Paudge Connolly (Cavan-Monaghan, Independent)

I welcome the opportunity to speak on this Bill which represents a major development in the international investment funds business in this country. Ireland's exceptional success over the past 18 years in attracting international financial services companies has received worldwide acclaim.

The list of international companies with operations here is a veritable who's who of the international financial services sector. They include Citigroup, JP Morgan Chase, ABN AMRO, MBNA, Merrill Lynch, HSBC, Bank of New York, ING Group, Unicredito and AIG, to name but a few. These companies were attracted to Ireland for a variety of reasons, including our attractive fiscal and regulatory environment as well as the availability of a highly skilled and educated workforce. One of the country's biggest assets is its willing workforce that, for the most part, has been educated to third level. Foreign investors spotted that fact which, in turn, boosted our financial services sector. We had the necessary product which was ready for the market.

There were also the distinct advantages of political stability, a telecommunications infrastructure that was considered robust at the time, 18 to 20 years ago, and an effective marketing strategy. The telecommunications infrastructure may now be considered somewhat out of date, but we are moving in the right direction to modernise it.

Few would dispute that the global financial services industry is undergoing a process of major change. Advances in technology and the impact of globalisation have resulted in radical changes in business models and European Union initiatives, such as the financial services action plan, have been partly instrumental in the European market becoming more integrated.

In the past seven years Ireland's attractiveness as a location for international financial services has also undergone major change in a favourable corporate fiscal environment. Returning emigrants from the United States and United Kingdom and immigration from countries which recently joined the European Union have helped to supplement the availability of skilled labour. Although people fear that Ireland will be flooded with immigrants, we need to continue to attract skilled labour from the new member states.

The Bill provides for the continuing development of the investment funds business. The administration of funds domiciled in other jurisdictions and asset management and custody services are instrumental in the growth of the funds sector. The domiciling of investment funds here will be facilitated by the legislation which reinforces Ireland's pre-eminent position in this area.

The International Financial Services Centre has been the focus of significant growth and progress for almost 20 years and employs upwards of 17,000 people. Approximately one third of the workforce in the centre is employed in the funds industry which has a throughput of several billion euro per annum. Since the early 1990s, extraordinary growth has been achieved in the funds industry, undoubtedly as a consequence of Dublin's international reputation for funds administration, management and servicing. Annual growth in funds has been exceptional, with an increase of 20% recorded for 2004 over 2003 and a phenomenal increase in non-domiciled funds in 2004 of more than 40%.

While few envisaged that the growth of the IFSC would scale such dizzy heights when it was built in 1987, it was recognised at the time that there was a niche in the market and this has been filled beyond the expectations of most people. When the market opportunity was identified in those far-off days our legislators did a good job by quickly drafting the enabling legislation. The rest is history. No one could have envisaged the degree to which we have been inundated with business. Financial services continue to evolve at a rapid pace and our legislation must be constantly adapted to keep abreast of developments, hence the necessity to effectively regulate all new products and activities in the market and reform existing ones.

The overriding consideration must be to keep our investment environment competitive to attract more companies to establish operations here. In contrast to many other areas which are regarded as havens for hot money, Ireland has developed an enviable reputation for integrity in the financial services field, which has enhanced our competitive position. In sharp contrast to the position here, some other locations are constantly open for business and welcome hot money with no questions asked. We have learned recently of cases in which other countries were used to set up money laundering and similar operations. Thankfully, we do not have a reputation in this area which is reason to be proud.

It is important that IFSRA, with its vital policing role, is given resources to carry out its function in the most effective manner possible. Many consumers rely on brokers and financial institutions for advice about investing money. In many cases, consumers' savings are invested on their behalf in funds to generate an income on retirement. It is vital that such investments are properly regulated on behalf of consumers, particularly as large reputable insurance companies have mis-sold products on which tax was paid in the past. With a Revenue deadline of 23 May imminent, it is essential that we avoid a recurrence of this type of mis-selling. People invested their pin money, profits from cattle sales or grant payments in an insurance policy, the value of which grew. The insurance companies may have collapsed or been acquired by another company in the meantime, which has left people unable to provide evidence of the source of the initial sum. Some elderly people aged in their 70s or 80s cannot sleep at night due to anxiety about explaining their position to the taxman, even though they know they were clean and not in the tax net at the time of their investment. Such tragic cases must be avoided in future. I propose that the ceiling of €20,000 be raised to €100,000.

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