Inward Investment in Wales

Written evidence submitted by Sir Roger Jones OBE

Despite being probably the best known and most effective Industrial Development Agency in Europe, the Welsh Assembly Government saw fit to disband the WDA in 2006, and transfer its functions to the Civil Service in Wales. My pleadings at the time went unheeded. I stated publicly that it would take three years for WAG to realise its mistake, a further three years to decide what to do and three more years to implement change. This would sentence Wales to nearly ten years in the wilderness in terms of industrial development. To this day, I stand by my prediction. We have seen expenditure in excess of £100m per annum that has produced next to nothing in the form of outcomes.

Why did this happen? I hold that it was political expediency. A rivalry amongst political leaders as to who could best deliver the "bonfire of the quangos" precipitated this summary action. The single factor which differentiates the public and private sectors is the propensity to take risks. The Public sector is risk averse, as is the majority of its hierarchy. A profit is nothing more than a reward for taking a risk. If the system demands a completeness of information prior to a decision, it will probably take too long and the opportunity will have passed.

The WDA was successful because it insulated politicians and civil servants from risk. In its heyday, probably 50% of its employees were inward facing, providing levels of comfort at the interface with Government. The other half were managing the interface with the private sector. Simplistically and possibly accurately, the public sector were seen as the wealth destroyers and the private sector as wealth creators. In the post-WDA era, it became evident that the management controls which were applied made the interface with the wealth creators dysfunctional.

The WDA was far from perfect. There were areas of dysfunctionality particularly in overseas representation, mostly due to poor selection of individuals for overseas positions. The imperative to have a spread of offices in all continents was flawed. The concept of being a "one stop shop" for all industries was flawed. There was insufficient selectivity in the technologies sought, and poor integration with Universities in Wales despite some heroic efforts. There was too much emphasis on the role of grants. It is the availability of skills and markets that create job.

On reflection, the absence of a strategic vision at Ministerial level was debilitating. The driver was the safety of the civil service position, not the outcomes in terms of wealth creation. The Board of the WDA was never able to transcend the relative inexperience of its paymasters.

What might be done to secure the improvements that the Welsh Nation so desperately deserve. Trapped with GDP per capita at around75% of UK average, the status quo is not acceptable. Some kind of arm's length agency is essential if Industrial Development is to be achieved. This has to be in position by the time the economy starts to recover.

Without resurrecting the WDA, there is an opportunity to start again with a smaller, more focused and independent body. This should be controlled by a private sector board with strong trade union representation, for without new skills the transition of the economy will be impossible. The Board will set strategy and evaluate outcomes.

The functions to be covered by the new organisation are as follows:

A) global technology tracking with close liaison with Welsh Universities;

B) knowledge of investment sources and finance;

C) knowledge of Manufacturing and skills in Quality Assurance;   

D) experience in selecting target technologies (energy, life sciences and high

added value tourism);

E) capacity and flexibility to follow other leads;

F) limited overseas representation but to include BRIC and development of remote networking for liaison with international contacts;

G) leading edge interactive web representation, which provides real access to

appropriate personnel;

H) high level internal audit;

I ) Competent HR to attract key players from competitors;

J ) effective marketing and brand creation; and

K) limited regional representation in Wales.

These functions would be represented on the Management Board. Interface with Welsh Government would be via the Main Board. This would limit the scope for micromanagement and introduction of new initiatives by the civil service. Success will be achieved only by limiting the dead hand of public sector control. However the Board would be fully accountable to the Government of Wales and would report with whatever frequency that was required.

If the above functionality is broadly acceptable, it would be worked up into a structure and format, capable of being fully costed. My estimate is that much could be achieved with an annual expenditure of £50m, to include £10m initial marketing spend.

June 2011