The creation of a favourable economic climate for industrial development has been a major achievement of the Government since 1987. We have arrived at a situation in this country where we have a stable currency, low inflation and a positive balance of trade.
A further economic priority for this Government has been to provide the best possible institutional structures to assist industry to increase production, sales and, very importantly, employment. If any lesson can be drawn from recent history, it is that the State cannot do everything, but what it does, it must do well. The best guarantee of such efficiency is to create institutions that precisely fill the needs of the day.
The decision to merge Córas Tráchtála and the Irish Goods Council was announced by the Minister for Industry and Commerce in his preface to the Review of Industrial Performance published in December 1990. Institutional arrangements for industrial policy must be determined by the requirements of the economy and of industry. This merger is a response to the changing trading environment in which small and medium sized industry now finds itself. The Single Market calls totally into question the distinction we have traditionally made between the Irish market and the markets outside. Between home sales and export sales, between being an exporter and not being an exporter, the Single Market places every firm in the same boat — a boat in which the prerequisite for survival is the ability to be internationally competitive.
Up to now, we could operate a two-tier system. The home market was one thing, export markets quite something else. What you needed to succeed on the home market was not necessarily the same as you needed abroad and for many companies who would never graduate to exporting, the need to be internationally competitive did not arise.
Accordingly, we had two agencies — one agency serving firms that were developing in the home market — the Irish Goods Council — and one agency serving firms that were developing in export markets — Córas Tráchtála. There is considerable support for functional rationalisation on the part of the "clients" of the agencies. Indeed, the agencies themselves — both their boards of management and staff — have acknowledged the inherent sense of what is now proposed. They have fully supported and co-operated with myself and my Department in the merger process.
Before going into some detail on what the Bill contains I want to set out some of the benefits which will derive from the merger. First, companies which graduate to exporting will no longer have to start an entirely new relationship with another agency: until now their early development was with the Irish Goods Council, and then when they moved to exporting they had to start all over again with Córas Tráchtála. Those Senators who have experience in business will know that the success of company development through agencies depends to a very important extent on the nature of the relationship that is built up on both sides, and that building this relationship is a time consuming process and one that involves personal commitment in both company and agency. To ask growing companies, whose resources are always stretched, to develop two relationships, where one could serve the need, is placing an unnecessary burden on companies, and one which it is now time to remove.
The second main reason we need one agency is that we want more companies to make the transition to exporting, and we want them to make it sooner. Because of the small size of our home market, Irish companies must move to exporting much earlier than companies of the same size would in, say, Britain or France. Companies there have a large familiar home market that they grow quite large in, but if Irish companies are to grow significantly, they must move outside this market at an early stage. By that I do not necessarily mean that they should export straightaway. What I mean is that their strategic focus should from the start be on a wider market than Ireland.
We do not want companies to grow with their sights fixed only on the Irish market, companies who start thinking about the outside world only when they need to look outside for growth. That approach means that their initial strategies will be moulded exclusively in terms of the Irish market. This increases the likelihood that they will approach exporting on the basis of trying to sell outside the country what they have done well with here. That is not the way. We want companies to be thinking about being internationally competitive from the very start. If they do so, then what they do in the Irish market will be a suitable basis on which to expand abroad when the time comes. There will not be any need to develop a new philosophy, a new approach.
The mechanism being proposed to effect the merger is as follows. Section 5 provides that the name of Córas Tráchtála will be changed to An Bord Tráchtála — The Irish Trade Board. Section 22 proposes that the new board will come into operation on 1 September 1991.
Section 6 conveys on the new board functions which combine the current functions of both Córas Tráchtála and the Irish Goods Council. The primary function of the new board will be to promote, assist and develop the marketing of Irish goods and services. Subsection (1) of this section, in many ways, is the key to the Bill. Although the drafting of the section follows the pattern of the 1959 Act which established Córas Tráchtála, there is an essential difference. This essential difference between the functions of the board established under this Bill and the functions given to Córas Tráchtála under the Export Promotion Acts is that, in the case of Córas Tráchtála, the functions were restricted to the exportation of goods and services. This Bill charges the new board with promoting the marketing of Irish goods and services and this will be done on both the domestic and overseas markets, which will be one market in the post-1992 period.
I want to make it quite clear to this House that the Bill will not result in any reduction in, or dilution of, the services which the Irish Goods Council has been providing over recent years. This point was raised in the debate on this Bill in the Dáil and, as I did in that House, I want to stress strongly that this Bill is not about closing down the Irish Goods Council and terminating its programmes.
The merger of the two organisations provides the opportunity for co-ordinating and enhancing the marketing support measures provided by both organisations to industry throughout the country. For example, CTT's network of regional offices will provide the new board with a facility for delivering a more regionalised service to firms selling exclusively on the home market.
A further factor which ensures the continuity of the programmes operated by the Irish Goods Council and, indeed, by Córas Tráchtála is the support they receive from EC Structural Funds. All their programmes are being supported in the Programme for Industrial Development 1989-1993, under the Community Support Framework. Since the commencement of the programme, the existing services of the agencies have been copperfastened and each has, with the assistance of additional funding, been able to expand into new programme areas.
I have spoken at some length on this issue because I want to leave no doubt about the health of the Irish Goods Council's operations. While I am still apeaking on section 6, I want to state at this point that a good deal of thought went into seeking a description of what the new board will be about. We have sought to give the new board a clear mandate, without getting bogged down in lengthy debates about the meanings of particular words.
For example, I know that Senators will be aware that the word "marketing" can be defined in a variety of ways by practitioners and academics. I would like to take a very straightforward stance on this matter. Marketing in the broadest sense is the link between society's material requirements and its economic pattern of response.
The task of the new board will be to assist companies in identifying markets, and in the development of their marketing skills to enable them to meet society's material requirements, so far as is possible, with Irish products. That is what the Government envisage the board will be promoting, assisting and developing.
If you look at what makes a company excellent, you will find that an excellent company knows how to adapt and respond to a continuously changing marketplace. The excellent company and its employees are committed to creating customers and to satisfying customers. An Bord Tráchtála will be charged with assisting companies to attain this level of excellence.
Sections 12 to 15 deal with the dissolution of the Irish Goods Council and the transfer of its staff, property, rights and liabilities to the new board. I want to make it clear that there will be no job losses on foot of the merger. The Government recognise that there is a major job of work to be done in improving the marketing capability of Irish industry and all the staff of the combined agencies have a key role in that work.
Section 8 of the Bill proposes that the aggregate amount of the sums which may be paid to the board for the purpose of enabling it to perform its functions will be increased to £400 million. The current statutory limit, as set in the Export Promotion (Amendment) Act, 1987, is £260 million and that figure will be reached in late August or early September this year. For this reason it is highly desirable that this Bill be passed in this session. If we cannot meet this deadline, arrangements will have to be made for Córas Tráchtála to undertake short term borrowings to maintain its operations until the Bill is enacted. I am quite confident of the full co-operation of this House to ensure that this Bill is passed today.
I should also add that it is estimated that, based on the spending projections contained in the programme for industrial development, the new limit of £400 million will cover Exchequer funding of the board until the end of 1994.
I would like to take just a few moments to describe, in general terms, the kinds of services which are supplied with this funding. Córas Tráchtála operates seven distinct marketing programmes and within each there is a range of related activities. These can, however, be summarised into three broad categories, first CTT provides detailed market information. Its network of 21 overseas offices provides essential on the ground assistance to exporters. Its market information centre in Dublin hosts the largest collection of market information in Ireland. Secondly, CTT operates a range of market development activities. These would include, for example, research activity which would identify potential markets for Irish firms or explore the best market entry strategies for particular sectors. The organisation of promotional activities like trade fairs, trade missions and inward buyers missions is also an integral part of its operations. Finally, CTT provides financial assistance to exporters through a range of schemes.
Since 1988, CTT has been operating its sales performance incentive scheme which provides modest amounts of financial support for marketing activities on a performance related repayable basis. A good example of a success story under this scheme is a firm in the West manufacturing car security systems. In 1989 the company was approved assistance under the sales performance incentive scheme towards the development of the UK market with excellent results. The company has recently become the approved supplier to Mazda in the UK and cumulative sales of £1.7 million in the UK have been achieved since the project commenced. During 1991 the company was approved for support under the targeted marketing consultancy programme to expand further its market development overseas.
The targeted marketing consultancy programme is the most significant grant scheme now operated by Córas Tráchtála. The scheme is a direct result of Structural Funds support and makes substantial grants available for major marketing projects. Although it only commenced last year, this programme has already approved 47 projects which could generate up to £600 million in additional exports.
For its part the Irish Goods Council provides general marketing advice for very small manufacturers who are totally reliant on the domestic market. In particular, it advises firms on opportunities in business-to-business sales and in undertaking sectoral marketing initiatives since 1989, the Irish Goods Council has been operating, again as a direct result of Structural Funds support, a programme of assigning marketing consultants to small firms which cannot afford inhouse marketing personnel.
One typical success story of a firm working with the Irish Goods Council is the case of two tool-makers who set up their own business in 1980. They visited a Goods Council organised subcontract opportunities exhibition which featured a wide range of imported pressed steel components. These exhibitions are designed to show small Irish firms the enormous opportunities that exist for manufacturing and supplying the industrial sector in this country with products which are currently being imported.
Working closely with the Irish Goods Council staff, the two business people decided to concentrate on component manufacturing rather than tool-making. They have been very successful in converting sub-supply opportunities identified by the Irish Goods Council into new business. Today some 60 people are employed and the company is Ireland's largest manufacturer of pressed metal parts to the demanding standards of the electronics and allied industry sections.
This Bill is also being availed of to bring some of the statutory provisions relating to the board in line with other Agencies. Section 7 provides that the Minister for Industry and Commerce will have power to give the board general policy directives. Section 10 contains a standard provision covering restrictions on the disclosure of information by staff or advisers to the board. Section 11 extends the provisions of the 1959 Act, relating to the nomination and/or election of board members and staff to the Houses of the Oireachtas, to cover elections to the European Parliament. Section 9 increases the number of board members from the present maximum of seven to eight, thus allowing the Minister scope to increase the spread of expertise on the new board to reflect its wider responsibilities.
I referred at the beginning of my speech to the Government's role in getting the institutional framework for its support for industrial development right. This Bill and the decision which it implements is the latest in a series of significant developments which have taken place since 1987 in the restructuring of State Agencies involved in industrial development and promotion. Among the most notable developments were: the establishment of FÁS to take over the functions previously undertaken by AnCO, YEA and the National Manpower Service; the merger of the National Board for Science and Technology and the Institute for Industrial Research and Standards to form EOLAS, a single agency with responsibility for the development, application, co-ordination and promotion of science and technology in Irish industry; and legislation is currently being prepared to provide for the amalgamation of the activities of NADCORP with those of the IDA.
In relation to the development of science and technology I note that the former Minister for Science and Technology is a Member of this House and I look forward to his contribution on this Bill.
I know some will say that this is an ad hoc approach to rationalisation of industrial agencies. I acknowledge that in a perfect world there might be some merit in that view. However, given the nature of a rapidly changing domestic and international environment and given the new challenges and threats posed by the Single European Market, Senators will agree that it is essential to have the freedom to review and, when necessary, change policy on a continuing basis.
This Bill is just such a response to the changing marketing demands on our firms. The logic and good sense of merging two agencies providing marketing support to Irish firms is clear quite apart from any general review of industrial policy.
Before concluding I want to deal with the focus of the new board. I see it as having four main strands. First, it will have a clear client group in mind. Its services will be overwhelmingly provided to and sought by indigenous companies. We are talking here mainly, but nor exclusively, of Irish-owned companies and mainly, but not exclusively, of small and medium-sized companies. Essentially what we mean by indigenous companies are those firms that have a significant amount of their strategic functions based here in Ireland, companies that have their marketing centred here, companies that are firmly rooted in the Irish economy. This includes, I am glad to say, a growing number of foreign owned companies.
CTT at the moment serves some 1200 exporting companies on a regular basis. The Irish Goods Council has a core client base of some 800 companies, most of whom do not export as yet. The aim of the new organisation will be to accelerate the sales growth of all these companies, wherever the opportunities present themselves.
CTT has, and the new organisation will continue to have, trade board functions which include the promotion of Ireland's trade in general. The new board will continue to have advisory functions to the Department of Industry and Commerce in relation to all trade and marketing matters, but in terms of its development thrust, the concentration will be on indigenous companies, most of which are Irish owned, and most of which are small and medium sized.
Secondly, the new agency will concentrate initially on one central task: helping Irish industry to take full advantage of the Single Market. Again, that is not the whole task. The new organisation will, as before, have a vital role to play in the development of export markets around the world, particularly in such important areas as North America, Japan and Australia. However, the concentration will be, as it must, on Europe. For those companies who do not export — to prepare them for competition from within the EC and for those companies who do export, to help them develop markets in what will be the world's biggest trading entity, something in the region of 340 million people.
Thirdly, the new organisation will provide financial support for marketing by firms. Both CTT and the Irish Goods Council have begun to benefit from major increases in their resources via European Structural Funds. These resources will be available to the new board to help firms develop their markets, and to help them make whatever changes are needed to compete effectively in the new international conditions. They offer Irish companies a once-off opportunity to restructure themselves for the new world we are moving into. They will be available only to assist those companies who demonstrate that they are in earnest about the achievement of new markets and growth in market share.
Finally, this agency will be the eyes and ears of many emerging Irish companies in the marketplace, not replacing but supplementing and enriching the company's own presence. Through this new agency, a company will be able to get initial access to markets across the EC and to the main markets around the world. One of the great strengths of the organisation will be the combination of the deep knowledge of the marketplace available to CTT and the hands-on development skills of the Irish Goods Council.
The success of the new agency depends, more than anything else, on the commitment of its management and staff to the challenging task which they face. I take this opportunity to put on the record of this House my appreciation for the work which the staff in both organisations have done over the years and to express my full support for them in their future efforts. In my two years as Minister of State with responsibility for Trade and Marketing I have been constantly struck by the commitment, skill and energy of the employees of the agencies and I am very confident they will carry these qualities onto the new board to the great benefit of Irish industry. I am very impressed by all levels of both organisations, the Irish Goods Council and Córas Tráchtála. I feel that the discussions to date have been very fruitful in relation to both boards of management and both staff organisations. I am very confident this House will support the decision of the Government to bring the Bill before the House and to create this new board.
I commend the Bill to the Seanad.
