Examination of witnesses (Questions 40
WEDNESDAY 16 JUNE 1999
ROBINSON and MR
40. Perhaps we can come back to that one.
(Mr Robinson) Chairman, let me be clear, it is an
important issue and we are very keen to deal with it. It is just
the question of whether it is in response to the Select Committee
or whether it is in response to the PAC.
41. I do not know what the PAC timetable would
be. I think it would be quite helpful if, in the context of our
own inquiry, you felt inclined to provide us with information?
(Mr Robinson) Chairman, we will take that away. Would
you mind, Chairman, if we consulted further on that?
Chairman: Yes, absolutely. I do understand the
proprieties and the niceties and we would be entirely content
if you took counsel. This is the first session that we are having
on this particular inquiry, so we have actually got a reasonably
decent margin of time, so do consult.
42. There are a few more points I want to put
to you. At the beginning of the session, if I heard you correctly,
you said that 50 per cent of Northern Ireland manufacturing employment,
ie 52,000, 75 per cent of exports, were as a consequence of inward
investment. The point I want to put to you is, is there a risk
that Northern Ireland's economy could become over-dependent on
inward investment, and the sort of risk I have in mind is that
at a time of recession there would be a disproportionate impact
and loss of demand and, therefore, Northern Ireland would suffer
(Mr Robinson) It is an important question, but, of
course, it is a question that is not just about Northern Ireland.
For example, there was a report yesterday in The Financial
Times that suggested that there was a 10 per cent. increase
in foreign ownership in United Kingdom industry over the last
few years, so there is a large global trend here that is at play
and clearly, as a region, Northern Ireland has no ability to influence
that. What I would suggest is that you are prompting, and I think
it is very important, what is the parallel policy to stimulate
locally-owned industry and what is being done on that and that
is a very important and vital issue for us as we go forward. The
long-term analysis that I have seenI have not looked at
it now for some few yearshas always shown that the Northern
Ireland economy has not generated enough jobs in its own right
to meet its needs, as a generalisation, and that that has always
been the rationale for inward investment. That seems to me to
make the case prima facie but I suggest it is rather a question
then about what is the parallel policy for indigenous industry.
43. And the last in these miscellaneous points,
the MacBride Principles: what is your assessment of the impact
of these on American investment?
(Mr Robinson) Currently the MacBride Principles are
not featuring in discussions we are having with American companies.
Those issues seem to have peaked some three or four years ago,
particularly around the tabling of shareholder resolutions in
a number of the major companies, the major publicly quoted stocks
in America that were investing at that time, and that seems now
to have run its course. It is not featuring in discussions we
are having with companies at present and, of course, when companies
raise these issues we point to the legislative environment in
Northern Ireland and point to all those issues as the response
and, as I say, at this point in time it seems to have dropped
off the agenda.
44. Some years ago the Select Committee, in
looking at job creation issues, visited one of your outposts in
South Korea and I think commented on it very favourably in their
report. Since then, however, to put it crudely, something basic,
as far as investment opportunities are concerned, seems to have
gone down the toilet, yet you still have a post there. You have
to choose by some mechanism where you place yourself around the
world and factors can lead to having an office in a land of no
opportunity. I am wondering at what stage do you re-assess these
issues and how long term do you have to hope that there might
be an upturn in business?
(Mr Robinson) Chairman, I will start the answer to
that and I think Leslie will come in as well on some of the detail.
The question posed is very important and is always difficult for
us because, on the one hand, we know this is a long-term business
and that even cultivating projects takes quite some time, so you
are always weighing up where you sit in that equation. We have
redistributed resources out of the Far East towards the United
States over the last few years. We have relocated our offices
in both Tokyo and Seoul to less expensive premises and some people
that we had employed there have left and we have not replaced
them. So we have finessed the cost base in that way. I think the
key decision and the key judgment we have exercised in Korea is
that the existing base of eight companies and the long-term relationship
that they seek and a similar approach in Japan justifies our continuing
with those offices. Certainly there is some evidence now of Korea
coming back out of recession, but I do not run away from the fact
that it is a judgment call in the final analysis as to what you
(Mr Ross) Chairman, this is a very valid point. If
you look at the growth in GDP, for example, in 1997 in Korea it
was 5.5 per cent, then dipped to minus 7 in 1998, when the economy
collapsed, but there is now zero growth, so the Korean economy
has improved considerably. Without repeating the points that Bruce
made, I suppose it is the need in Asia, above all other markets,
to build long-term relationships and, therefore, it is important
that we continue to develop the relationships with the parents
of the companies that have already invested in Northern Ireland.
We have had eight Korean investments in Northern Ireland and they
employ around 1,500 people, so the Korean market is important
in terms of cultivation. On the wider front, we have to prioritise
the markets, by looking at the size of the financial cake and
what slices we put in which geographical market. That is why we
have been moving resources from Asia/Pacific to more productive
markets in the United States.
45. Looking at your written evidence, you are
indicating the number of jobs that have been promoted and you
have given the divisions between those that are, if you like,
locally-owned companies and those that are externally-owned companies.
Taking the 18,000:5,000 ratio, I wonder if you can indicate, albeit
perhaps your most intelligent guess, what the ratio is of your
cost distribution in your efforts between those two separate markets?
(Mr Robinson) The first distinction I would draw is
between this aspect of the new investment, which is the primary
focus of Leslie's Group and activities, and then when they become
established and they move over to be dealt with within the Established
Industry Group, but my guess is that probably somewhere around,
in terms of our human resource and our day-to-day work, we would
be split about 50/50 between them and maybe slightly more on the
externally-owned businesses. By and large these businesses are
larger and have bigger management structures so that we would
tend not to be delivering our export services or our trade promotion
services to those companies. So we would be working much more
with locally-owned companies in that regard.
46. But what I am trying to make an assessment
of is that I suspectI could be entirely wrongthat
in terms of the jobs from locally-owned companies we are talking
about small numbers in a lot of companies perhaps, not as sexy
as, say, neon lights flashing, bringing in massive employment
from abroad and what the media consider the IDB to have done if
they did that. I am trying to assess whether you are going for
the headline-grabbing opportunities rather than perhaps more sustainable
jobs at home? Have you done any analysis to look historically
at jobs that have come externally, where they have been in five
or ten years' time as opposed to the jobs you have got locally,
to evaluate them in terms of the value-for-money aspect of what
you actually have put into it?
(Mr Robinson) Again, Chairman, we will come back with
some more detailed information on this,
but I think the basic point you are making is right, in that in
pure value-for-money terms the locally-owned industry has been
more cost-effective. But I think you come back to the bigger set
of challenges which also show that, is that a sufficient driver
for growth, and the conclusion that we have come to, Chairman,
is that it is not either/or; it requires both growth in inward
investment and local industry and that, having made that conclusion,
you set about the new investment task in a way that produces the
best outcome, because I still would point back to the fact that
75 per cent of the exports from Northern Ireland come from inward
investment companies, so that we still have this dilemma at this
point in time that you require both cadres of investment to produce
47. Could I ask you a question about some of
the frustration that you must suffer. For instance, about four
years ago we had great headlines that about 1,800 jobs were going
to come to Newtownabbey as part of a textile company's investment
in the Province. I suspect that before that headline was ever
written an awful lot of effort had been put in by IDB in getting
the company to that stage. Here we are four years later and there
are no 1,800 jobs in Newtownabbey. I am wondering what is the
cost in financial terms in the amount of manpower used for nothing
effectively? Am I right in saying it is gone and lost forever?
(Mr Robinson) You are absolutely right in saying that.
We have made that clear, in fact, that Hualon will not go ahead
and, yes, there is a degree of frustration and disappointment
but it really is part and parcel of the task and part and parcel
of the challenge. If we have 200 companies that come in in a year
to see us and we land 20 of them, there are 180 that we have some
48. But this is when you have landed them?
(Mr Robinson) But you are back to saying the yield
is 70 per cent out of the 100 per cent. That is part and parcel
of the job. The task for us rather is to recognise that that is
it and to go on and make sure that if we have enough on the top
line we will see more at the bottom.
49. There were a couple of questions there that
I do not think you picked up on. What was the cost? What was the
man-hour cost, what was the financial cost? What excuse or reason
did Hualon give?
(Mr Robinson) We have not calculated the man-hour
costs. There was no selective financial assistance paid to Hualon.
There was never any money paid out under the letter of offer,
so that the cost was the cost of personnel dealing with the case.
That was a lot because the project was a major project and we
had to go to Brussels as well on the approval, but in terms of
the reason why the project has not gone ahead, interestingly enough,
Hualon have continued to build their market in Europe and continued
to increase their sales in Europe. First of all, we had the question
of whether the support was going to be approved of and the company
made the decision from the beginning that they were not prepared
to invest without that being clear-cut, which I think was a perfectly
reasonable decision on their part. What then has happened in the
last 18 months is that the devaluations of currencies in the Far
East have effectively significantly reduced their operating costs
in the Far East and with that, although they have continued to
build the market and develop it, it is more profitable for them
to continue to manufacture in the Far East and supply the European
market. So we together discussed it and came to the joint conclusion
that for the foreseeable future that project would not go ahead.
We have a very valuable asset in that site. We believe that there
is tremendous potential for further development and we were keen
then to make sure that the site was not tied up for a long time.
So we came to a recognition that the project would not go ahead
and we are now moving ahead to look at how we develop that site.
50. Is there any prospect of the site being
(Mr Robinson) There is no question at all that the
site is a first-class site and we believe there will be certainly
interest from developers in Great Britain and maybe even further
afield in the site.
Chairman: A final question from Mr Beggs.
51. In spite of all the difficulties thrown
at IDB, it is a very significant achievement and a tribute to
the commitment and skill of the officials within IDB to have landed
Hualon and to have been able to overcome those aspects of this.
I have no doubt that success was primarily attributable to that
commitment. Could I ask how significant is expansion of the natural
gas network to IDB's plans to attract inward investment? What
assessment does IDB make of the impact of the Government's proposed
climate change levy on energy supplies on the relative and absolute
attractiveness of Northern Ireland as the preferred choice of
a mobile inward investor?
(Mr Robinson) In our marketing and selling
of Northern Ireland to potential investors, the costs of operating
there are obviously very important and anything that makes those
costs greater obviously we would feel is not helpful to us. By
the same token, the company will take into its mix in assessing
the project the availability of labour and labour rates alongside
issues such as rates, which manufacturing industry does not pay
here in Northern Ireland. So that will go into the whole mix in
terms of what clearly from our point of view we would prefer,
all other things being equal, which is to see those operating
costs less. As regards the natural gas, it is difficult for us
to assess that at present because, as I was saying earlier, in
the last year we have seen a significant change in the type of
new business coming to Northern Ireland. It is not actually manufacturing
industry per se. Certainly we know the market opportunities
in the future are especially good in the area of software and
call centres, so it is harder for us to call then the whole question
of the next stage of availability of natural gas.
52. I have one final question myself but I am
not in any way seeking for you to answer it now, not least because
it is a fairly large question and, therefore, a submission in
writing will be entirely appropriate. There is a constant projection
by the IDB and by Northern Ireland, totally appropriately, of
the fact that it is an educated workforce. I think it would be
helpful to us if you could give us, again in writing, some sort
of account of how you project to a potential investor what the
nature of that phrase means about an educated workforce? I do
totally understand it will vary according to the particular investor
because you will be responding to him in particular, but it would
be interesting to have a comparator statement because I imagine
you do make some allusion to what they might find in other parts
of the United Kingdom. I think if you were able to provide that
it would be very helpful.
Finally, since I see the Home Office is back in difficulties over
passports, I hope if there are any further jobs made available
at the Passport Office they will be made available to Belfast
in the same way as they were ten years ago.
(Mr Robinson) I am in total agreement on that.
(Mr Ross) Chairman, just in case there is a misunderstanding
between Mr Donaldson's question on job duration and Bruce's response,
perhaps I could make an observation. In relation to job duration
and the reference to eight years, the response was not intended
to suggest that inward investments only last eight years but more
that the monitoring period for grants generally only lasts eight
Mr Donaldson: I think, Chairman, that is a very
important distinction and I am pleased that Mr Ross has made it
because I was a bit concerned. I did not think the statistic was
right in relation to the lifespan of the jobs, so I am glad you
have clarified that and apologies to Mr Robinson if I did not
put the question perhaps as distinctly as I ought to have and
I think that is quite an important intervention.
Chairman: That seems a very happy note on which
to conclude the examination. We are much in your debt for having
come to give evidence and thank you very much indeed for the manner
in which you did it.
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