Examination of Witnesses (Questions 194-199)
DYSON
19 OCTOBER 2004
Q194 Mr Berry: Sir Richard, welcome.
Would you like to introduce your colleague for the record?
Sir Richard Needham: Lucy Grimster,
who works with Dyson part-time. When we have a requirement for
public affairs Lucy comes and helps. I thought it would be nice
if she came to the Committee today. Lucy did politics at Sussex
University and is doing a degree in international human rights
and I thought it would be nice if she could come and see the work
of the Committee.
Q195 Mr Berry: As you
will understand, the Committee is looking at UK-ASEAN trade relations,
and obviously Dyson is an example of a manufacturing company doing
business in Southeast Asia. I wonder if we could kick off with
a brief description of your operation in Southeast Asia. We obviously
know about the vacuum cleaner manufacturing business in Malaysia,
but perhaps you could give us an indication of the range of your
activities in Southeast Asia.
Sir Richard Needham: Malaysia
is the headquarters of nearly all Dyson manufacturing. There is
now some Dyson manufacturing with the new motor which we have
developed (a brushless motor) in Singapore; but the vast majority
of our manufacturing is in Southern Malaysia, in Johor Baru and
Senai, where we currently have two subcontractors who are responsible
for our total output. [1]It
has grown enormously in the last couple of years. When we first
went there in 2001 the annual production of Dyson was about 1½
million machines, of which the vast majority were for the United
Kingdom market. The production this year will be 2.7 million,
of which roughly a million will be for the United Kingdom and
the rest will be mainly for the United States, which is now almost
as large as our UK output[2]
(in fact we are now the second largest supplier of vacuum cleaners
by value in the United States), and also to Australasia, Europe
and Japan. In total with our subcontractors we probably employ
around 4,000 workers. We have our own people who work there in
terms of liaison, quality control, testing and engineering—in
fact, an increasing engineering base. By the end of this year
we will be the largest manufacturer of vacuum cleaners in the
world by value. It is a very, very important element now to the
economy of Southern Malaysia.
Q196 Mr Berry: To what extent do you
see your operations in the region as being manufacturing-based
for export to the United States and elsewhere? To what extent
are you selling products in that region?
Sir Richard Needham: In South
East Asia and ASEAN it is tiny and will continue to be tiny. We
sell 300 or 400 machines a year in Singapore.
Q197 Mr Berry: It is the manufacturing
base?
Sir Richard Needham: Yes, it is
98% for export. We would like to sell in Malaysia and we would
like to sell in Indonesia but there are not a vast amount of vacuum
cleaners in Indonesia at the moment.
Q198 Mr Berry: The big question is: why?
Why did you make the decision to locate your manufacturing activities
in Malaysia? I am sure a number of questions will refer to this.
Could I start with the incentives for foreign investment: what
kind of incentives has Malaysia provided?
Sir Richard Needham: I have a
paper here for you that I can leave with you afterwards, which
gives the incentives for Mexico, Canada, Indonesia, China and
Malaysia. Basically the only incentives are a five-year tax holiday.
We do get incentives which I have not got down here on research
and development opportunities. I could not say for one moment
that the reason for going to Malaysia was because of the tax incentives;
that was not the basic reasons for us going there.
Q199 Mr Berry: They were giving you tax
incentives which they really did not need to. That was a bit foolish
of them.
Sir Richard Needham: That is a
matter for them. The decision we made was not based on tax incentives.
To put it another way round, had they said, "You're going
to Malaysia with a 40% corporation tax" or, for example,
as it used to be in Malaysia, you could not own more than 49%
of your own business there, had it been those sorts of burdens
placed upon us then we would not have gone there. The reason we
went there had nothing whatsoever to do with the tax breaks, although
it is very nice to have them.
Mr Berry: I understand.
1 Note by witness: Dyson runs and manages the
factories which assemble its machines. Its partners provide the
buildings and the assembly staff. Back
2
Note by witness: The correct production destination figures
are: 900,000 (USA); 1,000,000 (UK); 800,000 (Rest of World). Back
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