Bernard Durkan (Kildare North, Fine Gael)
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Question 200: To ask the Minister for Enterprise, Trade and Employment the reasons given by overseas investors who have failed to follow through on job creation proposals here; and if he will make a statement on the matter. [28616/04]

Micheál Martin (Cork South Central, Fianna Fail)
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IDA Ireland is the agency with statutory responsibility for the attraction of foreign direct investment to Ireland, including its regions and areas, apart from the Shannon free zone which is the responsibility of Shannon Development. Overseas companies that are clients of these two development agencies submit investment proposals to the agencies for consideration for state support. Typically, these proposals include fixed assets — capital — labour and technology-research and development components.

The proposals set out indicative targets for achievement of the investment using criteria such as sales, profitability, exports and employment. Each investment proposal is subjected to an economic appraisal by the agencies prior to agreement of support. Once approved by the agencies, achievement of the targets set out in the proposal is subject to overall economic conditions, activity in the sector in which a company operates and sales orders etc. In many cases, depending on the circumstances outlined, investors often meet or exceed their targets. However, in some cases some targets are not met or only met over a longer time frame.

With respect to overseas companies, their overall performance against target has been remarkably strong. That said, in some cases, projected employment growth has not always materialised. There are a number of reasons for this. These include a downturn in global economic conditions; reduced customer demand; sector specific conditions; restructuring of industry or parent company; over estimation of jobs to flow from investment; inability to find suitably qualified staff and difficulties in attracting staff due to full employment conditions etc.

The development agencies and their client companies continually monitor the performance of an investment against agreed targets. In certain circumstances, the agencies can, under the terms of the legal agreement signed between the agencies and the investing company, seek repayment of financial support when targets are not met. The economic environment in 2004 has changed significantly since many clients submitted investment proposals in the latter half of the 90s. At that time the world economy, particularly in the high tech sectors was experiencing very strong growth. Consequently, the proposals approved by the agencies reflected high projected growth in sales, profitability and jobs. In 2000-01, there was a sharp downturn in the world economy resulting in substantially reduced orders, high levels of inventories and in many cases losses. To compensate for the fall in sales companies were forced to dramatically reduce their production capacity resulting in high lay-offs throughout the world.

Although the world economies have continued to recover since then, employment has not reached pre 2000 levels. In many cases companies want to avoid having to repeat the experience of having to make substantial lay-offs, and therefore, their employment levels have not expanded as quickly as originally anticipated. In addition, many companies are outsourcing manufacturing and services to lower cost locations notably India and China. Companies sometimes make decisions not to locate in a particular country even after it has visited that country.

The typical profile of projects setting up in Ireland has changed from manufacturing to mainly service and support functions. Under pressure from a changing economic environment, companies which had planned to set up manufacturing operations in Ireland with relatively high job numbers are now implementing different projects with higher value added functions but with lower job numbers. This is the type of investment that IDA Ireland is now primarily targeting and which is most suited to our modern economy.

Bernard Durkan (Kildare North, Fine Gael)
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Question 201: To ask the Minister for Enterprise, Trade and Employment the number of foreign investors who have indicated an intention to invest here within the past two years; the number of such actual investments that have taken place; and if he will make a statement on the matter. [28617/04]

Micheál Martin (Cork South Central, Fianna Fail)
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IDA Ireland is the agency with statutory responsibility for the attraction of foreign direct investment to Ireland, including its regions and areas. The following table provides details of the number of overseas announcements regard intentions to invest together with total associated job content and start-ups for the years 2002 and 2003 and to end October 2004.

In 2003, 32 greenfield and expansion job creation projects were announced by IDA Ireland with a projected total job content of nearly 5,600 jobs compared to 29 projects with a projected total job content of almost 4,800 in 2002. This result was achieved against the backdrop of two consecutive years of falling global inflows of foreign direct investment. In 2002, for example, global foreign direct investment inflows declined by one-fifth to $651 billion, the lowest level since 1998.

Looking to 2004, IDA believes there have been improvements in terms of new investments into Ireland and of growth in the value and scale of activities in overseas companies operating here. This view is based on contacts with client companies and strong indications of a substantial recovery in growth in the global economy and consequent increased flows of FDI. IDA is now competing for some very significant, high value investments.

I should remind the Deputy that there is a time-lag, often involving a few years duration, between a projected investment being approved and work actually commencing on the project and jobs being created. I am confident the strategies and policies being pursued by IDA Ireland will continue to bear fruit in terms of delivering the maximum possible level of additional overseas investment and jobs for Ireland.

Bernard Durkan (Kildare North, Fine Gael)
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Question 202: To ask the Minister for Enterprise, Trade and Employment the main factors presenting as deterrents to foreign investors here; if insurance or other costs, construction costs, administrative costs or other factors feature mainly; the way in which he proposes to address the issue; and if he will make a statement on the matter. [28618/04]

Micheál Martin (Cork South Central, Fianna Fail)
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IDA Ireland is the agency with statutory responsibility for the attraction of foreign direct investment to Ireland, including its regions and areas. According to IDA Ireland, Ireland has many attributes that continue to make it one of the most attractive and successful countries in the world in terms of attracting mobile investment. These include a low corporation tax rate; educated skilled and English speaking workforce and business friendly and agile Government and EU membership.

Despite the fact that the level of foreign direct investment in Ireland, relative to the size of the economy is one of the highest in the world, there are circumstances and factors that often work against us as the location of choice for specific investment projects. These include, in no particular order, a small domestic market of only four million, which is a significant drawback for some investors; a peripheral geographic location compared with more centrally located European countries, which increases transport-logistics costs, and reduces the speed of service that can be provided to customers; a higher wage and higher general cost level in relative terms than in the past compared with alternative locations in Eastern Europe and around the world — one of the key developments in recent years has been the large rise in low cost investment locations that are particularly competitive for low skill, low wage, projects and increasingly also for projects that are in the higher skill, higher technology, categories, which has happened concurrently with a general rise in costs across a range of areas in Ireland like insurance and housing, largely due to the successes of our economy in recent years; a lack of infrastructure in some cases, e.g. proximity to an international airport with good external flight connections and the quality of electricity supply. These factors particularly affect the Border, midland and west region; a lack of large urban populations with an attendant large labour pool and good range of services and amenities. Key elements of industrial policy that are in place to address these issues are as follows: IDA Ireland focusing on investment opportunities in sectors with low transport costs, e.g. high cost-low weight products, telecommunications intensive international-financial services projects, and targeting investments where companies require a location for producing products and services for sale globally, i.e. where the lack of a large domestic market is not important; the Government's national spatial strategy including its associated gateway and hub locations which is designed to concentrate resources, infrastructure, and amenities to create environments outside the existing main cities of Dublin, Cork etc. that will be attractive to foreign investment; IDA Ireland's regional policy which is giving priority to the marketing of gateway and hub locations; the national development plan and the associated progress being achieved in delivering vital infrastructural improvements in areas such as motorways, public transport, gas and electricity, broadband rollout etc. and a range of other initiatives aimed at improving the level of real competition in the economy, reducing costs, improve service levels etc.

A key focus of current policy with regard to the attraction foreign investment is to equip Ireland with the skills, infrastructure, facilities and overall operating environment that will allow us to compete effectively for projects at the upper end of the high skill/high wage spectrum, which is where our competitive advantage now lies. A particular focus in this respect is in the area of attracting research and development activities to Ireland. The establishment of Science Foundation Ireland, the introduction of a research and development tax credit and IDA Ireland research and development capability and RTI schemes are already yielding considerable success as evidenced by the recent Bell Labs Project.

I am confident that the strategies and policies being pursued by IDA, together with the ongoing commitment of Government to regional development will bear fruit in terms of additional overseas investment and jobs for Ireland.

Bernard Durkan (Kildare North, Fine Gael)
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Question 203: To ask the Minister for Enterprise, Trade and Employment his proposals to address the issue of job relocation to lower wage or more competitive economies; and if he will make a statement on the matter. [28619/04]

Micheál Martin (Cork South Central, Fianna Fail)
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Clearly, a more attractive cost environment abroad will inevitably attract some firms that are unable to produce in the high-wage environment of modern industrial economies. The continuing structural transformation of our economy is inevitable. With this, some plant transfers and other adjustments are bound to come, but where relocation has occurred to date, it has largely been limited to relatively low-technology, labour-intensive activities — those least suited to the economy we have become.

In recent years, the enterprise support agencies under my Department have been mandated to adjust their support strategies to meet both the needs of society in terms of high quality employment opportunities and the needs of businesses that generate and sustain those jobs. We must recognise that both outsourcing and relocation are inevitable in a free market and our economic performance has benefited considerably from winning investment from other economies. Future policies must ensure we are more open to the opportunities that expanding and less restricted global markets provide.

There are indications that economic prospects are improving and our propensity to capitalise on trends in global growth is likely to again stimulate business expansion and real employment growth. The Government and the economic development agencies are undertaking a number of co-ordinated strategies to sustain and promote employment growth. Our objective is to capitalise on the potential for research and development, new process and product innovation and more complex services activity to expand higher quality and more sustainable employment. Our aim is to make Ireland one of the most attractive locations in the world from which to do business. Whether that business is undertaken here or elsewhere but managed from here, is a matter for individual enterprises. What is important, however, is that our economic and enterprise policies promote deeper, stronger and more profitable connections with global markets.

In this regard, the recent report of the enterprise strategy group recognises that we are at a turning point in terms of the competitive impact of global competition for markets and investments. That group made a number of key recommendations that are being considered by a high level committee to look at the most appropriate route to implementing the ESG recommendations. I will shortly be making a report to Government on their work and recommendations.