Memorandum submitted by the Industrial
Development Board for Northern Ireland
INTRODUCTION
1. This memorandum seeks to provide background
to the Select Committee's enquiry into the aims, objectives and
effectiveness of inward investment policy in Northern Ireland.
In particular it seeks to set this policy within overall economic
development and employment policy, since the latter needs to be
taken into account in any evaluation.
THE INDUSTRIAL
DEVELOPMENT BOARD
2. The Industrial Development Board (IDB)
was established under the Industrial Development Northern Ireland
Order 1982 as an executive arm of the Department of Economic Development
and is responsible for assisting the profitable growth of Northern
Ireland's manufacturing and tradeable service sectors through
the development of existing companies and by securing new inward
investment.
3. IDB has an Advisory Board (which may
consist of up to 12 members) whose role is to advise the Department
(and its Minister) and oversee the work of the IDB staff.
CORPORATE STRATEGY
(1998-2001)
4. IDB's current corporate strategy as set
out in the document "Competing Globally", covers the
period April 1998-March 2001. It indicates IDB's Vision and Objectives,
which are:
(a) Vision
— To see a larger base of world class companies,
both locally and externally owned, in the manufacturing and internationally
tradeable service sectors. These companies will generate greater
economic added value, higher profitability and sustainable employment
and offer opportunities for improved job quality and personal/family
income, particularly in areas of greatest social need.
(b) Objectives
— To facilitate greater sustainable growth
by locally and externally owned internationally competitive companies
in the manufacturing and internationally tradeable service sectors
in Northern Ireland.
— To attract, from within these sectors,
new inward investment which will contribute to growth in sustainable
employment and offer opportunities for enhanced job quality.
— To implement industrial development programmes
which ensure equality of opportunity and fair treatment for all
in Northern Ireland.
— To give particular emphasis to areas
of greatest disadvantage.
— To secure maximum impact from the resources
available.
5. As indicated in "Competing Globally"
and in the more recently published, "Strategy 2010",
the economy in Northern Ireland faces significant challenges as
it makes the transition from its more traditional industrial base,
with significant employment in sectors such as textiles and clothing,
agricultural processing and the public sector, to a much higher
proportion of its employment in growth sectors, with higher value-added,
such as software, telecommunications, electronics and healthcare
technology.
6. Such growth will come both from the development
of locally-owned firms and from inward investment, the latter
being defined as both:
The significance of inward investment as a major
driving force in the transition and strengthening of the Northern
Ireland economy is demonstrated by the fact that 60 per cent of
the 86,000 employees in IDB's client companies are employed in
externally owned companies. In turn many locally owned companies
depend on supplying these companies.
7. The significance of inward investment
to IDB's strategy of helping the Northern Ireland economy to make
the major transition required in the coming years is demonstrated
by an examintion of IDB's key objectives and targets for the three
year period to March 2001. These are as follows:
— Jobs Promoted—18,000
jobs by externally owned companies and 5,000 jobs by locally owned
companies.
—Targeting Social Need (TSN)
— 75 per cent of all first-time locational
visits from inward investors to be TSN areas.
— 75 per cent of all first-time inward
investment projects to be located in or adjacent to TSN areas.
— Property Provision—At least
475 additional acres of land to be acquired for industrial use;
of which 300 acres to be in TSN areas, linking to the above target
in locating inward investment projects in these areas.
— Research and Development (R&D)
IDB will, in close co-operation with the Industrial Research and
Technology Unit (IRTU) and linked to its aim of attracting higher
value added projects to locate in Northern Ireland, encourage:
— 25 projects involving enhanced R&D
capability to be brought forward by companies;
— 200 projects supported by IRTU Programmes,
of which 100 will be from locally owned companies.
— Supply Chain—Maximise supplier
development opportunities by encouraging (a) externally owned
companies to increase their local sourcing of components and services
and (b) locally owned companies to ensure they have the capabilities
to meet these requirements. Targets for the number of companies
participating in supply chain development and local sourcing opportunitites
identified by IDB are:
| Already established major multinationals | 30 |
| Newly establishing companies (externally-owned) | 10 |
| Total | 40 |
This supply chain activity could generate an
extra £30 million per annum of business within Northern Ireland
by March 2001 and could represent an additional 300 jobs over
the Plan period.
THE ROLE
OF INWARD
INVESTMENT
8. As demonstrated in the overall targets
of IDB, inward investment has a highly significant role to play
in the strengthening of the Northern Ireland economy, and help
it achieve the transition towards higher value-added employment
in the coming years. It not only has the potential of bringing
in new, higher value-added employment, to replace declining sectors,
but can draw job opportunities towards areas of higher unemployment.
When this is combined with the work of agencies such as the Training
and Employment Agency (T&EA), inward investment can be used
to assist the long-term unemployed to re-enter employment.
9. Furthermore, such inward investment has
the potential to introduce new technologies, open new markets
and develop new management skills, and create stronger local linkages
through the supplier base, involving many locally-owned firms,
the construction industry and general services, including transportation
and logistics providers. A critical evaluation of the overall
effectiveness of this policy area therefore needs to take into
account all such outcomes. This document points to a key number
of outputs of inward investment, some of them interim, which can
give some indication of its overall impact.
MARKETING AND
SELLING NORTHERN
IRELAND TO
THE INWARD
INVESTOR
10. The central task of promoting inward
investment is to convince the potential investor of the business
case for establishing an operation in Northern Ireland. In essence
this proposition is based on:
— available, well-educated workforce;
— high quality transport and telecommunications
infrastructure;
— strong industry/academic links particularly
in the fields of electrical engineering and software;
— good industrial relations in an employment
law regime which is felt to be pro-business;
— relatively low costs of establishing
projects, in terms of property;
— the low social costs required of
employers;
— a flexible cash grant regime which
can minimise initial cash outflow in the early years of capital
intensive projects; and
— a relatively favourable tax regime,
including tax efficient depreciation allowances and property tax
exemption for manufacturing companies.
11. This message is targeted on both a sectoral
and geographical basis, this being determined by IDB's detailed
analysis of both the opportunities in world markets and the compatibility
of projects with Northern Ireland's existing industrial and educational
infrastructure.
(i) Sectoral
Targeted sectors are reviewed on a regular basis
and those currently targeted are:
These sectors represent around 70 per cent of
the current mobile greenfield investment projects. IDB also seeks
to attract general manufacturing projects, such as light engineering
and plastics, which can be found across a wide range of sectors.
(ii) Geographical
IDB's geographical representation is targeted
to match market opportunities and is regularly reviewed. Current
representation is as follows:
| Market | Offices
|
| North America | Chicago, San Jose, Atlanta, Boston
|
| Great Britain | London |
| Germany | Dusseldorf |
| Japan | Tokyo |
| Korea | Seoul |
| Taiwan | Taipei |
The following table demonstrates sectoral targeting in geographical
markets
| North America | Europe
| Asia Pacific |
| Software | Software |
|
| Telecomms | Telecomms | Telecomms
|
| Network Services | Network Services
| |
| Healthcare Technologies | |
Healthcare Technologies |
| Electronics | Electronics |
Electronics |
| Automotive Components | Automotive Components
| Automotive Components |
12. Targets for the work being generated in IDB's geographical
and sectoral markets are set out in annual internal Sales and
Marketing Plans. Those plans are submitted to the IDB Board for
approval and the Board regularly monitors results.
PERFORMANCE
13. Since 1993, when the Committee reviewed inward investment
as part of a wider enquiry on employment creation, there has been
an increase in the number of inward investment jobs promoted by
the IDB. Over the period April 1993 to March 1999, there were
68 new inward projects involving over 10,000 job promotions and
163 expansion projects by externally owned companies involving
over 15,000 job promotions. Annex A sets out details of inward
investment performance since April 1993, including data on job
creation in projects. Information is also given on achievements
in encouraging new inward investment to locate in disadvantaged
areas of Northern Ireland. Annex B sets out the resources involved
and for the remainder of the planning period.
EFFECTIVENESS AND
COHERENCE OF
CURRENT STRUCTURES
AND METHODS
IN SELLING
THE NORTHERN
IRELAND PRODUCT
14. In the period 1990-97, basic research by the IDB,
using the limited data that was available, suggested that Northern
Ireland, with about 2.5 per cent of the UK population, gained
approximately 5 per cent of the foreign direct investment into
the British Isles. Using a database developed by Ernst and Young,
IDB has calculated that in 1998-99, Northern Ireland achieved
8.5 per cent of all the mobile greenfield investment projects
coming into the British Isles and 9 per cent of the total jobs.
It is encouraging to note that this was achieved against the background
in a decline in the overall number of projects coming into the
British Isles and Europe.
15. Undoubtedly, the international perception of Northern
Ireland as an area of political instability has hampered the inward
investment drive in the past. This makes it impossible to undertake
a straightforward assessment of the success of the present structures
and methods against other regions that have not had to contend
with such challenges. However, IDB's analysis of the Ernst and
Young database, supplemented by IDB's own market research, indicates
the growing level of success in recent years.
16. In the past the organisation of IDB's overseas work
has had to be adjusted to deal with the challenges created by
international perceptions of Northern Ireland. Thus, for example,
in comparison to other regions of the British Isles' it has been
judged to be inappropriate to use advertising as the principal
means of reaching the market, since the message would be immediately
discounted in the light of negative media coverage. A much different
form of marketing and sales has been required and the development
of personal contacts with personal investors has had to play the
most significant role. Our limited advertising has been carefully
focused on selected trade press.
17. With the North American Marketing Campaign, launched
last October with a high profile Roadshow in 11 cities and using
a combination of political and business messages, IDB has started
now to break this mould and to develop a much more high profile
approach. The initial marketing theme of "Time for Your Business"
has been used to link the significant political developments of
the last year to the success that has been achieved by investors
in the last decade. Personal testimonials by senior executives
of multinational corporations have been used to support in our
target sectors the strength of the Northern Ireland business opportunity.
The message has in particular focused on the quality of the young
labour force, the excellent telecommunications and transport links,
the strength of the R&D and business infrastructure, and the
effective negotiation and aftercare service provided by IDB. Targeted
advertising campaigns have been developed to convey this message
to a wider audience, linked to focused sales drives.
18. IDB has concluded that it must be equipped in the
coming years, in terms of both staff and marketing budgets, to
develop this approach, adjusting it to the different markets and
gear itself to an even more pro-active stance. Marketing expertise
will need to be retained inside IDB as well as bought in expertise
and a significant commitment given to this work. Sustained campaigns
will be needed to overcome deep-seated perceptions and also to
combat the growing competition. The outcomes need to be carefully
monitored, although due to the nature of investment decisions,
outcomes often will come only several years after the marketing
investment.
19. In particular, IDB needs, in the coming years, to
build up its resources in mainland Europe, focusing on sectors
such as telecommunications, electronics, software and automotive
components since at present approximately a quarter of greenfield
projects into the British Isles come from Europe. In addition
it is planned to increase activity in Great Britain, focused on
mobile projects such as in software and call-centres where Northern
Ireland's well educated workforce can provide cost-effective opportunities
for businesses to establish off-shoots of existing British operations.
In many respects this has been one of the most difficult
markets for IDB to operate in over the last three decades and
recent political progress creates the opportunity now to address
these opportunities.
20. It is essential for IDB to further develop its own
marketing intelligence and resources, to ensure that it is abreast
of trends in flows of Foreign Direct Investment. Thus, for example,
it will be examining the key requirements of developing sectors
such as electronics and software to see how local universities
can be assisted to be up to date with such trends, in turn creating
a favourable environment for high technology investment.
21. It is important that all the resources available
in Northern Ireland are brought to bear on this. The resources
of the NI Economic Council and NI Economic Research Centre as
well as the two universities and appropriate other institutions
have the potential to assist IDB in the analysis of trends in
the international economy.
22. Work with investors has demonstrated their concern
to have one organisation drawing together all aspects of their
potential investment. It is therefore important that IDB remains
as the recognised "one-stop" shop for the negotiation
of assistance, introducing the investor, for example, to the T&EA
and IRTU. There is also a growing interest by local councils in
promoting their areas as locations for investment. It is important
that this work is undertaken in close collaboration with IDB,
helping the latter in presenting to the investor the key attractions
of each potential area as part of the wider Northern Ireland opportunity.
CONCLUSION
23. No other UK region has had to face the same challenges
of the last three decades, both in terms of economic stress and
international perception. The latter has limited the number of
investors interested in Northern Ireland. During this period,
however, there has been significant economic development in Northern
Ireland, and, as set out in Strategy 2010, Northern Ireland enters
the new Millennium with many major challenges, but also with a
history of significant economic success, particularly in the last
decade.
24. The improving opportunities for the Northern Ireland
economy is demonstrated in the growing market share of Foreign
Direct Investment into the British Isles that has been achieved
since the early 1990s, and in particular since the Good Friday
Agreement. This has enabled IDB to deploy a more persuasive marketing
message than hitherto to attract potential investors.
June 1999
| 
