Bernard Durkan (Kildare North, Fine Gael)
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Question 696: To ask the Minister for Enterprise, Trade and Employment the measures he has taken to improve the chances of further investment in jobs here; and if he will make a statement on the matter. [25997/05]

Micheál Martin (Cork South Central, Fianna Fail)
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Support for job creation and investment is a day-to-day operational matter for the industrial development agencies. The agencies seek to attract new greenfield investments as well as working with existing clients with a view to helping them expand their activities. They also work with other publicly funded bodies to enhance the attractiveness of individual areas and regions within the context of the national spatial strategy.

It is vitally important for all business to develop a capacity to strategically respond to emerging threats to their business and to exploit new opportunities. All of the industrial development agencies are working with their existing client base in this regard. The aim is to identify current firm level capability gaps and to deliver the environment and skill set necessary for sustainable success in specific markets.

A key objective for the agencies is supporting the development of a knowledge based economy. Last year, Enterprise Ireland supported 65 new high potential start-up companies and €50 million was invested in companies to undertake research and development projects. IDA Ireland also supported 36 research and development projects involving an investment by client companies of over €140 million. To further drive this objective the Government has established a new Cabinet sub-committee on research and development which is charged with providing a detailed road map towards the achievement of a 2.5% spend on research and development, in line with the Lisbon target. The Government has also approved the recommendations from the enterprise strategy group, which will guide and inform the direction of policy development and interventions over the next few years.

Key contributions are being made by IDA Ireland with regard to the development of a knowledge based economy by consolidating its existing client portfolio of 1,100 overseas companies and by investing extensively in promoting new inward investors into Ireland. The particular focus is on business sectors that are closely matched with the emerging needs of our economy and can operate competitively in global markets from an Irish base. Some key areas of focus for the IDA at present are advanced manufacturing projects in the IT, life sciences — pharmaceuticals and biopharmaceuticals, medical technologies and engineering sectors. Ireland is also a strong performer for businesses in the high value internationally traded services sector such as software, financial services, shared services and customer support activities.

IDA Ireland is making significant investment in the provision of focused regional property solutions. The objective of this is to ensure that key locations have the appropriate facilities, tailored to specific sectoral needs, to attract new investments. This involves networking and collaboration with local authorities and a range of organisations at local level to develop the essential infrastructure, business support services, telecoms and educational programmes.

Enterprise Ireland is also undertaking a complete restructuring of its organisation, with a clear focus on client need. I am satisfied that the strategy is appropriate, necessary and achievable and will position Irish industry as a key driver of Irish economic growth, jobs and wealth creation in an increasingly competitive global environment. The county enterprise boards or CEBs are actively developing indigenous micro-enterprises throughout the regions. A particular advantage of the county enterprise board system is that it delivers dispersed economic development throughout the country. Since their establishment nationally in October 1993 to the end of 2004, the CEBs have issued grant assistance to 17,050 projects worth over €155 million in grants. The actual net employment creation in CEB supported enterprises has yielded 28,296 jobs nationwide.

I am confident that the strategies and policies being pursued by the development agencies, together with the ongoing commitment of Government to regional development will bear fruit in terms of additional sustainable investment and jobs for the people of all regions.

Bernard Durkan (Kildare North, Fine Gael)
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Question 698: 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. [25999/05]

Micheál Martin (Cork South Central, Fianna Fail)
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Overseas companies in Ireland that are clients of IDA, submit investment proposals to the agency for consideration for State support. Typically, these proposals include fixed asset — capital, labour and technology/research and development components.

The proposals set out indicative targets with regard to 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, sales orders and so forth. In many cases, depending on the above circumstances, 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, difficulties in attracting staff due to full employment conditions and so forth.

IDA and its client companies continually monitor the performance of an investment against agreed targets. In certain circumstances, IDA can, under the terms of the legal agreement signed between IDA and the investing company, seek repayment of financial support when targets are not met.

The economic environment in 2005 has changed significantly since many IDA clients submitted investment proposals in the latter half of the 1990s. At that time the world economy, particularly in the high tech sectors, was experiencing very strong growth. Consequently, the proposals approved by IDA 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 layoffs 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 also sometimes make decisions, following site visits, not to locate in any of the countries visited.

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.