Examination of witnesses (Questions 1
- 19)
WEDNESDAY 16 JUNE 1999
MR BRUCE
ROBINSON and MR
LESLIE ROSS
Chairman
1. You are most welcome. Thank you very much
indeed for coming. We are delighted ourselves to be in Londonderry/Derry
to conduct this particular aspect of this inquiry and this is
the first examination that we are having in connection with it.
We will do our best to make sure our questions follow a logical
order but it means that they may come from different parts of
the horseshoe. If at any stage you want to gloss anything that
you say, either now or in writing afterwards, please do not hesitate
to do so, and we shall reserve the right to ask supplementary
questions in writing after the event if there is something which
either was not clear or which we thought needed following up on.
We are most grateful to you for the memorandum which you sent
to us in advance. I do not know whether there is anything you
would like to say of a general nature before we embark on asking
questions ourselves?
(Mr Robinson) Chairman, we are delighted to be here.
I am the Chief Executive of the Industrial Development Board and
I am accompanied by Leslie Ross, who is Deputy Chief Executive
and who has responsibility for inward investment. There are maybe
just a couple of points, if I may, that I would like to make.
We have obviously supplied you with the memorandum and with our
three-year strategy, "Competing Globally", and, in addition
to that, we have added the recently published end-of-year results
for the year ended in March. I think, Chairman, there are a couple
of points I would like to touch on in that. It is not possible,
in providing you with the information, to provide all the detail,
nor is it appropriate, so the process of developing the strategy
and refining the strategy is subject to an annual review that
we ourselves do as an Executive and then present to the IDB Board
as part of the process of submitting that to the Minister. So
this process of choosing our sectors to concentrate on and choosing
the markets to be active in is subject to an annual review and,
of course, we are required to change it in response to market
circumstances. Today there is a rapidly emerging opportunity in
all of this "E" business, "E"-commerce activity,
and that is an aspect that we are embracing very wholeheartedly
now, the opportunities there, and that is not reflected in our
memorandum because it shows the historical position. The end-of-year
statement points to the encouraging trend of Northern Ireland
winning more new inward investment and there are several reasons
for that, we believe. Undoubtedly, the political progress of the
last 18 months, the last few years, has helped greatly in that.
We also have tapped into a well of goodwill from the international
companies that are already established here, and we are getting
tremendous support from senior executives in those companies to
help us market the Northern Ireland message. In addition, I think
we have a number of the key components that multinational business
is looking for today in its operations—a very well-educated,
bright, young workforce, very adaptable and flexible, and very
strong university/industry links—and those are very important
facets in today's marketplace. Plus, there are a couple of other
aspects that are also very positive from our point of view. There
is a growing and quite strong awareness now of the importance
of economic development within the entire community of Northern
Ireland. We have seen that find expression in the district councils
with their economic development resource. Community groups have
become very active in all of this and so I think there is a sense
in which all of Northern Ireland is acutely aware of the opportunities
and that awareness is still growing, which is very helpful to
us. I also believe, Chairman, that in the last few years the marketing
and selling activities of IDB have been more professional and
that has contributed also to the improvement. I think we have
established clearly in the memorandum the importance of inward
investment to the economy but I would just underscore that with
a few key statistics: 50 per cent of manufacturing employment
in Northern Ireland, some 52,000 jobs, is in externally-owned
businesses. They are responsible for three-quarters of the exports
that go from Northern Ireland, so I think that is a very powerful
testimony, and 10.5 per cent of the GDP of Northern Ireland arises
from inward investment. Those are very important strands in the
economic life of Northern Ireland that externally-owned businesses
play. Chairman, those are the only points I would like to make
in the way of underscoring some of the things in the memorandum
and pointing to some other aspects, and we are quite happy now
to take the questions.
2. Thank you very much indeed and those introductory
remarks are thoroughly helpful. I have said this to my colleagues
before but I am taking the opportunity in open session of saying
it again so that it concentrates everyone's minds, that because
we are seeking to visit a couple of inward investment projects
during the balance of the day, we may go slightly clippety-clop
in terms of our questions and it may also be helpful if the answers
are reasonably concise as well if we are going to get the whole
way through our programme. Let me ask you some ground-clearing
questions to start. What precisely does IDB mean by the terms
"new inward investment" and "inward investment"
and could you give an indication of how you classify investments
by companies from Great Britain who have not previously invested
in Northern Ireland?
(Mr Robinson) When we refer to new inward investment
we are referring to companies making the decision for the first
time to establish in Northern Ireland. So those are first-time
investors. We then talk about inward investment as a general term
encompassing both those that have recently made the decision and
those that made the decision at some time in the past. When you
visit Du Pont this afternoon I think you will see that with some
30-plus years' experience in Northern Ireland it does not quite
fit the bill to refer to Du Pont in the sense of having made many
of the decisions about coming for the first time, but yet we are
acutely conscious of the fact that the ownership of Du Pont and
many of the key decisions rest outside Northern Ireland. So they
are still very firmly within the inward investment category. We
seek then as an organisation to ensure that the task of attracting
new investment gets very high priority and the primary responsibility
for that rests with Leslie Ross's Group. When a company becomes
reasonably established in Northern Ireland as being here for maybe
18 months or two years, the responsibility within our organisation
passes to a group of people in what we refer to as the Established
or Home Industry Group, because we feel that many of the project-related
issues of getting established are best dealt with by Leslie's
team. Very often these are to do with getting utilities sorted
out, many of those very important, vital early tasks, but once
they are established, it is more important, we feel, and also
of benefit the local economy to draw them into the network of
employers' organisations, of being involved in promoting good
management practice and we can best promote that through the established
industry sector. So that is why we classify companies in that
way and what the rationale is, Chairman.
3. Thank you very much indeed. Did you pick
up the Great Britain question?
(Mr Robinson) Sorry, I apologise for that. In terms
of inward investment, we treat companies where the decision-making
process is in Great Britain as inward investors because we see
the major task is not only seeing successful operations but also
having a line into the corporate decision-making, a line that
is independent of the local management, because we always believe
it is important that we can calibrate directly for ourselves the
corporate view.
4. And you would also define "new inward
investment" in the same way if it came from Great Britain?
(Mr Robinson) Absolutely.
5. As a matter of curiosity, would that practice
be different from that of the relevant bodies in Scotland, Wales
and England in terms of investment from other parts of the United
Kingdom?
(Mr Robinson) I think that the processes we all deal
with are similar, Chairman, and we all see in our discussions
with companies the importance of understanding not only where
the operations are but where the decision-making process lies
and that does put particular demands on your relationship with
the company in terms of securing further investment and so on.
So I imagine that, irrespective of how the other agencies classify
them, they would approach the task in a very similar way.
6. But for purposes of statistical comparison,
all four territories would report in the same way, so that you
would be comparing pears with pears and not pears with apples?
(Mr Robinson) We do that. Movement of investment within
the United Kingdom is not as well understood and not as well measured.
However, we all have very good calibration of investment coming
into the British Isles from outside.
7. And the statistical analysis of that would
be uniform?
(Mr Robinson) Yes, absolutely. When I make reference
to market share, Chairman, I would be doing it on an analysis
that was comparative with the Scottish or the Welsh or any of
the English regions.
8. The next question of a ground-clearing nature:
how many staff, first in Northern Ireland and, secondly, elsewhere,
does IDB employ in support of the inward investment activities
and what proportion would that be of total IDB staff?
(Mr Robinson) The Inward Investment Group has 105
people in it. That is out of a total headcount of 360. About 40
of the 105 are in the overseas offices. The rest form a support
group within headquarters.
9. In the memorandum you refer to the six target
sectoral areas and you indicate that 70 per cent of the inward
investment targets fall within those target areas. How do you
treat the other 30 per cent? Do you regard that simply as a bonus?
Clearly if somebody appears on your doorstep who lies outside
the sectoral areas you are going to respond to them but is there
anything we ought to know about how you treat people who are outside
the six targets?
(Mr Robinson) Not particularly. Our treatment of those
companies would be broadly similar. The difference is in how we
spend our resource and our marketing resource. For example, in
a targeted sector we will attend major trade events. In America,
for example, in the automotive components sector there is a major
event each year in Detroit. We clearly see that as a pivotal area
and event for us to promote Northern Ireland in the States. So
we will have a direct presence at that event in Detroit. We do
not seek to cover all the engineering shows in America, all the
plastics and injection moulding shows. So the main difference
is in how we devote our resource, but if we get any lead or we
get any opportunity to identify anyone, then we will seek to land
the project in absolutely the same way as if it were coming through
the targeted sector.
10. Since the areas in which what I will call
the non-targeted companies fall is a pretty substantial part of
the global economy, would you indicate why you do not regard them
as being generically sensible to pursue? I appreciate that you
need to have targets but is there anything else about them that
makes them inappropriate for Northern Ireland?
(Mr Robinson) It really, Chairman, comes down to effectiveness.
We believe firmly in these target sectors the growth rates are
such that you are much more likely to find companies that have
expansion plans and within some very specific subsectors of engineering
or, as I say, injection moulding, you may well have some reasonable
growth but it is much harder to get those companies and so the
selection is all about scarce resource and devoting it in such
a way as to maximise the impact.
Chairman: Very clear.
Mr Beggs
11. What proportion of new inward investment
projects attracted to Northern Ireland require selective financial
assistance?
(Mr Robinson) In terms of the projects that IDB deals
with, all of them have received selective financial assistance.
There was a number of years ago an initiative by the Government
to relocate some jobs from the South East of England. They were
primarily within the public sector and we did have at that time
a few projects come in that obviously did not receive selective
financial assistance. But in essence all the projects that come
in that we report on we support them, but, of course, there are
other activities. There is other investment coming into the Northern
Ireland economy, inward investment, that does not fall within
our remit and so that would not be reported on. I am thinking
particularly that we provide no support to property development,
for example, and there is a lot of that happening. Equally well,
we do not support the distribution sector and again you would
have investment coming in in that way.
12. Within what range has the percentage of
total investment met by selective financial assistance varied
over the past five years?
(Mr Robinson) Primarily we have been bringing down
the contribution, the selective financial assistance contribution,
to the projects as a general trend. In the last 12 months, however,
the industries that we have been attracting and the dynamic sectors
of the economy, which are primarily software and call centres,
the levels of capital investment involved in those projects are
considerably less than in manufacturing. So in some of those projects
our actual contribution is higher towards the project cost but
overall in those cases the level of support per job being promised
is significantly less. So while the contribution is going up,
the overall commitment of public resources is coming down.
13. Has the level of financial assistance needed
to secure projects fallen since the signing of the Belfast Agreement?
(Mr Robinson) It would be hard to form any conclusion
definitely on that. The figures, as we have published them in
the end-of-year statement, actually show that the percentage has
gone up, as I say, but the overall level of support has come down.
That is on the second page of the end-of-year statement. So the
answer to your question is no. The point I would make, however,
in answer to it as well is that we are not really comparing apples
with apples because the nature of the projects signed up in the
last year by and large is quite different in character from the
projects we have been signing up over previous years.
14. What do you estimate your overall "hit
rate" to be, measured as the percentage of initial inquiries
which lead on to investment in Northern Ireland and what factors
lead the others to fall by the wayside?
(Mr Robinson) In our annual report and in the memorandum,
we indicated that the visits made in terms of first-time visits
by potential investors and repeat visits, that is, where we are
identifying people as potential investors and they are coming
back, those combined have been running at about 200 a year for
the last few years. What those statistics cannot show is the quality
of project because it is just simply a numerical representation.
We have signed up in the last year 21 new inward investments,
the previous year was 12 and before that the pattern was 11, ten
and seven, so we can say that in the last five years we have increased
the number of new inward investors by about three times and the
pattern of visits into Northern Ireland has been broadly the same.
So we think that that points strongly to improved targeting on
our part and I guess as well a more realistic assessment in the
early stages of talking to people, usually in their markets, about
whether or not we think either the project has merit or that Northern
Ireland's prospects of landing that project are reasonable, but
I think that those figures show that we have been improving our
"hit rate" quite considerably. Of course, there is a
little bit of mismatch in timing because you sign a project in
one year and you may well have had the visit in the previous year
but I think it is a reasonable extrapolation of that to say that
we are now moving into something like one in ten visits leading
to a project.
Mr McWalter
15. In your opinion, what are the key commercial
factors which lead potential investors to give Northern Ireland
active consideration as a destination for their activities?
(Mr Robinson) In our experience, in all projects there
are a number of influences and sometimes quite a large number
of influences that come to bear in this. You look, first of all,
at their motivation for coming to the markets in some ways, if
you are looking at a potential investor from the Far East, there
is no doubt that they are looking at the European market and a
priori it is a decision about the European market. Within
that, from the Far East, English-speaking is undoubtedly a positive
contribution because of the fact that for most of the people in
the Far East they see in business terms learning English and everything
revolving around English as being important. In contrast, if you
are looking at the American market, while certainly in most cases
they are looking at Europe, there is also a component of looking
at perhaps the United Kingdom and supply to the United Kingdom
and Ireland as their goal and maybe they are not, therefore, quite
so ambitious in terms of Continental Europe. That would happen
in a minority of cases but it is noticeable from America, not
from the Far East, and, of course, the question then of language
is more about the familiarity of operating within an English-speaking
culture than the opportunity to learn the language as happens
with the Far East. Then within Europe the decision to come to
Northern Ireland is again quite different. It is almost certainly
to do with supply to the United Kingdom and Ireland market because
there is comparatively little attraction in their minds at the
beginning in supplying back into Europe. We quite often change
that thinking as things move along but it is not there in their
initial stage, and, of course, relocation within the United Kingdom
is primarily about availability of labour and cost. So those would
be the different influences that are at play in the early stages.
Then we move into demonstrating that Northern Ireland can meet
their requirements in various ways and the priority varies from
company to company, about the availability of very good people,
about the infrastructure and their ability to get in a manufacturing
sense product to market or in the sense of tradeable services,
the very high-quality telecoms infrastructure that we have here
in Northern Ireland. Those are the issues then that start to come
into play in projects coming from the four different market areas
(if I can describe it that way).
16. So a lot of those factors one could almost
describe as cultural rather than commercial factors? In your answer
they dominated?
(Mr Robinson) I think there is this element. We do
have a saying in our business that it is people who make the decision
and, therefore, it is understanding who it is you are dealing
with and understanding the individual who will make the decision,
because very often the people who come in the early stages are
not the decision-makers. So a big part of our early task is understanding
who will make the decision and what are the issues in that person's
mind. So yes, I would agree with you that the cultural and the
human element is undoubtedly part of all this.
(Mr Ross) Chairman, if I could come in on the back
of that. The investor invariably is a different type of investor
on almost every occasion, but undoubtedly people issues feature
highly in terms of the priority of what they are looking for.
Investors ask questions like "What is the productivity and
how can we operate profitably? Can we operate more effectively
and more competitively in Northern Ireland than in any other location?"
So they look at a range of component parts of the cost structure.
They are also very much influenced by the existing businesses
in Northern Ireland and how successful they have been. So the
testimonials have increasingly become very important to us in
selling Northern Ireland to potential investors. Of course, you
also get into areas such as the capabilities of the universities
and, as Bruce said, telecommunications. Potential investors do
get into the financial aspects and the ability to operate very
profitably in Northern Ireland, but the higher consideration is
Europe and the English language and the ability to service markets
worldwide through food, transportation, etc.
17. Many of the things that you have said could
be said also of those countries or those destinations which would
be competitors—the Republic of Ireland and other parts of
the United Kingdom, perhaps less so with other European Union
countries the English language factor but there will be other
compensating virtues that some of those countries will have no
doubt. From where do you face the greatest competition? Do you
nearly grab the cat by the tail and then find that somebody else
has grabbed it by the head?
(Mr Robinson) That is the story of this business entirely.
If you deal with something like 200 visits a year and you land
20 of them, there are a great number that escape your grasp.
18. Lots of cats?
(Mr Robinson) Exactly. The point you are making is
very important, which is, how do we distinguish, how do we differentiate
this product and how do we capture the imagination of the potential
investor, and we spend an enormous amount of our time in thinking
about that and our energy in seeking to do it. Leslie made reference
to the testimonials. In the marketing campaign that we mounted
in the United States in October, we used American focus groups
to help us to work through the branding process and it is, of
course, a truism in this business to say that the success of these
companies is very important and they are a very good proxy for
doing business in Northern Ireland, but I think what we learnt
when we got into it in some more detail was that it was also important
to have that testimonial from as senior a person within the organisation
as possible. So that is a big part of it. So some of this appeal
is to say, with a little bit of licence in this, "Your peer
in this industry, who is highly respected, has made the decision
to come to Northern Ireland," and that is a part of how we
seek to differentiate. We also would work exceptionally hard at
thinking very clearly about what we understand to be the real
key needs of the corporation and then work very hard specifically
to present those to a company because that is how you differentiate.
If everybody is going to score 90 per cent on their assessment,
it is the 92 per cent that is actually going to get the prize
and so you are into that amount of detail. Then I do think we
work very hard at some of the natural strengths of people in this
part of the world, their natural warmth and hospitality, and again
you find that culturally on the West Coast of America the comparatively
easier-going way of life here and less formal address and so on
of people all works for us as we seek to differentiate ourselves.
But those are the strands and you have to work at them exceptionally
hard to make the distinction.
19. I think you have described some of the factors
that tend to clinch it for Northern Ireland in your 20 out of
200 cases but how do you compare with the rest of the United Kingdom?
Are you suggesting that in the rest of the United Kingdom people
are cold and frosty and less welcoming and more formal and that
is why you win?
(Mr Robinson) All I can say is that there is a certain
amount of evidence coming to us from the customer base. For example,
in network services there has been a lot of extensive work done
about the impact of the different regional accents on the caller
and there is no question whatsoever that the Ulster accent comes
across exceptionally well. People from this part of the world
succeed in conveying to the caller—and this is not me telling
it, this is important businesses like Abbey National telling us—a
real interest in their problem and a desire to help solve it,
and let me repeat, I really do think this is about the difference
between scoring 90 per cent and scoring 92 per cent and sometimes
these are the differences that do allow us to get projects.
|
