Oireachtas Joint and Select Committees
Wednesday, 14 November 2012
Joint Oireachtas Committee on Foreign Affairs and Trade
Trade Promotion: Discussion (Resumed) with IBEC and IEA
I welcome from the Irish Business and Employers Confederation, IBEC, Dr. Pat Ivory, head of international relations, Ms Paula O'Dwyer, senior executive in trade and regional policy, and, Mr. Brendan Butler, director of policy and international affairs. I also welcome from the Irish Exporters Association, Mr. John Whelan, chief executive officer, and Mr. Michael Slein, vice president.
This meeting is another in a series of meetings and other activities which the committee is undertaking with regard to the promotion of trade and the role of the Department of Foreign Affairs and Trade in economic recovery. The aim of the committee's examination is to prepare and publish a report on the strategy and response of the Department of Foreign Affairs and Trade to the economic crisis, the Department's new recognised responsibilities for trade promotion, and how well the Department is performing in respect of the programme for Government measures for trade promotion and economic recovery.
The committee commenced this process earlier this year with a formal adoption of a scoping document and a meeting with senior officials from the Department of Foreign Affairs and Trade and the key State agencies involved in trade and investment, IDA Ireland, Enterprise Ireland and Forfás. A delegation of the committee had 30 trade-related meetings in three cities in the United States over six days in June.
After today's meeting, the committee will examine the way in which the visa system supports or inhibits trade promotion, meet with organisations with perspectives on the promotion of agricultural exports, and hear international perspectives from business organisations, as well as from chambers of commerce. It is essential we hear the views of the key players in the private sector who operate at the coalface of our international trade. Accordingly, we will now hear from IBEC and the Irish Exporters Association. Both are members of the Export Trade Council which was established by the Tánaiste and Minister for Foreign Affairs and Trade. I am sure they have views on how it is performing too.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence they are to give this committee. If a witness is directed by the committee to cease giving evidence in relation to a particular matter and the witness continues to so do, the witness is entitled thereafter only to a qualified privilege in respect of his or her evidence. Witnesses are directed that only evidence connected with the subject matter of these proceedings is to be given and witnesses are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.
IBEC will be first to present and then the Irish Exporters Association. Questions will then be asked by members. I hope contributions from members will be more questions rather than Second Stage speeches which will allow for better interaction between both groups. Before we begin, I want to thank Dr. Pat Ivory for information he provided to the committee's delegation before its visit to the US over the summer.
Mr. Brendan Butler:
On behalf of IBEC, I appreciate the opportunity to make a short presentation to the committee. IBEC is the voice of Irish business both at home and internationally.
It is the umbrella body for Ireland's leading business organisations and sectoral groups. In a sense, IBEC is run by and for Ireland's businesses and employers. We have a headquarters in Dublin and five regional offices in Waterford, Cork, Limerick, Galway and Donegal. Our 7,500 members employ 70% of the private sector workforce, so it is a very significant organisation. It has almost 200 employees and a turnover of €24 million. We estimate that we are ten times larger than the next biggest business organisation in Ireland. We represent companies from the largest in the country to the smallest. It is important to point out that we also have 60 sectoral groups, many of which members will be familiar with, including the Small Firms Association, Retail Ireland and PharmaChemical Ireland. It is a very large and significant family representing the business community.
In terms of our structure, we have three main areas that interact with the business community, with policymakers and with government. The area in which Ms Paula O'Dwyer, Dr. Pat Ivory and I work is the policy and international division. We see trade as being absolutely critical to Ireland's future as a small open island economy. We export almost 85% of everything we produce. We are unique in terms of the importance of trade and exports and the importance of being supported by the agencies of the State in regard to that export reach.
We also have an industrial relations and human resources division which provides advice to companies in terms of positive human resources. It operates as the main partner at national level. I am delighted to say that it looks as if, on the basis of the IBEC-ICTU intervention, SIPTU has deferred the industrial action in Dublin Airport next Monday, which is very encouraging. The final area is the 60 business sectoral groups.
In terms of the importance of trade and business to Ireland, there is a sense at national and European levels that there has been a very strong focus on austerity over the past three or four years. We really believe we need to look at perhaps the single biggest challenge which faces Ireland and Europe, that is, the question of unemployment. We need to move very quickly to a jobs and growth agenda. We must do the austerity but we have not been taking necessary proactive measures to stimulate growth and provide opportunities for the 450,000 people who are out of work.
In April, IBEC launched a campaigned called, Driving Ireland's Recovery, which was, in a sense, built around four platforms to try to get this country back into a growth stage. The four platforms, which will not surprise anybody, included keeping Ireland strong in Europe. We see our relationship with Europe as being absolutely critical. The second platform was restoring domestic demand - what can we do to give people the confidence to be in a position to get back to a more normal form of savings and spending? The third platform was pivotal in terms of supporting job creation. The fourth one was trying to deliver world class public services.
We launched this campaign in April but we accept that the financial situation in the country is such that one cannot come up with ideas that will cost the Exchequer money so, quite recently, we launched 50 specific actions to boost growth. All of these actions are tangible and they will be delivered at no additional cost to the Exchequer. They cover a whole range of areas but specifically in terms of trade, we see the forthcoming Presidency of the EU Council as an opportunity to advance international relations and bilateral trade agreements.
We have developed our business priorities for the Irish Presidency and they will be launched tomorrow in Brussels where our director general is due to meet President Van Rompuy. On 21 November next, we will launch our priorities in Dublin. Given the importance of the EU Presidency, with the Chairman's agreement, we will extend an invitation to all of the members of the committee. That is a bit of an introduction to IBEC but to focus more specifically on trade, I will pass over to Dr. Ivory.
Dr. Pat Ivory:
On the trade front, we are very active as a member association and we very much welcomed the invitation from the Government to join the Export Trade Council. We participate actively in that group together with CEOs from several of our member companies. We are very happy to work in partnership with all the Government Departments involved in the group and, indeed, with the State agencies, including Enterprise Ireland, the IDA, Bord Bia and Tourism Ireland. This council has met on a number of occasions and I think, as the council is developing, there is a greater understanding of each other's positions and we are happy to see that there is a greater engagement with the private sector taking place as the council evolves. We would like to see that continue into the future.
IBEC and its sectoral associations greatly value the role played by Irish ambassadors and embassy staff abroad in a number of different areas, including trying to solve or help us solve market access issues and in their new role in terms of co-ordinating and supporting trade missions and the work of the agencies abroad. We think this is a very welcome development that there is an Ireland Inc. approach with all the agencies and the embassy staff, led by the ambassador, working together.
IBEC's own trade council meets on a quarterly basis and has done for a number of years. We interact with Government officials involved in trade policy and promotion on a regular basis through our trade council. The council formulates the business position on trade policy but I will come back to that later.
We were also delighted to work as part of the Forfás steering group on the report, Key Skills for Enterprise to Trade Internationally, which was published in June this year. We feel the recommendations of this report should be taken on board and we have emphasised that at the Export Trade Council. Again, we are very happy to work in partnership with Forfás and the State agencies in regard to implementing the recommendations of the report, specifically in building the marketing expertise and sales expertise of Irish SMEs and indigenous companies and also in improving the language skills in Ireland and building on foreign language capability.
On 30 November, IBEC in collaboration with UCC and Enterprise Ireland will run its second workshop on doing business in China. This is an initiative to try to enable SMEs and large Irish companies, when they are doing business in a market with which they are not that familiar, to gain an understanding of the culture in that market and of the differences of doing business in that market. This has been a good collaboration with the Institute of Asian Studies in UCC and Enterprise Ireland.
On the international front, in addition to the work we do in Ireland, IBEC is the Irish member of Business Europe, the leading Brussels-based organisation which brings together 41 different business and employers' confederations. We interact with the EU Commission and the EU Parliament as a group with Business Europe which strengthens the position in Ireland.
We actively participate in the organisation's international relations committee. I sit on that committee and my colleague, Ms Paula O'Dwyer, sits on the free trade agreement and the WTO working groups. I also chair the organisation's network for developing relations with the United States. It was in that context that I did some work in collaboration with Business Europe and the US Chamber of Commerce which I will refer to later and which was the subject of the material I sent to the Chairman of the committee ahead of the visit to the United States.
IBEC is also the Irish member of the Europe Services Forum which promotes trade in services globally. This is an emerging part of business and trade in Ireland. As members will know, approximately half of Irish exports are services exports. In addition to manufacturing exports, we have a strong services exports side. Mr. Danny McCoy, IBECs director general, will meet Herman Van Rompuy, the president of the EU Council, tomorrow to outline IBEC's business priorities for the Irish Presidency.
I will give members a flavour of our trade priorities and the key priorities which are part of the 50 action plan points to which Mr. Brendan Butler referred and also part of our business priorities for the EU Presidency. The first is to advance negotiations on an EU-US trade agreement. IBEC works in partnership with Business Europe and the US Chamber of Commerce to advance this objective. The core elements of the package include not just eliminating and reducing tariffs but also non-tariff barriers and looking at how we can build investment, open up public procurement markets in the European Union and the United States, jointly protect intellectual property created in our markets and have better levels of regulatory co-operation between the European Union and the United States. We are feeding into the EU-US high level working group on jobs and growth which was established in December 2011. It produced its interim report mid-year and is due to produce its final recommendations in December. The final recommendations may recommend the launch of comprehensive negotiations on a trade package between the European Union and the United States. There may be an opportunity to give a mandate to start these negotiations during the EU Presidency which Ireland will hold next year. In that context, we have agreed with the Government to hold a transatlantic business round table meeting on 18 April which will immediately follow the informal Trade Council which is being organised to take place in Dublin Castle. We will bring business leaders from Europe and the United States to participate in that business round table meeting.
One should not forget the importance of the emerging markets. We have been working vociferously to advance EU free trade agreements with Asian partners both with our business partners in Europe and individually as an organisation. We welcome the completion of the EU-Korea free trade agreement which entered into force on 1 July 2011. The negotiations with India are advanced and we hope the EU-Singapore free trade agreement can be finalised in 2012. We are pleased to see that negotiations with Vietnam have been launched. This is very positive from an Irish perspective since we now have an embassy in Vietnam. It is the first Asian country included in the Irish Aid programme which was focused mainly on Africa, in which we have opened an embassy. IBEC supports the launch of the free trade agreement negotiations with Japan and will be working with the ambassador in Japan, with the Japanese ambassador to Ireland and JETRO.
I draw the committee's attention to our support for implementation of the Africa strategy which has been launched by the Department of Foreign Affairs and Trade, the Tánaiste and the Minister of State, Deputy Joe Costello. IBEC welcomes the increased focus on the potential to build trade links between Ireland and Africa. There is a good opportunity to move beyond the aid-type relationship to a more mature trade and aid based relationship. We know this is being welcomed by African countries and their ambassadors to Ireland. In that context, Ireland's Engineering Enterprises Federation, an affiliate of IBEC, launched a major new report, Winning Business in Africa - building a cluster for infrastructure projects. The report was launched earlier this year. We also actively participated in the second Africa Ireland Economic Forum, Building on Success, during which we presented the findings of the report at a workshop. We were very happy to engage in an exchange of views with the ambassador of Kenya to Ireland, Ms Catherine Muigai Mwangi, at the IBEC trade council meeting this morning. The meeting was very constructive and there was great engagement with the representatives of Government Departments and our member companies which are doing business in Africa.
I am delighted IBEC is supporting the Africa strategy because in the coming months many African politicians will come to Ireland. Yesterday we met the Congolese Minister for the Environment, while this morning I met a senior trade official at the Ethiopian embassy. There is huge growth in Africa.
I am delighted to welcome Mr. John Whelan from the Irish Exporters Association which has, for good reasons, been very much in the news in recent times. Members would like to hear what he has to say.
Mr. John Whelan:
I thank the Chairman and committee members for giving us the opportunity to address them. The Irish Exporters Association was established in 1951 and was the organisation which had the low corporation tax rate introduced in Ireland. Originally, it was to apply to export profits. It kicked in in the early 1960s and subsequent organisations such as the IDA utilised it to very good effect to increase our foreign direct investment. The organisation represents companies which account for 70% of export activity. In terms of the specific brief in regard to the Department of Foreign Affairs and Trade, initially we will look at the role of embassies and the trade portfolio, on which we will give some insights. We will talk briefly about the potential opportunities for restructuring and also about the work of the Export Trade Council. I will ask Mr. Slein, our vice president, to give an overview of our working relationship with the Department of Foreign Affairs and Trade.
Mr. Michael Slein:
I stress the importance of embassies abroad when fledgling companies are trying to make inroads into new markets. My experience with Enterprise Ireland, in particular, has been very positive. It is really important that we have people on the ground. Many years ago, when my export business was starting out, I attended a half-day forum chaired by three of the main exporting companies in Ireland, including Glen Dimplex. The big message was that if one wanted to be successful in the export markets, one would only be successful by having feet on the ground. It was emphasised that it did not mean employing a sales person and having him or her on the ground, that the CEOs of businesses needed to be heavily involved. Linked with this, the impact of officials, embassy staff, Enterprise Ireland staff and IDA Ireland staff cannot be underestimated. It is very important and a dramatic statement of intent to those involved in the markets in which we are trying to become involved in terms of our commitment to these markets. I advocate strongly that if there are cutbacks to be made, they should not be made in the export sector. We are heavily involved in China. There was an office in Guangzhou with one person, but it was closed down. That was a big mistake. Out of all those employed globally by Enterprise Ireland and IDA Ireland and in the embassies, one person is tiny. The key message is that we need support and help on the ground.
Instead of having three addresses in export markets, with IDA Ireland located in one place and the embassy and Enterprise Ireland in others, we thought it would be a superb idea to open Ireland House. It was to be one operation in one building in each of the markets in whcih we were involved. There would be a number of ways in which the work done would be complementary. Obviously, exporters interact with different people, including staff in IDA Ireland, Enterprise Ireland and the embassies.
We also thought this would give a good opportunity to have an Ireland showcase room within this Ireland House building. It could be a not so significant-sized room such as this committee room whereby there would a permanent display for Irish export companies. It need not be manned and visitors to the Ireland House could look at products and subsequently make contact with the companies involved. It is a successful model in many other countries and one I encountered 20 years ago.
We would also like to see a heavy emphasis throughout the Department, including with ambassadors, that 75% of its activity would be focused on trade. We would also like to see metrics put in place for each of the different embassies so that everyone could gauge which ones are operating successfully. The Irish Exporters Association would be delighted to provide feedback on the areas where we believe certain embassies are working well and others not.
Mr. John Whelan:
Coming up to the last general election, we were delighted to see the proposals for the new structure for the Department and the subsequent incorporation of trade into foreign affairs. It has worked very well as far as we are concerned. There is some more work to be done but we are already seeing exceptionally good returns from this new structure.
Our rate of exports to Asia is extremely low, coming to 5%, while it is 20% for most other European countries. Again, most of our embassy and promotional support activity tends not to concentrate on this region. We have presented the recommendations of our Asia trade forum and strategy to the Department. I agree, as Mr. Slein said, that there needs to be more investment in this area. I note IDA Ireland’s chief executive officer, Mr. Barry O'Leary, recently stated there needs to be more time and effort to attract foreign direct investment but it is difficult if the resources are not there. We know the country has difficulties with its resource bank. However, if one has to reduce resources, it should not affect front-line forces such as embassies and field supports in Enterprise Ireland and IDA Ireland. We need more embassies abroad and promotional staff.
We made a detailed proposal for the need for an Africa strategy at the Export Trade Council. Ireland has always had a good aid strategy for the continent. Up to 11 of our embassies are dealing with aid with the exception of our South African embassy which has just appointed Mr. Fred Klinkenberg to head up the trade portfolio there. The Government has taken up our suggestion and is beginning to train up some personnel in the other African embassies. It needs much more push, however. We have doubled our exports to Africa over the past two years. By the end of the decade, exports to Africa could come to €24 billion if the embassy, Enterprise Ireland and Bord Bia structures work together. That is much more than we will get out of China and yet we are hearing a lot about the China trade. It is important to get a balance on this and play to our strengths. We have a significant embassy structure in Africa, unlike our position in China, and there is an opportunity to build on the goodwill created by our historic and current contribution to education, training and aid in Africa. Many other countries are moving into Africa and eating our breakfast when it comes to trade. We need to press on there. A recent Export Trade Council meeting agreed on a €2 million pilot project for fresh trading initiatives in Africa with half of the funds coming from the Department of Agriculture, Food and the Marine and the other half coming from the Department of Foreign Affairs and Trade.
The committee is aware we cannot negotiate joint free trade agreements as they fall to the EU. We noted the joint economic commissions were languishing, doing nothing. We raised this matter with the Tánaiste and Minister for Foreign Affairs and Trade and his team. They moved on it and on 7 November 2011 he had a meeting with his Russian counterparts on this issue. He got it working with Russia, one of our fast-growing economic markets in the BRIC countries. The Minister of State, Deputy Costello, pushed it further. There are opportunities to extend this further.
Tremendous benefits are coming out of the Export Trade Council structure. One significant problem we are encountering is the difficulty the Irish visa regime creates for business people, as well as for students and tourists. We have had a significant move on this through the Export Trade Council. An interim structure was put in place for the London Olympics this summer. A more permanent structure is at the final stages of negotiation for implementation with the British embassy which will allow for the sharing of biometrics. It will give us a much more streamlined process and open up these markets, as well as the tourism and education sectors.
There are many opportunities in these areas and much good work has been done but a lot more needs to be done. We would stress, however, that the Department is under-resourced and needs fresh funding in the next budget. We are confident that such a move will deliver additional returns. We encourage the committee to push for it when possible.
The key sign-off during the Irish EU Presidency will be the EU-Canada free trade agreement. We pushed very hard on this and made several presentations on it early last year. The Canadian ambassador informed us Ireland was likely to be the largest beneficiary of this agreement. It is important it is signed off during our presidency. There are so many developments in the EU but they are very slow. This agreement would get us a clear win if we could get it signed off during the presidency.
I thank IBEC and the Irish Exporters Association for their positive presentations on what is the most important and difficult challenge facing our country. The trading and investing in a smart economy strategy was published in early 2010.
That publication had a particular emphasis on export-led growth, part of which included foreign direct investment, a topic we have not really covered, but it relates to new markets and the necessary co-ordination required. I am pleased this was raised in the Irish Exporters Association presentation and I will address the association first. The delegation referred to cutbacks and this is an important point we should take on board and emphasise, because it is short-sighted if we cut back. The example provided referred to a job in one area that could generate or create employment here, especially given the serious challenges we have with regard to youth unemployment. I believe one third of the youth are neither involved in education nor working. This is a Europe-wide phenomenon but-----
No, I have not. It is particularly acute here. Has the association discussed its specific suggestion with the Department? I think there is much merit in it having an Ireland House arrangement to co-ordinate a cohesive approach for embassies and the other agencies, including IDA Ireland, which operate abroad. That is imperative.
Mr. John Whelan:
We have raised it with the Department of Foreign Affairs and Trade. Generally the Department is supportive but it has pointed out that there is a capital expenditure cost. We raised the matter with Mr. John A. Moran, Secretary General in the Department of Finance. When he is shuffling the budgets I hope he can take into account some of the small cost structures that may have to be put in place to enable Ireland House arrangements to go up throughout the globe.
I was trying to establish one point. Sometimes in public bodies - it also happens in the private sector - people can become rather proprietorial about their area. As a consequence, politics goes on and this can be an obstacle to achieving the goals of the mission statement or the objective that the country wishes to achieve. Will the association comment on this? The association referred to something we could usefully support or take up, that is, the association's aspiration to best practice whereby embassies abroad would be evaluated. I know anecdotally that some are especially good because of the personnel they have. These embassies are proactive, positive and constructive in their work. However, I have heard that it can be slipshod in other areas and that it is not uniform throughout the system. The suggestion of a role of some sort for the association has merit. The question is relevant for IBEC as well. Does IBEC monitor the performance of our embassies and agencies abroad? We cannot afford to fail with the objectives and exercises we are undertaking. We must get real value for money and we must get results. Some of what we were saying was somewhat aspirational. Are hard-core evaluations being carried out, rating the successes in these countries or the lack of them? If one carries out peer reviews and comparisons in any organisation one tends to raise the game. We should try to bring everyone up to best practice.
Mr. John Whelan:
I will take the first piece and then I imagine my colleagues in IBEC will answer. There is a need to evaluate return on investment with all expenditure. The response by the Department of Foreign Affairs and Trade to our request for a greater presence in the emerging markets has been that it would have to be done within the existing budget. We strongly welcome the fact that the Department has appointed a house to carry out a review of the value of the embassy structure throughout the other 26 EU member states. We will be meeting the people the Department has appointed to carry out the review to establish the value for money or return of our 26 EU member state embassies. One assumes the Department can then assess whether it can save anything in that respect as a first stage to shifting money to some of the other embassies abroad. The process of benchmarking is fully accepted by the Department. Once we have finished the EU 26 I am keen to see the process carried out in Africa to determine if value for money is coming from Africa as well.
Dr. Pat Ivory:
We get regular feedback from our members of their experience of embassies and largely it is very positive. There are greater challenges for some embassies than for others because of the resources available in many cases. For example, Dr. John Dardis works with the Department of Agriculture, Food and the Marine as an agricultural attaché in Washington. That is helpful to our food industry but as a country we do not have the resources for an agricultural attaché in every embassy. Some of this is down to the resources available. We have found the ambassadors we have dealt with, including Michael Collins in Washington, Declan Kelleher in China and throughout the spectrum in Africa and the emerging markets, to be very committed. They have been willing to work with us to try to resolve market access problems that can arise, for example, in Russia or in the Middle East from time to time. This has been valuable.
We are willing to work with the Department of Foreign Affairs and Trade to help to enhance the skills of diplomats placed abroad. In this context I was pleased to accept an invitation from the Department of Foreign Affairs and Trade last year to give a briefing to all the diplomatic staff at all levels who were being posted abroad. We carried out two workshops with them on understanding business concerns and issues and the commercial side of things. By working together in partnership we can help the diplomats abroad perform to the best of their ability. On the whole, the feedback from our members is very positive.
I thank our guests for addressing the meeting today and I congratulate them for their positive attitude. It is refreshing to see such a positive attitude displayed by people at the coalface, especially at times of economic difficulty. I congratulate both organisations for their work, especially in respect of the passage of the fiscal stability referendum as well. I greatly appreciate it.
The Irish Exporters Association referred to a positive attitude in general. Like the delegations, I attended a presentation by the outgoing chief executive of Glen Dimplex recently. This presentation was referred to in another capacity at a Joint Committee on European Union Affairs meeting. The presentation portrayed this country and the companies in this country in a very positive way. I have never seen as good a presentation anywhere. Whatever influence the delegations and the Chairman have should be used during Ireland's Presidency of the EU Council. Similar presentations should be used during Ireland's Presidency for other companies. Nothing could convince anyone as much as those presentations can, do and will.
I agree strongly with the points made in respect of trade with Africa. The great advantage is that we do not rip off the African economies and that is important in the present climate.
I will allow the delegations to answer these two questions from Deputy Durkan and then we can come back to him again. Both organisations can address the questions on Africa and the Irish strategy for the Presidency of the European Council.
Mr. Brendan Butler:
We see the EU Presidency as important. It is an important six months in terms of brand Ireland. I sense that at European level, while we were seen as a difficult country some years ago, a great deal of effort has gone into trying to restore Ireland's international reputation.
It is our sense the Presidency affords a great opportunity and to that end IBEC has been working closely with the Departments of the Taoiseach and Foreign Affairs and Trade.
Africa offers tremendous opportunities for investment in infrastructure. We now accept that the economy was built on a false premise in terms of its over-reliance on the construction sector. Part of our report dealt with opportunities for Irish companies to gain access to some of the major expenditure on infrastructure. However, Deputy Durkan made a critical point. When we speak about trade, exports and foreign direct investment, we tend to mean the major American companies, but in the past five to ten years we have developed a range of Irish-owned multinationals. The Deputy referred specifically to Glen Dimplex, but other companies include CRH with its 75,000 employees.
Mr. Brendan Butler:
Kerry Group and Glanbia are also enjoying extraordinary growth. Paddy Power, Ryanair and DCC are other examples of successful Irish multinationals. We need to look at these companies as our champions and if we are to connect the Presidency, Africa and trade, we need to get more indigenous companies to operate on that scale. Some of these companies started off as two or three person operations. American multinationals employ 100,000 people in Ireland, but 75,000 are employed by CRH alone, with 65,000 in the United States. We tend not to recognise or promote these companies as champions, but Irish companies are the tenth biggest investors into the United States. Whether we speak about the Presidency or IBEC, we are speaking about trade. We have champions, but we need more of them.
Mr. John Whelan:
I thank Deputy Durkan for his comments on the gold medal award for Mr. Martin Naughton of Glen Dimplex. We will certainly take up the suggestion of repackaging it in some form in order that it can be used during the Irish Presidency. We have praised the Department of Foreign Affairs and Trade for increasing substantially the number of ministerial trade missions last year. It appears, however, that the Department will cut back on such missions during the Presidency because of the workload involved. We are most anxious that it does not cut back on them during the Presidency. Clearly, we have to maximise the Presidency, but at the same time we must be conscious of the need to open a few more doors.
Mr. John Whelan:
Trade missions enable companies to develop a footprint in emerging markets on the basis of a Minister inviting people to attend functions or signing memorandums of understanding. This work does not carry much weight in European economies, but it has a big impact in emerging economies which are politically driven and can allow companies to pass through doors which would not otherwise be opened. Furthermore, our competitors in other European countries are putting a phenomenal amount of work into trade missions because they, too, are trying to overcome their problems through exports. They have upped their game and we have to do likewise. If they are travelling with a Minister, we must do the same or we will lose traction.
Dr. Pat Ivory:
Trade missions and the co-ordinated efforts of embassies, Enterprise Ireland and Bord Bia have been very effective. For example, during the major agrifood trade mission to China which took place earlier this year the role played by the ambassador, Mr. Declan Kelleher, and his team was appreciated by industry. From an Irish perspective, we have a great advantage in the State agency structure we have developed. Many of our European partners envy the fact that our agencies are promoting Irish exporters. This is not available to all SMEs across Europe. The strength of the Irish system is the role played by agencies such as Enterprise Ireland and Bord Bia.
We are all singing from the same hymn sheet. I am encouraged that the delegation applauded the efforts of the new Government in rebuilding Ireland's profile in the world. That was a deliberate policy, with the addition of trade to the remit of the Department of Foreign Affairs. The committee meets all of our ambassadors on a regular basis, as well as visiting delegations. We recently met the Congolese Minister for the Environment, Nature Conservation and Tourism. The Congo is a vast country. It is the Brazil of Africa, a vibrant continent, the economy of which is growing at a rapid pace. The Africa strategy plays an important role in our potential development and relationships with Africa. The delegates referred to the Kenyan who was the leader of the African group of ambassadors when we met them. They want trade links. Yesterday a Minister pleaded with us to invest in the Congo. However, it was interesting to study the figures. The Congo exports €100,000 worth of goods to us, while imports from Ireland total €32 million. There is a huge imbalance, but these countries are pleading for investment.
When the British ambassador introduced himself to the committee, he mentioned areas in which we could co-operate. I am delighted that the delegates referred to construction. We have a highly skilled and professional class of engineers, architects and developers who may not be able to take on major infrastructural projects on their own, but the ambassador suggested British and Irish companies could liaise on projects.
I have many questions, but I recognise that the Chairman will not permit me to ask all of them. Reference was made to the workshop on China held in UCC. Dublin City Council successfully opened the door by twining with Beijing. UCD has the Confucius Centre and both the DIT and UCD have huge Chinese departments. Why was UCC chosen over UCD or the DIT in the context of organising seminars on China?
We are warmly regarded by the delegations who come here. In the international arena there is a great deal of trust and belief in us as a nation. The fact that Ireland won a seat on the United Nations Human Rights Council is evidence that we punch above our weight. The question arises as to whether we are exploiting our position sufficiently.
Dr. Pat Ivory:
In terms of the Africa strategy and working in partnership so as to get a better foothold and tenders for Irish companies, this is specifically what the report looked into. It looked at building a cluster for infrastructure projects and at helping Irish engineering companies and companies with project management expertise to gain access to international tenders, possibly ones funded by the European Commission, the European Investment Bank or the World Bank. Previously, our scale of operation has, to an extent, excluded us from participating in these tenders. The report produced for us by Schuman Associates in Brussels, in collaboration with the Department of Foreign Affairs and Trade and the Irish Engineering Enterprises Federation, specifically looks into this. There is a proposal between us and Enterprise Ireland to develop a cluster of these engineering companies here to become involved in tendering to win business. One of the initiatives we would like to see would be to see Ireland joining the African Development Bank and this has been raised with the Minister of State at the Department of Foreign Affairs and Trade, Deputy Joe Costello. We are already members of the Asian Development Bank. Obviously, there is a cost involved in joining, but it is well worth considering.
On the question as to why we chose UCC, the answer is simple. UCC came to us and asked us if we would be interested in developing something with it. We worked with UCC for over a year to try to tailor its programme to be as business focused as possible and when we reached a stage where we were both happy with it, we ran a workshop together a year ago. That was very successful and well attended and we now have a second workshop planned. There is good interest in the workshop, which will be a full-day workshop in IBEC. The reason we selected UCC was because the school of Asian studies and Irish Institute of Chinese Studies in UCC came to us and said they were interested in doing something and asked us to work with them. Of course, we agreed.
Mr. John Whelan:
On Deputy Byrne's question on education, Dr. Liming Wang of the Confucius Institute for Ireland is excellent and we have done a number of programmes with him. His programme for education in secondary schools is one we have been pushing for a long time, because Mandarin has not been taught in Ireland or many other countries. The US was well ahead of us in terms of making progress in this regard. The value of our programme depends on the sector one is in and one's interest in particular areas. For example, we are running a Smurfit College graduate programme for companies focused on Asia. The graduates are placed on specific projects associated with marketing strategy into Asia and they work with the companies and a mentor from the company and from the college. Over their full 12 months they produce a full business plan. How well this programme works depends on the college and its interest. This particular programme is going very well. We will repeat it with the Smurfit College and have just signed up with NUIG to run a similar style programme for non-Asian countries. The universities are very proactive and want to see more cross links between what they do and the needs of industry, particularly in the international sphere. We are happy to work with all of them.
Mr. John Whelan:
Sorry, on the question on infrastructure, I agree with the IBEC approach. For a long time we have pointed out that many of the big international contracts are given to major international architectural and engineering houses, with either African Development Bank or World Bank participation. Sometimes the only way to gain access to some of these contracts is to work through these other parties. Therefore, collaborative structures in infrastructure areas are probably the only way we will be able to participate. We believe the approach presented by IBEC is fine.
Mr. Michael Slein:
Deputy Byrne mentioned collaboration with UK construction companies. To return to a comment made by our colleagues from IBEC, I would not underestimate the champions we have here in the construction sector, Kentz Group, Mercury Engineering and Laing O'Rourke, all of which are as big or bigger than many UK comparative companies. Therefore, we have companies here that are capable of going out to do massive infrastructure projects.
I saw at first hand Mercury's concept stadium for the World Cup in Qatar in Doha. Senator Daly travelled on a six-day trip to the US and saw at first hand the link between Georgia Institute of Technology in Atlanta and here and other universities. Perhaps the Senator will comment on that trip besides putting his question.
I am sure the witnesses are aware from their own experience of many of the issues. One of the issues, particularly for businesses in San Francisco, is direct flights. I know this issue is back on the agenda. We wrote to the Minister, but the response was not entirely encouraging. Some 40% of our foreign direct investment comes from San Francisco, but there is a problem with regard to flights between Ireland and San Francisco. It is like having to send people to Paris from here in order to get them to England. This is trying and wearing and we are losing opportunities because of it. Have IBEC or the Irish Exporters Association had any engagement with the Government on this. I believe the issue was raised at its last meeting.
Mr. John Whelan:
We fully accept that. There is a need for direct flights to the west coast of America. We have pushed the issue on a number of occasions and the DAA is actively working on encouraging a number of airlines to go that way. The initial assessment given by Aer Lingus was that it cannot make the numbers work commercially. The DAA has brought some parties to the table and we have indicated that they could make it work in collaboration with another airline. For example, Turkish Airlines would be anxious to go to the west coast, but in terms of landing rights and so on, it would probably need a collaborative agreement with Aer Lingus. It could come through from Istanbul to Dublin and then on to the west coast of the US. The numbers could work in that way provided sufficient numbers came through from Istanbul. There are potential solutions, but we need to be creative and come up with one quickly. Otherwise, we will turn off some of the tap from the west coast. When we get foreign direct investment and want to ensure it goes deeper and employs more people, we must make it easier for the key shakers and movers to get back and forward between their subsidiaries. Therefore, in order to underpin even our existing investment from the west coast, it is key the issue of this access lane is addressed rapidly.
Dr. Pat Ivory:
The Chairman put his finger on the issue in saying it is a commercial decision. I am aware Aer Lingus tried to run direct flights to the west coast, but stopped due to the fact the route was financially unviable. Obviously, many IBEC companies have investments in the United States. Some indigenous Irish companies have invested in the United States and their executives need to fly back and forth, as do those from many American parent companies here. Improved air services would be welcomed by Irish businesses and our members. The DAA, particularly now it has its new facilities and terminal 2, has been working with new airlines and has announced new flights involving American Airways, United Airlines and others.
They outlined some of those new flights to us yesterday at the transport council. They are actively looking for solutions to this challenge. As Mr. Whelan said, if Turkish Airlines or Emirates which now has a large presence in Terminal 2 at Dublin Airport can develop a route with transfers to the west coast, we will certainly support it.
Mr. John Whelan:
The numbers coming from Asia are not showing. Quite a few of them travel through Asia and onwards with Etihad Airways and Emirates. We are not seeing it in the actual trade figures with Asia per se, but the Middle East figures have increased quite a bit. One could say access is helping this. One of the big advantages of travelling through the Middle East is that there is a tremendous network from there into Africa. These connections will make it much easier for us all to trade through Africa. The big advantage is that certain people are considering markets they would not have considered previously. It takes time after the initial assessment. If the connections are good for people and cargo, it is worth pursuing, but it can take up to two years. We, therefore, need the airways to continue to provide these services. If they do, it will yield long-term benefits.
I would like to return to the point I was making about direct flights, an issue on which the Dublin Airport Authority and some of the multinationals are working. However, Government authorities should be driving it. They need to assist to bring us over the line. They can buy seats on an airline just as anybody else can, although the European Unon might have issues with this. This is the most important air route we could have. I am sure it is a matter of concern for everyone present that we should have it but do not.
The issue of consulates which has been mentioned also came up in San Francisco. Given that there are 40,000 Irish passport holders in the Bay Area, it is clear that the consulate in San Francisco pays for itself. Irish people, apparently, lose more passports than people of other nationalities. The way we are organising our consulate service is not acceptable, as we are losing great people in San Francisco. Nearly everybody who becomes the deputy gets a very good job in the Bay Area. We have come across some great honorary consuls. It is ridiculous to expect the consulate in San Francisco to cover an area almost the size of western Europe. One cannot have the job done in such circumstances. There are honorary consuls in San Diego and at other locations. We have pointed out that huge costs are not associated with honorary consuls. It is a touchstone. If the representatives of an Irish company were arriving in Denver, for example, there should be somebody there to deal with them. Other countries do these things. We do not, even though it would not cost very much.
We have our report on the global economic forum. I am sure the delegates were present at the most recent forum. Many concerns have been expressed about the third forum. I have highlighted the issue at the committee. Many said at the second forum that not much had happened after the first. It was suggested very busy people who had been willing to give of their time to the project - time is money for such persons - would not continue to do so if results were not being seen by the time the third forum was held. The emigrant investor programme was mentioned as an example of what had been achieved in the meantime. It will be of concern to IBEC's members to learn that one application under the programme which was announced at the start of the year has been processed. I understand a further three applications are in the pipeline. That is poor, by any standard. It should be a no-brainer. It should be churning out stuff. I am using this to indicate what we will have to mention as an example of what we have achieved in two years when we are inviting people to attend the third global economic forum. If this achievement rate is anything to go by, we will not have a third forum. It will be said we are not achieving. I would like to get the delegates' views on the global economic forum. It is a great idea, but we are not putting enough human resources into bringing all of the initiatives to fruition.
Mr. Brendan Butler:
I will speak about the global economic forum and the related point about the value of consulates. One of the key issues with all of these initiatives is that it is hard to measure their impact. It would be useful to find a means of undertaking some cost-benefit analysis to determine whether the holding of an event, or the establishment of a consulate, actually yielded a positive return. Our instincts tell us that it should, but that is not scientifically based in any way. It has been suggested that as a country, we probably need to come up with some criteria for determining the value of some of the decisions being taken. We need to assess whether doing X is more valuable, in terms of international reach, than doing Y. Would we get more value from holding a third global economic forum than from spending money on The Gathering or other events? It is a flaw in our policy process that we find it somewhat difficult to measure these things in a real way. We tend to rely on instinct, touch and feel. The best information comes in the form of feedback from companies. It would be much more effective if some cost-benefit analysis or scientific approach was used when some of these decisions were being made.
Mr. John Whelan:
Senator Mark Daly will be aware that our main embassy in the United States is in Washington and that we also have consulates general in Atlanta, Boston, Chicago and New York. It is interesting that they are all located on the east coast. I, therefore, accept that we need more coverage on the west coast. The Department of Foreign Affairs and Trade will need more funding if it is to be able to do this. However, I agree that the imbalance needs to be addressed.
There have been some wins as a result of the global economic forum. Glen Dimplex has been mentioned. Mr. Seán O'Driscoll was recently appointed as our trade ambassador to Japan. A series of such appointments arose from the global economic forum. Work has been taking place on such appointments in various parts of the world, but it takes time to get the right people. It is then a question of what can be done to support them. This approach is working well.
An upgraded visa that is easy to use was supposed to have been introduced by March last year, but that did not happen. The easement for the Olympic Games was not a great solution. A final solution involving the sharing of biometrics, etc., looks like being much better in the long term. Ideally, we would invest more in the proper biometric facilities in our embassies. We need to be more innovative in this regard. We all remember the strong commitment to resolving this issue made at the global economic forum, but that has not yet been done to anyone's real satisfaction.
Many other suggestions were made at the global economic forum, for example, with regard to the awarding of special accolades to people who had done special work for Ireland. There have been a number of wins. Our approach in a number of areas has not worked and needs to be revisited. Unless a group is paid by the State to do nothing other than to go through all of the recommendations to see who will implement them, how far we have got with them and what we intend to do about them, any future endeavour of this nature will be anticipated with a degree of scepticism.
I would like to ask Mr. Whelan a question about what he said about the embassies. We went to America to see how our consulates were working. Obviously, we looked at the latest consul general's office in Atlanta. It is a one-man operation, although there is also a local staff member. It is working extremely well. We also went to Texas, one of the fastest developing states in the United States, with 48% of all new jobs in the United States being created there last year.
To have a presence in either Houston, Austin or Dallas would be important for Ireland. There are 85 consul general offices in Houston at present. Do we lose out much by not having a presence in booming and growing areas?
Mr. John Whelan:
Yes. Even where we have them, if they are proactive with the business community, it makes a significant difference. It is very much a question of having a proactive consul. It is not just a case of putting a head in; we have to put in a good head. After that, businesses can usually work well with them.
One of our colleagues on the national council has just come back from the United States and has pointed out that every state has its own rules and regulations with regard to every commercial agreement. He was just trying to get one line changed in an agreement and he had to go through three different local state rules and use local state agencies to go over the agreements again, as well as having to pay $1,500 each time for a one line or, as he maintained, two word change in a contract. This is where a consul, if he or she is switched on, can ease the situation in any particular state. However, one has to gauge whether it is worth it, whether to have consuls in every state or in which states to have them, and whether it is value for money.
It is an issue right across the embassy structure. This is why reviewing value for money within the EU and seeing whether we can release any of the resources into other markets is an extremely important aspect. Ideally, we need to transfer more funds into services abroad such as our embassies, Enterprise Ireland and IDA offices abroad and the Ireland House concept. This is the big issue facing the Government. If we can allocate the funds, it will underpin our export growth and our employment growth. If we cannot, we will drag along at a pace which will not have the kind of return in terms of jobs on the ground here in Ireland.
We have gone over the issue of the consuls. We could get guys like Mr. Joe McGlynn, who has done it for free in St. Louis for 30 years and is an excellent consul. At the same time, members of Intel and others have offered to go on State boards and said they are willing to serve. These are guys with experience the Government literally could not buy but I do not know how many have been appointed to State boards by the Government. They would be of great benefit to the members of the Irish Exporters Association and would be people they could pick up the telephone to contact. Is it a concern that this offer by so many people has not been taken up?
I have five questions and I will ask them quickly, if the Chairman will allow me. First, with regard to the BRIC countries, we have mentioned Russia and China but not Brazil and India, and I will also throw in Indonesia and other developing countries. Is there anything the witnesses would add in regard to areas where we are not represented? My second and third questions are related. The second is straightforward. How do our exports break down in terms of percentage between FDI and indigenous companies? Mr. Whelan talked about visas. Should we join Schengen, in his opinion? On exports generally, from memory, the EU saw 15% growth last year on average whereas Irish exports grew by 4%, which worried me at the time. Will the witnesses comment?
Mr. John Whelan:
The Senator mentioned Indonesia, where we do not have an embassy. His question underlines again that Indonesia has a major economy, is growing rapidly and there are great opportunities there. Moreover, as there is state domination, the embassy structure can be very important there. This underpins the earlier points we were making.
On the whole issue of EU versus Irish export growth, one would have to take the years since 2008. Our exports had dipped down very heavily so, as they are coming back up, comparison levels can get lost in the year-to-year situation. Generally, our manufacturing side has been suffering and our services side has been growing extremely rapidly and continues to underpin Ireland as one of the top locations for services export globally. What we need to be careful of is that 75% of all our FDI last year came in by way of services companies, and this could be a long-term concern for exporters on the manufacturing side. We have to watch the trends over more than one year.
The main issue on Schengen is our relationship with Britain. If we pull out of Schengen, every time people go to Northern Ireland, they would have to get a pass. The Department of Foreign Affairs and Trade says this is its only issue with Schengen so-----
Dr. Pat Ivory:
On exports, Ireland is still reaching record levels of exports, when one considers the actual value of our exports. I go back again to the growth in services exports that has been achieved and is likely to continue. This encompasses much of our software sector and also new emerging areas of services exports such as project management, consultancy and so on. We can get too focused on year to year figures whereas we should look at the longer trend. In addition, it is true to say we rely on growth elsewhere. We need a strong European economy and US economy. That is where working together to have an international agreement on EU-US trade could stimulate growth and create jobs in Ireland, Europe and the US. We need to stimulate world growth to get our exports going. Schengen is a political issue and I would not claim to have expertise in that regard.
Given the need for growth and job creation, even in the difficult situation in which we find ourselves, I ask IBEC to identify two issues it would see as impediments to job creation and I ask the Irish Exporters Association to identify two issues it would see as possible impediments to the development of the export sector. By the same token, I would ask the reverse question, namely, what are the positives?
Mr. Michael Slein:
To answer on behalf of the Irish Exporters Association, the first major issue is access to finance. For example, a typical business that wants to add €1 million in turnover has a requirement for €300,000 in terms of funding stocks and debtors. Therefore, if I want to grow my business by €5 million, I need somebody to give me €1.5 million, and that is not available. It is as simple as that. Forget all the advertisements we hear on the radio about Bank of Ireland being open for business, it is not.
The second big issue is the allocation of resources. Senator Walsh asked about India and China. These two countries represent almost 50% of the world's population and we have some 15 to 20 representatives between them, whereas Enterprise Ireland has 300 people in East Point. That is a classic example of poor allocation of resources.
Dr. Pat Ivory:
In terms of job creation, it is a question of skills. We need to look at how we can help people to change their skills and adapt them to new requirements.
For example, through initiatives such as conversion programmes, engineers who had previously worked in the construction sector were able to do a year-long conversion course which provided them with the skills required to work as engineers in other sectors, such as the software sector, where engineering skills are needed. This focus on skills and on helping people who are currently unemployed to convert their skills, thus enabling them to get back into the job market, is important. There are also some good initiatives in the area of science and maths skills at second and third level. The pharmaceutical and technology sectors have for many years been calling for a focus on producing more science and maths graduates in order to fill vacancies in the sector. Currently, many companies in this sector cannot find people with the required skills to fill jobs.
It must be remembered that trade consists not only of exports but also of imports. We need to get our domestic economy going again. Initiatives that can strengthen our domestic economy and boost growth will be good for companies that are selling their products on the domestic market. They would also assist in increasing our level of imports. Our port authorities, shipping companies and airlines benefit when the economy is doing well, which in turn ensures we have a greater capacity and ability to import products that we do not produce. Imports as well as exports have an important role to play in our recovery.
We have heard statistics for the growth in trade links with Russia as compared with China. I would like to focus on the Chinese element. Do the organisations view China as a particularly different market compared to other countries? Also, are all of the players singing off the same hymn sheet? The embassies were mentioned. We are all aware of the value of embassies. While we would like to see more opened, three of our embassies have had to be closed owing to the economic climate. However, there is a hidden other sector that we should look at. Dublin city has an international office. Dublin is the capital of Ireland. Many multinationals are based in the Dublin region. Many years ago, Ireland entered into negotiations with San Jose which resulted in the development of a productive relationship between this country and an Irish-American mayor and academic. We have never looked back since. The relationship built at that level was phenomenal.
We have gone to a lot of trouble in building relationships with China, including through the twinning of Dublin with Beijing and Cork with Shanghai. As an individual citizen who happens to be a Deputy, I met, along with Dr. Lemming, with a range of senior executives of a company called Baosteel, which is either the second or third largest steel manufacturing company in China. They were brought in by a Cork company which has since shifted its manufacturing plan to China. Are we pulling all the strings together? For example, we have been hearing about airline operations to America. When the Lord Mayor of Dublin visited China he was able to open doors that were phenomenal for the Dublin Airport Authority, DAA, which entered into negotiations with two or three Chinese airlines with a view to establishing links. Do both organisations recognise the value of Dublin, the capital city, as a marketing tool? Do they also recognise it has an international office and engages in a big way with St. Petersburg and China? Is everyone pulling together in order to achieve greater successes, particularly from the point of view of China?
I pay tribute to the delegations before us, who have been most forthright and informative in terms of the information we are getting. I have two questions for IBEC. IBEC has regional offices. There is evidence that many small companies do not have the resources to develop export markets. Is IBEC, through its regional offices or any other mechanism, proactive in trying to identify such companies, which could be the Glanbias of the future? Related to this is the matter of the FDI and pharmaceutical companies in respect of which licences for certain prominent drugs are due to expire. What impact will this have on our exports?
My second question relates to a good point made by Mr. Slein, which was that the biggest challenge facing most of our companies is credit. I note Mr. Butler referred to the damage to Ireland's reputation. It is accepted that the banks were a prime player in this regard. The banks are also prominent members of IBEC. Is there some discussion going on within the IBEC family to try to get the banks to function in a way that supports small businesses and to deal with the high levels of debt, particularly private debt, which, if they do not address this issue, will prevent them from providing credit in the future? Is there any activity within IBEC in this regard?
Mr. Michael Slein:
I do not believe that for the majority of small indigenous Irish companies with ambitions to grow their export businesses, China represents low-hanging fruit. A prominent brand name represents a fantastic opportunity. For example, the main focus of attention for all of the super car manufacturers - Ferrari, Lamborghini and Bentley - is the Chinese market, where such brands are growing exponentially. As such, China presents a fantastic opportunity for Baileys, Jameson or any of the really prestigious Irish brands. For the vast majority of small indigenous Irish exports, however, it is not low-hanging fruit.
Dr. Pat Ivory:
Obviously we view China as a different style of market. One of the reasons we are holding the workshops is to enhance the ability of SMEs to do business in what is a very different culture and to help them understand the differences between, for example, doing business in the UK and US and doing business in China. It is good to see linkages between Dublin city and Beijing and Cork and Shanghai. IBEC recognises the role agglomeration can play and the strength of the Dublin region in terms of trade. However, it is important to develop a good regional spread throughout the country. We must strike the correct balance in this regard. It is also important that we leverage our strengths with regard to the infrastructure and resources we have in this country. Terminal 2 at Dublin Airport is a great resource, as are the airports at Cork and Shannon.
Dr. Pat Ivory:
No. There are proposals made by the Government to separate Shannon Airport from the Dublin Airport Authority. It is important that the importance of Shannon Airport for regional development is recognised. We have met the two task forces put in place by the Government to develop business models to help Shannon Airport to develop into the future and also to look at the new structures being proposed for Enterprise Ireland and IDA Ireland and the taking over of some of their roles. This is an important item that must be advanced in the coming months.
There was a question on the role of our regional offices. Identifying companies is not a role they have ever played. However, we work very closely in partnership with the State agencies, Enterprise Ireland and IDA Ireland. In that context, we very much welcome the decision of IDA Ireland to have an increased focus on attracting foreign direct investment from Asia, with a new internal structure to consider whether more investment can be attracted, from China in particular but also elsewhere in Asia. The visit earlier this year of Mr. Xi Jinping was very welcome in terms of the State agencies and the Government working together to advance this objective.
There is certainly a challenge in terms of patents running out for certain drugs produced in Ireland by the pharmaceutical industry. We must face this challenge. Over time there has been increased emphasis on undertaking research and development in this country, which is proving to be successful. We are attracting new investment in reseach and development in the pharmaceutical industry in order to develop new products and perhaps change the style of some of the business we do. This is continuing and it is very welcome.
On the issue of finance and banking, access to credit and finance presents a challenge for the economy. As we exit the troika programme and make further progress towards getting back to the markets, I hope in 2013, there will be an opportunity for us to introduce new finance and provide for access to finance into the economy. We look forward to this happening and are very pleased that Ireland's performance in the troika process and the reports on this have been very positive. We are meeting our targets and well on target to exit the programme are as planned. The Minister for Finance has made it clear that Ireland is capable of returning to the markets in the near future, which is something to be welcomed.
Are debate and discussions taking place within the IBEC family? This issue affects many of its members. I am aware that the banks are significant members of Dr. Ivory's organisation, as well as significant contributors. However, many of its members are suffering as a consequence of the lack of credit from the banks. In spite of the fact that the banks are big contributors, an organisation such as IBEC should be extremely proactive in playing its part to ensure this issue is resolved. I am trying to elicit from Dr. Ivory whether IBEC is on the sidelines or proactive in trying to make this happen.
Before I allow Dr. Ivory to answer that point, I will allow in Senator David Norris who is very anxious to contribute. He had to attend Private Members' business in the Seanad but was present for the presentations.
That is appreciated. I offer my apologies; I wished to contribute during Private Members' business.
The delegates are most welcome and it is very interesting to hear what they have to say. As they can imagine, I come at this issue from a slightly different perspective. Although they were delighted at the change in name of the Department, I was concerned by it because I could see a recalibration in the direction of trade rather than human rights. It is very important that we keep human rights to the fore. As for returning to the markets, off with everyone, as I do not believe they will last that long. Ultimately, it is likely that within 50 years capitalism will be banjaxed and I hope that will be the case. Of course, we are going to re-enter the markets. We are being patted on the back by the troika and all kinds of people. Dr. Wolfgang Schäuble visited Ireland to tell us how well we were doing and that we were an example to be pointed to. Yes, that is so - at the price of evictions and having soup kitchens. Did I ever think, as an Irishman, that I would see day when we would again have in this country soup kitchens and evictions, just as we are about to celebrate 100 years of our glorious struggle for freedom? There is, however, a contrary view.
Life is very complex, even in a business sense. I have dipped my toe in the water of business, successfully enough, but for reasons other than commercial. It is fascinating and one gets a great kick out of it because it is like a game, something wonderful like Monopoly. However, I point to its two-sided nature. Patents running out is a problem for Ireland in one sense, although in another it is good for us. On the one hand, we bemoan the fact that patents are running out, while, on the other, we push as hard as we can to ensure they run out for the big pharmaceutical companies in order that we can have generic drugs and reduce the cost to the health service. There is a very curious and interesting balance.
I have two questions. I am delighted to hear Terminal 2 is doing so well, although when I was in it last week, it was virtually empty. It is, however, a beautiful building. To me, it is almost a symbol of the difficulties the country faces - a stunning and wonderful building for an anticipated market that has not materialised and may not do so, although I hope it does.
My first question is on human rights. China and low-hanging fruit have been mentioned. Again, this is fascinating. What an irony it is, however, that it is the Lamborghinis and Bentleys of this world which are picking the low-hanging fruit in what is still supposed to be a Communist country. There is a wonderful refreshing irony, but I wonder about it. One might consider what has happened in Tibet, for example, and the recent considerable increase in the number of Tibetan Buddhist monks who set themselves on fire and killed themselves. At what stage, if ever, do human rights enter the equation? I do not imagine this question is asked very often by the delegates and I do not blame them for this, but is there any point at which human rights enter the equation? Perhaps there is not.
My second question concerns the corporation tax rate of 12.5%. Mr. Whelan has mentioned that his organisation was involved in creating this tax in 1951. I have always been a little worried about it because it seemed fragile and represented something artificial, something that would lead to situations where companies would have an office with a nameplate in the International Financial Services Centre through which profits would be manoeuvred and accounted for tax purposes. I am delighted if the country can make money out of it, but I wonder if there is an exit strategy, just in case the measure comes unstuck. I do not believe, however, that it will as a result of a direct attack, in a political sense, by France, Germany and the Dutch. It is far more likely to come under attack because people have now woken up, for example, to Starbucks. There is a big stink about Starbucks which has made a vast profit on which it has paid no tax whatsoever because it has a deal with the Dutch. We should note the hypocrisy. The Dutch are the ones who want to screw to the wall the Greeks - and us - while they are fiddling as hard as they can. They can make a profit out of this by recycling and money laundering, which basically is what is going on. It is the same with the French. They are no longer after us but chasing Facebook and Google for their profits.
I reiterate my two questions. It will not surprise nor shock me if the delegates tell me there is no point at which human rights will ever enter the equation but I ask the question in any case.
My second question relates to whether our guests have an exit strategy. I am not advocating that we get rid of the 12.5% rate, particularly as it is of advantage to the country. However, there is a difficulty. Any problem which arises may not come from the obvious sources.
Mr. John Whelan:
Ethical products are very much the in thing globally. Most of our multinationals have already bought into them and indigenous companies are buying in more slowly. Next week, for the first time, a sustainable exporter award will be presented at our export industry awards ceremony. We have been pushing very hard in the greening of the supply chain and Bord Bia has introduced its Origin Green initiative. All of this is aimed at bringing about more sustainable, ethical production, whereby we will not be damaging the planet or the people who inhabit it. As most poverty has been eliminated through international trade, we want to keep pushing in that regard but without disadvantaging anyone in the process. Trade and human rights can sit very comfortably alongside each other. Corporations in Ireland which have been doing well on the export front have been buying into this message. Besides being good for one's soul, it is also probably good for business to be waving the flag for human rights and ethical products.
Mr. John Whelan:
The low rate of corporation tax here has been extremely valuable to the economy and is responsible for 90% of our exports. A large proportion of our expertise in international trade - even that of indigenous companies - comes from companies which spin off from multinational companies. We have been obtaining good returns from the corporation tax rate. I accept that there is a need to develop many more indigenous companies. It must, however, be borne in mind that when we do develop such companies, they end up being taken over by multinationals. As a result, they are suddenly outside the loop again. We find that the published and actual effective rates of corporation tax differ. For example, the Netherlands has all sorts of deals available which lead to its effective rate being reduced to a rate below ours. In addition, the French have an effective rate which is very similar to ours. The corporation tax issue is occasionally singled out, but, by and large, our rate is probably reasonable, particularly if various deals are not put in place to reduce it.
Deputy David Norris referred to an exit strategy. The position in this regard is similar to what would happen if one were trying to execute an exit strategy from the global banking structure and the related bonus culture. Unless everyone agrees to something globally, those with the skills to manipulate financial markets will move to wherever they can minimise their tax exposure. It is the same with corporation tax. Ireland is only one player on the global scale. It is a reasonable player which provides clear governance rules for investment and the return on investment out of the Irish market. Ireland is not a banana republic. If we remain on our current path, we will continue to do well. We would only execute an exit strategy if other countries also began to exit. Meanwhile, we are reasonably well positioned.
Dr. Pat Ivory:
Our well-known position is that we are 100% committed to maintaining the rate of corporation tax. That will continue to be our position which we have defended successfully in the past and we have the ability to do so again in the future. Our corporate tax regime is transparent, while those in other jurisdictions are less so. For example, other countries have many more exemptions and ways of paying less tax which are not apparent from the headline rates that apply. There will always be discussion of tax levels. As the eurozone moves forward and meets the challenges facing it and as the European Unions discusses its challenges, all of these issues will arise again. We must be prepared to defend our corporation tax rate in that context.
On human rights, companies are increasingly cognisant of their corporate and social responsibilities. A raft of international legislation is now in place in this regard. I refer to the UN Convention on Human Rights and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions which we have signed. In our experience of Irish business, there is a strong commitment to trade in a sustainable and fair way.
I thank our guests. This has been a very useful discussion in the context of the report the committee is preparing. I thank both groups for coming before us. The experiment of having both of them present worked very well because members were able to put the same questions to each of them, which was important.
The committee has still to decide on its work programme for next year. Last year we concentrated a great deal on the United States. For 2013, we will certainly look towards Asia as a destination to visit as part of our work programme. In that context, we might seek some information from our guests on the countries they believe we should visit as part of our work programme.
I take the opportunity to support the work of our embassies abroad. Senator Jim Walsh expressed concern about some of the embassies.
I have visited and been in contact with many of our embassies and they are extremely active in the areas of diplomacy and trade. Ireland has a small network of embassies which cannot be compared to those of the British, the Americans, the Japanese or the Danes. Ireland's embassies are small operations. The embassies of other countries might be run by 40 to 50 staff, while Ireland's may only be operated by four or five. This aspect must be taken into consideration. Our embassies do a great job with the limited resources available to them. I would like our embassy network to be expanded. Perhaps we might consider the locations in which it is important to have embassies and consulates such as Jakarta in Indonesia, the United States, Latin America and South America. For example, we have only two embassies in South America, but we could have many more. We hope we can, as a committee, give some direction to the Department of Foreign Affairs and Trade in this matter. I hope we can work with the Department and our guests. This meeting has been extremely useful and great exchanges have taken place between members and guests. We experimented with a different format and it worked well. The outcome is better when there are exchanges back and forth.
I again thank our guests for coming before us and apologise about the mix-up in respect of Question Time. Deputies Brendan Smith and Seán Crowe would have liked to have been present, but they were obliged to be in the Dáil for the taking of Priority Questions. The information shared at this meeting will be useful to the committee when it is compiling its report.