Examination of Witnesses (Questions 400-419)
DTI AND UKTI
21 MARCH 2006
Q400 Mr Bone: Roughly?
Ian Pearson: A major feature of
my work in the time I have been Trade Minister has been involvement
in negotiations and discussions about negotiations, because it
is the Trade Commissioner, Peter Mandelson, who negotiates on
behalf of the 25 Member States. Nobody is in any doubt about the
UK's view and position when it comes to the Doha development agenda.
Q401 Mr Bone: Do you think we are
winning that argument?
Ian Pearson: We need to remain
focused on achieving an ambitious outcome to the Doha round. We
are fighting our corner within the European Union. It is no great
secret—I think I said this to the Committee on another occasion—that
the UK wants to move further forward on agricultural reform and
on agricultural market access than a number of other EU Member
States. This is all part of what will be a tied deal if we can
get it finally agreed. It involves Europe moving further on market
access but also on non-agricultural market access and on services.
Other countries, including India, Brazil and a range of others,
are doing more and we will continue to try our utmost to get an
ambitious, pro-development deal but we will have to see what happens
at the end of the day. There is no guarantee of success here.
Q402 Roger Berry: You advise UK companies
to get out more. Would you give the same advice to the English
RDAs because our experience in India was that a number of companies,
British or Indian, had encountered the trade investment agencies
of the devolved administrations of Northern Ireland, Scotland
and Wales but they were not talking a lot about the great work
that English RDAs were doing. Should they be doing more?
Ian Pearson: We need to make a
distinction here between trade promotion and encouraging inward
investment. RDAs' inward investment activities are funded through
the single pot. There are quite strong co-ordination mechanisms
to ensure that RDAs do add value and we do work closely together
with RDAs. There is a committee on overseas promotion which brings
together the main bodies involved in inward investment promotion.
That was set up over 25 years ago to co-ordinate the promotion
of inward investment into the United Kingdom. RDAs have to seek
Prime Ministerial approval for any proposal to extend or create
new overseas offices involved in inward investment promotion activities.
As part of this, they have to consider co-locating with UKTI inward
investment offices overseas. There are some strong mechanisms
in place here to ensure that we are not having some damaging competition
between RDAs and we are trying to attract companies to their particular
region as opposed to another. RDAs are increasingly using the
strap line, the UK's trade and investment partner. There is a
"UK@" brand on exhibitions as well. I am not saying
there is not more that could be done here because there very probably
is but there are some mechanisms in place here to avoid duplication
and waste of resources.
Q403 Roger Berry: That was going
to be my second question. My first question is about lack of visibility.
That was my perception. People did talk about Invest Northern
Ireland and the WDA and so on but certainly the people that I
met were not mentioning RDAs at all. Are most of our RDAs active
in India? Are all of them active in India? Are any of them active
in India?
Ian Pearson: It is only the British
Midlands which is the East and West Midlands combined. Some Members
of the Committee met with some representatives from there and
we encourage you to talk to them. They will tell you where they
think they add value.
Mr Bone: They did not.
Q404 Judy Mallaber: We did meet and
were slightly puzzled by the British Midlands representative who
was part of Deloittes. We were very unclear as to what she had
added because she was unable to give us examples and yet I have
papers here for the Committee which tell us of a number of inward
investment opportunities that have come through British Midlands.
Either you as the Minister can tell us or officials can come back
to us on this. It would be helpful to know exactly how it operates
and whether you think it does add value. Secondly, what is the
value of having somebody only looking at inward investment and
not looking at potential export opportunities for our local companies
in the Midlands?
Mr Collingridge: Speaking at the
national level and with experience of Asia generally, I think
they can add value in terms of the way that we can work with individual
companies in terms of the product that we are able to offer. They
can provide in many cases much more direct assistance, if you
like, to companies that we may be talking to in terms of locating,
in this case in the Midlands, if they happen to be there or working
with the Scots, the Welsh or the Northern Irish in that sense.
They do add value to the national effort. The issue of whether
they have visibility in a particular country—India in this
case—is a question of how much resource the particular RDAs
are prepared to put into that office.
Q405 Rob Marris: My understanding
is that the British Midlands representative who is employed by
Deloittes costs £150,000 a year. As a taxpayer as well as
an MP, it strikes me as ridiculous that we have the Department
of Trade and Industry and also RDAs, whether from the devolved
administrations or from the regions, doing this stuff. I think
it should all go through the DTI. There will always be a problem
with resources for any given region even when they double up as
the Midlands have. You put your finger precisely on the point.
That is why I think it should go all through the DTI and we should
ban all RDAs from doing that stuff.
Ian Pearson: That is certainly
a particular point of view. What I have tried to do is explain
the mechanisms that are in place before an RDA would be able to
open an inward investment office. They are quite robust. I am
only aware of one application to open an office that I have had
in the 10 months that I have been Minister, which was for London
to open an office in China. That seemed to make a lot of sense.
Q406 Judy Mallaber: There was one
other question which I did ask which you have not come back on.
You say they have to come for permission to open in relation to
inward investment. One thing that puzzled me was that if you had
a regional representative out there who presumably could be briefed
about who our major companies in the Midlands are, they would
potentially be in a good position to be able to look out for export
opportunities and feed them back into companies in the UK. Are
you saying that that is something that they are either not allowed
or not meant to do or it is not regarded as being valuable for
them to do? Are they only meant to focus on inward investment,
not export opportunities?
Ian Pearson: They are there to
focus on inward investment opportunities. We have other partner
agencies as well that we work with. If you look at the European
Union they understand the concept of regions. It would not be
unusual to promote a particular region when you are looking at
Germany, for instance, or France or Italy. When you go outside
the European Union the UK looks like a pretty small place. It
is the UK that is people's perception. Whether you are UKTI staff
working in India or a British Midlands representative working
in India, you have to sell the UK first. What UKTI has always
tried to do is present a cheeseboard, if you like. You can have
this particular south western cheese, this particular north western
cheese or this particular Midlands cheese. A lot of the promotion
of the UK is based on some of our key, generic selling points
about why the UK is a good place to invest in the first place.
Q407 Roger Berry: The whole thing
about the UK being at the forefront of people's minds is central.
Mr Collingridge referred to the advantage of RDA staff perhaps
being linked to individual companies. When we were in Chennai,
we met a trade mission of a small group of companies who were
into engineering and design vehicles, Ashok Leyland, et cetera.
That was set up by UKTI. I could not see any input. There were
companies from the Midlands but it was not a Midlands organised
thing at all. It was a UKTI organised thing for individual companies
with specific expertise that, for example, Ashok Leyland was very
interested in and no doubt other Indian companies were in Chennai.
It does raise this fundamental question about economies of scale.
If you are really going to put effort into selling the UK in India,
does it make any sense at all to encourage RDAs to do little bits
and bobs with the odd person from the Midlands, the odd person
from Yorkshire? Is this really a sensible way of spending quite
a lot of money?
Ian Pearson: I do not think it
is the case that we are encouraging RDAs to do this.
Roger Berry: Are you discouraging them?
Rob Marris: Or not allowing it?
Roger Berry: As Mr Marris says, should
you be more robust on this and say that the money would be far
better spent if it was allocated to UKTIs?
Q408 Chairman: London First is setting
up an office in Mumbai. The Corporation is setting up an office
in Mumbai and the Mayor of London wants to do something in Mumbai.
In Mumbai there will be three different faces for London. What
kind of cohesion does that offer for a very important market?
Ian Pearson: If you look at China
as well you have different organisations that will operate out
of Beijing. The important thing is that there is co-ordination
between these different groups.
Q409 Chairman: Would not the best
co-ordination be if UKTI had all these representatives under its
direct control, working from the same offices, presenting a much
more united front, rather than the very disparate effort that
is now being made?
Ian Pearson: It is perhaps unusual,
if you do not mind my saying so, that you seem to want a monopolistic
approach to this.
Q410 Rob Marris: Certainly; rationalisation!
Ian Pearson: The individual organisations
concerned would have their own views as to the merits of what
they are doing.
Q411 Roger Berry: If you say, "This
is what RDAs are for and devolution brings about results like
this. Sorry, Committee, there is not a lot I can do apart from
perhaps promote co-ordination", if that is the answer, I
understand that is the answer; but in terms of spending public
money surely it is far better, particularly in a market like India,
to put the money into UKTI that has the expertise, is doing the
business? There is not much added value from having separate offices
out there for London, the Midlands or wherever and, in London's
case, having three separate offices which seems quite bizarre.
Is the answer, "Sorry, that is life. That is devolution.
You guys voted for it" or is the answer, "We can do
something about this and we will have a word with them"?
Ian Pearson: When it comes to
Scotland, Wales and Northern Ireland, budgets have been devolved
for a considerable period of time. The last spending review took
the decision to devolve inward investment resources into the single
pot and in effect to decentralise it for the English regions.
Some of the English regions have taken the money allocated and
added to it because they wanted to do more internationally in
certain markets. It is a decentralised decision that they have
taken because they think it is in the best interests of their
region. What I have tried to explain however is the co-ordination
mechanisms through the COP process and requiring ministerial approval
if you are going to set up an office. That I think ensures that
there are the best prospects of effective co-ordination here.
This is obviously something that the Committee might want to come
to a view on. You either have a devolved or decentralised system
or you do not. You have to make a choice as to which is best.
We have made that choice so far. I recognise and I think the RDAs
would recognise that, first and foremost, they sell the UK. As
long as we work together at this, as long as there is the close
co-ordination, I think that is the best guarantee that we are
not wasting resources.
Q412 Chairman: We did hear some information
when the RDAs rubbished other regions and said, "We are better
than them. Have you seen what is wrong with that region?"
We heard that put to us by businesses.
Ian Pearson: I would be very disappointed
if I were to hear that because I do not think that is the way
to go at all.
Q413 Chairman: I am sure we would
all agree on that. You talk about co-ordination but surely you
cannot compartmentalise our country's economic relationship with
India in the way you are trying to do. Outward investment, inward
investment, trade, joint ventures are all part of a mix of business
strategies any one business might want to engage in. To put one
into a pot—inward investment from within the UK—and
the rest under UKTI does not make sense. It is not the way businesses
work in the real world.
Ian Pearson: I think there has
been a blurring of the distinction between trade promotion and
inward investment activity. We have, in my view, a sterile debate
about the balance of resources that ought to be devoted to trade
support and inward investment. I think the modern reality is you
need to be able to do both. Also, the sort of people that you
are talking to when you are trying to get a major inward investment
into the United Kingdom are not necessarily the same people that
you would talk to if you were looking to persuade them to purchase
particular goods and services. In many cases, you are either talking
about completely different companies or different people within
the same company that you need to approach for those activities.
In reality, there are often distinct roles. I think that distinction
has become more blurred. The point that I am trying to make about
globilisation and how the world is changing is that it is about
two way trade and investment and we should not get too hung up
about the boundaries and the barriers.
Q414 Mr Bone: If you follow the logic
of your argument about devolving to the RDAs and the Welsh Development
Agency et cetera, you should not have the UKTI present.
That is what you are really arguing, is it not?
Ian Pearson: No, it is not what
I am arguing at all. I am arguing that we need an organisation
like UKTI to help ensure that we have competitive businesses in
the UK doing business internationally and that we have an organisation
that is helping to attract inward investment into the United Kingdom.
I genuinely believe that with globalisation UKTI is more important
than it has ever been. We have that body that can market the UK
and assist our companies to succeed internationally and can attract
high quality foreign investment into the United Kingdom as well.
We need to do that at a national level. That is not to say that
in some regions they do not have their own particular interests
in wanting to persuade companies to locate in their particular
areas.
Q415 Rob Marris: Focusing on the
Indian market both in terms of UK investment there and in terms
of selling goods and services there, you mentioned the tremendous
opportunities in the Indian marketplace and encouraging UK companies
to look at the opportunities but you also said that there is a
perception problem and India is a difficult marketplace. Could
you sketch in a little more about what the DTI is doing to inform
UK companies who wish to be in India, whether to invest or to
sell there, about the local quirks that any country has? You did
mention roadshows, for example.
Ian Pearson: I mentioned the Doing
Business in India roadshows which are practical and on the ground,
going round the different regions. They have been very well attended
by companies so that shows that there is a level of interest in
the Indian marketplace. I also mentioned the work of the Indo-British
Partnership Network and the Joint Economic Trade Committee which
is business to business, getting together to discuss areas where
there were particular barriers to them entering the marketplace
and also in some cases doing business with each other. I also
mentioned the staff in our various posts and the fact that we
have 74 people in nine locations who will be doing work from OMIS
reports and, in some cases, some hand-holding with companies as
they are attending meetings and looking to identify business opportunities.
There is a whole range of support that is available at the moment.
Q416 Rob Marris: What if somebody
on the Pensnett Trading Estate in your constituency comes to you
as a local MP, not realising you are the very knowledgeable Minister,
and says, "We have heard that India is a bit big these days
and getting bigger. We want to be there"? Where do they go
for information? Is it too diffuse or is it focused enough? Talking
to some metal basher on the Pensnett Trading Estate about JETCO
is not probably going to help them, is it?
Ian Pearson: No, but I would put
them in touch with their local international trade adviser who
would probably go round and talk to them, make an assessment of
their business and their potential for exporting to India. They
would probably advise them to maybe go on a roadshow and talk
to them, depending on the size of the company, about our passport
to export programme. I have just been reminded to mention UKTI's
website which has lots of information and links in terms of doing
business with India.
Q417 Rob Marris: I have particular
concerns about the situation of scheduled castes and tribes in
India. Caste-ism used to be called "untouchability".
I met an English businessman in Chennai, for example, who said
that he would only employ Brahmins. That is probably illegal,
by the way, under the Constitution of India. What does the DTI
do to inform UK companies wishing to go to India about caste-ism?
Ian Pearson: There is a variety
of information available about doing business with India generally.
I am not sure what level of detail that goes into and whether
it would mention issues of caste-ism as you describe. Certainly
they will explain the legal and employment position with regard
to the employment situation there.
Q418 Rob Marris: Could you look into
it and let us have a note on that specific issue?
Ian Pearson: Yes.
Q419 Chairman: Rob Marris was talking
about quite small businesses on a trading estate in your constituency.
Is it right that we should be putting as much effort into small
businesses as we are in relation to the Indian market with other
challenging, developing markets? Is it not really the big and
medium sized businesses that we should be focusing on?
Ian Pearson: I would like to reassure
you that we have some medium sized businesses on the Pensnett
Trading Estate.
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