Select Committee on Northern Ireland Affairs Minutes of Evidence

Memorandum submitted by the Industrial Development Board for Northern Ireland


  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.


  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.


  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:

    (i)  first-time investors to Northern Ireland; and

    (ii)  expansions/further investment by externally owned companies.

  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 multinationals30
Newly establishing companies (externally-owned)10

  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.


  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.


  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:



    Network Services

    Health Technologies


    Automotive Components.

  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:

North AmericaChicago, San Jose, Atlanta, Boston
Great BritainLondon

  The following table demonstrates sectoral targeting in geographical markets

North AmericaEurope Asia Pacific
Network ServicesNetwork Services
Healthcare Technologies Healthcare Technologies
ElectronicsElectronics Electronics
Automotive ComponentsAutomotive 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.


  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.


  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.


  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

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