Joe McHugh (Donegal North East, Fine Gael)
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I apologise for the delay in starting this part of the meeting. I am sure the members of the InterTradeIreland delegation, and those they represent in the work they are involved in, will have been interested in the subject matter of the first part of the meeting. On behalf of the committee, I welcome the officials who are in attendance at this meeting to discuss the issue of all-island economic development. I welcome Mr. Thomas Hunter McGowan, who is InterTradeIreland's chief executive officer; and Mr. Aidan Gough, who is the organisation's strategy and policy director. The members of this committee are familiar with Mr. Gough because we have bumped into each other before. We look forward to hearing more about the work that InterTradeIreland is involved with at local level, with particular reference to the global and cross-Border implications of that work.

Before I invite Mr. Hunter McGowan to make his presentation, I advise him and Mr. Gough that they are protected by absolute privilege in respect of utterances at this committee. However, if they are directed by it to cease making remarks on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their remarks. They are directed that only cognisant evidence on the subject matter of this meeting is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a Member of either House of the Oireachtas, a person outside the Houses or an official by name or in such a way as to make him or her identifiable. I ask Mr. Hunter McGowan to proceed with his opening statement.

Mr. Thomas Hunter McGowan:

As our submission was circulated in advance of today's meeting of the joint committee, I will not go through all of it in detail. I will pick out a few important highlights. InterTradeIreland has been tasked by both Governments with boosting North-South economic co-operation for the mutual benefit of Northern Ireland and Ireland. In the last 14 years, some 25,000 small and medium-sized enterprises have benefited from our cross-Border information and advice service. Almost 5,000 companies have taken part in our all-island programmes. These companies have generated €725 million worth of trade and business development value. More than 3,000 jobs have been created in these small and medium-sized enterprises. The value of cross-Border trade is estimated to be approximately €2.5 billion.

Our visionis to create an environment in which Ireland and Northern Ireland co-operate to ensure businesses are making full use of cross-Border opportunities to drive competitiveness, jobs and growth. Our research has shown that 70% of all exporters took their first steps in exporting by trading with the other jurisdiction on the island, which indicates that there is a pathway to exporting. Our supports focus on two key pillars, which are trade and innovation. The demand for our programmes is very high. We recently received 920 inquiries for the 60 places on our Fusion programme and 770 inquiries for the 60 places on our Acumen programme. The 50 places on our pilot Elevate programme were easily filled. It is clear that there is a demand for an Elevate programme that serves between 75 and 100 companies per annum. It is clear that there is a substantial supply-side deficit for the programmes we deliver.

Our performance is measured by reference to very stringent key performance indicators that are subject to tough assessment. So far, we have exceeded the performance target that has been set for us in every corporate plan. Between 2008 and 2010, the return on our expenditure was 10.6:1, which means that for every €1 we spent, there was a return of €10.60 in business value. Our projected out-turn at the end of this year for the 2011-13 period is 15:1. We had 200 first-time exporters and 92 first-time innovators in the first period. We have had 195 such exporters and 235 such innovators in the second period. Clearly, there has been a focus on innovation. The jobs impact in the 2008-10 period was just over 500 jobs. We estimate that the equivalent figure for the current period will be between 1,300 and 1,400. In the 2011-13 corporate plan, we had to make cumulative efficiency savings of 3% per annum. The number of companies we engage with has increased from approximately 8,800 in the first period to over 9,000 in the current period. The business value generated - the extra sales and efficiencies achieved, or the extra investment made in the companies we are involved with - has increased from €232 million to €321 million. At the same time, our budget has decreased from €23.3 million to €21.8 million. It is clear that we are doing much more with much less.

One of the reasons for our success has been the companies we seek to work with. Our programmes focus on small firms that aspire to grow but have suffered from the decline in the domestic market. As such companies are small, they have often gone off the radar of the larger development agencies. We also focus on building companies that are sustainable by providing them with the capabilities and opportunities for sustained growth. Companies that export or innovate are three times more likely to have grown over the past three years. This fact, coupled with the convergence of business activity across the island at a level where only one in five businesses across the island are reporting increasing sales, points to an economic imperative to increase the number of businesses exporting and innovating.

InterTradeIreland has shown that cross-Border co-operation has a clear and positive role to play in this sector. In the last three years, we have assisted 235 companies to become first-time innovators and 195 more businesses to become first-time exporters. As I have said, some 70% of off-island exporters took their first steps into the export market by starting with cross-Border sales on the island. The benefits of close co-operation for mutual economic benefit have been shown in the research and development partnership between the United States and Ireland and the strength of North-South partnerships participating in the seventh EU framework programme. There is a strong foundation in place for participants in the upcoming Horizon 2020 programme. Our strategic priorities are to stimulate more job creation and job retention by increasing the numbers of businesses that benefit from our programmes, and to do this in the most efficient manner by ensuring the non-programme costs of the organisation are kept constant or reduced where possible. I will welcome anything that the members of the committee might want to say.

Mr. Alasdair McDonnell MP:

I welcome the delegates. I am glad to be here. Before I ask a few questions, I want to say that I am big supporter of InterTradeIreland. I sometimes hear criticisms of the body, however, or have questions about it thrown at me. It seems from what Mr. Hunter McGowan has said that he believes things are working. When does he think the body will have reached its limit and fulfilled its mission? People sometimes say to me that InterTradeIreland is just doing what other groups should be doing in the North or in the South. In that context, can we get things working better? I believe some of the criticisms of those who are asking questions about InterTradeIreland are unfair. Some people say that the things it does would happen spontaneously anyway. I am inviting Mr. Hunter McGowan to flesh out the specifics a little more for those of us who support InterTradeIreland and are keen to better make the case for its work.

Mr. Thomas Hunter McGowan:

When we evaluate all of our programmes, we take account of dead weight, which is very important. I refer to things that would have happened anyway regardless of whether we were involved. We make sure to remove that element from all of our programmes. We do not report the full value of those elements relating to companies that would have proceeded to do things in a certain way. The question of when we will reach our limit, or when our mission will be accomplished, is a difficult one. The sands are shifting as we move into the new territory on this island of the innovation model. That is a shifting concept because new innovation is rolling out all the time. One might think one has mastered something, but something new will come along. We are going through a whole range of new technologies that are coming at us. We are stuck now with new challenges that people would not have anticipated a decade or 20 years ago. When the entire domestic market suffered as badly as it did, it put pressure on companies to find new markets. Our role was to try to give them the capabilities to try to make sure they could do so.

Everything we do is about providing capability. We give sales capabilities and science, engineering or technology ability to companies. We provide innovation capability within the company. We provide assistance, but until the companies have those abilities and are able to export and innovate we will not reach an end. However, there may come a point where the general dynamic of the economy comes into play and our system functions well and works strongly.

Mr. Gough may wish to speak about a recent cross-Border study in which the OECD looked at innovation on a cross-Border and regional basis and came up with some interesting findings.

Mr. Aidan Gough:

Before I talk about that, I agree we have come a long way in the 14 or 15 years InterTradeIreland has been operating. When we started off, we found the biggest barrier to fulfilling the remit we were given was that the business and university communities basically did not know each other. The networks one would expect in an area with a Border the size of ours did not exist. We have spent a lot of time developing those networks and as we have developed them, it has become clear that a host of new opportunities are coming about as a result. We are facilitating those opportunities so that they deliver value for both economies. For example, in the area of public procurement, last week over 1,000 business came together to look at opportunities to enter the all-island public procurement market. We had buyers and SMEs from all over the island at this event.

We have also seen clearly from other research that the Border is an opportunity in itself to help develop the export potential of the economy. We know exports are driving growth and we also know, from our research, that 70% of exporters from this island took their first step into the export market by exporting into the other jurisdiction. There is a clear pathway therefore for InterTradeIreland to help increase the export potential of the two economies by providing more SMEs with experience of exporting.

The OECD report in which we have been involved looked at cross-Border co-operation in the area of innovation. We are one of six regions examined. The final draft of the report is not available until publication some time in November but it highlights the importance of cross-Border innovation ecosystems and the potential that can come from operating on a cross-Border basis, in terms of the resources it opens up to firms within the two regions.

Joe McHugh (Donegal North East, Fine Gael)
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Thank you. We will now take questions from three members and then we can have a response on those.

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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I welcome Mr. Hunter McGowan and Mr. Gough and compliment them on their work. They say that InterTradeIreland is 14 years in existence. The Acumen programme was running in Ballyconnell more than 14 years ago, so it probably predated the political progress made at the end of the 1990s and the signing of the Good Friday Agreement.

I am glad the witnesses have highlighted the significant potential and value of North-South business and co-operation. This presentation dovetails with our earlier discussion on the need to improve infrastructure. Most of us have had the opportunity to attend different events and to meet different companies. I am aware of companies in my area of Cavan-Monaghan that have worked with InterTradeIreland through different programmes and that they value its contribution strongly.

A number of North-South implementation bodies were established by the Good Friday Agreement. We need to progress this in the all-island context for the good of the people of the 32 counties. What potential is there or what is the next step required for InterTradeIreland, or a similar venture, to develop business and trade? At this stage, some 15 years on from the Good Friday Agreement, we should be moving towards additional North-South bodies.

We recognise the potential for further co-operation in the food sector. Over the years in the agriculture sector, even before the valuable progress emanating from the Good Friday Agreement, there has been huge co-operation on the island of Ireland between the two Departments and the agencies. This co-operation is ongoing in the farming, food and agri-sector. Therefore, there may not be a need for a formal structure as the agencies North and South work well together. We need greater emphasis on exports. As mentioned, the pathway to exporting for many of our SMEs is to our neighbouring jurisdiction. This message must be delivered and supported.

Mention was made of programme 7 of the EU. We are all aware that substantial funding over the past decade or 15 years has gone into research, innovation and development, but there is not a quick return on that investment. A return on such investment takes time and some of the investment that took place eight or ten years ago is only paying dividends today in areas of business and economic activity. I am aware from our Departments and statutory agencies that they have been successful in sourcing funding from programme 7 and its predecessors. However, some of the schemes and funding are only available when two jurisdictions or separate Administrations support the application. In some cases three different member states must support applications.

Is InterTradeIreland satisfied enough is being done to source additional funding from Europe for our island? The President of the European Commission has often emphasised the need to fund adequately the research and development programme Commissioner Máire Geoghegan-Quinn has charge of. This is an opportune time to emphasise the need to ensure the potential draw down for our country is maximised through co-operation North and South and between the different statutory agencies.

Mr. Pat Doherty:

I thank InterTradeIreland for its presentation and have three questions for the witnesses. The organisation's ongoing budget reductions are bound to have some effect on its work. Will the witnesses explain how these reductions hamper their work and explain how their relationship with their sponsoring Departments is working? Deputy Smith pre-empted my other questions but I will put them anyway. What additional powers or areas of work would InterTradeIreland like to develop and what outstanding barriers does it see for all-island or all-Ireland trade? How do they think these barriers can be tackled?

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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I thank Mr. Hunter McGowan and Mr. Gough for their presentation. There are differentials with regard to excise, VAT, other taxation measures, compliance issues, environment and the labour force. How can we overcome the differences between the two jurisdictions? How does InterTradeIreland work percentage wise between take-up in the Six Counties and the 26 counties and with regard to the development of SMEs?

Mr. Thomas Hunter McGowan:

I will try to deal with the questions in context, but will begin with Mr. Doherty's question on budget reductions and whether these have hampered us in any way and what our relationship we have with the sponsoring Departments. We have an excellent relationship with both sponsoring Departments. Our relationship works smoothly and we have no difficulty in getting what we require.

Unfortunately, the economic problems facing North and South have put significant pressure on everyone to make some contribution towards the effort required to get budgets back into balance. There is continuing pressure on the Northern Ireland Executive to get the cost of the public service down. Every part of the public service has been affected by this in Northern Ireland, where there will be efficiency savings of 4% for the next three consecutive years and where there has been 3% savings for three consecutive years already.

Previously, I outlined how we have a significant demand for our programmes but reducing budgets. We are devoting all the resources we can directly towards small and medium enterprises. We are not too concerned about the administrative budget and we can take a reduction there easily enough, but when we have to cut back on the companies we have to manage demand carefully. To that end, we are trying not to generate too much fervour for the programmes because, as I have shown previously, having 900 applications for 60 places is a recipe that could cause much disenchantment with the body and a perception that we are not fulfilling our requirements. We must be careful to keep the pipeline controlled in order that we do not over-press for it. The main difficulty we have is trying to meet as many of the requirements as we can with out over-egging the demand put towards us.

The sponsoring Departments have been very helpful to us. We have good relations with them and we meet regularly. There are no issues arising and we have never had a conflict about the things we wanted to do. The Departments have been very supportive of the things we want to do. However, we are all hampered by the overall efficiency drives that are needed.

A question was asked about outstanding barriers. In our recent reports we have found that there are no regulatory barriers anymore. The most important thing is to get the drive and ambition into the management teams of companies in order that they can export and grow and trying to engender that into companies is important. That will be the real barrier because even though we say that up to 70% of companies export off the island of Ireland, over 60% have never exported - the figure may be even higher - or looked outside the domestic market. We are actively encouraging companies to try to move up to that next step.

Deputy Smith asked about new powers and where we can go. We are an implementation body and we can only follow whatever policy is put towards us. We are policy takers rather than policy makers. To that end, we will do everything that is assigned to us. We have developed some new elements for dealing with micro-businesses in sales in cases where they are unable to meet the full requirements of our Acumen programme. We have had a closer look at micro-companies that do not have the same resources as medium or larger companies and we have tailored a new sales programme for them. There is certainly a benefit for them and they can take it up readily.

There was a question about getting innovation into companies. We do not charge companies for the capability-building that we run. We simply look for ambitious companies and try to get them to get at it. These are two new areas we have gone into. We are also looking at extending the public procurement process. We have done a number of go-to-tender and meet-the-buyer sessions where we train people how to fill out procurement documents. We have introduced small and medium enterprises to the buyers. The next stage is to try to get SMEs to collaborate with each other to make joint bids. Consortia building is becoming important. The next big task is to try to get consortia building going among SMEs for public procurement.

We have enjoyed excellent success for companies under the European Commission seventh framework programme. A minimum of three companies is required for applications. We are in a good starting position because anyone leading with us is already in two jurisdictions. We have had a high success rate, considerably higher than most other bodies throughout Europe, at approximately 30%. We have also developed a user-friendly app, due out shortly, which will help companies with Horizon 2020 funding. It helps to demystify some of the parts that were rather difficult for some companies. We have an excellent working relationship with Invest NI and Enterprise Ireland in working to ensure that everything integrates well. We have a good network in operation on the island and that will assist the process.

Deputy Ferris asked about the split and where our programmes fall. One third of the entire operation and the companies we assist are in Northern Ireland and two thirds are in the South. We tend to match it according to the funding we get, which is in the same proportions.

I did not pick up the question on the labour force properly.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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I asked about excise, VAT, measures on taxation, compliance issues and environmental and labour laws. How do these impact on trade and co-operation in the different jurisdictions?

Mr. Thomas Hunter McGowan:

One of the advantages for companies is that there is a low sunk cost. A company can almost operate from one jurisdiction in the other jurisdiction. However, where there are variations, whether in labour law, VAT or whatever, we provide innovation vouchers to help companies get the legal advice they need so they can decide whether to set up an office in the other jurisdiction or be registered for VAT in the other jurisdiction depending on what is most beneficial to them. The advice can help to point out the differences in labour law or the minimum wage or whatever the various elements. Companies are aware that different rules and regulations are in place and this has not presented as a problem for us. They have found our intervention beneficial. We give a small voucher but the advice we get is excellent as well because the people we use as advisers are expert in all these areas. The initiative has been useful for companies and, to date anyway, it has not presented as an issue for us.

Seán Conlan (Cavan-Monaghan, Fine Gael)
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I have two questions. Deputy Ferris alluded to some of the issues that could cause difficulty in trade across the Border. What are the greatest difficulties, whether VAT or otherwise, coming from the republic face in accessing Northern Ireland markets?

Mr. Hunter McGowan remarked that InterTradeIreland was a public policy taker, not a policy maker. Will he elaborate on what we could do in both jurisdictions to help InterTradeIreland in the task of increasing the amount and volume of trade between North and South in particular and with the rest of the world as well? What can be done from a public policy perspective to help the organisation in its task?

Mary White (Fianna Fail)
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I acknowledge the great work that InterTradeIreland does North and South. Another lady and I started Lir Chocolates in 1987. Mr. Hunter McGowan is correct. Our first exporting steps were into the North. It is a great experience to go into a different culture and jurisdiction. It is a different world and there are different ways of doing business. The professional culture in the North is different. It was my job in the company to do the initial exporting steps and I fully appreciate what is involved. I have it to say, in front of my political colleagues from the North, and I have absolutely no doubt from my experience, that business people in this part of the country, the Twenty-six Counties, were ahead of the politicians North and South on relationships. The business people were ahead of the politicians. It used to fascinate me that people were doing business under the radar while there was still a distance to go in resolving the crisis in the North.

The point that annoys me most is that the British Government will not support or even come closer to the 12.5% corporation tax. A short time back, Prime Minister David Cameron said that he will not have any further discussions or decision on it until after the Scottish referendum. It is very disappointing. It is a terrible waste. Over the years, it has been the politicians in the North who have held back working with us. I know that from my own information. The politicians and the DUP in the North were very reluctant to work with the IDA here but there is now no doubt that things are changing.

I thank InterTradeIreland for its participation in the steering group on the initiative for the centre for cross-Border studies, which is launching an exciting new project towards a Border development. Getting employment going North and South is high on the agenda of this committee. I started a business here when the unemployment rate stood at 17%. Becoming unemployed is the most serious thing that could happen in a person's life. Getting jobs for people is critical. I compliment InterTradeIreland on its great work. The witnesses are correct that 70% of exporters take their first steps by starting cross-Border sales.

Mr. McGowan said that InterTradeIreland is trying to encourage more companies here to export but if the person does not have the fire in their belly Mr. McGowan will not make them do it. To become an entrepreneur and develop a business outside one's safe home zone one has to be a risk taker and have no fear. One cannot drum that into people, if they do not have that fire for their businesses. It has to come from within one's soul that one wants to bring this business to an export level. Enterprise Ireland has come a long way in helping companies and giving them contacts around the world. That was not available in my time. I made the steps into the North. I subsequently became very politically involved in the North. I thank the witnesses and wish them the best of luck.

Mr. Aidan Gough:

We published a report last week that exactly endorses Senator White's last point. A key criterion for us in working with companies is that the attributes and ambition of the key decision-maker within a small business are absolutely critical to how far that company wants to go. We recognise through our work that there are many small and medium sized businesses across the island where the key decision-makers do have that ambition and we are giving them supports to take that ambition and the potential of their companies as far as it can go. The first step is exporting across the island. We fully agree with Senator White.

There are still barriers to cross-Border trade. There are regulatory differences but by and large, when businesses are aware of them, they can navigate the differences. We see opportunities through much more enhanced co-operation. That is what we are working on. We are trying to create an open system of innovation across the island with the business at the centre. A business in Ballymena may have an idea but it may need research expertise that resides in Cork, or venture capital investment, or some other technical or marketing expertise, to bring that idea to the market. We are trying to put in place the schemes and the facilities to support that business, no matter where it resides on the island so that it can get access to whatever it needs to become more innovative or competitive. We see that through the demand for our programmes. We also see it through the FP7 that was mentioned.

We set up an all-island steering group approximately two years ago that brings together the key agencies across the island to co-operate on enhancing North-South participation in FP7. Approximately €80 million has been drawn down for North-South participant programmes under FP7. As a result of that co-operation that draw-down rate has increased substantially over the past two years. We believe that there is a very strong structure in place across the island to improve the North-South participation in Horizon 2020. It is a key objective of our organisation.

We talk about opportunities rather than barriers. The committee will see, in the paper that we presented, reference to the US-Ireland research and development partnership. This concept was talked about and developed 10 or 11 years ago. Now we see the fruits of that, as it has funded over 15 projects. That brands the island and research on the island as world-class.

Seán Conlan (Cavan-Monaghan, Fine Gael)
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I asked specifically about barriers going from the South to the North.

Mr. Aidan Gough:

Those barriers are not different. There are regulatory barriers but the scale of the opportunity is probably slightly less for southern companies going North. There is, however, substantial demand for our programmes from companies south of the Border to access the Northern market. We work primarily with the small to medium-sized business that has not exported before.

Mr. Thomas Hunter McGowan:

We are very supportive of corporation tax and would like to see that happen but it is on hold until after the Scottish referendum on independence. One other issue that comes up often is access to finance and the availability of finance. We will publish a report on that at the end of this month. One of our findings is that SMEs over-rely on overdraft to fund their working capital, up to around 91%, compared with 61% for their European counterparts. That is effectively caused by the lack of other opportunities to get venture capital or equity sharing. We will raise that issue later. We will publish the report in two or three weeks' time. There has always been a great deal of attention given to that area. The supply side is alright. We have serious concerns that companies are not investing in growth finance to upgrade their equipment and their capabilities for future growth but are trying only to deal with the debts that they have on hand. That will become a major issue as we go along. Many have cited it as a difficulty.

We would like to develop all of our programmes and deliver more of what we do because we have recently completed a full strategic review of what we do with all the major strategic partners with whom we deal, as we prepare our corporate plan for 2014-2016. Generally SMEs, sponsoring Departments and all interested agencies have said that we are on the right track and that we are doing the kind of things that they would like us to do. There are a few bits of filtering here and there that we have considered.

One of our biggest programmes is Innova in which we get two companies, one North and one South, to collaborate on a joint project. It has become very difficult for us to support as many projects as we would like, simply because of their size. It is an area that we would like to grow. We have some marvellous examples such as a company in Carlow called T.E. Laboratories, TelLab, collaborating with Williams Industrial Services in Newtownabbey to develop a portable water pollution monitoring device. If successful, this could be very important in the world market, never mind in the Irish market. We would like to see more of that but there are limits to what we can afford in that regard.

We have to remain in the space of being policy-takers. If we expand the boundaries of what we do in the areas we are in that will keep us busy enough, without becoming something completely different.

Joe McHugh (Donegal North East, Fine Gael)
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I thank the witnesses. I have had positive feedback from businesses that have been in contact with InterTradeIreland, which itself may not always get feedback. The organisation is based only in the Six Counties as a service provider. It does outreach work and comes to different counties and so on.

From an organisation point of view - the witness need not answer if he does not wish or if it is politically difficult to do so - would it be of value to have a foot in some form of structural sense outside of Northern Ireland?

Mr. Thomas Hunter McGowan:

This arose as part of the review of the St. Andrews Agreement. There was a suggestion that we could have an office in the South but that suggestion was turned down. It is a political decision.

Mr. Alasdair McDonnell:

I remind everyone that Newry is a southern town. Stop creating problems.

Joe McHugh (Donegal North East, Fine Gael)
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It is something for the committee group to consider. I thank the witnesses for their attendance. The committee will be happy to do any work that will add value to the work of InterTradeIreland.

Mr. Alasdair McDonnell:

If they build the Narrow Water bridge they will be in Omeath. It will be a suburb of Omeath.