Select Committee on Northern Ireland Affairs Minutes of Evidence


Examination of witnesses (Questions 40 - 52)

WEDNESDAY 16 JUNE 1999

MR BRUCE ROBINSON and MR LESLIE ROSS

  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.

Chairman

  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.

Mr Hunter

  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 accordingly?
  (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 seen—I have not looked at it now for some few years—has 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.

Mr Robinson

  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 do.
  (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 suspect—I could be entirely wrong—that 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[2], 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 economic activity.

  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 degree of —

  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 used?
  (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.

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.

Chairman

  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[3]. 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 years.

  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.


2   Page 22. Back

3   Provided pages 19-22. Back


 
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