Examination of Witnesses (Questions 240-259)
BERR AND UKTI
28 APRIL 2008
Q240 Roger Berry: What are UKTI's sector
priorities in Turkey in the new financial year and have they changed
at all from last year?
Lord Jones of Birmingham: We have
shifted the emphasis on a couple and I will come back to that.
There will be what I would sometimes call the `usual suspects',
which is supporting one or two champions in sectors. Vodafone
comes to mind and HSBC comes to mind, mobile telephony and banking,
where they are doing really well and we are there to help all
we can, and other banks and ICT companies as well. However, there
are a couple where we have shifted the emphasis and shifted the
sector effort more in the last year. Environmental technology
comes to mind. All round the world at the moment we are seen as
one of the leading nations for providing technological solutions
to climate change, to issues of pollution, to energy conservation,
and it is a reputation that has been hard won by universities,
by businesses and by the Government stimulating and helping that,
putting taxpayers' money into things which are getting a meaningful
return, and that is good to see. UKTI is pushing that around the
world at the moment and Turkey is no stranger to that. Linked
to that is water management and the whole issue of stopping wastage
of water and also how you handle the stuff coming into the tap
and how you handle the stuff going out of the house or the factory,
so there is water as well. One that I feel particularly both pleased
to champion and also keen that we get seen as a proper sector
the whole world of education and training, the stimulation of
our growth in universities around the world. We have four universities
in the top ten in the world—UCL, Imperial—
Q241 Chairman: We want to ask about
education at some length later.
Lord Jones of Birmingham: —and
Oxford and Cambridge. Those four are in the top ten. Only America
has got more in the top 50 than us. It is a really good emblematic
British success and linked to that is then training and professional
qualifications. The world wants to see our professional qualifications
on their CVs and then also linking in with businesses, training
people on the ground in technical subjects. We can sell that into
Turkey as she grows and develops hugely and that is a sector where
we have shifted our emphasis in the last 12 months.
Q242 Roger Berry: You were quite
bullish about UKTI resources overall in your earlier remarks.
What is your view about the current level of UKTI resources in
place for Turkey given that it is a priority market and so on?
Lord Jones of Birmingham: Last
year we increased the number of people on the ground from 15 to
20 and that is significant. We designated it one of our emerging
markets. We have really put the money where the mouth is in terms
of not just saying it is important to us but have put more people
in to stimulate it. I am going in September for a visit and I
will take a business delegation with me. I would point out that
I will be the first Trade Minister from this country to go to
Turkey for at least 15 years, so that spans two party political
governments so it is not a party political point. If you have
got at ministerial level increased clout and representation, at
resource level more people, and we have specifically strategically
designated it one of the markets where we are putting more effort
in, then the businesses of Britain respond, you see. A lot of
the businesses of course deal in other markets as well and know
us quite well and know how we can help them in this one. A good
example would be airports; another example would be ports; and
PPPs in which we are acknowledged as the world's best. How you
get that working in Turkey is not your normal "Let's go in
and help them sell widgets." There is another sector where
I intend to beef it up in this 12 months where you say has it
changed from the last 12 months: from 1 April I took over as Minister
in charge of Defence and Security Sales, and I am delighted and
thrilled that I have got the chance to champion one of Britain's
great manufacturing sectors. Defence equipment manufacture is
something of which Britain should be enormously proud. It employs
hundreds of thousands of people; it generates an enormous amount
of corporation tax which pays for a lot of schools and hospitals—
Q243 Chairman: I think we are getting
a bit beyond Turkey.
Lord Jones of Birmingham: No we
are not and I will tell you why: because we do not anywhere near
punch our weight in selling defence equipment to Turkey by a mile.
We sold about £40 million worth last year and that should
be increased substantially. One of the jobs I want to do is to
make sure that UKTI/DSO, gets into Turkey and does the business
there more than it does today.
Q244 Roger Berry: I might have some
views about what Turkey does with some of the military equipment
but we will not go into that, although Azerbaijan springs to mind!
Lord Jones of Birmingham: One
of the things I would say is I would rather see a country with
our set of values, a country with our degree of transparency and
governance as better placed to sell some of this stuff than some
other countries. If anybody ever says to me if we ever stop selling
this stuff, for some reason the French and the Americans and the
Chinese and everybody else will stop; I say, "Get real."
Q245 Roger Berry: I was not suggesting
that. I am just well aware of the Government's attitude on end
use controls and there are end use issues in relation to arms
exports to Turkey.
Lord Jones of Birmingham: That
is a good point and I accept that.
Q246 Roger Berry: Turkey is obviously
one of the High Growth Market Programme target countries. You
have given a very positive picture of the priority given to Turkey.
Where does it rank amongst those priority markets?
Lord Jones of Birmingham: In terms
of 17 emerging markets, we do not sit down and go, "Who's
going to be number one this week? Where did India rank last week?
Does Turkey come in at tenth or 14th?" You do not even get
a bonus point for scoring four tries. We intentionally do not
rank it because we do not want competition for resources within
the 17. One thing I would say is that it a big untapped market
for this country and it needs more time in the sun than it has
had in the past. Putting 15 up to 20 in its resource capability
is evidence of our intention.
Q247 Roger Berry: Some degree of
ranking must be necessary to determine resource allocation. You
have got to make some decisions about which of these markets get
how much money. There has to be some system of prioritising where
UKTI resources go and I was just curious to know whether Turkey
was high amongst the 17 or whether Turkey was low. They cannot
all be the same.
Lord Jones of Birmingham: We do
not willy-nilly next week decide let's put a few people into Mexico
and take a few out of India, we do not do that.
Q248 Roger Berry: That is why there
must be priorities.
Lord Jones of Birmingham: I am
not hiding it from you; we genuinely do not rank in amongst the
17. I promise you we do not. Do we look strategically at how we
spend the money and where we spend it? Yes, of course we do.
Q249 Roger Berry: Okay. As I understand
it, we have got a new High Growth Market Programme adviser who
is intended to attract UK medium-sized corporations to Turkey.
Has he or she delivered results thus far?
Lord Jones of Birmingham: It is
a very early appointment so the answer is at the moment I have
not made a judgment yet so I cannot tell you.
Q250 Roger Berry: Okay. What has
the network of regional Turkey champions and regional roadshows
delivered?
Lord Jones of Birmingham: I am,
as you may imagine and knowing where I come from, very pleased
that we are getting UKTI out on the road round the regions of
England and the three Celtic nations more than has happened in
the past. I do not mean presence, they have been there forever,
but in terms of getting specific roadshows, and for that programme
again it is early days. I cannot tell you we produce this or that,
but it is just a delight to see that we are putting more emphasis
into stimulating small businesses. I mentioned Vodafone and HSBC
and I could have mentioned Ove Arup, I could have mentioned loads
of companies, and it is easier with them, it is a different job
to be done. You hit the nail on the head when you talked about
SMEs. How do you get an SME in Manchester or Birmingham or Newcastle
or Cardiff to want to bet their ranch in Istanbul? It is just
extremely difficult. I understand why because would you do it,
would I do it? There is a human equation in a way that does not
happen in a big business. To get them to put their toe in the
water needs more then UKTI, it needs more than the local chamber
of commerce. I think it often needs involvement in the supply
chain, to be honest, it needs a bit of help from their mates down
the road. There are a lot of different impacts to get a small
business to do it but one way at least we can make them aware
is have a UKTI roadshow sitting in their town.
Q251 Roger Berry: Finally, Chairman,
may I be devil's advocate, the whole SME argument is based on
this notion that SMEs are disadvantaged more than large companies
and they need the extra support but they will grow and become
major companies and so forth—
Lord Jones of Birmingham: I do
not agree with all of that.
Q252 Roger Berry: Let me ask the
question and not ramble: do you not think sometimes that the resources
put into promoting SME activity specifically geared towards a
country like Turkey might be money better spent on backing larger
companies that can make substantial economic benefits much more
quickly and much more easily, like some of the defence manufacturers
you were referring to earlier?
Lord Jones of Birmingham: Sure,
when you say backing—and I feel very strongly about this
and it is also in the stated aims and objectives of UKTI—we
do not back any company if backing means we give them money. If
you mean build capacity for them and knock down doors and give
them publicity and bang the drum, of course we do. If that is
what you meant by backing, then I am with you, for two reasons,
the temptation is what you say which is that you do that job for
a few big'uns and you let the rest to fend for themselves. The
upside of that is that it is easier because you are dealing with
fewer people and you are dealing with more sophisticated overseas
traders and investors and it is easier because the people you
are dealing with tend to do it themselves more anyway. The downside
of it is you would not achieve employment growth in Britain in
the same way—by a mile you would not. But seriously, the
great employment growth in a developed economy, and certainly
in this economy, comes from small business, not large business,
and, secondly, you will not achieve the wish for smaller businesses
given that you have got the employment growth and the need to
employ skilled people and you therefore will not drive the skills
equation in the country. The way to get a small business to do
better in Britain and to succeed in employing more people is to
expose them constantly to overseas competition, and the way to
do that is to get them to trade with places like Turkey. To do
that you hope what they then do is employ more people but you
hope they see the need to train their people to do it. The real
training equation in this country to make it fit for purpose in
the 21st century is to get the employer (and, by the way, the
employer might be the public sector as well) to understand the
need for training people. In that, UKTI's capacity-building should
be directed just as much at small businesses. By the way, it cannot
just be us. I would say with respect to you guys with your constituencies,
it cannot just be you either, and I am sure you every day support
small business, of course you do, it has got to be all the different
component parts of an economic society because unlike the big
boys the small guys need help from everybody.
Chairman: It is not entirely surprising
that at the mention of small businesses, Mr Binley has jumped
up and down.
Roger Berry: I did say I was being devil's
advocate, Brian!
Chairman: I think the Minister has already
anticipated your supplementary but I will let you have it nonetheless.
Mr Binley: I am sure he has and I hope
he has because he will know that running small and medium-sized
business is a very lonely business. You just have not got the
support and all of the strength around you and that means two
Ps are very important—piggybacking and partnership—and
that is where success will come from, piggybacking on the back
of large industries. 400 small companies support the Airbus—
Chairman: This is a discussion on Turkey
more than economic issues.
Mr Binley: One more point—piggybacking
is important but so equally is getting people on the other side
of the water, wherever that may be, to work with people, hold
their hand and give them comfort, and I wonder what UKTI is doing
about those two Ps?
Q253 Chairman: In relation to Turkey,
please.
Lord Jones of Birmingham: One
thing I found frustrating at the CBI about small business, and
I have found it in this position as well, is the very reason as
to why they succeed is because they are, and rightly so, intensely
focused, and they have got to focus because if they do not focus
on their business in 30 seconds they fail. The trouble with focus
is that it does not allow room for all the other stuff and it
is a problem that anybody wanting to reach out to small business
has, from government, to an RDA, to a trade union, to the CBI.
It is more difficult to get a small business to give you time
and effort and energy than it is a big business. Moving on to
the specific with Turkey in terms of what are we doing to stand
by their side. Why we need to is because if you can get a small
business to understand that it is as important to focus on the
Turkish market as it is to focus on their customer down the road,
you have to, firstly—in the proper use of the word, not
a patronising use of the word—educate them. In other words,
they have got to understand a wider market. We are 60 million
people on a lump of granite in the North Atlantic and the market
out there, especially in a globalised economy, is enormous. If
a small business can see, especially with all the communication
aids that exist today, that Turkey, especially if Turkey was in
the European Union, could be as much its home market as five miles
down the road, if you can get a small business to understand that
and educate them to that point, then hold their hand when they
put their toe in the water, be there from the embassy through
their local bank, through their advisers, through us making sure
they get access, making sure they get a fair deal, making sure
they are not jumped on from a great height as they make one or
two mistakes, as they surely will, welcome to life, then UKTI
will have done its job. It starts with getting them to understand
what their home market is in a different century. It is very difficult
for the small business but it is absolutely essential.
Q254 Mr Bailey: Certainly from the
experience I have talking to small businessmen in West Bromwich
everything you said is absolutely correct, but can I focus for
a moment on the Turkish-British Business Council. We had a meeting
with them earlier when we went to Turkey. On the surface it is
ironic that British/Turkey trade is at a lower level than trade
between Turkey and France and Turkey and Germany, who politically
are far less sympathetic to Turkey and the TBBC said it wants
to double trade. How realistic is that?
Lord Jones of Birmingham: Firstly,
and it is a source of acute frustration for me but it happens
in most developing economies, Turkish Airlines buy an Airbus.
That has got wings made in North Wales, it has got undercarriages
made in Gloucester, it has got aero engines made in Derby and
some avionics made in Bristol, but it is booked as an export from
France to Turkey. We have fabulous trade figures between Britain
and France because of that but not British/Turkish figures and
yet half of the aircraft that is flying around, for which Turkey
have traded with the European Union, is made in Britain. One of
the real frustrations I have is that Airbus, every one of them,
is a huge big item, Turkish Airlines buy one, it does the monthly
figures, it is big stuff and we do not get that. Secondly, America
sells Turkey an F-16 Fighter and you have got a sizeable percentage
of that Fighter made in America that has got British gear made
in Britain on it, yet that is booked as an export to America,
not as an export to Turkey. The figures frustrate me. I am not
hiding behind them. Could they be better, of course they could.
Could we get this awareness up, yes, we should. There is a lot
of stuff we do, especially clever stuff, which goes into Turkey
via another country. I notice with interest the number one export
nation into Turkey is Holland. I had a look at that thinking is
that right and of course it is because what they are booked as
is where is the headquarters of the company that is making the
sale and they go through Holland for tax reasons. You have got
stuff made in another country in the European Union through Holland
and back into Turkey because the exporter gets a tax break. They
are no more made in Holland than you or me but those are the figures.
I ask you to look at the figures with a degree of circumspection
but the overall emphasis, you are quite right, it could be better
than it is today. We, with the Turkish-British Business Council,
have put a quarter of a million pounds of your money in the last
two or three years in building it up, getting it help. Last year
we even paid £5,000 towards secretarial support, so we are
with them. We are helping them in an overall capacity. Is it realistic
that they will double their trade figure in the next couple of
years? I would say yes. I have to say, I want them to go for it,
I do not want them to limit their expectation or their aspiration.
Q255 Mr Bailey: I do want to raise
a point apropos what you just said, but just on the funding issue,
could you clarify this because you anticipated my next question
which said the TBBC just received £5,000 of government funding,
you say that is for secretarial support.
Lord Jones of Birmingham: We gave
them £11,000 last year, £5,000 of the £11,000 was
for secretarial costs and £240, 000 in the last two years.
Q256 Mr Bailey: Previously it was
nearly a quarter of a million. I believe India gets something
like a million and we are not knocking the million that India
gets, but in the circumstances do you think that should be improved?
Lord Jones of Birmingham: The
facile answer to you is of course it should, but everybody should
be improved and if I improve that figure, I am going to have to
cut it off somewhere else unless someone gives me more money in
the round, which they will not do and, by the way, nor should
they do. The answer to success in our Department is how we use
our skill and judgment to maximise return on the money we have,
not give us more money. The facile argument is give us more money,
of course, but it is more about how we apply the resource we have.
We make a judgment and say, "Well, that's what India is,
that's what Turkey is and no we haven't ranked them".
Q257 Mr Bailey: Is there any prospect
of the UKTI match-funding the TBBC member contribution?
Lord Jones of Birmingham: No.
Q258 Mr Bailey: That is a straight
answer! My colleague raised some matters in the context of support
for SMEs. I am interested because you are a forceful advocate
for industry as a whole but for the West Midlands in particular
and as a West Midlands MP I go around and mention Turkey and I
get a look of incomprehension from the SMEs I talk to. What would
you be saying to the SMEs in the Black Country to try and broaden
their horizon?
Lord Jones of Birmingham: Interestingly,
I was talking to a company in your constituency this morning,
Hadley Industries, in a wonderful named street in West Bromwich
called Downing Street, which I thought was quite funny. I am pleased
to hear you say a degree of miscomprehension, not hostility.
Q259 Mr Bailey: No,
Lord Jones of Birmingham: It is
one borne of innocent ignorance more than anything else. Let alone
what would I say, I do say "You have got one of the biggest,
getting wealthier by the day markets on your doorstep and what
is more they like you, and what is more you are part of a country
that says, `We want you in our club more than the others, now
go and put the ball in the net'", and UKTI should be there
to help them put that ball in the net. The first thing we have
got to do is get them out there to see it, kick the tyres, feel
it and understand it. I often say to them, "Your customer
base—" in other words, the bigger companies that they
supply, "—find out if they deal with Turkey. You will
find one or two of them do and then if you want me to help, because
one of the reasons I have been asked to do this job is I know
a lot of people in business, and you want me to ring up one of
those bigger companies and say, `Can you put him on your back
as you stomp in next time and let them learn'", that is what
I often say. I think this is the way to do this because you cannot
ask a small business to risk the money on day one. Also, you cannot
ask them to spend an awful lot of time which they would consider
a waste, but you can ask them to link in with the people they
know and trust and therefore have their best interest at heart.
I hope they know that I have. I am sure their customers have.
I often say to them it is a market which, unlike any other in
Central Europe, which is where the other accession states have
come from into the European Union for instance, is populous and
they are young and they are going to want the value-added goods
and services that you provide and we, UKTI, should be there to
help them. Can I say one other thing about this, given that your
question was specific about the West Midlands, which is they are
also secular Islam, in the West Midlands we have got the biggest
propensity of Muslims in Britain per capita of the West Midlands'
population. It would do racial integration and religious integration
in Britain no harm at all if a few businesses that employed a
lot of Muslims in Britain were seen to be trading even more with
a Muslim country on good quality equal terms. I would say that
if I was in the North West, I would say it if I was in Yorkshire
and Humberside, anywhere where you have got big Muslim populations.
I want them to know that we trade with people in the world because
of the potential for making money, not because of the colour of
their skin or the God they worship.
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