Industrial Development Bill, 1977: Second Stage.

Question proposed: "That the Bill be now read a Second Time.'

Parliamentary Secretary to the Minister for Industry, Commerce and Energy (Mrs. Geoghegan-Quinn)

The purpose of this Bill is to extend, in a number of specific ways, the powers of the Industrial Development Authority. Its main objective is to enhance the capability of the IDA

—to assist the development of domestic industry, and particularly small and medium-sized indigenous firms;

—to stimulate the emergence in much greater numbers of new entrepreneurs.

In the first place, the Bill empowers the IDA to give loan guarantees and interest subsidies in respect of the finance needed for mergers and acquisitions.

Up to now the main incentive to help existing industry to become more efficient has been the re-equipment grants scheme. Our commitment to home industry suggests, however, that the IDA should also be able to take a positive and constructive part in bringing about desirable and orderly change in certain sectors. The industries most likely to benefit are composed of smaller scale firms and are for the most part not capital-intensive. Restructuring assistance is consequently unlikely to entail an outlay proportionate to its obvious benefits.

At present the existence of excess capacity in industries at a time of competitive pressure from imports is enforcing structural changes involving major costs in terms of redundancies, lost capacity and the need to create substitute employment. The Bill would set a limit of £500,000 on the amount of borrowings which the IDA could guarantee in any one case without Government approval.

It is also proposed in this Bill to provide for the giving of loan guarantees and interest subsidies to first-time industrialists in respect of loans raised to provide working capital. The new guarantee facilities will be limited to £150,000 in any one case, but the Government may permit a higher figure. Given this new power the IDA intend to launch an enterprise development programme. In Ireland the volume of new projects promoted by first-time industrialists has been disappointingly small, and it is clear that one of the main causes of this apparent lack of enterprise has been the inability of the entrepreneur to raise the necessary finance to carry him through the start-up situation. All too frequently Irish banks will lend only on the security of assets rather than on ability and enterprise. It is envisaged, therefore, that this proposal will get a response from a wide spectrum of Irish people, both at home and abroad, who have the qualifications, experience and enterprise to become successful industrialists.

The projects will generally have to be commercially exploitable within a reasonable time span, and it will be necessary also to assess in each case the ability and commitment of the would-be enterpreneur. Assistance towards working capital will be supplemented as appropriate by the existing range of benefits for fixed assets administered by the IDA.

In section 4 it is proposed formally to give the IDA power to engage, with the Minister's approval, in giving assistance of a technical or advisory nature to developing countries. There is a considerable demand for such assistance, both from the developing countries themselves and from international organisations which provide contracts for development projects abroad. While the IDA have, in the past participated to some extent in work of this kind, this Bill will formally give them the legal authority to do so.

The Bill also contains in section 5 a number of provisions designed to tidy up the ceilings on aggregate expenditure set out in the existing legislation. Financial commitments under the present Bill are brought within the appropriate limits, and expenditures on equity which formerly were not covered by any ceilings are brought within the limit on grants of a capital nature. The Bill further proposes to bring the amount of training grant which can be approved, without Government permission, into line with that for capital grants generally, namely £850,000 per case; previously there was no legal limit on the amount of training grant which could be given to any one undertaking.

The IDA have, since 1970, given grants of up to 50 per cent of the costs involved in research and development projects, subject to an absolute maximum of £15,000 per project; the Bill proposes to raise this limit to £50,000 but with the limit of 50 per cent of approved costs continuing to apply. The new limit is justified in the context of the increased costs of scientific work and the increased scale of projects now being undertaken by Irish industry and, in many cases, being delegated to Irish subsidiaries of overseas companies.

Under existing legislation authentication of the authority's seal requires the attendance, sometimes at short notice, of two members of the authority. As a practical matter the Bill gives the authority power to delegate this function to two of their senior officers.

Finally, the Bill includes a provision which will extend the shareholding powers of the IDA. Under the Industrial Development Act, 1969, the IDA are empowered to take shares in certain industrial undertakings. Legal opinion has indicated, however, that on the basis of the existing provisions the authority could be confident of having power to take minority shareholdings in existing companies only. In order to remove the doubt regarding the authority's power to take majority shareholdings and to ensure that they have adequate flexibility to operate successfully in the increasingly sophisticated financial environment, it is proposed to extend the authority's shareholding powers to enable them to take shareholdings of up to 100 per cent in suitable industrial undertakings, or in companies participating in the ownership, control or management of suitable industrial undertakings, and to enable them to form or participate with others in the formation of new industrial companies.

This is a reasonable and pragmatic extension of existing IDA powers and functions. Save in exceptional circumstances, IDA personnel will not be engaged in the actual day-to-day management of commercial enterprises; furthermore, under the terms of the Bill it will be necessary for the authority to seek the Minister's prior approval before they take a majority shareholding in any company. The Bill also provides for a limit of £1 million on the amount which the authority may expend on the purchase or taking of shares in a particular body corporate without prior Government approval.

I expect that these extended powers of participation will be particularly useful to the authority in the implementation of the new enterprise development programme. With these powers the authority would be, if circumstances so warranted, in a position to set up a company to manufacture a product successfully developed under the programme or become a shareholder in a company being set up for that purpose—for instance, in cases where the Irish party was for the time being over-burdened with technical production and marketing problems. or lacked the professional support or finance to bring the project to an early start-up.

The House will appreciate, from this synopsis of the contents of the Bill, the extent to which the new provisions are oriented towards the promotion of domestic industry, and in particular small industry. The new powers will be of considerable assistance to the IDA in their promotion of domestic industry, a task to which they are giving increasing attention, while at the same time realising the continued necessity of attracting increasing numbers of new overseas projects.

Senators will probably be aware of the series of measures taken by the authority in recent times to supplement and reinforce the main programmes aimed at domestic industry. These include a joint venture unit, which will seek out a suitable overseas company to go into partnership with an Irish company who wish to expand or to develop a new project. There is the project identification unit which take the initiative in identifying new manufacturing opportunities for Irish firms, whether arising from the establishment of large foreign industries in this country or supplying existing Irish firms with materials which are currently imported.

There is a product and process development grants scheme whereby the IDA may make a grant available towards the cost of research involved in improving an existing product or developing a new one, or improving a manufacturing process. Measures recently undertaken by the Government will help to increase the rate of project approvals for small Irish industries. The Minister recently announced that the small industry "cluster" concept, introduced on a pilot basis a couple of years ago, is to be immediately extended throughout the country, with a nationwide programme of nine small industry clusters. The IDA have also recently been authorised to proceed with the building of five 7,000 sq. ft. advance factories specifically for small industries. In addition, the fixed asset investment criterion for small firms has been raised from £200,000 to £300,000, a change which will enable a greater number of projects to come within the scope of the small industries programme's generous package of incentives.

These measures represent a substantial commitment by the Government to increasing the resources available to promote local Irish enterprise. Taken together with the generous financial and after-care advisory services at present available, I am confident that they will lead to accelerated growth of the small industry sector in Irish industry. The measures contained in the Bill can be seen as further promoting industrial recovery and future development. As such I am confident that they will receive your support. I accordingly recommend the Bill for the approval of the House.

Mr. McCartin

This is another of the Bills which in the course of the last month or so this House has discussed which were originally initiated by the past Government and naturally on this side of the House we will give the Bill the welcome it deserves. It is not a new or radical approach to a solution to the problems which we have but it is what we might call another mildly progressive step in the right direction which I hope will achieve a number of desirable objectives. I think we had a few weaknesses in the scheme of assistance that was available particularly to small industries generally, and we welcome the provisions in the legislation here which will improve the facilities available, particularly to new business people who are starting up without much experience and, as always, with a scarcity of capital.

I particularly welcome the provision for the guaranteeing of borrowings by first-time industrialists because in my experience the vast majority of the people who started up industries got what might be described as fairly generous grants in the past, but the assistance in the form of two-third grants were sometimes down to 50 per cent. Sometimes to the ordinary citizen it appears a big sum of money. Often, indeed, to an industrialist starting up it appeared that the sort of assistance he had got put him on a solid foundation on which he had only to build. Generally, however, if one meets the people who have been engaged in small industry in the past number of years one finds it has been one long battle to provide and get sufficient funds to enable the project to keep going. Usually they start off all right with a grant covering a fair proportion of the investment that was intended to be made, but generally speaking there is nothing provided for the sort of losses that are incurred by most industrialists, particularly by inexperienced people who start up with a load of good ideas and ambition and willingness to work hard but not an awful lot of experience in the handling of money.

I particularly welcome the provisions through which, hopefully, someone will go in and assess the real need. In the past we had not really a tradition of business, we had not any tradition of expertise in industry generally, and throughout most of the country the small number of industrialists who got off the ground were people who did not have anything except the ambition to do the job. They had very little experience and very little advice available to them. I would say that along with the guarantees of money and interest provided in this Bill, something in the nature of advice to start off with must be available, because, of course, money cannot be paid out unless there are carefully made plans and projections worked out. I hope that we will see the IDA, in addition to this sort of assistance, giving some sort of strengthening up assistance, perhaps providing advisory services. In addition to the money, expert people in the field of industry and business must go out and assess the need, must be able to give advice and, having assessed the need, be prepared to underwrite the capital that is required.

There is no point in us looking back and thinking what could have been achieved if we had had a different policy on the part of the principal lending agencies in the past. We had a situation where the security of the investment was much more important to the lending agencies than the possibility of guaranteeing employment or getting a new industry off the ground, which came secondary to the main question, which was an absolute safe and secure investment for shareholders, for the people on whose behalf the lending agencies were making the investment. Fortunately in recent years we have had the Industrial Credit Company taking a more liberal point of view in this regard, but I think the assistance that we are now promised from the IDA will go a long way towards improving the situation for people starting in industry.

I do not think that this sort of legislation will by any means solve all our unemployment problems. If there is any mistake politicians and parliamentarians could make at any stage, whether during election campaigns or in the course of debates in either Houses, it is to lead people generally to believe that it is the agencies of State who will solve our unemployment problem. What we do here is certainly a help to people starting up and to industries already in operation, but we should be very careful to bear in mind all the time that what we have here for the most part is a free enterprise society in which the Government offer help and assistance through various means, like what we have here today, to people to solve the problems for themselves. If Governments or political parties or candidates in elections go too far to lead people to believe that the solution to all our employment problems is one which the Government have undertaken to provide, then we will take the emphasis away from what we should be trying to do to encourage people to solve the problems for themselves and for their neighbours.

The unemployment problems which we have are very serious, but they will not be of such serious proportions if the Government and individuals in industry settle down to working out a solution. If we look at the situation and say that for every job we have at the moment we must provide so many more jobs in the next 12 months, if we reduce it down to the small industry and say every industry that employs ten or 15 people today should be able to increase that number by one or two in the next year, it does not appear to be such an impossible task. There are few industries that could not do this, but many employers are discouraged.

While discussing the role that the Industrial Development Authority have to play, it is no harm to question some of the reasons why industries do not rush to employ greater numbers of people. At the moment in industry there is a fairly good market for most goods being manufactured. Many industrialists feel that there are more orders in the book than there were two or three years ago, but a lot of them are rather slow to increase their staff. We have a situation where there are so many factors that influence the taking on of more staff that industrialists are slow to do so. The media give too much coverage to people laid off, but if somebody requires two or three more people they hesitate to employ them because they fear that, perhaps due to a change in situation, those people might be laid off in five or six months' time.

Then you have the question of the trade union attitude to the letting off of these people; the question as to whether the industry is successful or not; the IDA asking questions about grants that have been paid, levels of employment and so on. If we had more consultation between the IDA and industrialists generally we could, perhaps, work out a more reasonable solution to our unemployment problems.

A lot of advice is needed by both employees and employers on the whole question of labour relations. It is important that the Industrial Development Authority participate more in instructing, advising and helping both sides of industry. We have had mistakes on both sides. While many industrialists are prepared to raise a complaint when profits go down and things are difficult, employees are not informed when things are going very well. On the other hand, we have the situation that I mentioned where, because of lack of communication on both sides of industry, employees and trade unions are not always as sensitive to difficult situations arising within industry as they should be.

If the State is to be involved in financing industry it must also play a much more active role since we have not got the tradition, the experience of industry. We are talking about encouraging first-time industrialists to start up and it is important that we provide some sort of back-up advisory service that will start them on a more competitive basis.

The moves we are making through this legislation are the right ones to help solve the unemployment problem, but far too many people think that solutions to the unemployment problem can be found in the appointment of extra gardaí, teachers, civil servants, or whatever they may be. These are services that we need, and we should see them in the light of how many guards we need, how many teachers we need and not how many jobs we can create by filling posts in these services. The way to solve our unemployment problem is by putting people into productive jobs where we can manufacture something and export it, or jobs in creating markets for our exports.

The provision in the Bill enabling the IDA to extend their technical and advisory services to developing countries is a very good one. It is the same subject which we discussed at length here earlier. While we may see ourselves to some extent in western Europe as being a poor underdeveloped country, still we must admit that poverty is a very comparative thing and that by most standards we are very well-off and well equipped to develop industry. At this stage it is good that we are mindful of the problems that are being experienced by countries who have difficulties compared with which ours are not really serious problems at all. I welcome that provision in the Bill and certainly I can say that there will not be any opposition from this side of the House.

Mr. Butler

I welcome the Bill. It is an extension of the Industrial Development Act, 1950. Industrial development efforts are not the preserve of any party or Government: they are a service to the State and that is the way they should be recognised.

The amendments in the Bill are a vast improvement and we welcome them. The idea in the Bill to assist in the development of domestic industry, particularly small and medium industries, is very welcome. It is welcomed not just locally but throughout the country. There have been statements that more industry must come into Dublin because of the size of the population and because of the numbers who are unemployed. We would welcome that but we would not welcome it to the extent that it would take away interest in rural Ireland. Many of us come from rural Ireland and are here to defend it. There is large scale unemployment in rural Ireland as well as in Dublin so we would hope that rural Ireland would not be overlooked to the advantage of Dublin.

The Bill provides for loans and guarantees for mergers and acquisitions. A number of industries may be carrying out the same functions and because of the cost of those functions there may be no great profit and eventually an industry may wind up. We welcome the allowance here for mergers because a number of small industries would reduce costs and give greater profits to all concerned and greater confidence to the worker and industrialist.

There are one or two questions I would like to ask about the Bill. Section 4 states:

The Authority shall have, in addition to the functions assigned to it by section 3 of the Industrial Development Authority Act, 1950, and section 11 of the Principal Act, the function of providing, as the Minister may consider appropriate, assistance of a technical or advisory nature to a developing country.

We have passed here already today the International Development Association (Amendment) Bill, 1977 and we feel in the Seanad that we should give all the assistance possible to the developing countries. This section gives that assistance of technical and advisory nature to the developing countries and it is welcomed. Since 1970 the IDA have given grants of up to 50 per cent of the cost involved in research and development projects, subject to a maximum of £15,000 per project. I do not know how one would calculate the cost of a research and development project but if it costs, say, £10,000, how much of that would be grant? Would £5,000 be given for a £10,000 project? If that is the case, I cannot see why there in an absolute maximum of £15,000. Often research and development projects cost up to £50,000, £60,000, £70,000, £100,000 and maybe more. Why should the grant be limited to £15,000 in that regard? This limit should be raised to £50,000.

We all realise the value of the IDA to our country and the work that is being done by them. I have met personnel of the IDA on a number of occasions and I would like to take this opportunity of saying how helpful they were. At all times they have been more helpful than one would expect. When IDA officers come into an industry, when an application is made for a grant, there is a certain amount of nervousness and so on but immediately they arrive the applicant is put at ease. If everything is right there is no problem and, if not, they explain the position and try to rectify the problem. Without doubt the personnel are a credit to the IDA, as anybody who has met them will agree.

Over the past number of years we have had our problems in industry. Recently our problems have been enormous and we should try to do something quickly to make the industries of Ireland more stable so that they can be accepted internationally as such. I will not mention the industries mentioned in the national papers over the past few months but we should be able to get over those problems and get on the road to success.

We have also been arguing about whether labour-intensive industry or capital-intensive industry is the better. We could argue the point that labour-intensive industry gives more employment, but there is also a need for capital-intensive industry. We need exports so that our balance of payments will rise. We need the confidence of capital being invested in Ireland. We need both labour-intensive and capital-intensive industry working together. We discussed today whether we are relying too much on overseas industry. I would not think this is the case but I feel we could do better at home if we invested finance in agriculture. Agriculture has been mentioned in the other House and there is a wide area of investment in agriculture. The IDA have helped in that regard. Regarding the processing industry in agriculture, the people from the IDA have been very helpful in dealing with grant applications. The grants were available and paid. Agriculture is not fully developed on the industrial side, that is, in regard to the processing of agricultural produce, such as milk and meat. Milk processing is far advanced but much more could be done and I hope that when propositions are made in that regard the IDA will be helpful. I am sure they will. I hope that they will consult from time to time with An Foras Talúntais because they have much to offer in that field and there should be meetings between the personnel of both bodies.

Much of our meat is exported on the hoof but we must have a balance here. We must not commit ourselves to 100 per cent processing of meat. We must have exports of live cattle. I would think the proportions should be three processed to one live. Having that combination those in agriculture would get the greatest benefit from their produce.

It was announced also that we should have joint ventures of Irish and foreign shareholding and while I would agree with that I would have doubt about it working. We are not ready for that type of development yet. Maybe some of our entrepreneurs could join in a venture with foreign shareholders and it would be a success but if it was accepted widely then we would have many problems. The foreigners would be more advanced in industry and take control of that type of industry. State-sponsored manufacturing industry was also mentioned and I agree the IDA should get more involved in this.

There are a number of problems that would face anybody in developing industry and the most important one is the infrastructure of our roads. We are not ready for big industry throughout the country. Because of the infrastructure the cost of getting our produce out of the country is far too high, and something should be done urgently in this regard. I would like to congratulate the county development teams on the amount of work that they have carried out in conjunction with the IDA. Working closely together, much could be done for Irish industry.

There should be more communication between unions and industrialists. This situation has been highlighted very recently, and unless something is done we will have more trouble on our hands. It has been suggested that a smaller number of unions in any industry would give the best results. I have my doubts about that. The power of a very large union would be too great. My personal feeling is that a number of smaller unions would be better than one large union. The smaller union is closer to its members, it can get the message across to its members more quickly and there is more communication with one another. I am a member of a small union and I know the way small unions work. We would have fewer strikes with smaller unions.

I welcome the Bill. I think the provisions of this Bill will improve the previous Industrial Development Acts.

Professor Conroy

I should like to take the opportunity of congratulating the Industrial Development Authority. We have a body of people here that most people do not even know about and certainly they do not appreciate the wonderful work they do which compares very favourably with that of any corresponding development authority throughout the world. I have been involved with the IDA at certain stages and I know the excellence and quality of their work.

One particular matter, which I am very glad to see is covered in this Bill, is the question of joint ventures. We are getting to the stage when we should ensure, as far as possible, that any industry or enterprise that comes into this country will have an Irish component. This is necessary not only in a narrow national sense but for the general health of the industry. Some of the difficulties we have seen recently might well have been avoided, at a very early stage, had there been an Irish component, had there been more communication between the incoming people and those of us who live in this country. Far too many industrial companies, despite all the efforts of the IDA, equate the situation here as being similar or identical to that in the UK. It is a totally different situation and attitude, background and so on. I think it is a general principle anywhere that an incoming industry should be associated, as far as possible, as far as practicable, with people who are already indigenous to the country. This is a principle which we should bear in mind ourselves as our own industry develops and extends overseas.

The second aspect of this Bill, which is excellent, is as regards small industry. Small industries offer more, in the long term, to this country than large industries. Too often in the past when we have thought about industrial development we tended to think in terms of a massive factory, a massive corporation, and we have not realised that the real viability in the most important industrial nations, in West Germany, in Japan, in the United States, France, Great Britain and Sweden, is often provided by the smaller industries rather than by the larger corporations which all too often have really come close to the dinosaur stage, and there is no point in introducing dinosaurs into this country.

There is one aspect on which we are desperately weak, and it extends right through our whole structure, both in Government and industry, and that is research and development. If we are just accepting what is done elsewhere and just taking it on here without any input of our own, then we truly are very ancillary to industry elsewhere. We cannot to any great extent involve ourselves in basic research, but there is a very important role that has been shown by other countries that are developed—Japan is the obvious example—in which basic research and development done elsewhere are then modified and extended and changed from the purely theoretical to the practical and then employed to build industry. Not only Japan, but the United States over and over again has imported ideas from Europe, developed the applied technology and then built industry on top of it. Research and development in relation to our industry are very important, but it is very difficult for a small industry to employ even one or two people who will be more or less full-time involved in research. That can be a severe or even a crippling financial burden for a small company. One may well say in theory that it can be done but when one has the experience of it in practice one realises it is very difficult. It is often not good enough to attempt to make use of the IIRS, very helpful though they may be. There has to be some situation in which our own small industries can develop. This assistance could be of key importance in translating what may be a very good idea into a practical reality giving employment.

It is also of key importance that the IDA should be given much greater freedom as regards their shareholdings and that their legal position, which was perhaps a little doubtful, should have been clarified. The IDA have to be in a position to take up shareholdings particularly when, as is suggested here, they will be involved in financial enterprises which by their nature are those that the normal commercial banks are unable to support as adequately as one might wish. It is very important that the IDA should be able to take shareholdings and should be seen to be able to do so. This is important when attracting external industry. It is important that the IDA should keep a close eye on what is happening, not from any sort of invigilation point of view but by being involved and being able to help before the problems arise rather than after.

One further aspect of this Bill which was mentioned in the debate we had earlier today and on previous occasions here is in relation to developing countries. We are painfully just beginning to build up quite a lot of expertise on how a country gets across the enormously difficult gap between an underdeveloped country and a developed country. We have a certain amount of expertise to offer which on a semi-unofficial basis is already being availed of. I am delighted to see that the Industrial Development Authority are being given full backing and formal recognition of the contribution which I am sure they will be able to make in this respect. I would like to welcome the Bill.

Mr. Moynihan

On behalf of the Labour Party I welcome this Bill, which is continuing on the same lines as the industrial development legislation going back to the fifties. It is much the same because it is endeavouring to expand and create further industrial opportunities. None of us, on the passage of this Bill, will go away and think that that is the end of the necessary industrial development legislation and that we have reached a situation where all our employment problems will be solved. There is still a long road to go before any Minister can look on legislation as having achieved that.

The Minister should look on this in a broader sense than just making grants and incentives available to people. Many of us come from areas that have been bedevilled by over a century of emigration, in which there has not been any confidence in the people or development by the people. The colossal haemorrhage of emigration did not halt until the late sixties and only came to an end with the sealing-off of employment opportunities in the USA and Britain. I am thinking of the areas in Kerry and Cork and other areas in which we are under pressure to create industry. In dealing with applications for industry we have got to be realistic. I would ask the Minister to give attention to this.

I have had some experience in meeting substantial numbers of people coming in here from abroad and also natives who are looking for sites and investigating the possibility of setting up industries. Unfortunately, many of the areas, if not all, in which we would endeavour to pressurise those people to set up are lacking in the vital infrastructure that is an absolute priority and prerequisite for industry. I speak of roads, water and sewerage, housing and, above all, electricity. Much of the money that will be channelled in for the encouragement of industrial development should be made available to these undeveloped areas to recreate confidence and opportunity for the people. The very foundations necessary for industry should have first attention by way of special money to provide roads, water and sewage, housing and electricity adequate to cater for industry. The excellent sentiments and provisions of this Bill and all its predecessors will be of no avail unless we first give recognition to the basic requirements of industries before they can successfully set up in any area.

We are conscious of the colossal battle that lies ahead in order to give more employment. This is a job that will continue for a very long time. In addition to the IDA there are also the county development teams and the regional development associations. The county development teams have been in operation and have, in conjunction with the industrial development officers for the regions and in consultation and with advice from the IDA, done very good work. We must accept that what they have all done combined together is still far short of giving our people employment opportunities.

I would suggest to the Minister that possibly the combination and composition of both the county development teams and the regional development associations should be widened. At present it comprises the unpaid secretary, the chairman of the county council, who often has other full-time activities, the county manager, who also has full-time activities and the county CEO of both education and agriculture committees. There are two vital elements, chambers of commerce and the trade unions, who have not a voice in this important body. These are the people who finally have to get to grips with setting up, establishing and making a success of industries. I believe they should have a say in the invitation of industry and their advice and expertise should be availed of by way of direct involvement with all these statutory bodies.

There is another matter which is also of some concern to those of us in trade union activities. Rationalisation is a feature and will continue to be a feature of Irish industry for many years to come, because some industries are very old and require an injection of new techniques, new machinery and new expertise. New industries which have started within the last ten years and which got grants in excess of six figures did within six or seven years introduce major rationalisation schemes and new machinery. The net effect was that there was a 25 per cent reduction in the labour force. Grants were originally paid on the labour prospects and after a short period further grants were paid for the rationalisation scheme, but the net result was that an industry would reduce its labour force by practically 25 per cent. In my opinion, the Minister should be satisfied that there is an urgency in regard to the rationalisation of new industry and that the urgency is not based on the securing of higher profits at the expense of a diminished labour force.

It is frequently quoted in the media that areas that are important for tourism should not be industrialised. This is a falsehood. Industry and tourism can merge very happily. In fact, it is established that many of the amenities that go to make up a top tourist area are themselves major magnets for personnel and top-level officers of foreign and Irish industries. I would urge on the Minister that while there may be pressure that industry should not go into an area that has a high tourist potential, this is not right. The people of these areas can demonstrate clearly that industry can succeed alongside tourism.

My final point is in regard to industrial relations. These have been much commented. on. One very tragic and unfortunate incident gave rise to very wide comment. I would say that an overwhelming majority of trade unions and employers do not want strikes and, fortunately, never have a strike. It is a minority who have them. I would urge on the Minister and the Government to be hesitant in bringing legislation into this field. It is a delicate field and one in which any legislative attempt will not succeed. The basis for responsible and good industrial relations tions must be established between the employers and the trade unions from within and cannot be successfully legislated for from without.

Mr. Mulcahy

I welcome this Bill. If I have anything to say against it, it is that it should have come long ago. I have to disagree with what the Leas-Chathaoirleach said, that it is not a great problem. He may not have used quite those words but that a lot of other people have problems greater than ours. It is very important that the message about the job target that we have should be recognised by everybody as a very difficult one to achieve. Fifteen thousand jobs in manufacturing is one hell of a target for our industry. It means that every unit in society that can influence jobs must do something very special about it. That includes employers, the trade unions, and of course, the agencies of State set up to help.

The agency of State set up to help here is the Industrial Development Authority. They and the Minister have declared the targets that we have to achieve in order to achieve some reasonable level of employment over the next decade. I will not get involved in what that reasonable level is, but it is some percentage which might be the base load for the number of people on the register. In the last five years we have lost a lot of jobs in traditional Irish industry and some in new industry.

The role of the IDA in this is a key one. It is essential to the whole Government influence on development. I would like, before I say some critical words about them that I think the IDA are a tremendous State agency and doing a tremendous job. I would like to publicly mention the chief executive of that organisation as a person with tremendous flare. We have a lot to thank him for in terms of our industrial development. The Minister must bring it home to the IDA that their whole mission is not just getting jobs but industrial development. That is the title of the IDA agency. The getting of jobs and then letting them there is not sufficient. A certain amount of that was done in the past. We have to have working in these State agencies of ours risk-taking executives. I suspect that the name of the game was not to get involved where there was danger.

When I spoke on the Gaeltacht Bill earlier today I pointed out that a group like Gaeltarra Éireann had no choice but to get involved in the risk-taking aspect of industrial development in those areas because there was no other way that would get people involved. They had to attract them into unattractive areas in terms of the infrastructural aspect that has been outlined by Senator Moynihan. They also had other difficulties. One of the difficulties that arises when you get involved in investment in industry is that there is a chance that you can lose. We must be willing to put up with the losses as long as we make a much greater number of gains and achieve our targets.

In the past I believe the IDA development took place too slowly and that it is only now that some of the things that should have happened before are happening. For instance, joint ventures have been commended. Why were we not joint venturing five years ago? The reason I am being critical here is that the other things were missing. We may sit back and say, "Well, that is it".

Senator Conroy mentioned small industries. We had a great upsurge of interest in small industries in the back end of the 1950s and early 1960s and things went along very well for a while. Then small industries seemed to go out of the profile of interest. In the Fianna Fáil manifesto we highlighted the importance of small industries and highlighted in particular one aspect, which was that the percentage of investment going into small industries was only running something like 10 per cent of the total whereas we all know the small industries make up something like 60 per cent of the total employment.

It is great to see an expansion in that activity now as represented by what is happening in this Bill and, in particular, to see the support being given to first-time industrialists. That is a nice new term. We should let it roll around a little, "first-time industrialists". We used to talk about first-time home buyers. We need a lot more first-time industrialists and we need to give them support. That means a lot of money and a lot of help and putting up with it when they lose, because we will lose a few.

I recommend the Minister to encourage the IDA to lose a little in order to gain a lot. For instance, in the Irish Management Institute at the moment, if I might just refer to one of my own interests, there is a programme just started. It has been seen in the media as the Business Development Programme. The Minister for Labour opened it last week. Here 17 executives who want to expand their firm and employment have agreed to enter into a two-year development programme with the guidance of the people of the Institute. We have got support to do this from the IDA, the banks and from the EEC.

We must see a lot of that. If we can get IDA to support more of that activity then small industries may expand at the rate required and we may have more entrepreneurs in the country. If we have entrepreneurs going into small industries a lot of them may turn into biggies in the long run. If you look at the structure of Irish industry now compared with ten years ago you can see that the top people in Irish industry were hardly present in a lot of cases ten years ago. I will not mention names in that regard.

IDA need a clear strategy in relation to this industrial support service. They have been articulating it fairly well. I see in the current issue of Business and Finance their various executives have outlined the different legs of their strategy, which to me is a very useful contribution. One area which is the first leg of that industrial strategy is exports. Fifteen thousand jobs created every year means an output of something like £200 million. That cannot be added to the total demand in our own market. It must go abroad. It is essential that a huge export effort take place. I have mentioned this before in the Seanad.

I was misquoted in the media as having mentioned £2 million exports. I said £200 million. It means that we will need a tremendous number of extra salesmen out there selling for us. I find from IMI research, something like 13 per cent of the managers in the country are in marketing. If we had 15,000 in manufacturing every year and something like 2,000 of them managers, about 100 will be needed out there selling to get that product into the export market because we cannot, as I said before, consume it at home. It has to get into export markets. There are approximately 200,000,000 people living within a radius of 200 miles of Rotterdam. That is where we have to sell, not in Dublin or in Cork.

The next part of the strategy which I would like to comment on is the technology one. It is supported in this Bill and I welcome it. We have not a very good history of supporting technological development in this country. I have referred before to some of the difficulties that arise with the efforts, for instance, of the Institute for Industrial Research and Standards, to get a strategy going in this regard.

I quoted before from a paper on transferring technology to the firm: "A Study of the Diffusion of Technology in Irish Manufacturing Industry" by Thomas J. Allen of the M.I.T. University and he points out:

So the IIRS strategy, which on the surface appears eminently reasonable, has not worked. Just why this is so is not immediately clear. One possibility, suggested by the general manager of a major Irish firm, is that they have associated themselves too closely with British technology, and "... British technology is always either too backward or too sophisticated for Irish purposes." That the IIRS is connected very strongly to the UK can be documented very readily (Table XXII). Eighty per cent of the foreigners with whom IIRS staff reported regular contact were in the UK.

That is an example of where we can be codding ourselves that because we have agencies of a particular kind a strategy looks right, if it is not being delivered in the right way then it will not be effective.

There is an approach which I have come across called the Pellucio, which is used in Brazil where they seem to have got much more technology transfer. Here, instead of the money being given directly to institutions of that kind it is given to industry first in voucher form and the industry can pass it on to these bodies in payment for help given in the development of technology and, in particular, help given in the development of new products. This is the other leg of the industrial strategy, the product development.

We are a country which does not seem to take an interest in innovation in technology—a limited interest but not sufficient for 15,000 jobs we are talking about. The reason for this may lie in our educational system. All I can say at this point is that we should pay a lot of attention to what is going on in the Regional Technical Colleges, the National Institute for Higher Education in Limerick and the VEC colleges in Dublin. In those areas may be the future entrepreneurs who will take an interest in the new product development which will in the middle eighties provide the 15,000 jobs a year.

This brings me to some of the problems that seem to be arising. I will take the industrial relations one as some people have already. I am not afraid to mention the company that is in trouble at the moment—Ferenka. It seems to me that a company like that has got into trouble because of many, many weaknesses. They seem to have had weaknesses in their constitution in the beginning, in their management and in the support which the trade union must give, particularly where they see a large firm getting into trouble. Nobody in this case can be left off the hook. I have some figures here which I got from discussion with the middle managers of Ferenka. Ferenka were started by an inexperienced ex-patriot management team. This led to ill-defined management policy of which the approach to personnel was but one. None of the start up team had held a similar position——

An Leas-Chathaoirleach

The Chair understands perfectly well the thinking behind the move into this subject. Nevertheless, I must point out that this subject may not be discussed in itself in detail. A passing reference may be made to such problems, but a detailed discussion on the problems of a particular company is not in order.

Mr. Mulcahy

It is such an outstanding example of what I am trying to put forward as the non-delivery of what apparently seemed to be good industrial strategy that I think it should be in order to give that one example. I am not going to discuss it. Will it be all right?

An Leas-Chathaoirleach

A passing reference to the problems in a particular industry would be in order, but not a detailed analysis of the problems of one industry.

Mr. Mulcahy

The passing reference is that in the time since Ferenka were set up there have been five managing directors, three production managers, four chief engineers and five personnel managers. When a company, regardless of whether it is that company or any other, get into trouble everybody should come in behind them particularly the development agencies. I hope, if more trouble of that kind comes up in the future, that the development agencies will be in there from the beginning.

Another problem that can arise is the lack of development of the downstream industries from areas where we have primary raw materials. We have talked before about this and it has been mentioned in many seminars and written up. Nevertheless, if we believe in downstream industries I would have expected to see many years ago industries based on zinc and our base metals operating in the country because it would not be very difficult to buy the product, even if we have not got the smelter to produce it, and use it for downstream industries to get them going until such time as the others come on stream. I just mention that as an example of incomplete thinking. You do not have to wait for the raw material to set up the industry. We can get those industries going.

With regard to the structure of the support system for industrial development we have heard the Minister talk about the development of the industrial development consortium. I welcome that—he mentioned it in the Dáil— as a support operation for the work of individual agencies like the IDA. It would be unfair, having made some critical comments and also made some laudatory comments, to say that it all falls on their shoulders. Obviously it depends on a linkage with CTT, IIRS, National Science and Technology Council now to set up and other areas plus, of course, the financial institutions. It appears to me that the idea for the industrial development consortium can bring all of that together without going into setting up a group like an industrial organisation corporation, a new enterprise board or otherwise. We have the agencies and we can be proud of them. The thing is to get them to work effectively as single agencies and to work collectively as a group. The industrial development consortium is the answer to that. It may not be the only answer but it is one and it is certainly worth trying. I welcome hearing about that even though it has not been referred to in this House at this stage.

In relation to the job effort I have some sympathy with what Senator Moynihan said. We need jobs from any source in the next decade. In order to get 15,000 jobs per year in manufacturing we need a 15 per cent expansion per year. This is a colossal expansion. We have achieved only 10 per cent in volume expansion and about 5 per cent in productivity expansion recently. We need 15 per cent of volume expansion and about 7 per cent in productivity expansion to give us the 7½ per cent annual growth in employment that is needed to meet that target. This will need, amongst other things, investment, which is a fundamental leg of that same industrial strategy I have been discussing.

We have been achieving good investment and it has been expanding at a good rate. In the most recent "Quarterly Economic Review of Ireland, Third Quarter 1977," we see that the gross domestic fixed capital formation rose by 30 per cent in value terms and a similar rate is expected for 1978. The ESRI have forecast a rise of 30 per cent. What worries me—we are talking about a figure of £1,380 million—is that 55 per cent of the total capital formation is in building and construction. The main thrust for our manufacturing expansion will have to come from machinery and equipment installation, which is only 40 per cent. It is even more worrying that when one looks at the rate of usage of the money put aside for investment in construction and building in the last year, there has only been an increase of 5 per cent in money terms. If that continued through this year, and the increase that has taken place recently does not happen in sufficient volume terms, there will be a £90 million short fall of the money made available for this. This is another example of not, in the past, putting in the investment where it was required to create jobs but using that industry is a contracyclical device to manage the economy.

I hope that one of the things that will happen in this regard in the future operation of the strategy is that the construction industry will be left alone to get on with the job and keep investment going into it. We need the investment. We have to sacrifice other things, like wage rises. All of this, taken together, can create a strategy for the development of 15,000 jobs per year but they are all interlocked and we cannot say we will leave it to the IDA. There are many facets to it and every one of them has to be attacked but somebody must orchestrate it. We will depend on the IDA for this. I am confident that they are capable of doing it but things must be done faster.

It would be wrong not to mention again what I said earlier on the Gaeltacht Bill, that attention must be paid to the goods produced in this country. Most countries which produced a healthy manufacturing sector in their economies did so by an earlier protection of their products. We accept that we cannot have protection within the EEC system but we have, at least, to keep encouraging our consumers to favour guaranteed Irish products. It is only fair that I should conclude by saying to those consumers this Christmas: "Look before you buy because a 10 per cent swing in the purchasing pattern could mean 10,000 jobs." In the light of talking about a strategy of 15,000 jobs that makes a lot of sense to me.

I am delighted to see that the IDA are moving along the lines outlined in the Bill, that the money is being made available. My message to them is to take lots of risks because it is only by risk investment that we will gain these tremendously high targets we have to achieve.

Mr. Connaughton

First of all, I would like to say that so far as the Bill goes, I regard it as a good development. However, I took particular notice of Senator Mulcahy's view of taking a lot of risks. If one were to confine oneself to what is in the Second Reading of this Bill, there are not many risks there. If we are to achieve anything like the 15,000 jobs per year, I am sorry to say that I cannot see it in this Bill.

I would like to pay sincere tribute to the men and women who run the Industrial Development Authority, not alone at national level but at regional level. The Galway-Mayo area has been the most successful region they have, which is remarkable because it is generally recognised as a most disadvantaged area. I would also like to say that the biggest single crisis is the unemployment situation. As far as I am concerned, if this Bill is the solution to it we are certainly in for lots of trouble. This Bill has not gone half far enough along the road I would like to see it taking.

When we come to our ability to attract foreign industrialists we have to compete with several countries, indeed every other country in the world for that matter, some with very sophisticated skills in attracting industry. From a national point of view the IDA have been extremely good at this business. I am also led to believe that the tax-free holiday our incoming foreign industrialists are enjoying is not likely to be with us for the next few years. If that is the case—I ask the Minister to give his views on that subject—we will be in a dramatically worse position than we are in now because with this type of incentive the IDA had a strong hand. We were in a favoured position in that a company deciding to set up here would know that their tax reliefs were looked after for 15 years.

Debate adjourned.

The Seanad adjourned at 8.30 p.m. until 10.30 a.m. on Thursday, 15th December, 1977.

Seanad Éireann díospóireacht - Wednesday, 14 Dec 1977