Oireachtas Joint and Select Committees

Tuesday, 4 July 2017

Joint Oireachtas Committee on Communications, Climate Action and Environment

Digital Hub Development Agency: Chairman Designate

5:00 pm

Photo of Hildegarde NaughtonHildegarde Naughton (Galway West, Fine Gael)
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I remind witnesses and members to turn off their mobile phones as they interfere with the sound system.

I draw the attention of members and witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the joint committee. If, however, they are directed by the Chairman to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence.

They are directed that only evidence connected with the subject matter of these proceedings is to be given and they 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. I also advise witnesses that any submissions or opening statements they have made to the committee will be published on its website after this meeting.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

The purpose of this afternoon's meeting is to engage with Mr. Paul Holden, chairperson designate of the Digital Hub Development Agency, in order to discuss the approach he proposes to take, if and when reappointed to the role, and his views on the challenges currently facing the body. Members are well aware of the Government's decision of May 2011, which put new arrangements in place for the appointment of persons to State boards and bodies. Reference to this arrangement is also made in the Department of Public Expenditure and Reform guidelines on appointments to State boards of November 2014. In 2016, the programme for Government suggested that nominees for chairs of State boards will be required to engage with the relevant Oireachtas committee prior to their appointment. This committee welcomes the opportunity to meet with the chairperson designate in public session to hear his views and we trust that this provides greater transparency to the process of appointment to our State boards and bodies.

I welcome Mr. Holden and invite him to address the committee.

Mr. Paul Holden:

I an honoured that the Minister has decided to reappoint me to the chairmanship of the board and I welcome this opportunity to explain to the committee something about the Digital Hub Development Agency and how I expect it to develop over the coming years.

The hub has a multi-faceted brief and three main ways in which it contributes to Irish society, namely, the enterprise development aspect, the urban regeneration aspect and the community development aspect. Our role is to create an environment in which an enterprise cluster can develop. A cluster attracts a variety of businesses of different sizes and different stages of development which are engaged in similar activities or complementary activities where, by virtue of their close proximity, they can learn from one another, help one another, buy and sell from one another or share facilities talent, ideas and costs. Our job is to make this interaction as frictionless as possible.

The simple view of what we do is that we are just landlords, albeit extraordinarily flexible landlords on account of providing lease agreements which allow companies to expand easily and shrink when they have to shrink within the hub. Beyond the simple view, we are also facilitators in a whole variety of ways. We provide a world-class technical infrastructure for the companies we host. We provide meeting rooms, as and when they are needed, an on-campus cafe and networking events, educational events and advice clinics. We have a centralised reception and security facilities and all these are things which emerging companies would normally have to look after themselves. It would cost them and distract them from their core business.

Our cluster currently has 95 companies, with 750 employees in total. One of our most important achievements is that roughly half are Irish-owned, the other half being foreign owned, which presents great opportunities for learning from one another, supporting one another, trading among themselves and opening up geographical and sectoral markets in which they can help each other. Clusters of this kind enable things to happen that would not otherwise happen, and faster than they would otherwise happen. We envisage that the concentration of companies will attract to the area, though not necessarily to the hub itself, all sorts of specialist support services such as legal services specialising in intellectual property or in mergers and acquisitions, financial experts who are plugged into sources of finance, graphic designers, web designers, marketing experts, translators and so on.

Continued growth of the cluster ties in with the second aspect of our mission, which is urban regeneration. When it was established, the agency was made custodian of a significant property portfolio, including 19 buildings spread over nine acres. Many of these are listed buildings and are of architectural of historical value but many have been disused for a long period and are in a poor state of repair. Our challenge is to treat them with the respect that such a heritage deserves while repurposing them and converting them into productive use. Without very significant State investment, we have to do this in conjunction with the private sector and the project stalled for a number of years during the recession, when it was difficult to get private developers involved. Things have begun to pick up in that respect. At the end of 2015, we succeeded in securing the conversion of a grain storage facility, which once stored the raw materials for making whisky by the George Roe distillery, into modern offices. In the 1800s, it was the largest distillery in the world and exported some 2 million gallons of whisky per year. The building was a grain store but now it is a brain store - instead of being used for heavy industry it is being used for intellectual activity. In return for the work carried out on the grain store we transferred title to a disused warehouse at the back of our campus, which had been in a very poor state of repair. The developers constructed two blocks of high-quality, modern student accommodation, which are now fully operational and house almost 500 students. This has brought a huge level of economic activity into the area.

We are currently engaged in a process to secure the redevelopment of a large site on the south side of Thomas Street, including a vat house which was formerly part of the Guinness facility. It will be a very significant development that will revitalise a big stretch of Thomas Street that is currently very run down and unattractive. It will bring employment and economic activity into the area and will have a positive impact on tourism, because it is just around the corner from one of the biggest tourist attractions in the country, the Guinness Storehouse. Most important for us, it will significantly increase the amount of office space we have for our clients and allow us to expand the cluster further.

The third part of the digital hub's project is our integration into the local community. It is located in the Liberties, where there is a very strong local community and a tradition of hard work and enterprise. Our vision sees the digital hub as an integral part of that community, just as Roe's distillery was in time gone by and Guinness still is. In partnership with the National College of Art and Design, we have been working with young people in the locality to help them to master digital technologies and become active producers of various things of which they would normally be passive consumers, such as graphic design, fashion design, video production, music production etc. We have been working with local schools to help them derive maximum value from digital technologies and we have run programmes for older people parents and others who have had limited exposure to digital technologies.

We are working with local businesses to help them develop their web presence and realise the potential of online trading. Together, these three aspects of the Digital Hub's project mean that the hub makes a contribution at many levels, not only economic but also social and cultural. It is my hope that this will continue in the years ahead.

If any members wish to visit the Digital Hub to see what we are doing, they would be very welcome. I am happy to answer any questions they may have.

Photo of Hildegarde NaughtonHildegarde Naughton (Galway West, Fine Gael)
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I thank Mr. Holden for his presentation. I will start with my own questions before bringing in my colleagues. I note a recent article in The Irish Timesby the Digital Hub's CEO in which he describes trying to attract companies with 150 employees. How does Mr. Holden see that fitting in with his current operation?

I understand that approximately 64% of the Digital Hub's revenue is self-generated, with the rest coming from State funds. Are there plans to grow that revenue? Does Mr. Holden believe that, in light of the way it is currently constituted, the Digital Hub Development Agency can be successful? Finally, on economies of scale, can Mr. Holden see the Digital Hub taking advantage of linking in with the likes of Google? I ask Mr. Holden to note those questions as I will call on my colleague, Senator Leyden, to speak next.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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I thank Mr. Holden and congratulate him on his appointment. The Digital Hub was under enormous pressure during the recession. The concept is brilliant; the hub utilises an area of the city which was run down and which it has regenerated. The hub has nine acres and 19 buildings under its control. What kind of funding is it getting from the State per annum? Mr. Holden said that student accommodation has been developed on the campus. Is that correct?

Mr. Paul Holden:

The arrangement we had with the private developer was that we provided it with the property for which we had no use, which was essentially run down, in return for which it developed another property for us. There was a trade.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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That sounds very practical. Does it bear any relation to the development of further inward investment? I presume the hub receives support from IDA Ireland. I presume the agency is promoting the Digital Hub internationally.

In light of Brexit and what is going to happen, I imagine the Digital Hub should be focusing on the British market and hoping to attract small companies that would like to avail of a base in a central location in Dublin. I think the hub is doing its best in a very difficult climate. Temple Bar was a concept of the late Charles J. Haughey and has been very successful in regenerating that part of Dublin. I am aware that the area in which the Digital Hub is located has architectural merit, with the development of the grain store and so on.

The Digital Hub is not confined to digital work in respect of developing the campus. Nine acres is quite a lot of land in a very strategic location. Mr. Holden made the point that the development agency worked with a private developer to develop student accommodation. That is very practical work done with the private sector. I have great time personally for State companies like the one of which Mr. Holden is chairman, which have the flexibility and imagination to develop. They have the opportunity to go beyond what private developers can do because they have the support of the State in respect of finances, loans and so on.

I wish Mr. Holden and his board every success in the future. I certainly have not come across any difficulties with the Digital Hub and I am delighted it survived. During the recession, the troika and the rest would have been delighted to close down everything. The Digital Hub is very lucky to have survived and can now only go from strength to strength.

Photo of Eamon RyanEamon Ryan (Dublin Bay South, Green Party)
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I welcome Mr. Holden and apologise for being a little late. I missed the very start of his presentation. I have always been a sympathetic supporter of the Digital Hub. I think it was in the late 1990s or early 2000s that it was initially conceptualised by, if I recall correctly, Mr. Ahern. It seems that the Digital Hub has always had involvement with over 90 companies and has always had the same property deals in play. It has always had good relationships with the local community. The companies located there have been an important part of turning Dublin into a hub for start-up businesses. However, the world has moved on. We are now established as a venture capital and digital centre. A lot of the activity is located by the docks south of Samuel Beckett Bridge in the quarter called SOBO District, especially for smaller companies. Is it time for a rethink and recalibration? While this is not to criticise, what I heard today sounds very similar to how one might have described where the hub was at seven or eight years ago, when I had more of a connection with it. Perhaps that will change when the hub gets new office space and is able to expand. Is it time for a strategic rethink?

Over the years there consideration has been given to bringing the hub under Dublin City Council, while Enterprise Ireland and other bodies were considering other institutional structures. The Chairman asked about the governance structure. Is there blue-sky thinking about what comes next? The answer may be for the hub to stick to what it is doing because that is working. The hub is a valuable part of Dublin's and the national infrastructure. Having listened to Mr. Holden's presentation, my overriding feeling is that it is very similar to what has been there for the past ten years in both scale and nature.

Photo of Hildegarde NaughtonHildegarde Naughton (Galway West, Fine Gael)
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I invite Mr. Holden to go through those questions at his leisure.

Mr. Paul Holden:

I will work backwards, if I may. For the past few years, the Digital Hub has been host to over 90 companies. That is true. However, it is not the same 90-odd companies all the time. We have a constant throughput of companies. That is quite a difficult trick to achieve as we have to be able to manage the companies coming in and the ones going out in order to maintain our occupancy level, which is at virtually 100% at all times. That brings us to the Chairman's question about room for expansion. At the moment, we literally do not have any room for expansion. However, we do have a property portfolio, which is the only asset we can leverage to develop additional office space and revenue and - to arrive at another of the Chairman's questions - become financially self-sustaining. The ultimate objective is to use the assets we have to become financially self-sustaining and to continue to attract more businesses into the area. The hub should be a magnet for businesses while supporting enterprise in the same area. We can already see that happening as there are some support and service type businesses in the immediate vicinity of hub although they are not our clients.

In respect of governance structures and so on, as has been stated, the plan is to transition the hub under the aegis of Dublin City Council as soon as possible. I understand that legislation is in preparation to do so. That will change the governance structure. The intention is that the hub will be created as a company controlled by the council. That will allow it to get on with its business.

Senator Leyden asked about the level of Exchequer funding.

The State funded us to the tune of €1.5 million last year for operational purposes. This is down considerably from even a couple of years ago when I think €1.7 million was available for operational purposes. In that time, our commercial income has increased from €1.5 million to €2.7 million, so one can see that we are already making strong progress towards self-sufficiency. Within our current envelope, we have cut our costs and increased our commercial income quite considerably but there is probably a limit to what we can do until we get further office space to generate income for us.

The Chairman asked about the possibility of getting bigger companies into the hub. At the moment we just simply could not accommodate them. However, the ideal mix would include some companies that are larger, and of necessity have sub-supplier requirements, and can buy in specialist expertise. That will allow companies which have that specialist expertise to grow in their shadow. That is the international experience. Large companies tend to have a collection of smaller companies that survive by being sub-suppliers to them. Our ambition would be to have some larger companies as almost anchor tenants so that we could encourage a sub-supply team to grow up around them.

The Senator asked about our relationship with IDA Ireland. This week, the Minister announced the appointment of someone from IDA Ireland to our board. We have had representation from IDA Ireland on the board for as long as I can remember. IDA Ireland almost routinely, when bringing them into the country, bring FDI companies to visit the Digital Hub to see what is going on there. Many of the FDI companies, even the largest ones, start off in the Digital Hub when they come to Ireland first. It is what we call a sort of soft landing point where they can start their recruitment drives and do the groundwork to build up their team here. On Brexit, attracting companies in from the UK is very much on our mind.

Senator Leyden asked whether we are restricted to just digital activities. The Act specifies that we are a digital hub development agency. The enterprises we are interested in developing are involved in digital business of some kind, be it digital content or technical application of some kind. The benefit is in the clustering activity that I described. They may be even taking or stealing staff from one another but they are bouncing ideas off one another, challenging each other in a whole variety of ways or assisting each other in co-operatively going after a market. They can help each other in a whole variety of ways. However, we are a digital hub development agency.

Photo of Hildegarde NaughtonHildegarde Naughton (Galway West, Fine Gael)
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I will bring in Senator Leyden who wants to ask a question.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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The amount of money involved seems to be very low for something that has such potential. I presume the agency has access to capital funding for capital projects. Is there any special tax designation in terms of developing that area as being, in a sense, one of national significance? St. Patrick's Tower is in the agency's portfolio. I pass it quite regularly. It can be seen from the road. I know the area. The National College of Art and Design was down in that area at one time.

Mr. Paul Holden:

It is down the road from us.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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Is it still there?

Mr. Paul Holden:

Yes.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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It is still operating. It did not move. It is close to the agency's operation.

Mr. Paul Holden:

Yes.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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It is kind of complementary to what the agency is doing.

Mr. Paul Holden:

It is closer to town, down Thomas Street.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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Yes. It is quite a good area. It sells a lot. It is distinctive.

Mr. Paul Holden:

Yes.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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On the question about capital, I feel that the money involved is very low in relation to, say, the development of the International Financial Services Centre. I was on the Front Bench of Fianna Fáil when Mr. Haughey brought that to the Front Bench. No one knew much about it except himself, including any of the potential Ministers, but he drove it very fast. Should there be a bit more drive here? That was developed very well and there was massive financial investment. Is the potential there to get more funding for what the agency is doing in order to try to accelerate the development and give it a push in this current climate? There is so much demand for accommodation, etc., in the city of Dublin. Given that it has access to nine acres, which is enormous, I am wondering what is holding the agency back.

Mr. Paul Holden:

To answer the Senator's questions directly, we do not have any capital funding and there is no special tax designation for the area of which I am aware. However, if the Senator knows of any way in which we might get either, we would certainly make good use of any capital he can find for us and would exploit any special tax designation he can get for us.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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He might be back shortly in government so Mr. Holden might as well be speaking to the right man.

Photo of Hildegarde NaughtonHildegarde Naughton (Galway West, Fine Gael)
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If members do not have any other questions, on behalf of the committee I thank Mr. Holden for coming before us and his worthwhile engagement. I propose to forward the transcript of today's discussion to the Minister for Communications, Climate Action and Environment for his information and consideration. Is that agreed? Agreed.

Photo of Terry LeydenTerry Leyden (Fianna Fail)
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We may avail of the invitation to visit at some stage.

Photo of Hildegarde NaughtonHildegarde Naughton (Galway West, Fine Gael)
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Yes. The committee would be very much interested in visiting the hub. I have no doubt that Mr. Holden's experience, in particular his experience in business, ensures that he is very well qualified for his role. We wish him well.

Sitting suspended at 5.38 p.m. and resumed at 5.40 p.m.