North/South Ministerial Council: Trade and Business Development

– in the Northern Ireland Assembly at 12:00 pm on 4th February 2002.

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Photo of Lord John Alderdice Lord John Alderdice Speaker 12:00 pm, 4th February 2002

I have received notice from the Minister of Enterprise, Trade and Investment that he wishes to make a statement on the meeting of the North/South Ministerial Council in its trade and business development sectoral format, which was held in Limerick on Wednesday 23 January 2002.

Photo of Reg Empey Reg Empey UUP

The sixth meeting of the North/South Ministerial Council in its trade and business development sectoral format took place at the Castletroy Park Hotel. Ms Carmel Hanna and I represented the Northern Ireland Administration. The Irish Government were represented by Ms Mary Harney TD, Minister for Enterprise, Trade and Employment. Ms Hanna has approved the report, which is also made on her behalf.

The Council received a verbal report from InterTradeIreland’s chief executive, Liam Nellis, on the body’s recent achievements and the key activities in which it will be engaged in 2002. Those included progress on such initiatives as the reconciliation of trade statistics, the publication of discussion documents on all-island competitiveness, support for microbusinesses operating in the border region, the development of InterTradeIreland’s networks and the linking of businesses through high- profile events including the enterprise forum last November, a forthcoming equity network conference and the 2002 agency forum.

In September 2001 the Council approved InterTradeIreland’s corporate plan for 2002-04, which outlined the body’s strategic goals for that period. At its meeting, the Council considered and approved InterTradeIreland’s operating plan for 2002, which sets out the proposed activities of the body through which the corporate plan will be implemented during the current year. The main activities outlined in the operating plan include research, information and communications technology, e-commerce, the promotion of cross-border institutional and business alliances, the development of an all-island business model, knowledge transfer and the promotion of private equity.

The Council considered and approved InterTradeIreland’s proposals for the introduction and operation of a financial assistance scheme. The scheme sets down the general principles and arrangements that would apply to the assessment, monitoring and evaluation of assisted projects.

(Mr Deputy Speaker [Sir John Gorman] in the Chair)

The Council discussed an interim position paper on public procurement, which was commissioned by InterTradeIreland. The paper identifies an opportunity for greater co-operation and the sharing of information between the two Administrations on procurement issues, including supplier linkages, tendering and supplier databases, e-procurement and the procurement excellence model. There was a useful exchange of views on the issues raised in the consultation paper. The Council noted the paper’s key findings and asked to see the InterTradeIreland proposals that resulted from the findings and recommendations of the final report.

The Council agreed to meet again in the same sectoral format in Northern Ireland in April 2002.

Photo of Eddie McGrady Eddie McGrady Social Democratic and Labour Party

I thank the Minister for his report, which contains many interesting initiatives to promote commerce, industry and, I hope, tourism in the whole island of Ireland. Does the Minister intend — now and for the next North/South Ministerial Council meeting — to assess the consequences on trade and commerce in Northern Ireland resulting from the introduction of the euro in the Republic of Ireland on 1 January, and its potential impact on inward investment here?

I hope that the Minister will agree that the currency differential could have a serious, perhaps adverse, impact in Northern Ireland, particularly in the border regions. It is important that an urgent assessment of that impact be made. In doing so, will the Minister consider the suggestions — I will not go into those now — in respect of pilot schemes that might soften the blow and improve people’s experience of the dual currencies that exist already in most border regions?

Photo of Reg Empey Reg Empey UUP

Why am I not surprised by the "Hear, hear", Mr Deputy Speaker?

That was not discussed at the meeting. Indeed, the Member will be aware that the operational and corporate plans of the Trade and Business Development Body do not contain a requirement for that body to discuss the euro specifically. However, they do address matters that are relevant to competitiveness. The Member will also be aware that my Department sponsors the Northern Ireland euro preparations forum, which did a sterling job trying to prepare our businesses for the introduction of the euro in January. That work will continue at departmental level.

The Member will know that we are used to working in a dual currency environment. The euro does have a significance that is different, in so far as it is a pan- national currency that deals with a growing amount of trade. The bulk of our trade with Europe is in the euro zone. I am happy to take on board the Member’s comments and, even if it is not appropriate for the North/South Trade and Business Development Body to deal with it, there is no reason for its not being dealt with at departmental level or between the respective Departments, North and South. I am sure the House will hear more about the euro and how Northern Ireland’s industry reacts to it.

Photo of Lord John Kilclooney Lord John Kilclooney UUP

I was interested in Mr McGrady’s comments. Does the Minister agree that the introduction of the euro in the Republic of Ireland is of some significance to Northern Ireland, and does he agree that anyone who invests tries to invest wisely, does not invest in a territory where the value of the currency is collapsing, but prefers an area where the currency is strong? Any businessman using his head would not invest in a territory where the euro was collapsing. Does the Minister agree that the euro is at its lowest level for six months, and does he realise that people in Northern Ireland, who had punts in the Republic of Ireland, are now returning those funds to Northern Ireland and the safety of the pound sterling?

Photo of Reg Empey Reg Empey UUP

I am grateful for the Member’s comments.

My view remains that the euro is undervalued, not that sterling is overvalued. The last few years of stability between our currency and the American dollar has facilitated substantial growth in exports to North America and significant investment from North America. The problem was to do with the way in which the euro was introduced. At the very outset countries were admitted into the euro whose economies had not converged sufficiently, and this fudging of the issues, in an attempt to get the statistics to align, created the view that the euro was dominated more by political considerations than by economic ones. Consequently, we have been left with a huge mountain of between 25% and 30% differential to trade into the euro zone, and that is extremely difficult for exporters. However, it is useful in cases where people can buy in the euro zone and sell in the dollar zone. Some people do that and hedge their currencies.

The problem is that we are trying to squeeze economies into the single currency that have not converged and that need different interest rates to control their levels of activities. The Republic needs a higher interest rate, and countries such as Germany need a lower interest rate.

That fundamental conflict is the cause of the instability. It is still my view that it is the euro that is undervalued, and not sterling that is overvalued. I suspect that until such time as the markets believe that the driving force is economic and not political, some of that instability will remain.

Photo of Gerry McHugh Gerry McHugh Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. I welcome the statement on the issues of all-island competitiveness, the operating plan for research, information and communications technology and e-commerce. Can the Minister tell us what further work can be done to allow more equal competitiveness and advantage to all areas in the light of the lack of broadband facilities in places such as Fermanagh and Derry?

Photo of Reg Empey Reg Empey UUP

I hope, with the Speaker’s permission, to make a statement on broadband to the Assembly, in which all those issues will be addressed, later this month. It is clear from several debates in the House, and from questions I have been asked, that there is great interest in broadband, particularly in the west. We have quite a lot to say about it; actions are already in train. I have had meetings with the Ministers in the Department of Trade and Industry in London, who have responsibility for the issue, and there are a number of matters that I wish to draw to the attention of the House. If the Member will allow, I will not go into greater detail at this time.

With regard to issues that might generate further economic activity, I draw the attention of the Member to the matter of procurement. Government purchases in Northern Ireland amount to approximately £1·6 billion. In the Republic, they are in the region of £4 billion or £5 billion. Remarkably little purchasing occurs between jurisdictions. Some people from here are able to get into the procurement circuit in the Republic and vice versa, but we believe it could be far more substantial. That would have the benefit of import substitution. There may be companies capable of supplying both jurisdictions that are currently not taking advantage of that situation, partly because they do not have knowledge or understanding of the different procurement regimes. InterTradeIreland is working hard to generate further activity in that area. We believe that that will result in the creation of jobs.

Photo of Jim Shannon Jim Shannon DUP

The DUP believes that practical co- operation between Northern Ireland and the Republic of Ireland is in the best interests of our constituents and the people of Northern Ireland. With that in mind, what sectoral business interests are involved in the cross-border institutional and business alliance? Will the cost of promotion be borne or shared by those businesses, and if so, to what percentage?

Photo of Reg Empey Reg Empey UUP

I am not sure that I heard every point that the Member made. InterTradeIreland will initially promote some of that activity, but it is the belief of that organisation that, ultimately, the private sector should take on the responsibility. What is required is a start, and for someone to set the tone. It can be done jointly. It does not all have to be done by InterTradeIreland or by the private sector. Ultimately we want it to be done by the private sector, because that would relieve InterTradeIreland of the associated costs.

There has been a history of poor communication between business organisations, with the possible exception of the Confederation of British Industry (CBI) and the Irish Business Employers Confederation (IBEC), which have been co-operating for some years. There are other areas of activity that are virtually blank.

I have just referred to public procurement in each jurisdiction, and remarkably little attention has been paid to that. We discussed at the meeting the need to take the initiative with the clear intention of the private sector’s playing an increasing role in shouldering the burden of the costs.

Photo of Ms Jane Morrice Ms Jane Morrice NIWC

I would like to bring the subject back to the euro, which will be a surprise. Forgive me if I misheard the Minister, but I think he said that it was inappropriate for the body to deal with single currency and the euro. I would like to understand that better. This body discusses trade and InterTradeIreland, and the euro is vital to that. The Minister said that there is a differential of between 25% and 30% when exporting into the euro zone, which is the Republic of Ireland. What is being done to help small businesses to overcome that barrier? What is being done to encourage the hospitality industry to use the euro and to allow tourists to use the euro north of the border? I have many other questions, but I will confine myself to two.

Photo of Reg Empey Reg Empey UUP

The Member partly misheard what I said. In the operating and corporate plans of InterTradeIreland no specific mention is made of the euro, but my Department has specific responsibilities for the euro preparations forum. However, I went on to say that there could be a role for competitiveness. I made that point clear to the Member for South Down, Mr McGrady.

We are a regional Administration in the United Kingdom, and we do not have responsibility for these fiscal matters, so we have to deal with the situation as it is. When there is a currency differential which varies between 20% and 30%, we do a number of things. First, the Department’s business excellence service, which is incorporated in the IDB, carries out an enormous amount of work to improve the competitiveness of our companies, large and small. We offer a wide range of advice. We have had "meet-the-buyer" and a range of other events to encourage companies to be as competitive as possible. However, the fact remains that if one trades in a different currency zone, one is at the mercy of the markets and of what people believe to be the value of the respective currencies. However, that is only one side of the coin.

In my reply to the right hon Member for Strangford, Lord Kilclooney, I referred to other companies that can use the strong sterling to purchase in the euro zone and resell in the dollar zone, which is our largest export market. Those people can make an additional margin out of that type of activity. If one purchases in sterling and sells in euros, one is at a particular disadvantage. I do not dismiss or underestimate the difficulties that have arisen, but I have to stress that it is not a straightforward, simple matter.

In the long term, one has to work out how to control the economies of different nations that have not converged. Those economies can have different rates of growth. One single interest rate is applied to all when it is clearly unsuitable for some — and that is the dilemma. No one has provided an answer to that question, and that is why, in my opinion, the markets are undervaluing the euro. A single currency works only in economies that have converged and are on a similar cycle. When economies peak and trough at totally different times and grow at different rates, attempts are made to squeeze everything into one pot, and it does not fit. Until that is resolved, there will continue to be an undervalued euro.

Photo of Derek Hussey Derek Hussey UUP

I listened with interest to Mr McHugh’s question on broadband infrastructure.

I want to remind the Minister that between the constituencies of Fermanagh and South Tyrone and Foyle there is another constituency called West Tyrone. However, that is not the essence of my question.

The Minister will not be surprised that I ask him to elaborate on the section in his statement that mentions support for microbusinesses in the border region.

Photo of Reg Empey Reg Empey UUP 12:30 pm, 4th February 2002

The hon Member is a member of what I call "team West Tyrone" — I will never be permitted to forget that that constituency exists between Fermanagh and South Tyrone and others. The Member has, on a number of occasions at Question Time and by other means, raised the matter of broadband infrastructure. As I said to Mr McHugh, I hope to be able to make a comprehensive statement on that at a later stage.

With regard to microbusinesses, InterTradeIreland will have a grant-giving capacity to support projects that are outside the remit of our existing agencies. Its remit will deal with assisting businesses that are straddling the border, where a small amount of resources could help. At present, such companies fall between the existing agencies of both Administrations. We will take extra care to ensure that there is no duplication, and it is not anticipated that we are talking about large amounts of money.

In some cases we have businesses that are literally on two different fields, and there are particular problems that go with that. Bearing in mind the problems that have arisen over the past 30 years, it is our view that in those areas the natural development that one would have expected was prevented by terrorism, threats, roads being closed and areas being artificially cut off, which would not otherwise have happened. We felt that it was appropriate to recognise those facts and recognise that, in those rural areas, it has not been possible to attract large multinational investments or significant locally based investments. However, there are people, particularly in the border counties, who have the desire and determination to engage in business, and we want to recognise the particular problems that they face. For that reason, we hope to provide this scheme to allow microbusinesses to grow, develop and provide much needed employment in those areas.

Photo of John Dallat John Dallat Social Democratic and Labour Party

I welcome the Minister’s statement and would like to follow up his encouragement for public procurement in both parts of the island. Am I to believe that this now presents a new and exciting opportunity for small and medium-sized businesses to tender for Government contracts on an all-Ireland basis? Can the Minister assure us that the procedures will be open and transparent with input from the public audit offices both here in Belfast and in Dublin?

Photo of Reg Empey Reg Empey UUP

The procurement policies of this Administration and of the Irish Government remain our own and theirs respectively. The point that I am trying to make is that we have recognised that there is a huge pool of procurement year in, year out. We are wrestling with the problem of defining and agreeing what the real level of trade is between the North and the South, and I can assure the Member that it is not a simple exercise and that a great deal of work is being done on that.

A comparatively small amount of procurement is going North/South, and if you add the two together you get a pool of between £6 billion and £7 billion of trade. That has the potential to grow and allow local companies to participate in it. As that is already there, we should encourage and prepare companies to take advantage of it.

There is the matter of awareness and of drawing the possibilities to the attention of small companies. They may not be aware of those possibilities, nor understand the procurement policies and procedures in the other jurisdiction. That is an educational issue, and those companies require "meet-the-buyer" events; assistance to help them get onto select lists; and help to understand the tendering procedures. The ‘European Journal’ will still apply, but the procedures set down by the Audit Office are not affected. We are engaged in an endeavour to involve companies that do not conduct, or go after, any business in another jurisdiction. There are also those companies that do go after the business but have difficulty in managing the substantial differences in the procedures on both sides of the border. There is potential in both jurisdictions for more of the existing companies to get a slice of the business. Some have been successful in winning contracts in construction, for example. Minimal cost is involved in initiating this endeavour, but it is an educational process. It has great potential.

Photo of Conor Murphy Conor Murphy Sinn Féin

Go raibh maith agat, a LeasCheann Comhairle. I return to the issue of procurement policy, which is, as the Minister pointed out, a matter for each jurisdiction to decide upon. I am not sure whether the Southern figures that he gave were in euros or punts, but there is a substantial amount of money in the public procurement purse. Can he assure us that some cognisance of targeting social need (TSN) policies will be taken in the position paper, so that in the area of public procurement, and in InterTradeIreland’s scheme of financial assistance, TSN attitudes, ideas and policies can be used to target that substantial public money into needy areas on both sides of the border? Such areas have suffered from neglect over decades from state agencies that had responsibility for creating employment in those areas. When public money is available for procurement it should be used to target those areas that most need financial assistance and which need business directed towards them and business promoted and nurtured within them.

Photo of Reg Empey Reg Empey UUP

I can advise the Member of the precise arithmetic, but we are talking about a substantial number of billions of pounds’ worth of business annually. InterTradeIreland has published its TSN action plan, which is subject to approval by the North/South Ministerial Council, and it has made its absolute commitment clear. If you look at the type of companies targeted, and the geographical areas in which we are developing businesses, you will see that they are nearly all in TSN areas. Our endeavours in relation to procurement could, of course, apply to any company in Northern Ireland, whether it is in a TSN area or not.

(Mr Speaker in the Chair)

Currently, companies lack knowledge of the potential — some feel unable to take on the responsibility, as they do not have the procedural knowledge in different jurisdictions, and some may lack tendering capabilities. We believe that we can assist those companies, draw their attention to the potential and help them with the procedures. They may require technical and professional assistance. Purchasing organisations on both sides of the border have a responsibility to ensure that details of what they are doing are disseminated widely, so that even a small company in a remote rural area is, as much as possible, on a level playing field.

There is huge potential in this area — it is money that has already been spent, and a large proportion of it is in importing. Import substitution, which would have a positive impact on the balance of payments, could therefore take place here. We could make progress on a range of issues. The key issue is that many companies, especially small ones, do not recognise the potential that exists. InterTradeIreland will have the task of getting that message across to companies. It has set that as a target, therefore it must show how it intends to deliver in that respect.

We are also trying to establish accurately the baseline for current levels of purchasing on both sides of the border, so that we can measure any improvements.

Photo of Mr Eamonn ONeill Mr Eamonn ONeill Social Democratic and Labour Party

How will the development of an all- Ireland business model, the transfer of knowledge and the promotion of private equity benefit small businesses, in particular, in their quests to access venture capital? Will there be opportunities for businesses to improve in those circumstances? What does the Minister hope will emerge from those initiatives?

Photo of Reg Empey Reg Empey UUP

Since its inception, the Trade and Business Development Body has been tasked with examining equity capital and its availability. Work has been carried out on that. A major study by chartered accountants, which was published some months ago, indicated that, by and large, money was available at a reasonable cost. However, it also identified certain gaps in the market. There is a huge cultural problem in Northern Ireland in that people are less willing to contemplate venture capital involvement.

The Republic is ahead of us in that respect, because it has had some success, but Northern Ireland still has some way to go. The problem in the past was that venture capital tended to be available for the big boys only. However, sums of money that are within the scope of many small businesses are now available.

A business model for the island would allow us to benchmark our position and to analyse the likely impact of certain economic decisions on businesses. In that way we could identify what we must do, target resources to the businesses that need them most and identify areas of weakness where resources could be concentrated. In that sense, it is a benchmarking exercise.

The debate on venture capital and equity must continue, because there is a cultural problem. Venture capital drives much of the American economy, and it has done so for many years. However, there is resistance to venture capital here. People do not want to give up a slice of their companies. Venture capitalists can provide money to a company at a much greater risk than would a commercial bank. Understandably, they demand a percentage of the equity in the company for that service.

In North America that system has driven business, created new jobs and wealth, and encouraged the creation of new businesses. The big weakness in Northern Ireland is that our business start-up rate is lower than that of our counterparts in these islands. Anything that encourages the acceptability of venture capital and its use is therefore likely to have a positive impact throughout the economy.