Examination of Witnesses (Questions 40
- 59)
TUESDAY 7 NOVEMBER 2006
UKTI
Q40 Mark Hunter: The seven are it
at the moment, but there is an annual trawl effectively for new
ideas?
Mr Timmins: Indeed.
Q41 Mark Hunter: There is nothing
outside those seven which you want to tell us about just now?
Mr Timmins: I do not think so.[1]
If we were having this discussion in a few months' time, by which
time we would have completed the exercise that I have just talked
about, there may well be other sectors which are appearing on
the horizon. I would like to stress that our commercial team in
Brazil are constantly on top of which areas of opportunity are
building potentially for British companies. They make lots of
contacts and they are framing a view over the period of a year
of where there are opportunities bubbling for British companies
and it is that intelligence that they will present to us as part
of this exercise so that it can be presented to British industry
and decisions can be taken about sectors for next year.
Q42 Mark Hunter: The second part
of my question is about how well we are doing in those seven strong
sectors already and I would be grateful if you could address that.
Could you also say a little bit about how you prioritise the seven
sectors? Are they all equal priority or are some more significant
than others? Can you explain that a bit further?
Mr Timmins: In terms of how well
we are doing, we have, as part of the UKTI headquarters organisation,
a sectors group. It is the job of the sectors group to manage
our interests in relation to these sectors and I do not have at
my fingertips the detail of how well or otherwise we are performing
in each individual sector, but that is something that we can provide
for you if you want to have that. We do receive reports quarterly
from our teams in Brazil which indicate for each sector what activities
they have undertaken in support of that sector, but more crucially
what outcomes are being achieved. I do not mean numbers of seminars
and numbers of contacts, I mean outcomes as opposed to outputs.
Q43 Mark Hunter: I think we will
be interested to receive, as you said, more information on that.
The other part of the question is how you prioritise the seven
already identified areas. Are they all equal? Do you have equal
resources allocated to each of them? Are some of them extremely
significant and perhaps some of the seven marketed a little less
so?
Mr Timmins: I think the answer
to this question is that the sectors in terms of their priorities
do not just relate to how we see the sectors in terms of the Brazil
market because part of our approach to sectoral activity is to
determine for the UK economy which of the sectors will add most
value to the economy if we provide UKTI support. There is an issue
here about our sectoral strategy, if you like, in terms of the
UK economy. By and large the more high value-added the sector,
the more knowledge-based the sector, the more likely we are to
take a view that the benefits to the economy are likely to be
greater and that is something that may determine how much or how
little resource is provided for that sector in terms of its focus
on Brazil.
Mr Hockney: If I could add to
that. Out of those seven sectors there is one that specifically
stands out and that is oil and gas and if you are asking me to
rank, that would be our number one top priority. The others, maybe
environmental technologies and healthcare, would be in the second
tier, if you like, with the others following under a third tier.
That is a rule of thumb in terms of resource.
Mark Hunter: That is helpful. I would
like to explore it further but given the time—
Q44 Mr Clapham: Mr Timmins, when
we get the note on the sectors, could you let us know whether
we have got any water companies involved in working in Brazil
and, if so, which companies and what they are doing?
Mr Timmins: Fine, I will do that.
Chairman: Thank you.
Q45 Roger Berry: May I ask about
aerospace. Brazil is the fourth largest aerospace manufacturer
in the world and it looks like before November 2005 it was a priority
sector and then it was demoted. I need to know why it was a priority
sector before November 2005 and why it was then demoted? If British
companies come along and say "We are interested", it
looks like they said they were interested, there was a seminar
in London and then it all went a bit pear-shaped. Is this what
happened?
Q46 Rob Marris: It failed to take
off!
Mr Timmins: As a general rule,
as I was explaining, the extent to which a sector becomes a priority
for a market is very much determined by the view that industry
in the UK takes of that market at any given point in time and
it is that determination which really guides the way in which
UKTI support is given and the extent of UKTI support. I do not
know the specifics in relation to the aerospace sector. I was
not aware that it had dropped off the list, has it?
Mr Hockney: Yes, it has gone to
a second tier.
Mr Timmins: If it has gone to
a second tier priority, then it is because a judgment has been
made by the sector in the UK that for the moment Brazil is not
in the top league of priorities but that, of course, could change.
Q47 Roger Berry: With respect, that
is a tautology, of course that is true. I am trying to get some
understanding about how you move from a situation where because
somebody said, "This is a priority sector", UKTI spent
a load of money organising a series of seminars in the UK, 50
companies attended, only four were interested in going to Brazil,
what did they find out in Brazil that you could not have told
them? Was it the localisation agenda? Was it that it was very
difficult to break into the market? What I am trying to get at
is how do you move from a situation where the great and the good
say, "It is a priority sector". It has clearly put some
effort into this. UKTI put a lot of effort and probably money
into it and then pretty quickly, they are saying, "No, no,
it is not a priority after all". I am trying to understand
what took place, why that change took place.
Mr Hockney: I think you have hit
the nail on the head. Embraer, the fourth largest aircraft manufacturer,
was looking at its new supply chain and we thought there must
be opportunities for UK companies here. The teams overseas talked
to Embraer, they said, "Yes, we are looking for a new supply
chain". We brought over some of the key people in Embraer
to talk to British suppliers, British suppliers seemed quite keen,
we had a good turnout and we then decided to follow that up with
a visit to Brazil to take it that stage further, hopefully getting
British companies to make partnerships with companies in Brazil
because the only way to get into Embraer is to have a local partner.
It was that jump from the huge 50 company turnout in London to
only four companies that were interested in going out to Brazil.
The things that were told to us by those companies were that it
was the significant costs of selling into Brazil, it was the cost
of setting up a partnership in Brazil, that they had easier fish
to fry and that is what they chose.
Q48 Roger Berry: Could I ask one
quick final question. What you have described seems to be perfectly
reasonable and understandable, but I am not sure it fits with
your earlier comments that the priority sectors are determined
not by you going to a British industry and saying, "Hey,
guys, have you thought about Brazil?" but the UK aerospace
industry coming you to saying, "Hey, guys, we are thinking
about Brazil, what do we do?" I thought it was the business
that identified the priority sectors. What you have just described
is a different process.
Mr Timmins: It is a mix because
clearly industry has its own intelligence on individual markets
but so too do our commercial teams. Our commercial teams have
their ears to the ground constantly, they are aware of where there
are opportunities. On some occasions those opportunities are not
known to British industry but there is a dialogue; on other occasions
the opportunities may well be known to British industry, and there
is still a dialogue and out of that dialogue will flow a decision:
either the sector does see the market as a priority or it does
not see the market as a priority.
Chairman: I think my colleagues want
to come in on this area. Peter Bone first.
Q49 Mr Bone: Chairman, on this particular
point, the logic seems to be that you are saying that the companies
in a particular sector choose the priority market. Now it seems
to me the priority markets are probably the ones which are established,
so they can well spend their own money in developing and, by the
nature of things, it will be the traditional market. Is it really
the role of government to support that sort of thing or is it
the role of government to encourage British companies into new
markets which they are not in already?
Mr Timmins: Yes, indeed, I think
it is the latter. It can be a mix of both depending on the circumstances.
Q50 Mr Bone: I am sorry to interrupt
you, but originally you said that was not the case, it was that
you were only following the market-led countries from the sectors,
you were not doing your own thing.
Mr Timmins: What I said was we
did not engage in market promotion and in effect what I meant
by that was of a generalised kind. We have shifted away from simply
promoting markets to British industry per se to a rather
more selective, discriminating approach which is about trade development
and a sectoral focus, so I do not feel that there is a tension
between the two points that you have raised. I think we are very
keen to work with British industry, with different sectors, where
there are opportunities for all of them and in some cases those
may be in established markets. Let us not forget that the established
markets, the developed markets, are of major interest to British
companies, not just the emerging markets. This is the other side
of the UKTI strategy. The emerging markets are one side of the
strategy, but the established markets are the other side of the
strategy which are major targets for us in terms of inward investment,
research and development, and a whole range of other areas, so
I do not think there is a tension there.
Q51 Rob Marris: Mr Hockney, you mentioned
when you were talking about aerospace local partners and so on.
That is the first time I recall hearing this morning about the
need for local partners, et cetera, and it is something
we encountered, for example, when we looked at trade investment
with India. I was not aware that there might be a similar situation
in Brazil. Could you sketch in a little more about that? Is it
a legal requirement, is it just the way it is always done or is
it because UK companies are timid?
Mr Hockney: It is not a requirement,
but, as we have talked before about bureaucracy and the red tape
there, if you have got a local partner it is a lot easier to get
through the mass of regulation. I think it is imperative for British
companies that want to really establish themselves in the market
to have some local knowledge.
Q52 Rob Marris: Does ICI have a local
partner in Brazil, for example?
Mr Hockney: I would think when
they started off they did.
Mr Binley: I am a little concerned about
your comments about the schizophrenia within your organisation
between emerging markets and established markets.
Chairman: This is a really important
question and I think, perhaps, do not get me wrong, Brian, we
need to return to this rather when we deal with the strategy.
It goes to the heart of it, it is really important if you do not
mind. If we have time at the end we might come back to it.
Q53 Judy Mallaber: Just on the last
one, I would be interested to know which were the four aerospace
companies that were interested, if it is possible to send that
on to us. Moving on, I looked at annex I on science and technology
initiatives, which I found fascinating, and I am rather embarrassed
to say that I did not have a clue that Brazil had this range of
achievements and potential in all these areas: stem cell research,
video games through to some of the environmental technologies,
and it would not have occurred to me, which seems to indicate
that it is not widely reported in the UK. Which countries are
involved in seeking to exploit Brazilian expertise, which is clearly
there from the report you have given us? Which other countries
are involved in pursuing that?
Mr Timmins: I think that is a
question I cannot answer. Which other countries?
Q54 Judy Mallaber: Yes. You do not
know whether other countries are pursuing that?
Mr Timmins: No, but it may well
be a question which our people in Brazil will be more readily
able to answer.
Q55 Judy Mallaber: If you are able
to find out anything about that, that would be helpful. Are British
companies aware of that potential? If it is something that is
not even on our radar screens, is it on the radar screens of British
companies that there is that potential there?
Mr Hockney: Certainly, as we have
outlined here, there are several examples. For example, on the
blood fractionation project which is where a British company is
again working with a Brazilian company to try to establish a manufacturing
facility where they can carry this out in Brazil. It is splitting,
as I understand it, the plasma from the rest of the blood. At
the moment the blood is shipped out of Brazil either to the United
States or the UK, the process is carried out there and then the
plasma is returned to Brazil. What the Brazilians want to do is
establish it in their market. Yes, in short, companies do know.
Again, in the oil and gas field there is a number of examples
of where companies have worked with Brazilians, and I would hope
that companies should be aware of this.
Q56 Judy Mallaber: It is quite a
wide range of areas of scientific expertise that are touched on
within your paper which you have given us. Do you take the opportunity
to tell companies that there might be opportunities there or is
it, again, up to them if they happen to have made the link?
Mr Timmins: I think what I would
say here is that obviously there are individual British companies
working in these areas but if you ask me, "Is British industry
across the piece aware of Brazil's strengths?" I think the
answer would have to be, "Probably not as much as it should
be". That is a factor too of what I think is a problem we
have with Brazil, that its strengths as a major trading power
and a major economy, the world's 11th largest, are not fully understood
by British industry. I think it is a point that goes wider than
Brazil's strengths in this particular area.
Q57 Judy Mallaber: Obviously a number
of those areas of research and scientific advance will have been
developed within universities and educational institutes. Do you
know what links there are, if any, between UK and Brazilian universities
and educational establishments?
Mr Timmins: We do not, but that
may well be a question the Foreign Office could answer because
this area is very much within their field of work.
Q58 Judy Mallaber: Is that not something
UKTI thinks you need to be aware of?
Mr Timmins: Indeed, it is very
much. It is very important to UKTI working jointly with the Foreign
Office and, in fact, developing the science and innovation network
that we have which includes people in our overseas posts, including
in Brazil.
Q59 Judy Mallaber: You do not know
if there are any specific links between UK and Brazilian educational
institutions?
Mr Timmins: I would need to find
that out for you.
1 Note by witness: There are other sectors
that are currently considered by UKTI as a High priority in Brazil
which are: Agriculture; Education and Skills; Engineering; Sports
and Leisure Infrastructure; Chemicals; Security and Textiles.
There are also some which are of a lower priority which are: Automotive;
Construction; Creative and Media; Clothing, Footwear and Accessories;
Giftware, Jewellery and tableware; and Marine. Back
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