Micheál Martin (Cork South Central, Fianna Fail)

I thank the Deputies for raising this important matter and, at the outset, record my disappointment at the outcome of the aid notification procedure. Notwithstanding recent developments, it is clear that Ireland will continue to face global competition for future investments. It is to be regretted that the European Commission has opted such a narrow interpretation of its conditions when projects like Intel can locate anywhere in the world. I have made this point very clearly to Commission officials on numerous occasions.

The vast majority of inward investment projects need not, however, undergo this process. Of the very small number of projects that do, each project must be examined in the context of its individual elements. We cannot, therefore, draw generic conclusions from the Commission's decision and must be careful to ensure we do not do so. Recently, for example, the Lucent Technologies-Bell Labs investment of €69 million to establish a global headquarters for research into telecommunications and supply-chain technologies in Ireland was successfully notified to the EU.

While IDA Ireland considers the outcome of the Intel case to be unhelpful in the progressing of investment projects of this size, it does not envisage that it will have a direct negative impact on Ireland's ability to attract foreign direct investment in the future. Financial support is only one of a combination of factors which makes Ireland attractive and competitive to inward investment. The availability of highly educated young people with the skills and ability to use knowledge quickly, flexibly and creatively has been vital in attracting inward investment. The education system is focused on continuous learning and pursues a collaborative approach with business and industry. The Government's science foundation programme contributes to the improvement of research capabilities and skills in Irish universities in partnership with international business and world-leading centres of research excellence.

Ireland continues to invest heavily in infrastructure, especially in the areas of access and telecommunications, and the Government's national development plan is establishing high quality physical and social infrastructure. Ireland has retained a competitive operating environment while undergoing a transformation in much of its business structures in response to new models and the needs of global enterprise. We offer one of the most attractive corporate tax environments in the world in which a rate of 12.5% applies to all corporate trading profits. Ireland consistently outperforms other locations in providing the best return on investment to US companies. We also compete on a par with the best, most advanced countries in the world for business. We are winning investments of the highest quality across the wide range of business types and sectors in which we have chosen to compete.

The current regional aid guidelines will expire at the end of 2006. Discussions have commenced on the guidelines which will cover the period 2007-13 on the basis of proposals from the European Commission. In considering the new guidelines, I am influenced by comments in the Commission communication, Working together for growth and jobs — A new start for the Lisbon Strategy, which states that the renewed strategy will focus on growth and jobs. According to the Commission, if we are to succeed we must ensure that Europe becomes a more attractive place in which to invest and work while shaping policies which allow our businesses to create more and better jobs.

Consideration of the new guidelines should focus on ensuring that the reform of state aid policy and, specifically, the shaping of the new regional aid policy are geared towards allowing a sufficient degree of flexibility to promote the realisation of the objectives and targets of the re-launched Lisbon strategy. State aid rules should not be solely inward looking, nor should they be designed primarily to regulate state aid within the European Union. As I pointed out to the Commission, the world is changing rapidly and Europe must look outwards every bit as much as it looks internally. The rules must recognise the need for the EU to be internationally competitive in attracting investment. Any desire to reduce regional aid within the Union must be balanced with the need to recognise that all member states face an increasingly competitive threat from other locations around the world in attracting investment. These countries not only have access to much lower cost bases and improving skills and infrastructure, but are less restricted in the levels and types of aid they can offer.

The Commission has stated that the regional aid guidelines review must not be approached as an isolated issue. It must also be conceived as an integral part of a general reform of state aid policies designed to give practical effect to the conclusions of the European Council which call for less and better targeted state aid. According to the Commission, this approach implies strict control of what are potentially more distorting forms of aid while allowing member states sufficient flexibility to design aid measures which promote the realisation of the objectives and targets set out as part of the process of implementing the Lisbon Agenda.

I am concerned that the focus to date in the review of the regional aid guidelines has concentrated on the strict control of state aid. Mechanisms which provide member states with a sufficient degree of flexibility to design aid measures to realise the objectives and targets of the Lisbon Agenda must also be accommodated in the new guidelines and general reform of state aid. The package must encourage a high level of investments and allow disparities to be reduced in line with the Lisbon objectives.

On the Intel project, I reiterate the comments I outlined in my press statement yesterday. As indicated at the outset of my reply, I am extremely disappointed with the outcome of the aid notification. Under the terms of the European Commission's multisectoral framework on regional aid for large investment projects, which came into general effect on 1 January 2004, approval of the proposed grant aid to Intel was required. Detailed discussions continued until recently following the submission of notification to the Commission in June 2004. It became apparent in the course of the discussions that the Commission was adopting a different interpretation of the provisions in the multisectoral framework than that on which IDA Ireland and my Department relied in proposing to grant the aid. The Intel project was the first case to which the framework's provisions were applied. Substantial further information was supplied to the Commission and a number of meetings were held. Further submissions were made in an attempt to resolve the differences which arose.

To respond to Deputy Howlin's point, the Government took its decision to withdraw the proposal for aid in agreement with Intel and IDA Ireland. It did not take that decision in isolation, which is an important point. I attended meetings with Commissioner Monti before he retired and with his successor, Commissioner Kroes. At one of the meetings, an official made it clear that even if this went through a full formal process, it would not come out the other end in a positive light. We had to be honest with Intel and communicate that to the company.

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