Shane Ross (Independent)
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I would like to highlight the need for the Tánaiste and Minister for Enterprise, Trade and Employment to ensure access to export credit insurance for exporters. I am sorry the Tánaiste, Deputy Coughlan, is not present for this debate. It is not unusual for a senior Minister to be absent in these circumstances. It is nice to see the Minister of State is here.

Billy Kelleher (Cork North Central, Fianna Fail)
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I am the Minister of State with responsibility for international trade and commerce.

Shane Ross (Independent)
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That is even better. I acknowledge that for the first time, a Minister of State represents an improvement on the senior Minister. The matter I am raising is very relevant in light of this afternoon's Budget Statement. If the economy is to come out of recession, it will be led by exports. It is important for the Government to recognise the need to help exports and exporters in any way possible. That appears to be lacking in today's budget, specifically in the area of export credit insurance. Exporters need to be protected, particularly in the indigenous area. I am not attempting to look for protection, in the form of export credit insurance, for the multinationals that account for a large proportion of our export figures. They do not need it and it is not relevant for them. We need to encourage and give some sort of certainty to indigenous industries that need the sort of protection that is afforded to similar industries in other European countries. The Netherlands and France, for example, have provided this necessary protection, or similar protection, to exporters. If our exporters are to compete on a level playing field with those countries and others, it is imperative that export credit insurance be made available to them so they can export their produce with the kind of protection we are talking about.

I have not seen the Minister of State's reply. I am not aware of the complete contents of the report produced by KPMG, which was commissioned in August of this year to conduct a review of this area. It would be very helpful if he were to release its contents so we would know what has been decided. More importantly, the Minister of State should tell us what action he intends to take as a result of the review. Does he intend to sit on the review and do nothing about it?

Reviews are not really meant to be written to delay matters although they often have that effect. While I do not suggest this to be true in this case, they report what is expected of them, delay a decision and are a waste of money. This is because having been given instructions, reviewers often instinctively sense what Ministers, employers and paymasters want as a reply and they write to orders. While I do not necessarily suggest this is so in this case, it would be useful - I cannot understand the reason the Minister has not done so - to release this review to public attention and scrutiny and therefore to public debate. Indeed, it is unfortunate the senior Minister in this Department sat on another review in the case of FÁS, when it would have been better had she released it earlier rather than sitting on it until the last minute. Consequently, I ask for the release of this review so it can be debated.

The importance of the export industry lies in the incredible number of jobs it supports, particularly in the food and drink sectors. While it is difficult to be certain, approximately 50,000 people are employed in those sectors. Moreover, approximately 60,000 people are employed in the distribution sector and a great number of others are affected. For example, 120,000 farmers also are dependent on this industry. All these people need the kind of security that a small sum spent on export insurance would provide. I ask the Minister of State to regard this not as a matter for contemplation or review, but as a matter of urgency to help employment in the sectors, to assist the economy to recover and to provide the sort of confidence that is absolutely necessary at present.

Billy Kelleher (Cork North Central, Fianna Fail)
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A State export credit scheme was established under the Insurance Act 1953, which provided export credit insurance to exporters to cover against the risk of non-payment for their goods by buyers abroad and to encourage the export of Irish goods and services. The scheme covered a wide range of risks up to 1991, when the Government decided to phase out State involvement in the provision of certain types of cover following a comprehensive review. In 1997, a further review was completed by my Department on the operation of the restructured scheme with a view to establishing whether and to what extent there continued to be a need for State involvement in this area.

This review established that, in the six years since 1991, the private market for short-term cover had developed considerably and that the then current insurance exposure levels imposed on the State were disproportionate to any benefit they might give to exporters. As a result, the then Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Harney, announced in February 1998 that the State was withdrawing from the provision of export credit insurance with immediate effect on the grounds that there was no longer any necessity to expose the State to significant and avoidable financial risks in the provision of export credit insurance and that the risk which insurance of this sort imposed on taxpayers was disproportionate to any benefit it gave to exporters generally.

Over the following ten years, the commercial market for credit insurance operated satisfactorily as exporters were able to get cover on the commercial market. However, approximately one year ago, some market failure in the commercial market developed due to the international financial upheaval across all financial services and insurance houses. As a result, insurers began raising premiums and, in some cases, providing highly limited cover or withdrawing cover entirely. The lack of affordable export credit insurance was then strongly highlighted by exporters as a significant problem.

As a result, the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Coughlan, commissioned Forfás to undertake an assessment of the position at the start of this year. The Forfás report, concluded that the suggested insurance top-up scheme proposed by the industry would not be self-financing, as claimed. It also concluded that the implementation of such a proposal would cost the Exchequer significantly in respect of default losses, administration and auditing or monitoring or both. In addition, it was established that the number of companies potentially benefitting would be quite limited because State intervention in topping-up existing policies would not be of benefit to any company the cover of which had been totally withdrawn.

In light of this Forfás report, it was therefore considered desirable to undertake a full-scale forensic evaluation of the Irish credit insurance industry, which would draw on and analyse data from commercial insurers. It was envisaged that the process also would involve consulting key stakeholders, including companies that had been affected. In July last, the Department commissioned international consultants KPMG to undertake this study. KPMG carried out a rigorous analysis of a significant amount of data, supplied in confidence by the insurance industry, which facilitated a thorough assessment of the credit insurance market in Ireland. A comprehensive picture of the market was established.

The KPMG report, finalised in October last, established that only 4% of Irish exports are insured. It also found that the introduction of a State-backed short-term top-up scheme, whereby the risk period was less than two years and the market was prepared to provide partial cover, would be expensive and would cost at least €1.7 million annually. Moreover, this sum would rise significantly, up to tens of millions of euro annually, were different levels of intervention to be provided. It was established that the impact would be small and that a negligible number of jobs would be supported by such an initiative. The concentration of cover which was identified also is obviously unsatisfactory from a spread of risk standpoint. In addition, it was found that there are indications that this market is showing signs of recovery. This appears to be evident globally that insurance houses and financial services markets are beginning to stabilise. Some activity is evident and people are able to get some cover again.

As the Government has a responsibility to ensure efficient use of scarce resources, a commitment of large-scale funding to an initiative with marginal benefits for Irish industry and high-level risks to the State, would be foolhardy. Accordingly, based on the overwhelming weight of evidence in the KPMG report, the Government decided last month that a State-supported scheme of short-term export credit insurance should not be introduced. It must be appreciated that in these difficult times, the Government must carefully assess whether new proposed schemes and initiatives justify the expenditure involved. In this case, on foot of the report and based on forensic analysis, it clearly would not.

There has been some comment that other European Union member states have introduced state-supported schemes. This development was, of course, fully considered. Each such scheme must, under European Union state aid rules, be approved by the European Commission and such approvals have included a condition that the level of premiums to be paid by companies under any such scheme should be a multiple of regular premium levels in order not to distort the commercial market. These high premia have made such schemes highly expensive for business and, as a result, take-up has been less than anticipated in many countries. In some cases, other restrictive conditions also have been imposed such as, for example, the destination countries which can be covered. In several countries, including both France and the United Kingdom, alterations to the schemes were necessary to encourage companies to avail of them. In the case of the United Kingdom, its Government last month signalled its intention to discontinue this scheme at the end of this month because signs of market recovery are now evident.

The KPMG report also suggested that the Department should investigate a possible medium-term intervention where the risk period is more than two years. This is highly distinct from short-term cover in which the risk period is less than two years. It also should be appreciated that most Irish exports do not fall into the medium-term category, which caters more for large projects or infrastructural goods and services, but it may be relevant to some companies. My Department is considering this option in the context of the action plan for trade, investment and tourism, which is being prepared at present, as recommended in the smart economy strategy.

In any event, the wider issue of credit availability for business is much more significant and work is under way to address this issue as part of the bank recapitalisation process. I am sure the Senator was watching the debate on the budget in which the Minister for Finance outlined clear proposals in the context of using his powers under the NAMA legislation to address the issue of making credit flow freely across the broader economy and in particular towards small to medium-sized businesses. The bank guarantee scheme, the banks' recapitalisation scheme, the nationalisation of Anglo Irish Bank and the passing of the National Asset Management Agency Act all are aimed at this goal. The National Asset Management Agency Act has been strengthened further by a Government amendment providing the Minister for Finance with the power to issue guidelines to the participating institutions in the NAMA process on lending practices, as well as procedures to improve the flow of credit to small and medium-sized enterprises and, if necessary, to other sectors. Under the recapitalisation scheme, additional measures were introduced to support SMEs, including a commitment to increase lending capacity to SMEs by 10%. How much time remains?

Michael McCarthy (Labour)
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The Minister of State's five minutes is almost up.

Billy Kelleher (Cork North Central, Fianna Fail)
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I wish to refer to an issue Senator Ross raised in the context of the report's publication. The insurance companies opened up their books to KPMG on the assumption that it would be completely confidential. This information is highly commercially sensitive and the insurance companies were not obliged to provide the information. They volunteered the information provided that it was given under a confidentiality clause. Both the Department and KPMG signs that and consequently, they are honour bound. I believe the Senator would accept the reasons these insurance companies would not be able to allow this information to enter the public domain.

I could discuss a few more areas in this context, but we are probably moving slightly off the issue of export credits.

Michael McCarthy (Labour)
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The Minister of State's time is up.

Billy Kelleher (Cork North Central, Fianna Fail)
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However, it is important to put on record the reason the KPMG report is not being published. No conspiracy theories are involved in this regard. It simply is a basic fact pertaining to commercial sensitivity. The Department and KPMG sought out the insurance companies, which assisted and co-operated in giving the information on the context of the market and the conditions surrounding export credit. This is the reason it cannot be published.

Shane Ross (Independent)
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I thank the Minister of State for his reply. He does not expect me to accept it but-----

Billy Kelleher (Cork North Central, Fianna Fail)
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I do.

Shane Ross (Independent)
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I get to disappoint the Minister of State as well. I wish to ask him about the release of the report.

Michael McCarthy (Labour)
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I ask the Senator to be brief as another Minister of State is ready to take the next matter.

Shane Ross (Independent)
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I will be brief but I am entitled to ask a question. I do not accept that commercial sensitivities are a good enough reason for not issuing the report. Would the Minister of State consider releasing it with the commercially sensitive parts redacted? If there are commercially sensitive elements they could be removed, as happens with many other reports, and let the findings and the reasons for them be released to the public. KPMG can remove any commercially sensitive parts.

Billy Kelleher (Cork North Central, Fianna Fail)
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The Department and KPMG entered into legally binding agreements. This information could not be released.

Shane Ross (Independent)
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Ignore that.

Billy Kelleher (Cork North Central, Fianna Fail)
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The broad thrust of the report quite clearly indicates that export credit insurance or the top-up system which was proposed by some people in the export business simply were not viable. There is now an upturn in that market. It is quite possible that commercial houses and insurance houses will be able to provide that cover in future and that there will be no need for the State to get involved in short-term export credit insurance. I mentioned there is also a medium-term issue which the Department is examining.

In the short-term, we believe there is an upturn. Some articles written in Sunday newspapers recently reflected the fact there is confidence out there. I was in London yesterday where we met insurance and banking companies promoting Enterprise Ireland companies. They were very confident that this market has stabilised and commercial activity was again beginning to happen.

Shane Ross (Independent)
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Another report has been buried.