused on graduates because the Waterford Institute of Technology is a good base on which to build. We have also focused on start-ups. There was a call for a start-up fund in the area. Obviously, we are involved with companies which have emerged from particular crises involving companies such as TalkTalk which we supported.

Mr. Kevin Sherry

In terms of science and technology, regional clusters and the recommendations of the innovation task force, as an organisation we have a strong focus on technology. We work closely with the universities and the institutes of technology in the development of their capability and linking them with Irish companies. In that regard, we have introduced an innovation voucher which is focused on encouraging companies to avail of the capability available within the institutes of technology and universities. This initiative has been extremely successful. Several thousand vouchers have been issued.

On Deputy Bernard Durkan's questions on barriers and impediments to entry to new markets, every market is different. In individual markets we focus on areas of opportunity and matching them with the capabilities of Irish companies. Recently we received a great deal of attention in certain areas of China, for instance, international education services. It is critical that companies are listed on the approved website in order that universities and institutes of technology are able to offer their services in that market. We play a key role, in conjunction with the Department of Foreign Affairs and Trade and the Department of Education and Skills, in ensuring there is an understanding of the educational capabilities in Ireland and companies are registered on the website.

Obviously, there are other trade barriers in terms of bilateral trade agreements - for example, the Mercosur agreement - on which we are in discussions with our colleagues in the Department of Jobs, Enterprise and Innovation. Many companies are having to make decisions about which markets they should go after. If I stick with China, there are in excess of 140 Irish companies which have a permanent presence there; they have a sales and marketing or other resource there. Without that commitment to a market, these markets will largely remain impenetrable to many companies. Often distance and commitment are the greatest barriers as opposed to regulatory requirements. In the pharmaceutical sector the implications of this would have a greater impact on the multinational companies which are IDA Ireland clients, but we are working closely with companies in the life sciences which see both threats and opportunities in this area. There are opportunities in the sense that there are companies which are gearing up their investments. One of the areas in which Ireland has strong capability is engineering services. There is also support for the pharmaceutical sector which is strong in Ireland. Those companies which have increased their capability are targeting international markets such as South-East Asia. The reduction of barriers will also create opportunities for companies.

On the extent to which companies can compete internationally, as I stated, there are more indigenous companies than ever before exporting from Ireland. Part of the reason for some of these companies, for instance, in the construction and engineering services sectors, has been necessity, but we have seen a rapid transformation in some sectors, such that companies which were primarily focused on the domestic market are now international players collaborating with other Irish companies and winning business in international markets, whether it be in the Gulf, Asia or the United States. Some of the larger Irish companies which are well known - Deputy Eric Byrne asked for the names of companies - including PM Group are acquiring companies turning themselves substantially very much into international companies.

Mr. Niall O’Donnellan

On manufacturing, engineering, having endured a few torrid years as the construction industry - one of its main markets - collapsed, has transformed itself. It is refocusing on opportunities in the med-tech and export sectors. There are some really interesting companies such as Multihog, Combilift, Mincon - the company which produced the drill bit used to get down to the Chilean miners - and Creganna in Galway in the medical industry sector. They are focused very much, as Mr. Sherry stated, on product development and competitiveness through being innovative, etc. For the first time in many years we are seeing a big increase in exports from the engineering sector.

Mr. Kevin Sherry

The engineering sector has transformed itself from being one that was predominantly focused on the domestic market to one that is now predominantly focused on exports. It includes companies such as Combilift, McHale and Keenan. Such companies may not be as well known to the consumer because they trade primarily business to business, but they would be well known internationally and are selling in many countries.

Deputy Maureen O'Sullivan asked about support for companies in procurement. One of the key factors for us in helping companies to compete internationally is how competitive they are. We help companies to improve their competitiveness through what we call a lean programme, to which there are three stages: lean start, for companies in the very early stages; lean grow and lean transform. We supported over 170 companies to embark on serious productivity programmes during 2011. That is a key drive for us because we are focusing on ensuring that companies in those sectors are less vulnerable to fluctuations in exchange rates with dollar and sterling.

Our primary focus for the printing industry is on companies looking for export markets. We work with the industry to help it transform its competitiveness. We are not in the business of distorting local markets. We provide a greater level of assistance and support to companies focused on export markets.

We do not have responsibility for the tourism sector but we work closely with our tourism colleagues. For example, Tourism Ireland has responsibility for promoting opportunities in English as a foreign language and we work closely with it in the area of international education. As I noted earlier, the Minister, Deputy Bruton, will be leading a trade mission to France at the end of the month which will include a visit to Rennes associated with the Volvo Ocean Race in order to promote tourism. We are working with Tourism Ireland on that trade mission.

Deputy Eric Byrne asked about targeting enterprises and the definition of an Irish company. Enterprise Ireland works with manufacturing and internationally traded service companies that have a majority control in Ireland. It is not a question of nationality. We also have responsibility for foreign direct investment on the food side. We work with the larger food companies, such as Danone, to encourage them to locate in Ireland. This is a strong sector in this country. Approximately 20% of the world's infant formula is produced from Ireland. This is an example of where Ireland is a lead player on the world stage. Another example is a company called Creganna in Galway. Not many people know this company but if one is unfortunate enough to require a stent, Creganna is a global leader in the manufacture and design of the guide wires used for stents. Combilift is another global player in the area of specialist forklifts. Another engineering property, Keenan, produces diet feeders for the farming community. There is a large number of well-known international Irish companies but the challenge we face is that many of them are business to business operations rather than consumer focused and, as such, are not as well-known as certain consumer brands.

In regard to co-operation between universities and industry, a key focus for us on our start-up side is encouraging spin outs and start-ups from universities. We have invested substantial resources in ensuring that the commercialisation process within universities is as good as it can be and that we optimise the benefits associated with the State's investment in research.

Mr. Niall O’Donnellan

We employ nearly 100 people whose key role is commercialising college research. Some of them work alongside researchers to understand the opportunities that arise for commercialisation and transferring research into existing or start-up businesses. We invest directly in between eight and 12 research spin outs every year but we also work with a wider number of potential start-ups and researchers through enterprising training and advice. We also work with existing companies to help them access research in colleges through a network of technology centres which we operate in co-operation with IDA Ireland. The companies involved, which are the combined clients of both agencies, are given help in defining their research agendas and supported in leveraging what they require from within the research community. We get involved at the applied edge and the commercialisation stage. We are the bridge between the research community, which is funded by Science Foundation Ireland and the Higher Education Authority, and the businesses.

Mr. Kevin Sherry

Deputy Neville asked about areas which have been impacted by the recession. Few areas have been left unaffected by the recession but the sector which has been most affected is engineering and construction. One of our key priorities over the past three years in particular has been helping companies in this sector to internationalise their operations. Three years ago we experienced an avalanche of large construction and engineering service companies which had strong capabilities and extensive business in Ireland but little international business. We worked tirelessly with these companies to help them access international markets in the Gulf states and other European countries. A substantial number of them have since been successful in securing business in international markets. That work continues.

As the domestic market has not yet picked up, the number of companies approaching Enterprise Ireland for help in accessing export markets is increasing. We have established a market research centre in East Point specifically to help those companies and a team has been made available to support them. We also established a new potential exporters team focused specifically on companies which have not previously been exporters to help them build their skills so that they are capable of exporting. The skill base within a company is important as products and services in terms of assessing which are the appropriate markets to pursue. In regional locations we are focusing on local employment and we are financially supporting and encouraging the network of community enterprise centres.

With regard to the changes in Shannon, we are working closely with the team based there. Two people have been appointed to work with the teams that have been established in Shannon and we now have responsibility for the client relationship with indigenous companies in the region. We work with them in the same way as we work with any other company. We see international opportunities for the aerospace sector and this is one of the sectors we are targeting in the aforementioned trade mission to Russia. We are working closely with colleagues in the Shannon region to exploit opportunities in this regard. Furthermore, Enterprise Ireland has a substantial presence in the Shannon region.

Mr. Niall O’Donnellan

Nearly 70 people work for us in our regional office in Shannon. It is a national centre for our Irish CEB support team and a number of related teams, including the community enterprise centre programme.

Chairman

Enterprise Ireland is co-located with Irish embassies and consulates in 24 of our 29 office locations. Enterprise Ireland's Silicon Valley office is located about 30 miles south of San Francisco. Are our guests not of the opinion that a model such as that which the consul general in New York uses, namely, the Ireland House initiative, would work better because it would mean that everyone would be operating from the same location and would be in a position to engage in almost instantaneous contact?

Mr. Kevin Sherry

We are both located in Silicon Valley. For many years Enterprise Ireland and IDA Ireland have been located in San Jose, which is in the valley itself. We believe it is essential to be located in Silicon Valley because we are right in the centre of all the companies. We also have an incubator centre, which is associated with our office there and at which six companies are located. We are co-located with IDA Ireland and there is a great deal of interaction, as Mr. O'Leary indicated, between it and Enterprise Ireland in the context of targeting multinationals. IDA Ireland targets them from an investment point of view and Enterprise Ireland targets them in the context of encouraging and supporting Irish companies to gain a foothold and then provide products and services to them. We work very closely with the consulate there and those in every other location. Distance is not a barrier and in this particular instance, the distance involved - less than 50 miles - is very small. As Mr. O'Leary indicated in respect of London and Paris, while we are co-located in the same cities, we are not co-located with the embassies there. We work seamlessly with each other and distance is not a barrier.

A fundamental factor for us relates to our identifying the areas in which synergies exist and in respect of which we can add value to each other. A second such factor is that we remain on message in terms of Ireland Inc. As Mr. O'Leary stated earlier, the message relating to Ireland Inc. is critical. Operating as Ireland Inc. is very important. Some of the members, including the Chairman, will see for themselves next week how we operate.

Chairman

Are there any international business people on the board of Enterprise Ireland or are all the directors Irish based?

Mr. Kevin Sherry

I do not know whether one would describe our board members in terms of nationality. One of our board members is Mr. Jim O'Hara, a former head of Intel. I should perhaps have mentioned earlier that one of the things we, as an organisation, have is a network of advisory panels across the globe. There are a number of these in the US, while there are others at different locations. These panels are populated by Irish people who are working internationally but also by international players and are utilised for the benefit of our client companies. We put Irish companies in contact with the panels, which provide them with support and advice on how best to access particular markets. We also work very closely with the Global Irish Network. We recently launched a global Irish contacts programme, which we are rolling out in conjunction with the Department of Foreign Affairs and Trade. As an organisation, Enterprise Ireland does not have on its board at present a person who resides outside of Ireland.

Chairman

What would be Mr. Sherry's view on appointing to the advisory panels some international people who are based abroad? Would that be a good idea?

Mr. Kevin Sherry

That is a matter for the Tánaiste.

Mr. Niall O’Donnellan

There is a process in place. The authority for appointing members to the board of Enterprise Ireland resides with the Tánaiste. We are an agency of the Department of Foreign Affairs and Trade.

Chairman

I accept that. I just wanted to obtain our guests' views on the matter. I thank Mr. Sherry, Mr. O'Donnellan and Mr. Hopkins for their contributions. Our discussion has been useful for all the members present. Our guests are welcome to remain on to observe the next part of the meeting, during which representatives from Forfás will make a presentation. I again thank our guests for joining us. I am sure their contributions will be reflected in our report.

Sitting suspended at 3.55 p.m. and resumed at 3.56 p.m.

Chairman

Our final presentation is from Forfás. I thank the representatives from that organisation for being so patient during the past hour and three quarters. Sometimes we keep the best wine until the end. I thank them for staying on and for listening to the presentations made by IDA Ireland and Enterprise Ireland.

Our guests from Forfás are Mr. Martin D. Shanahan, chief executive, Mr. Declan Hughes, divisional manager in charge of enterprise and trade policy, Mr. Adrian Devitt, department manager with responsibility for economic analysis and competitiveness policy, and Dr. Michelle Kearney, senior policy analyst. Before I invite Mr. Shanahan to make his presentation, I must advise our guests that witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If, however, a witness is directed by the committee to cease giving evidence in respect of a particular matter and the witness continues to so do, he or she will be entitled thereafter only to a qualified privilege in respect of his or her remarks. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a Member of either House of the Oireachtas, or any person outside the Houses, or an official either by name or in such a way as to make him or her identifiable.

Mr. Martin D. Shanahan

I thank the Chairman and members for inviting us to come before the committee to discuss Forfás's work on trade and investment policy and its relationship with the Departments responsible for trade policy and promotion. The Chairman has alluded to the fact that I am joined by my colleagues, Mr. Declan Hughes, Mr. Adrian Devitt and Dr. Michelle Kearney. Ms Laura Watts is also present.

As members will be aware, Forfás is Ireland's policy advisory board for enterprise, trade, science, technology and innovation. We undertake evidence-based research and analysis and provide policy advice, from an enterprise perspective, to the Minister for and Department of Jobs, Enterprise and Innovation and the Government in a range of areas. Forfás also manages the work of and provides research and analytical support to the National Competitiveness Council, the Advisory Council for Science, Technology and Innovation and the expert group on future skills needs. The Irish National Accreditation Board is a division of Forfás and we also host the Office of the Chief Scientific Adviser to the Government. I am aware that the current interest of the committee is primarily in trade promotion, especially in the context of the role of the Department of Foreign Affairs and Trade in that regard.

There is and should be a link between enterprise policy and trade policy and also a link between these and trade promotion activity. It is from a policy perspective that Forfás can best have an input into the committee's deliberations. Forfás works across a range of economic ministries and agencies and with private sector stakeholders that can influence the competitiveness of the environment for business and that can have a direct or indirect impact on enterprise development. We work very closely with our sister agencies, Enterprise Ireland and IDA Ireland - from which the committee has heard this afternoon - and Science Foundation Ireland to ensure the coherence of policies to support enterprise growth and job creation.

It is important to point out our remit differs from those of our sister agencies because it is primarily at a national policy level rather than an operational level. At home or in overseas markets, our advice principally comes from an enterprise perspective. Forfás also works very closely with the Department of Jobs, Enterprise and Innovation, which has responsibility for national trade policy and, working through the EU, international trade policy, and with the Department of Foreign Affairs and Trade, which has responsibility for trade promotion, the Export Trade Council and joint economic commissions.

During the years Forfás has examined a wide range of issues relating to international trade and Ireland's enterprise policy, including analyses of Ireland's trade performance and priorities and advising on international policy negotiations; the preparation of reports on Ireland's trade and foreign direct investment performance; analyses of the dependency of Irish exports on particular markets and the consequent vulnerability to exchange rate changes; assessments of changes in international trade policy and trading regimes; and reviews of requirements for improved trade facilitation and export controls. Forfás has also provided policy advice on multilateral and bilateral trade negotiations, including at the World Trade Organisation and Mercosur; progress on the development of the European Single Market; the services directive; trade facilitation measures, including an assessment of a single window and trade finance; and assessments of the impact of currency fluctuations on Irish trade.

A number of projects are being progressed in 2012 in the context of the Government's trade, tourism and investment strategy and the action plan for jobs, including the development of economic partnerships, with particular emphasis on China in the first six months of the year, on which we are liaising with the Department of Jobs, Enterprise and Innovation, the Department of Foreign Affairs and Trade, other Departments and agencies and Chinese counterparts. Other projects include an assessment of the costs associated with exporting for Irish firms and identifying actions to reduce them. We will also conduct a revision of high growth and emerging markets strategies, including for Asia and Latin America, to identify the opportunity areas and countries where Ireland and Irish enterprises can succeed in growing trade and investment. This will include assessing economic growth, imports and exports and key sectors of opportunity and advantage for Irish enterprises and identifying the skills capability of enterprises to enable them to successfully compete in key markets and realise sectoral opportunities. This work will be undertaken with the expert group on future skills needs to be launched by the Minister for Jobs, Enterprise and Innovation on Friday, 22 June. I note the committee's interest in skills for trade. As part of these reviews a range of horizontal policy issues are being considered, including those relating to access, visa reform, air connectivity, fiscal and finance measures and brand and reputation building.

As well as being a member of the Export Trade Council, Forfás also participates in a number of national and international trade fora. With regard to the joint economic commissions between Ireland and a number of countries in high growth and emerging markets, Forfás provides research and analysis as requested on high level objectives and areas of interest from an enterprise perspective. This builds on our collaboration for a number of years with the Department of Foreign Affairs and Trade in the provision of data based on our research and slide packs that can be used internationally in presentations on Ireland's competitiveness and enterprise performance. The provision of this enterprise data assists in reputation building efforts. I will refer to our role in the development and subsequent implementation of the Government's trade, tourism and investment strategy.

I emphasise the centrality of trade and investment policy and trade promotion to Irish economic recovery and development. Ireland is one of the most open economies in the world, with exports and imports together accounting for 190% of GDP. At present exports are the only contributor to GNP and GDP growth as consumption, investment and Government spending remain depressed. Notwithstanding the prevailing international economic uncertainty, Ireland's trade, investment and tourism performance has continued to improve, with exports relatively resilient during the global recession. Ireland's share of world services exports increased in 2011. However, while its exports continue to grow, its share of world goods exports has declined, leading to an overall decline in our global market share from 1.13% in 2010 to 1.05% in 2011 owing to the export growth of other countries.

Much of our trade performance is linked with our foreign direct investment performance, and the many advanced international companies located in Ireland are based here primarily to export to the rest of the European Union and also the Middle East and north Africa. While many Irish-owned companies which export are still mainly focused on the UK market, this sector also shows an increasing focus on the wider European Single Market, as well as on North America, the Middle East, north Africa and the emerging economies of the BRICS group, comprising Brazil, Russia, India, China, and South Africa. Growing indigenous exports remains a challenge. Ireland's goods and services already involve a high degree of technological sophistication. This is because the emphasis on innovation in Government policy has increased over a number of years and also because of the role enterprises in Ireland play as key links in global production chains, as evidenced by the high share of exports as intermediate goods rather than final production goods.

Building on what has been stated, to illustrate the importance of internationally trading businesses to the economy in 2011, collectively the client enterprises of the development agencies, namely, Enterprise Ireland, IDA Ireland, Shannon Development and Údarás na Gaeltachta, employed more than 323,000 people directly in manufacturing and internationally traded services activities in 2011. There was a similar number in indirect employment. They also accounted for more than 78% of exports in 2010 and an estimated 71% of tax payments to the Exchequer in 2011. In order for these enterprises to continue to be successful, Ireland needs to become more competitive.

Securing export growth and productive investment in the period to 2015 is the key focus of the trade, tourism and investment strategy. These objectives and that of securing a competitive business environment are also reflected in the 2012 action plan for jobs which has as its main focus supporting enterprise to create jobs. The Government's trade, tourism and investment strategy is an important pillar of enterprise policy. It recognises the intrinsic links between trade, investment and tourism. Forfás carried out analysis of a wide range of issues in the formulation of the strategy and assisted in drafting the document. The strategysets ambitious targets for indigenous exports, foreign investment and tourism market development to 2015, including at a high level to increase the number of new jobs directly associated with exporting enterprises by more than 150,000 and the creation of a similar number of new indirect jobs. It also aims to increase the value of exports by agency assisted indigenous companies by 33%, diversify the destination of indigenous exports, increase overseas visitor numbers to 8 million and secure an additional 780 inward investment projects through IDA Ireland, with 20% of these being greenfield investments from new and high growth markets.

The strategy contains detailed objectives for each of the high level targets. Trade promotion activity should be aligned with these targets and objectives. Obviously, each agency, including the Department of Foreign Affairs and Trade, has its own specific objectives, but collectively these are the overall national trade and investment objectives and they can best be achieved through close co-operation between the Department of Foreign Affairs and Trade and the agencies involved in overseas markets. This is even more important, given Ireland's relative size and the resource constraints within overseas markets. Importantly, the strategy sets out specific institutional actions to increase the co-ordination of policy and strategy in Ireland and our target markets to ensure a coherent national approach. These include the establishment of the Export Trade Council, with increased engagement between the relevant Departments, agencies and the business community at a senior level to oversee the implementation of the strategy and provide views on additional policy measures required.

The strategy also sets out the requirement for increased co-ordination of diplomatic and State agency resources overseas in the field through the establishment of local market teams to be led, where relevant, by the ambassador or consulate in-market and the preparation of annual co-ordinated country market plans. Commitments have also been made to ensure integrated trade missions, where practical, to maximise the potential and impact of State-led missions. This is not always practical with different priorities within geographic areas. The strategy also recognises the importance of Ireland's diaspora as a global network to draw upon and that this resource is effectively linked with a broader trade and investment promotion strategy.

The Export Trade Council operates under the auspices of the Department of Foreign Affairs and Trade and is chaired by the Tánaiste. Forfás is a member of the council and also supports and has an input into the work of its secretariat in the Department of Foreign Affairs and Trade. As part of the work of the Export Trade Council, Forfás has a role in monitoring the progress of the strategy and targets. In early 2012, Forfás prepared a trade, tourism and investment performance report for 2011, based on the best available data, which tracked performance during the first year of the strategy.

The council also considered an overview of the co-ordinated market plans for 2012 and outputs and activities for 2011 and, in the autumn, will consider mid-year reviews of progress. These market plans, developed on a co-ordinated basis by the ambassadors and consulates on the ground have real potential to secure a more strategic approach to our efforts in the field and need increasingly to focus on key priorities and outcomes for Ireland in each territory linked to the overall plan.

As I mentioned earlier, Forfás is engaged in the collation and analysis of trade data from a variety of data sources. I would like to highlight some of the key elements in terms of Ireland's recent performance. Overall, exports of goods and services are now above pre-crisis levels, reaching €172 billion in 2011, an increase of 5.5% on 2010. Imports were at €131 billion, resulting in a net export surplus of €41 billion, an increase of 14% on 2010. As I mentioned already, net exports were the key driver of positive GDP growth in 2011 and the main contributor to GNP growth in 2011. However, merchandise goods exports, while growing in volume terms, have not increased in price terms over the past decade. We need to achieve an increase in volumes and, more critically, the value of our exports. Ireland needs to look to higher value-added exports and to secure new investment in manufacturing to increase the price levels of our exports, as well as increasing volume. Implementation of the competitiveness and sectoral enterprise recommendations in the Action Plan for Jobs 2012 are key to achieving progress in this regard.

Our key export markets, the US and the UK, continue to account for one third of our exports, resulting in a high exposure to currency fluctuations and highlighting the need for continued focus on growing eurozone exports and diversification to other markets. Agency-assisted firms' exports continued to grow reaching €127 billion in 2010. Diversification of export markets for indigenous companies has increased through moving away from the UK and increasing to other European markets, the US and Asia. The opening up of new markets through trade promotion is a key part of this effort. As already alluded to by the Enterprise Ireland representatives, indigenous firms continued to shift from dependence on the domestic market to international markets, with exports as a percentage of sales of indigenous firms increasing from 34% to 43% between 2008 to 2010.

Ireland's exports are relatively concentrated, with the three top export sectors, namely, chemicals, business and financial services, accounting for 70% of all exports. While on the one hand these sectors are responsible for Ireland's export resilience this on the other hand highlights vulnerability if these sectors experience further structural change or downturn in demand, again highlighting the importance of developing new sectors. The pharmaceutical sector was referred to earlier, which again is one of the areas where we are vulnerable given the patent situation.

Ireland is continuing to perform well in terms of attracting greenfield FDI projects relative to its size. The stock of FDI in Ireland as a share of GNP at over 100% remains among the highest in the OECD. However, as stated already by the IDA representatives, the competition for mobile investment is intensifying and a range of risks remain, highlighting the need to retain a focus on restoring our international competitiveness. Attracting investment from new and high growth markets has proved challenging and broadening our promotion effort to attract projects from these new sources of investment and markets will be critical for the future.

While tourism numbers increased by 5% in 2011 to 6.2 million, they still remain at approximately 80% of the 2008 peak. Similarly, total tourism spend was at 60% of peak in 2011, with spend per visitor at 80% of peak also.

I have outlined in my written submission, which has been circulated, a summary of the economic outlook for some of our key trade, tourism and investment markets. Given time constraints, I do not propose to go through the detail. However, I am happy to answer any questions subsequently.

It is worth taking a moment to consider what businesses believe leads to export success. In the context of our work with the expert group on future skills needs, we recently asked 42 significant companies, most of which were already exporting, what they believed led to export success. While the answers varied across the sectors the main factors included: innovation in products and product design - this included having high technical and engineering capability in some sectors; a focus on and detailed understanding of customers and markets; building alliances and the support of the enterprise agencies and other bodies; having a strong reference site and-or partnership on the ground in market; and, the availability of skilled sales staff with appropriate language capability. The 42 companies surveyed for this study, which employ a total 16,000 people collectively, indicate a positive employment outlook, with their employment levels expected to increase by between 15% and 20% over the next three years. The ICT sector and international services sector reported the most positive outlook.

The principal challenges as we see them from a trade promotion perspective will be servicing of existing markets for trade, tourism and investment while at the same time targeting new high growth markets and to do this within constrained resources. There is also a challenge to identify those markets which hold the greatest potential and that may differ between trade, investment and tourism. Linked to the overall trade, tourism and investment strategy , we need to be extremely clear about our objectives and targets at the level of the individual markets and all State bodies’ activities should be aligned to those objectives. Where multiple agencies and the Department of Foreign Affairs and Trade are present in certain markets we should, in so far as is possible and practical, ensure that they work in concert on the collective objectives. As already stated, that is the case.

I thank the Chairman and joint committee for inviting us. Given the shortage of time, I have provided only a tree top overview of Forfás. However, we have a great deal of data and analysis at our disposal and would be delighted to be of assistance to the joint committee in development of its report.

Chairman

I thank the witnesses for their comprehensive document, which will be very useful in the preparation of our report. It is good to note all the agencies have provided an outlook, which I am sure members will read.

Deputy Bernard J. Durkan

I thank our guest speakers for their submissions. Are they satisfied that they have adequate resources commensurate with the need to generate industrial interest, investment, job creation and competitiveness?

I agree, as I am sure do other members, with the witnesses' comments on the issue of higher value exports. However, are they satisfied that this is not to the detriment of the basic manufacturing sector about which we speak from time to time? Are they conscious of the need to ensure that we have a basic income sector that is also competitive, in particular in view of the fact that house prices are not as they were a few years ago which, in turn, means a lesser proportion of income will go towards paying mortgages on houses purchased from now on? We are stuck with the situation in respect of houses already purchased but to what extent has this been factored into the witnesses' calculations?

The last issue relates to currency fluctuations. We are in an ideal position from the imports perspective as the euro has weakened considerably. That should be a disincentive to imports, and unnecessary imports in particular, and it should be an advantage in respect of exports. However, this is not the case with energy and fuel. To what extent is the activity in the energy market monitored, including the impact on job creation and retention and the markets here? As a former spokesperson in the area, I came to the conclusion long ago that the degree of manipulation in the fuel area has significant economic impact across the European Union. Oil prices have dropped fairly considerably now, although this does not seem to be reflected in what we pay domestically. This is down to the fluctuation in the currency, apparently, although I believe a great deal of this is due to market manipulation which takes place, especially at times of low interest rates. This means there are greater opportunities for market speculation in commodities than in finance, although there is enough speculation ongoing in the financial services area as well.

Deputy Maureen O’Sullivan

I apologise for not being here for the beginning of the presentation but I will read the document properly. I know the work of Forfás is in the analysis and policy area. When that is being done for a particular area or company, is there consideration of performance indicators and a follow-up in that respect? What staff and budget is available for the work? I am interested in the tourism sector but it would be better for me to read the document before reverting with some questions.

Deputy Eric Byrne

The document given to us is absolutely comprehensive and it is so widely spread, it may be difficult to focus. I will be more general. The witnesses form part of a policy advisory board and have referred to the Government's policy on trade, tourism and investment strategy, which they may have produced for the Government. Much of the documentation refers to the instability in Europe, particularly the euro.

Does Forfás ever consider the potentially catastrophic scenario of the euro breaking up and Europe dividing? When a trade mission goes to America, we fully appreciate the work done between the IDA, Enterprise Ireland and others. America is a country we understand to be in severe financial crisis, along with Europe, but everybody speaks about growth areas. I am thankful we have a Minister going to Russia, which is wonderful. I do not know how often we send representation there but it is one of the BRIC countries of Brazil, Russia, India and China. Maybe there is a worldwide infrastructural shift of capitalism and perhaps the West is in economic decline. America may be in economic decline if it is compared with China and its growth levels. We know the Far East and Asia generally are growth areas.

One of the jobs of the witnesses is to consider tourism. Perhaps it is too futuristic to consider but when will we see O'Connell Street and Grafton Street littered with Saudi Arabian high spenders? That may sound funny and I have a story to illustrate it. When I was part of the Eastern Health Board the country was in crisis because it could not recruit enough nurses so I suggested we target the Philippines. There were laughs around the place but it came to pass. We are talking about a continent in crisis. As the intellectual wing of the agencies, do the witnesses consider how to bring in high spending Brazilians or Arabian people? There are middle class students from Malaysia but we want their parents to come here as well.

Are we thinking far enough ahead? When we walk out of the door tonight, Spain, France, western Europe or America may be in crisis. Are we preparing policy for the new world, including the Asian countries?

Deputy Dan Neville

Forfás would have done research into our competitors, especially with regard to semi-skilled and unskilled workers. Are we writing off unskilled and semi-skilled manufacturing? Has the competition put us out of the market for attracting such investment? I would repeat the experience of the Dell operations in Limerick. I was surprised to learn that the company was not very happy after the decision and how it worked out when operations were moved to Poland. I believed it would have had that level of research done before making the decision to move from Limerick. Are we completely out of those markets and has any research on it been done? Is research at this stage pointless because of a lack of competitiveness with regard to wage rates?

Chairman

I have a couple of questions. What added value has the Expert Trade Council brought to the trading dimension? Trade with Africa and the African strategy has not yet been mentioned. We have heard about trade missions to Russia, America and China, but how important is the African market?

Mr. Martin D. Shanahan

The questions and comments have been quite wide-ranging. I will deal with them in order and ask some of my colleagues to contribute. Deputy Durkan asked about resources, and that was also mentioned by Deputy O'Sullivan. As the policy advisory board, Forfás has limited resources, and we also undertake other significant activities. We have approximately 30 policy advisers, and the body produces the type of analysis which we have referred to this afternoon. There are 89 people in the organisation, and some of those are involved in shared services activities for sister agencies. Across the agencies, resources are tight, as they are across the public service. We are in a downsizing mode and investment and resources in this area are very important, as we are trying to bring in trade and investment.

There were a number of questions on manufacturing, particularly basic manufacturing as it was termed, from Deputies Durkan and Neville. We discount nothing and continuously look for avenues for new types of activities. Although we had previously priced ourselves out of certain manufacturing activity, that does not mean we are currently or in the future will be priced out of that market. In recent years this country focused on property and construction, which absorbed a huge amount of resources and drove up wages, and we priced ourselves out of a great deal of activity. We should and do continuously analyse what types of activity, especially manufacturing activity, we can attract to Ireland or develop within Ireland. There are a number of actions within the jobs action plan which are under way. A manufacturing forum is about to be set up in which the Government parties and private sector individuals will meet to discuss the issues and what more we can do about manufacturing. We are examining the agency's supports for manufacturing to see whether they are adequate. The regional aid guidelines are being negotiated and we are very interested in having an input into the outcome of that.

Forfás will produce a new manufacturing strategy by the end of the year. As I said, we are starting with a blank page. We are not suggesting we are out of any particular business but the reality is that costs, particularly labour costs, currently preclude us from certain types of activity. Deputy Durkan mentioned house prices and the cost of living. That is all tied together, and I will ask Adrian Devitt to comment on that.

Deputy Durkan commented on the euro and asked whether we have thought about the catastrophic event and so forth. Obviously, we monitor closely what is happening within Europe and in the eurozone. We have considered the impact on trade and foreign direct investment of certain scenarios playing out in the eurozone. That said, it is important to state we remain reasonably confident the member states involved will be able to make sufficient progress to ensure the catastrophic event mentioned will not come to pass. We consider those matters. Again, I will ask Mr. Devitt to comment on that shortly.

With regard to the types of analysis we conduct and how they are used, the primary audience for our analyses is the Government and policymakers. We work closely with our sister agencies in developing policy, that is, IDA Ireland, Enterprise Ireland, Science Foundation Ireland and the Department of Jobs, Enterprise and Innovation. They feed us the situation while we look at data on a wider level. They are party to the discussions on policy and the chief executives of the agencies and the Secretary General of the Department are members of the board of Forfás. That provides for the policy coherency which Forfás was established to achieve. I will ask Mr. Devitt to comment on the two matters I mentioned.

Mr. Adrian Devitt

On cost competitiveness, Ireland's competitiveness was at its weakest point in April 2008, after the boom. Since then, cost competitiveness has improved by approximately 15%, as measured by the harmonised competitiveness index. Half of that is due to Irish prices being lower than those in other countries with which we trade and half is due to exchange rate developments, which can easily be reversed.

In terms of understanding whether Ireland has a future in certain sectors, it is probably useful to see what costs are important. If one is a company in the IFSC, approximately three quarters of one's cost are labour costs. If one's labour costs are out of line, therefore, one is in trouble. In manufacturing activities, including more basic manufacturing activities, labour costs are not very important. Typically, they can be 15% to 20% of one's locally determined costs. They are important, but there are also many other costs. What else is important for manufacturing companies? They typically use large sites of land, so land is expensive. They generally transport high levels of raw materials and final goods, so transport costs are important. They are also much more dependent than other sectors on utility costs, especially energy, waste and water costs. Ironically, if one has a manufacturing company, labour costs are a smaller share of one's total costs. If one wishes to improve the cost competitiveness of a manufacturing company, it is not simply about being competitive on wage costs but about the transport and utility costs and so forth. It is a much broader range of factors.

With regard to what has happened, our property costs are down substantially. Most of those benefits go to new companies coming here rather than the existing ones, which are possibly tied into upward-only rent reviews. In terms of labour costs, hourly wage rates have not changed dramatically for existing companies. New companies are able to drive better deals. The picture with utilities is mixed. Energy costs are down quite substantially, largely due to international price developments with oil and gas. Waste costs are down substantially as well, which is of benefit. The cost of professional services varies across the sectors, with legal services being relatively high and other services, such as architectural services, having fallen a great deal. Overall, the picture with costs is mixed. It depends on what sector one is in and whether it is a new company that is able to capture some of the advantages or an older company tied into boom level prices.

On the second issue, the future of the euro is a major factor. While there are significant developments in financial markets, it is positive to see that, from a real FDI investment perspective, it is not putting off potential investors. The Department of Finance and the Central Bank are better placed to talk about the manufacturing side. Clearly, clarity on this at EU level would be of huge importance. Continued low interest rates at European level will stimulate growth in Ireland, and any stimulus in the core countries would be very important for our trade performance. With regard to trade policy, we have spoken a great deal today about the need to diversify our trade into other countries. A relatively large share of our exports go to the US and the UK, the dollar and sterling zones. It is a much higher proportion than other countries so it leaves us a little more exposed. There are a range of issues in that regard.

We are aware that companies prepare for all potential issues. Companies are considering these issues and are taking steps to address them, such as reviewing their supply chains and where they come from and go to, reviewing their revenue projections and assessing what a major currency change would do to their expenses and sale flows, and also looking at their cashflow. At both national level and company level, there are things the State and companies can do and are doing.

Mr. Martin D. Shanahan

There were a couple of other questions. Deputy Eric Byrne asked whether we are looking east as well as west and if there is too much focus on the US.

Deputy Eric Byrne

I am talking about targeting the Israeli middle class and the middle classes that are emerging from a tourism and business perspective. We are doing reasonably well with the students, but we need their parents. We need to attract the middle class Chinese, not just the children. Is the agency targeting that?

Mr. Martin D. Shanahan

Indeed. There is significant work under way to look at new and high growth markets. As I mentioned in my opening statement, we have a particular focus in the first six months of this year on China, that is, looking at all facets of China and how we might engage with them. That includes foreign direct investment, trade, tourism and international education. We look at how we can build strong ties with China at the political, cultural, trade and educational levels, what is the win-win and what is the future. We will replicate that model with other countries, both South American and Asian, to see what are the possible wins for Ireland.

It is clear, and it is important to state as much, that we cannot have the same presence in all markets and we must continue to service the markets that are currently yielding the return. We are aware, and Barry O'Leary underlined it earlier, that the North American market is yielding, and has yielded, the return in foreign direct investment. It is proving more difficult in the new, high growth markets, particularly Asia, but it is a long game. We must be in there now to yield future returns. That analysis is under way and as it comes on stream we are happy to share the information with the committee.

The Chairman posed a number of questions on the Export Trade Council. The council has added and will continue to add value. It brings all of the key players at a very senior, ministerial and agency chief executive level and senior business people together to discuss the key issues that must be debated. As well as providing a forum for discussion, it ensures everybody is on message in an individual market. We need to be on message at base to ensure we all understand the key objectives and targets and who is delivering on what in individual markets.

I ask my colleague, Mr. Hughes, to respond to members on the Africa strategy.

Mr. Declan Hughes

Africa fits into the broad review of new and high growth markets. It is an area in which Ireland has a good reputation and strong links both culturally and from an education perspective. We were visited by a Tanzanian Government delegation some years ago and a number of senior members of the delegation had been educated by Irish missionaries. There is a strong affinity between us. When we look at Africa from an agency perspective, there are a number of dimensions. There is north Africa, an area which offers opportunities for Ireland. Free trade agreements are being negotiated at EU level, to which the Department of Jobs, Enterprise and Innovation is a party. We hope the negotiations with Morocco, Egypt and Tunisia will advance quickly and provide opportunities for Irish businesses in the food, agri-services and education sectors and some of the ICT areas.

South Africa is an area which offers particular opportunities for Irish companies. Enterprise Ireland recently opened an office there and exports are performing well. We had a very good year last year and can provide the committee with the details. The new office is doing well.

From an enterprise perspective, there are other parts of Africa where there are opportunities. Members will probably be aware of food and beverage companies such as Diageo and Glanbia which are very successful in Nigeria. A number of companies are active there following horizontally the oil and gas industries. Uganda is another area which offers opportunities.

Irish Aid has been extremely active and has a very good reputation in Africa but particularly in sub-Saharan Africa. The Department of Agriculture, Food and the Marine has recently launched an initiative on food and agricultural production aimed at productivity and yield improvement. It is a €2 million fund and a very welcome initiative. It will provide an opportunity for strong indigenous feed companies such as Keenans or companies involved in agricultural production such as Samco and others in Deputy Dan Neville's area to explore opportunities on the African continent which will be of benefit both from a trade and investment perspective as well as from the perspective of improving agriculture productivity. That is the general approach we are taking to the review of high growth markets in general in looking at sectoral and country opportunities. There are a number of enabling measures which are important in pursuing these opportunities.

We spoke about China, India and the rest of Asia. On issues surrounding access, visa arrangements and air connectivity are the key priorities to be addressed.

Chairman

I thank the delegates for their contributions to what has been a very useful discussion. The joint committee appreciates the input of the agencies involved. It was good to have the representatives of Forfás present with those of IDA Ireland and Enterprise Ireland. The document is excellent and the comments made will be considered in preparing our report. If we need further information, the clerk to the committee, Mr. Martin Groves, will contact the delegates. I hope that at the end of the process on which the committee has embarked its conclusions will be of assistance to IDA Ireland, Enterprise Ireland and Forfás in the development of their strategic responses to the economic situation in which we find ourselves and, in particular, help them in developing further their already strong relationships with the Department of Foreign Affairs and Trade.

The joint committee went into private session at 4.45 p.m. and adjourned at 4.55 p.m. until 2.30 p.m. on Wednesday, 11 July 2012.