The second session of today's meeting is a discussion on the general issue of Irish exports with the Irish Exporters Association. I welcome Mr. John Whelan, chief executive of the Irish Exporters Association, and Mr. Bernard Coyle, chairman of the IEA food and drink council. They are both very welcome and I appreciate their attendance. I will not go through the parliamentary practice regarding privilege as I read it out earlier. I invite Mr. John Whelan to make his presentation.
Irish Exports: Discussion with Irish Exporters Association
Mr. John Whelan
I thank the Chairman for the invitation to address the joint committee. The likelihood is that exports will remain the only significant source of a positive momentum in the economy for the next few years and, that being the case, safeguarding and expanding the export base will continue to be a critical important objective of the Government's overall economic strategy. We are concerned that the stimulus measures being given to many of our competitor countries are not being repeated in Ireland and that obviously puts our exporters at a competitive disadvantage. Moves recently by the Federal Reserve in the US in terms of Ben Bernanke's statement on quantitative easing whereby the US is going to stick at it until such time as it reduces the level of unemployment effectively means that our exports not only to the US but to the Middle East and Asia, where the US dollar is the main trading currency, will also be under competitive pressure. That is not a good platform for us to be looking towards as we head into the last quarter of 2012 and into 2013 and emerge from a year that has been not particularly good for Irish exports on a relative scale. In addition, the fact that the Bank of England has commenced quantitative easing once again will make our exports to the UK increasingly less competitive and, as a consequence, our cost base will look more expensive to an English buyer.
Our main markets in the eurozone, which account for 37% of our exports, are dragging along; they are just coming out of recession and are now back into it again. We seem to be facing a double dip scenario there and that makes it very difficult for our exporters to grow their exports. It is a situation that needs positive stimulus by Government to help us to achieve a greater level of growth.
Many exporters are doing reasonably well but others are not doing as well as they could. Due to the economic circumstances faced by many exporters in most European markets, they are nervous about investing and as a consequence they are not creating the jobs they potentially could create. The jobs growth targets of the trade and investment strategy to 2015 are not being met. The underlying export figures which lead to such growth in jobs are not what they need to be. To have jobs growth we need to stimulate the export sector further. We are all conscious the home market is difficult and it will continue to shed jobs. In our submission today we have indicated a number of areas which need to be addressed which would assist exporting companies as well as those which would like to start exporting. This would also assist companies doing a certain level of exporting and which could do more but need greater access to finance. The committee must understand that companies already exporting to particular markets must be incentivised to enter other more distant and risky markets. Otherwise they will take the safe option and who would blame them. If the objective is to create more jobs through exports we must incentivise companies. Issues with access to finance at present are not helping and we will delve further into this.
If the US and UK Governments reduce the cost base for their exporters and use a currency mechanism to help them to have stronger exports, then we must respond in some way, shape or form. We have indicated a number of areas which need to be watched and addressed. As we approach the budget we could hit the tipping point between increasing the cost base and keeping the export industry competitive. We can steal a march by targeting fast-growing export markets, but these markets are more distant and new to exporters. As a consequence there is higher risk and more working capital is required. This brings us back to supporting mechanisms. A wide range of companies trade only on the home market. With the proper incentives they could be introduced onto export markets. This needs further addressing.
Committee members are familiar with the fact that our food and drink sector, particularly agrifood, is the largest of our indigenous export sectors, accounting for approximately €8 billion. In the first six months of this year it saw a downturn, having grown by 25% in the previous two years. This is indicative of the factors I indicated to the committee. Mr. Bernard Coyle heads our food and drink council and his company has been actively exporting for many years. He will speak about some of the issues in the food and drink sector, in particular the cost of doing business.
Mr. Bernard Coyle
Mr. Whelan has given committee members an overview and I will give the point of view of an indigenous company on the ground. Mr. Whelan pointed out that for various reasons many good companies do not export. It has been of concern for a number of years that from the artisan market up these companies do not progress and get involved in the export market. Being pragmatic I believe many opportunities exist for Irish companies to export throughout Europe, particularly to our nearest neighbour across the water, but these are not being taken for a number of reasons. Austerity is not only an Irish phenomenon and many companies in the UK are closing because of difficult trading conditions. Many mergers are taking place and many larger companies are closing plants and reducing surplus in the marketplace because the prices of commodities are rising but they cannot secure price rises for their products from the multiples.
I will go back to basics and ask what is happening in the marketplace and why we are so slow to get our indigenous companies to export. Our focus on food companies is good, through Enterprise Ireland and Bord Bia which do a wonderful job, but we must strengthen this focus. Much is happening in IT, ICT and farming and many opportunities to create employment exist; we are all conscious of employment. A number of platforms are involved and it is about getting the artisan producers one finds in west Cork and at food markets to a level where they have the drive, motivation and initiative to reach a position where they are exporting. It is not easy for them and we need to examine the supports available to them at present, for example, through enterprise boards.
The food industry is and has been very regulated and this adds to the cost base. People used to start by making soda bread, jams or chutneys at the back of their house, but now they must work in a food grade building. One needs access to finance because of the cost of building. One needs accreditation, in particular from the British Retail Consortium as it is demanded by all and sundry. Problems also arise with middle management skills, which roll into the staff. Mentors should be more relevant, such as people with a business background who were involved in exporting and who are recently retired or semi-retired whose contacts in the sector are still relevant. They would still be able to open doors. In many cases people move on so one needs those who are relevant.
Increasing the number of employees to more than 15 requires access to finance and we are all aware of this. The business expansion scheme is one of the best initiatives that has ever been brought to the table by government. It has been a tremendous help and this needs to be stated. Such companies will have accreditation and top-class food buildings but they need further finance to expand. The availability of senior and middle management with relevant skills is still a problem. We have a disjoint between our third level colleges and industry. We continue to turn out people with skills which are not that relevant. We are aware of the issues in IT and the issues experienced by PayPal with regard to languages. Given that we have approximately 500,000 unemployed people, it is shocking that for the past two years food companies have been going abroad to recruit relevant people. It is not uncommon for people to take a hotel room at Heathrow Airport and spend a couple of days recruiting development chefs, process technologists, food technologists, production managers and chill chain management.
Technical quality is a major issue. To make things worse, the UK is hitting a downward spiral. It is seeking to recruit 137,000 people to join the food industry. We must refocus on how and where we get people. This has a bearing on our cost base, as Mr. Whelan alluded to, and salary levels at middle and senior management in the food industry are between 25% to 35% higher than our nearest neighbours. We are all aware that finance and skills shortages are factors for the food industry.
We are all aware that entrepreneurs take risks but when things go wrong there is no safety net. I think they are afraid to put their neck on the block because they feel they are being unfairly targeted. If their companies go pear shaped there is no safety net for them. That stops some people from pushing on. We need to adopt the American model. When entrepreneurs fail within reason, they dust themselves off and start again, bearing in mind that creditors must be protected and so on. Here, when an entrepreneur fails, he may be ostracised.
A number of issues need to be discussed, but we can come back to them and deal with them later.
Thank you, Mr. Coyle.
Mr. John Whelan
Would the Chairman like me to comment on one or two of the key points?
We will allow Mr. Whelan to make these key points before taking questions.
Mr. John Whelan
We met officials from the Department of Jobs, Enterprise and Innovation in 2011 to discuss access to finance as well as other issues. It was agreed that one of the solutions to the issue of accessing additional working capital at a reasonable cost was the credit guarantee scheme. This was discussed in both Houses. It was raised in the Dáil in June and the members of the Seanad voted on it on 4 July. We were promised that funds would be released in July. When that did not happen in July, we met the Taoiseach who said it would be released in September. Now we are heading towards the end of September and yet this three year programme is not in place. We met banking staff at very senior levels, right up to the chief executives. The Bank of Ireland, Ulster Bank and Allied Irish Banks were the three banking groups approved to run the scheme. They have been expressing concerns about its operability. The scheme should be at least pushed out. The Minister for Jobs, Enterprise and Innovation suggested that as an option the package could be reviewed after the first 12 months, if it is not working. We have a concern that it will not deliver on the 1,300 jobs it is supposed to create and it will not assist the 1,600 small and medium sized enterprises that need extra working capital to expand. We urge the committee to try to find the roadblocks to the proposal and deal with them so that the scheme becomes operational. The sooner we test it, find the bugs and make the adjustments, the sooner it will be rolled out. There are other issues with regard to bank bonds and we have issues with export credit insurance, but the low-hanging fruit immediately available to us is to have an operational credit guarantee scheme.
I will now deal with the cost of doing business. I am sure members are aware that the universal social charge has been a significant cost across the employment front. It is paid on gross salary before one puts a penny into the pension fund. We believe the level of income tax taken together with the universal social charge is now at the tipping point. Any further increases are likely to have a damaging impact on trying to motivate the export industry to keep on driving. The Department of Finance and the IMF indicate that €3.5 billion needs to come out of the budget; however, we stress that direct income tax and the universal social charge should not be touched. We believe to do so will immediately impact on our export industry. We are very concerned on that front.
The cost of doing business, including rates, rent and waste charges, are substantial. We understand that these charges are necessary to fund local government but it is important that during recessionary times one does not increase these costs because it knocks another notch off the ability to get companies up and trading again.
We also stress the issue of energy costs. Oil prices are dipping up and down. They have come down in the past week or two; however, that has not stopped Bord Gáis from raising gas and electricity prices. The rebate for companies that are major users of electricity, which is worked back to oil or gas prices, is scheduled to come off in the autumn. In order to support a manufacturing industry that in the main exports its products, that rebate should be extended somewhat further. Manufacturing industries create employment. The food industry is part of the manufacturing industry. Getting goods to the market is very important. Transport as a percentage of the final costs of a product can be as much as 10% to 15% in the case of the food industry. It tends to be in the region of between 3% and 5% for the pharmaceutical industry. Other countries have brought in a special user rebate. We have been putting this idea to the Minister for Transport, Tourism and Sport, Deputy Leo Varadkar and his team for the past 12 months. We have also been putting this idea to the Department of Finance. There are smart ways of applying it without losing income under the excise heading. We stress that cost should be tackled.
The Export Trade Council met last week. I stressed to the Ministers the importance of making early announcements of the trade missions for next year. In that way those in the export industry can start the planning process. The Irish Exporters Association is happy to row in and roll out trade missions in countries that are not being covered by trade missions. We completed a very successful trade mission to India three weeks ago as there was no official Government-led trade mission to India this year. If we are serious about competing in these fast- growing emerging markets we need as many as possible ministerial trade missions. The industry will move behind that.
My final key point refers to the export outreach programme. We have indicated that about 14,000 to 15,000 companies who each employ 50-plus employees, employing a total of 447,000 people, are not exporting. Mr. Coyle touched on some aspects of the ways to get these companies exporting. Many will not survive on trading in the home market only. These companies will not grow unless they get into the export markets. Whereas Enterprise Ireland has a start-up programme for fresh food, it is touching on a very small base. We need a wider initiative that involves many players in the various sectors, the export industry association being one to try to encourage these companies to start trading off the island. That could create a whole wave of new exporters and create new jobs.
I thank Mr. Whelan and Mr. Coyle for their contributions. We will group the questions. I call Deputies Dara Calleary and Peader Tóibín and Senator Deirdre Clune.
I welcome Mr. Whelan and Mr. Coyle to the committee and I thank them for their work over many years.
It was mentioned that the banks that were approved to roll out the credit guarantee scheme had expressed concerns to the Irish Exporters Association. Will they outline the concerns expressed by the banks and when was the last time the IEA engaged with either the Department of Jobs, Enterprise and Innovation or the Department of Finance on the scheme?
Mr. Coyle referred to artisan producers and trying to encourage them to grow the business by getting into the export market. He himself is an example of how that was done.
I get a sense that in Ireland, food is regulated to death and that in so doing the artisan is regulated out of the market, whereas other countries to which we export and with which we are in competition seem less obsessed about gold-plated regulation and more obsessed about the quality of the food. I seek the views of the witnesses on this. As for the cost of doing business, I presume the Irish Exporters Association has the same views on the potential of changes in sick pay legislation as the other business organisations.
I am concerned that the association included ministerial trade missions as a warning point. Has there been a fall-off in the number of ministerial trade missions since the trade function moved to the Department of Foreign Affairs and Trade? Previously, there was always a Minister with responsibility for trade, who used to lead off that section. Second, what countries were covered this year? Finally, the overall presentation from both Mr. Whelan and Mr. Coyle suggests that within the Government system - and not simply the party political system - there appears to be a complacency about export markets. There appears to be an attitude that it is all doing really well, exports are flying and large quantities of drugs are being exported from the country. In short, one gets the story that exports are doing well. However, I detect an overall sense from the witnesses that there is complacency within the entire system to the effect that it will be all right on the night. Is such a perception wrong?
The witnesses should take a number of questions from Deputy Tóibín and Senator Clune before addressing them.
Go raibh míle maith agaibh as an cur i láthair. I have had the pleasure of visiting the Mr. Crumb site in Finea a number of times in the past. It is a fascinating place and it is great to see such an industry located in such a relatively rural area, of which it is the backbone. As for exports, I note the figures released in mid-September indicated 62% of all exports were in the chemical and pharmaceutical sector. This is a massive area, probably mostly derived from the multinationals, and much of it has large capacity. In other words, an increase in exports often does not lead to the addition of many extra jobs. This is a significant issue for the Government to consider, as is the concept of the patents cliff with which that sector is faced. Interestingly, the witnesses mentioned that 35% of exports go to eurozone countries and I have one question in this regard. Some research was conducted in Germany to identify the value of the euro in the context of the euro being of a lower value than a potential Deutsche Mark. It was worked out that it is worth €50 billion to the German economy to be a member of the eurozone because of that differential. Such a differential probably exists for Ireland but in the other direction. Much of the recent increase in exports can be attributed to the decrease in the value of the euro. Has work been done to ascertain the exact cost of the euro to Irish exports in that specific area?
I am amazed that sometimes, especially in rural areas and for small food producers, there is not greater clarity between Leader partnerships and country enterprise boards. I also am dismayed that as of yet, no fully State-wide export programme for small businesses of up to about ten people is in place through the county enterprise boards. I note InterTradeIreland has done good work in providing resources for management in businesses with regard to exports to the North of Ireland. Perhaps the county enterprise boards and Enterprise Ireland have much to learn from that sector. I agree wholeheartedly with regard to redundancy rebate, possibly of sick pay etc., that costs potentially could be loaded upon this very important sector. I am in favour of a progressive rates base in which the size and type of business is taken into consideration in the calculation of such rates. Moreover, such a system would have some understanding of the profitability of a business with regard to rates and they would not be applied blindly in respect of a very profitable and a less profitable business. These are the major issues that affect people.
Another point concerns the extremely low element of exports to the BRIC countries, vis-à-vis our traditional markets. While I acknowledge the IDA is for inward investment, in Australia, for example, I understand one IDA representative works part-time to cover all of Australia. It is easier for us to export to Anglophone countries like Britain and the United States in which we have a diaspora. It is very difficult for Irish companies to get into countries such as India or China. The level of education and training must be improved in order that companies can approach this task with a level of confidence. As for credit, it is shocking that the microfinance credit facility and the credit guarantee scheme are still not in place. Opportunities and jobs are lost for every month that goes by with a lack of such measures being put in place.
I thank both witnesses for their presentation. On the credit guarantee scheme, the joint committee might take this issue up directly with the Department to ascertain its present status and what are the obstacles. That is probably the best thing members can do at present. I would be interested to hear Mr. Whelan's response to the comments of the banks.
Members are aware of the importance of the food sector. Mr. Coyle spoke about artisan food products and how to bring them to the level of being part of a strong export sector. At present, Bord Bia does a great job in promoting abroad at food fairs and so on. Where is the supermarket shelf space for all these products? I am interested in supermarkets in particular, as previous Oireachtas committees have considered groups such as Tesco, Dunnes Stores, Aldi, Lidl and the Musgrave Group. It is very difficult for a small producer to get shelf space in supermarkets, which is where most consumers shop. While some people use the local food markets, delicatessens and so on, it is vital to get supermarket space for such exports. Mr. Coyle might provide members with an insight into any experience or information he may have in this regard.
Mr. Bernard Coyle
I will do my best. It is not easy. Fundamentally, there always will be a certain segment of people who wish to produce for the local farmers' market but not for the shop, or for the local shop but not for the supermarket, or for the supermarket but not for the multiple chain of stores or whatever. Perhaps a case could be made that the agencies should try to segregate who from that group - be it 100, 1,000 or 10,000 people - is actually interested in going at the outset from stage 1 to stage 3, or from platform 1 to platform 3 in order that the agencies could nurture those people who wish to make that break for whatever reason. Such people might have an ambition to make it a family business, a national business or an international business as opposed to those who will simply be content to go to the farmers' markets three days a week with what they or their family are able to produce to sell what they can.
Another angle is that people need to be guided. Traditionally, artisan food markets arose from the idea that people would make what they were good at. Consequently one person might make soda bread, another might make chutneys, someone else might make jams and so on and off everyone goes. However, if people want to reach the next level, they must stop and think about it at an early stage. They must ask whether they are making something for which there is a gap in the market. This reverts to Senator Clune's point on where are the gaps on supermarket shelves. Unless one is going to make the most wonderful soda bread ever produced, there is no point. While most people think they do, unfortunately many people make many wonderful products. Consequently, at some stage people need to stop and think whether this will be a growth business that will become a national or an international company and whether there is a gap for the product in the market. The agencies need to work with such people at that stage to tell them that while they make a wonderful product, it will never be any bigger than the local market, local shop or whatever.
An element of segregation is required, which ties into research and development. The multiples will tend to work with those with a good research and development facility or background in place. It is cost neutral to them. They want people coming to them and pointing out how they could supply an item better, more cheaply or with a longer life. The biggest trap into which people fall is to approach the multiples with "me-too" products in which they are not interested.
Senator White will have come across this. If we were to ask Bord Bia, Enterprise Ireland or the enterprise boards how many food companies were building plants, we would get a long pregnant pause and people would need to think about it. Leaving out the bigger companies such as Glanbia and Kerry, there seems to be a major gap between the artisan producer and the medium-sized company with more than 50 employees which have the buildings, accreditation and management to enable them to move on to the export level.
Deputy Calleary stated earlier that food production seems to have almost gone to a pharmaceutical style. The quality of buildings and the amount of accreditations required for food producers is at a pharmaceutical level and in some cases even greater. They are required to have a number of audits in addition to the BRC, which is the accreditation sought even in France. A considerable expense and management time is consumed on that. Senator Clune asked how we could get artisan producers from employing two to five people up to 20 or 30 and onto 50, which represents the launch platform for export markets. All the bodies need to review it and see what can be done. By all means we should help everybody, but different help is required by different sections.
Mr. John Whelan
I will deal with Deputy Calleary's comments first. We have reservations about the credit guarantee scheme. The 2% up-front fee to set it up effectively means that the cost of a loan to a regular business has increased by 40% before going anywhere else. As the State takes 75% of the risk we had hoped the State in putting out the scheme would instruct the banks to charge 2% - or even 3% - below their normal rate. At the moment an overdraft facility can cost anywhere between 7% and 9% so there is room for manoeuvre. If the banks reduced it, it might become cost neutral or the same as would apply to a normal loan. That is one of the reservations. If it will cost more, it will not have the desired effect and will not stimulate companies to seek newer markets into which to expand and as a consequence will not create the jobs. There is also a provision requiring that no more than 10% of the total loan portfolio the banks give to any company can be in this particular credit guarantee piece, which will make it very difficult to administer. Our concern is that it will not be taken up and as a consequence will not create the jobs.
Mr. Whelan also mentioned that when the IEA had discussions with the banks - Ulster Bank, AIB and Bank of Ireland - they had expressed concerns on the scheme. What were those concerns?
Mr. John Whelan
They are concerned that the requirement with regard to 10% of the portfolio makes it very difficult for them to manage. Based on the extent of dealings a client has with a bank, it is restricted to offering this 10%. Bearing in mind that it is geared to help 1,600 companies with €150 million each year for three years, it should go out in tranches of €250,000 to each company. However, having a maximum of 10% of the loan portfolio in it makes it very difficult for the banks to administer in a meaningful way, which is their biggest concern.
At least if we get it out, we can prove to the Government that it is not working. It has agreed to review it after year one. The longer the delay, the further we are away from that. We would be fairly confident it will not achieve what is expected of it without further adjustments, but it needs to be made operational.
Deputy Calleary also asked whether there had been a drop-off in the number of trade missions since the Department of Foreign Affairs and Trade took over responsibility for trade. It was a very positive move which is working extremely well and has re-energised the embassies abroad. We feel we do not have enough people in the embassies and would like to see more. We made a submission to Government on a trade strategy for Africa. At the moment 1% of our trade comes from Africa but 17% of our embassy structure is there. Africa is also growing very rapidly and there is great potential. We need to ensure that every embassy takes at least one member of staff on board with a trade brief. While we have done great work there on the aid front, most of the other countries which are competing with us have come to the conclusion that Africa is moving rapidly and they are moving in on the trade front. We need to do likewise and utilise the strength of our embassies to help us to do that. On food and drink, the food side is doing particularly well there. However, there are opportunities for considerably more food companies there. Glanbia is expanding very well as is the Irish Dairy Board, but a number of other food companies could go in under the banners and become involved.
On the trade mission front, those involved have upped their game considerably and have been getting out. Our concern is that other countries are also getting out. We need to benchmark ourselves against, for instance, how often UK Ministers are getting abroad. We see them out often more frequently in various markets and it requires a continued push. With the EU Presidency in the first six months of next year, we are getting signals that the number of trade missions will need to be reduced as a consequence. We make the point that Ministers get an extra halo when travelling abroad during the time when they have the EU wrap around them. I hope they will buy into that.
Deputy Tóibín spoke about Leader, the county enterprise boards, EI and the jobs strategy. There was a wide-ranging announcement under the jobs strategy 2012 with more than 100 different initiatives. While most of them were pretty good, many of them need to be acted on because we are being asked for job strategies for 2013. At the moment our position is that we should implement those in the 2012 strategy and we could do a considerable amount with them. For example, the creation of a 400 ha salmon farm off the Aran Islands was announced. Our salmon exports generally have dipped over the past decade - we now export approximately 10,000 tonnes of salmon. That one salmon farm on the Aran Islands would create 400 jobs approximately, producing 10,000 tonnes and doubling our exports of salmon. We need to benchmark ourselves. Last year Scotland exported some 200,000 tonnes of smoked salmon. The Scandinavian countries export approximately 1 billion tonnes of salmon. If one ramps up the numbers, with the creation of 400 jobs for each 10,000 tonnes of smoked salmon, the opportunities in the sector are enormous. We need to build on some of the strategies that were announced and push them as hard as possible. The Minister for Agriculture, Food and the Marine, Deputy Simon Coveney advised us that they are waiting for a foreshore licence and planning permission. He is pushing this hard but, as in the case of the credit guarantee scheme, it is taking far too long to get it started. If that salmon farm is tested and it is found to work, many more will follow.
Our strategy must be to take the jobs strategy and put as much effort as we possibly can behind it. In that regard it needs the members and their colleagues to push hard to try to get them delivered on.
In response to Deputy Tóibín, we have had severe difficulties with the announcement of the restructuring plan for the county enterprise boards restructuring plan, the body charged with supporting companies that employ fewer than ten people. The CEBs are in a no-man's land as they are scheduled to be closed down and subsumed into the county council structures. Many of the CEBs no longer have a chief executive, as they left under various schemes and nobody replaced them. The CEBs did good work for many years and could continue to do so for companies that employ fewer than ten people. We do not understand the reason for the restructuring. The boards acted as a springboard for exporters at the early stage who could then be handed on to Enterprise Ireland or Board Bia. That needs to be speedily addressed.
The Leader programme tends to operate separately and is very good at community level. I have seen it work very well at a number of levels in the community. It tends to be a much more community orientated programme.
The currency was mentioned, drawing a comparison between the value of the euro and the deutsche mark. We have been doing reasonably well from our exports. The German economy has been exporting at twice our levels by and large. They are gaining even more than we have gained. For them the euro and eurozone operates very well. Should Ireland pull out of our link to the euro, the question then arises as to whether to link to sterling or the US dollar. We could not float as the punt again as that would be unsustainable in the current bond market. The eurozone is a better place for the average exporter than to be linked to sterling or the US dollar. We regularly survey exporters and 90% would prefer to stay in the eurozone.
There is no suggestion of pulling out of the euro. There is a cost involved in the high level of the euro which is dissipating now as the euro has weakened somewhat.
I now call Deputy Michael Conaghan and Senator Mary White.
My sense is that the Tánaiste and Minister for Foreign Affairs and Trade, Deputy Eamon Gilmore, is combining those two roles very creatively and competently.
Let me comment on the success of the food sector in the export markets. By its nature food requires a great deal of regulation. I know some have raised the issue of over-regulation but by the nature of the product this should be expected. The levels of regulation do not seem to be inhibiting Irish food in the export market because it is very successful. Other categories of commercial activity are not exporting or are underperforming. Are there particular skills that other companies could learn from the success of Irish food? Is it a matter of exporting techniques or getting out into the world and being more proactive? Irish food must have some X factor which other companies could learn from.
I read an article in The Irish Times last year which drew attention to the fact there were entire regions in France where Irish goods and services had no penetration at all. That came as a shock to me. The article was raising this as an important issue for export strategy . What is the rationale of opening up the ground work for our exports?
I congratulate Mr. Whelan on his perseverance and on the exemplary work he does on behalf of the Irish Exporters Association. The association has retained its iconic members. That speaks for itself. I attend the annual dinner of the IEA and I am over-awed by the members of the association.
I empathise with every word of Mr. Coyle's contribution. I could talk for a week on this topic but I will limit my contribution to two points. First, Mr. Whelan wrote a letter on the outreach export programme in which he states that many mid-sized companies have difficulties in growing their business internationally and find themselves outside the State's support agency system for exports. The IEA estimates that 14,700 companies employ approximately 500,000 people. Enterprise Ireland has 1,700 of these companies as client companies, which leaves a large group of business with potential to become successful exporters and with the ability to create jobs.
Our Chairman has kindly agreed to invite Enterprise Ireland to appear before the joint committee as soon as possible. A new scheme was launched in March of this year by the Minister for Jobs, Enterprise and Innovation, setting up a new department in Enterprise Ireland that will help 1,800 companies to export their products. We will then be able to see how that programme is developing. It is very timely to meet the delegations from the Drinks Industry Group of Ireland and the Irish Exporters Association because the prime issue today is jobs. We have 309,000 people unemployed of whom 60% are in long-term unemployment. They have been continuously unemployed for more than a year. The only issue that matters is jobs.
I co-founded a business in the 1980 motivated by the need to tackle the severe unemployment at that time. Mr Coyle is probably a bit like myself. One must be a workaholic to start up a business, particularly a manufacturing business.
Mr. Bernard Coyle
Or mad.
Yes. We used to question ourselves as to whether we were mad. It requires a person to work 24/7. Ms Connie Doody and I worked 24/7 for 16 years, including Christmas Day and New Year's Day. We worked on Saturdays and Sundays because that was what the business required. People used to ask me how I could get the product on the shelves in the supermarkets. They would complain about the supermarket. If they are complaining they might as well stay at home as they are not up to coping with the heat in the kitchen. When one has a business it is not just a case of doing a job from 9 a.m. to 5 p.m.; it requires an extraordinary commitment, particularly if one is starting from nothing.
We must remember that the Kerry Group started off as a very small company. In the case of Baileys, Mr. David Dand carried the bottles of Baileys around Europe trying to sell the liqueur. There are major opportunities.
My greatest disappointment is the Government's handling of the county enterprise boards. On Friday last, the Chairman, Deputy Damien English, and I attended a very successful cross-Border meeting in Monaghan. It was fantastic to see the co-operation between the enterprise boards in the South and the boards across the Border. The Government has let this drift. Ideally the county enterprise boards should come under Enterprise Ireland and not be devolved to the local authorities. I understand that Enterprise Ireland will adopt a regional mentality that it will help the small companies in the regions. The county enterprise boards have a significant contribution to make to help people to start up a business. There is no question about that. That is something that must be delivered. It is not happening.
I am sure Senator Clune has heard me complaining relentlessly about the lack of available credit to companies. The Chairman has agreed that we invite Enterprise Ireland to respond to the request to get more companies exporting. The bottom line is that every job created in production creates 2.5 jobs downstream. A service job only creates 1.7 extra jobs. We have significant opportunities.
I compliment Mr. Coyle on what he has achieved. He is fantastic. We will do everything we can to help the Irish Exporters Association.
Mr. John Whelan
I will respond to Deputy Conaghan's comments. Our food industry has tended to export most of its product to the UK. They have had difficulties going across mainland Europe and into Asia. Targets have been set under the trade and investment strategy, Towards 2015. Bord Bia has been moving well in meeting them. We are getting more companies into mainland Europe. We are getting good traction in terms of our food exports into China. The exports are coming from a low base and it will be a slow process. My colleague, Mr. Coyle, may wish to comment further on that.
With regard to the X factor, we have been having some strong success from indigenous service companies in the past few years. Our software services companies have been doing extremely well and the cross-over between services and manufacturing, particularly in clean tech-green tech which has been very successful. We have seen growth levels of 20% from a wide range of these companies.
These are small companies at the early stages that will need more financing, as we have indicated earlier, and they will need to have the doors opened for them through trade missions and so on, if they are to grow further. They need a more stable eurozone. When people get a bit more confidence, they will be happy to spend money. At the moment nobody is happy to spend money. That is holding us back. There has been some very good growth.
The food industry will have the X factor for the next decade. World demand is just rocketing. The second X factor on the export front will be clean tech-green tech, with the services overlapping.
Mr. Bernard Coyle
I thank Senator White for her good wishes. Needless to say I also admire all the great things Senator White achieved. It does take hard work. This brings us to the point that when Enterprise Ireland comes before the committee, I think there is a case for segregating companies, yet not disenfranchising any of them. If one goes to the races and there are ten horses on the card, one must make a choice on who one chooses. It is horses for courses. There is room for the artisan food companies and there is room for the mid-tier companies but, as Senator White said, it is the people who will commit to work 24/7 for 365 days of the year. Not everybody will have that level of motivation. That is fine. We are all told of the need for work-life balance, but the bodies should go out of their way to segregate those who have that level of motivation and drive to put that level of effort in. That will help to pick winners that will get to platform 2 or platform 3 quickly.
The UK is our nearest market but the market in France is starting to open up. Let me give a quick example. We are launching a new brand on the Continent this year but in January we set a minimum floor of €250,000 to put behind it. We have already exceeded that amount of money. We are getting very good feedback but we will not get paid back until next year. When we talk about artisan food companies getting ready to get on the export train, there must be some segregation because not everybody will be in the starting position.
Senator Tóibín mentioned sick pay. Sick pay is a significant cost for Government and it must be treated very delicately. Again, if one is producing a product and people are out sick, as the producer one must replace them. One will then have to pay the person that is sick as well as paying the person who is doing the job.
I know the Government has been considering the diesel rebate for some time. It is beginning to affect our comrades in the haulage industry. Hauliers are dropping like flies. Agricultural contractors also experiencing the hit. As an island nation we need a vibrant transport industry. The number of haulage companies that are going under is shocking. It also raised the allied issue of green diesel.
Enterprise Ireland is doing a very good job in difficult circumstances. Bord Bia is doing extremely well, but it is time to start segregating companies and picking winners and putting the emphasis on them, whether it be cash or expertise. Mentoring is fine but one needs people with the relevant experience, with all due respect to consultants. One needs a person who has been there and done that.
Progress has been made by the working group dealing with the fuel rebate and the haulage association and the Minister for Finance has been involved. We will certainly put the weight of the committee behind it and I hope we will see some progress in the budget.
We will be proactive in dealing with the issues that have been raised today and will revert to the Irish Exporters Association on them.
Mr. Whelan raised the question of export credit insurance, a subject that we wished to have debated last year but were told was not an issue. I am concerned about it. Is it still an issue for the IEA?
Mr. John Whelan
The position is that because of the shortage of cash we are seeing a very significant uptake in invoice discounting, which gives one cash back. It works for Ireland and England. If one tries to get invoice discounting with the banks from outside Ireland and England, they seek evidence of having export credit insurance in place. This is where export credit insurance comes up again as an issue. We have seen an increase in the number of companies that take out export credit insurance mainly because they have been forced to take it out by their buyers. The export credit insurance is supporting the other bank funding instruments. That is the reason it has raised its head once again and is necessary. We have pointed out year in and year out that most of the governments in OECD countries support their exporters by having an export credit guarantee scheme in place. The Americans do it extensively as well.
Is it still an issue for the Government to look at?
Mr. John Whelan
Yes.
Mr. Bernard Coyle
Chairman, can I finish with something that is slightly off-centre? There is feedback from a number of companies in the enterprise sector. Although we will not go into it in detail, it is allied to the issue of cash for gold and the robberies taking place around the country. People are flagging that companies and industrial premises are being targeted in the same way as private houses were being targeted for jewellery. The idea is to rob the stainless steel, copper, aluminium and so forth. This will have a huge effect on industry if it becomes widespread. Northern Ireland and the UK are dealing with these issues. If one goes to a smelter's, one must have photographic identification, one's number plate is noted and one is paid by cheque. We are a little concerned that the Government has not moved on any of those issues. The pilferage, for want of a better term, is still widespread but is now moving up a gear and affecting factories and companies. There is a downside to that. Many companies, by their nature and following encouragement down the years, including the fact that entrepreneurs have wanted to bring companies to their native areas, can be in isolated locations. If the owners arrive on a Monday morning and find that someone has been in the premises with saws and sawed up the stainless steel or other material, production will stop. The issue is only now becoming quite apparent.
There are ready-made solutions from the UK and Northern Ireland.
Mr. Bernard Coyle
Absolutely. There have been for the past 12 months or two years.
That is something we will have to raise with the Ministers. Thank you for that. I thank the witnesses for their participation. We will be in touch with them again as we progress with our work. I wish them the best of luck with their exports.
Mr. John Whelan
I thank the Chairman.
Mr. Bernard Coyle
I thank the committee for giving its time to listen to us.
The joint committee adjourned at 2.55 p.m. until 1.30 p.m. on Tuesday, 2 October 2012.