The Irish Exporters Association (IEA) today (2/3/11) outlined priorities for the new Government if an export-led strategy to restore Ireland’s economic health is to be achieved. In outlining its own five areas of action the Association stressed that the Government must hit the road running by taking positive actions and must avoid wasting valuable time in further analysis.

According to Mr John Whelan, Chief Executive of the IEA, economic recovery will depend on an accelerated export-led strategy with Irish exporters benefiting from recent gains in competitiveness and continuing strong growth in global markets. “The challenges facing the Irish economy are well known and we urgently need the new Government to move rapidly to support and prioritise a sustainable enterprise base which is competitive on world markets to enable the required export growth target to be reached,” said Mr Whelan.

The IEA says that a 33% expansion in exports over the four years 2011-2014 will create 150,000 direct jobs. This represents an average of 7.5% export growth per annum. “We believe that in the current climate of global growth this is a realistic target for Government to aim at and one already committed to by the IDA, Enterprise Ireland and Tourism Ireland,” said Mr Whelan. He noted that achieving this target will enable all the targets implicit in the IMF/EU recovery plan for Ireland to be fully met thus ensuring a return to pre-recession employment levels.

The IEA believes that its five lines of action should be implemented within the first three months of office to create the conditions that will allow all of the growth targets to be met. The five IEA lines of action are:

• Restoration of Ireland’s reputation abroad
• Ensuring a more competitive export base
• Facilitating rapid export expansion
• Ensuring adequate funding and finance for export trade growth, and
• Supporting competitive Transport initiatives for international trade

Restoration of Ireland’s Reputation Abroad

Re-building Ireland’s profile abroad will require a joined- up approach by the agencies involved in promoting and representing Ireland internationally. The IEA stresses the need for urgent action to restore the damage to Ireland’s international reputation and strongly urges agencies with their Departmental Ministers to visit our major trading partners and emphasise that we are open for business and that full economic recovery is underway. They must stress that we are putting in place stable banking structures and that we will meet all international debt obligations. Foreign-owned companies currently account for 92% of export volumes and these firms need assurance that their Irish operations are in a sound economic region and worthy of further investment and expansion. The IEA believes that the upcoming St Patrick’s Day celebrations provide a unique opportunity for Irish public representatives and promotional agencies to press home the “We are open for business” message. The overseas visits must, however, be a well co-ordinated global business promotional event.

Trade missions also provide good opportunities for Irish exporters allowing them to come face to face with potential business partners abroad and the IEA says that Trade Missions led by the Taoiseach and Government Ministers have, in the past, proven very useful in opening doors for Irish businesses in many Asian and other emerging markets. To ensure full value from these Mission a plan should be put into operation with the Taoiseach leading many of these missions in 2011. The IEA also urges the relevant Minister to ensure that participation in Trade Fairs should be open to all Irish firms, not just clients of EI or Bord Biá.

Ensuring a Competitive Export Base

Global competitors still have some key cost advantages over Irish exporters. Progress made in the recent past in improving our competitiveness will need additional urgent support to ensure Irish exporters continue to expand international sales. The IEA has outlined areas the new Government must address over the next three months. One such area is labour costs. In the private sector they are heading in the right direction, but still are above the EU average. Wage rates will need to be further addressed for some years before we become fully competitive. In the meantime, employers can be assisted in reducing labour costs by reducing employers PRSI payments. Another area is the cost of energy which continues to be above the EU average. Transport costs are another area of concern as they soar due to rising crude oil prices. Because Irish exporters are more exposed than their European partners to higher fuel prices ‘a special user rebate’ system similar to that in France must be introduced to offset some of this extra cost. Because international air access is vital to all exporters as well as being a key tourist entry route the IEA recommends an immediate abolition of the travel tax.

In an effort to reduce the cost base for Irish exporters the IEA also calls for a VAT exemption for services exporters to provide services exporters the same VAT treatment as exporters of goods. This anomaly has been detrimental to services exporters and must be corrected by the incoming Government. The IEA also recommends that services companies exporting more than 90% of their output should be VAT exempt and that there be an Employers PRSI exemption when export sales exceed 7.5% per annum to encourage exporters to push for higher export sales with a resultant growth in jobs. The IEA further proposes that a new Government scheme be introduced to rebate all employers PRSI in any of the next four years where a company’s exports have increased by at least the economic target of 7.5%.

Facilitating rapid export growth

To achieve the 33% export volume growth over the next four years, actions need to be taken to facilitate the emergence and growth of new exporters businesses, as well as the accelerated promotion of Ireland as an investment location for foreign-owned corporations. The key actions that the IEA recommends are:

· Focus on Services Exporters with Export Outreach Programme: The IEA estimates that only 3% of the 120,000 services businesses in Ireland are active in export markets. To increase export growth in this area a wide ranging Export Outreach Programme should be established to assist these companies.

· Establish Ireland as a Gateway to developed markets for the emerging economies by means of Special Export Zones. Emerging economies are fast developing own branded products and innovations in their home markets and increasingly are seeking export success. Ireland has a track record as a successful exporting nation and this competence has the potential to be sold as a service to the emerging entrepreneurs. Special export zones with a coordinated community of service providers should be provided along with the establishment of standing missions in target economies to educate and recruit participants.

· Promote Ireland as a viable European Distribution Hub: Ireland is losing in competition with the Benelux countries as a location for premium European distribution centers. We must carve out our niche in this lucrative segment by developing a multi-faceted transport policy along with a focused marketing campaign aimed at existing and potential Irish-based enterprises, including Irish-owned enterprises. The IEA recommends a task force be set up by Forfás to develop the concept to enable the IDA and logistics and customs stakeholders to implement a suitable strategy to ensure Ireland’s competitive positioning.

· Asia Trade development critical to rapid trade growth: The growth in global trade is now driven by Asia, with China the world’s second largest economy and Japan the third. The IEA Asia Trade Strategy 2011-2015 details a number of recommendations to Government.

· Global Internship programmes for students: Internships for Irish graduates should be expanded with a focus on Asian markets. University placements with companies located across the region should aim to foster real world business connections and experience. We should target 1,000 placements after three years.

· Increased Government funding, practical commitment and resources: Political commitment to Asia’s potential must be shown in practical ways. Our market presence should at least match that of our competitors and there should be a focus on additional incubator and trade support in the priority markets.

· Irish companies - ‘In country’ business parks in Asia: Establishing Irish Business Parks, IDA-style, for Irish businesses in key Asian markets should be examined. Special tax incentives could be offered with on-the-ground resources and services to encourage SMEs to locate their offices there.

· Expanding Ireland’s network of tax treaties and promoting them to investors: Further development of Dual Tax agreements and better promotion of their advantage would enable more efficient Asian FDI into Ireland and Irish FDI into Asia. The new Government should aim to have a promotional programme on Irish Dual Tax advantages in place within its first three months with the target of having a comprehensive review and overhaul of such agreements with all Asian priority countries to be completed within the next two years.

· Optimising the use of Irish Embassies in Asia: Increased staffing allocations are urgently required in key Asian markets. In all of India we have only two development agency staff and in China a paltry four. We urgently need the new Government to demonstrate proper commitment to this issue.

· Making Ireland the most business friendly country in Europe: As Ireland has become a base for US companies operating in Europe, so too we must focus on attracting Asian FDI. Measures needed include a quicker and simpler visa system to build economic and cultural links and a coordinated migration policy with other EU countries to ease access.

· Creation of Ministry for Export and Trade Promotion: The suggestions above could be more easily achieved if the Government appoints a Minister with specific responsibility for Export and Trade development.

Funding and financing export trade growth

Trade finance and banking support have become much more critical to Irish export businesses over the past two years. The debtor default by export customers has increased substantially and political instability has further exacerbated the financial stability of exporters. Access to funding in these circumstances has become a larger problem than ever before and these difficulties have been added to by the high street banks aversion to risk of any kind. The reduction of credit insurance underwriting facilities and increased cost of available cover has further increased the funding difficulties for all businesses. New product development and new market research & development in these circumstances fall victim to the lack of normal funding availability. The new Government must imaginatively tackle this banking and funding malaise if Irish exporters – particularly the indigenous sector – are to be able to take advantage of otherwise favourable international trading conditions. The IEA recommends a number of actions for implementation by Government in their first three months in power.

The first recommendation is the introduction of a Credit Insurance scheme for indigenous export industry. This will not require the Government or its agencies to formally enter the insurance market, but to provide a back up facility to enable existing insurance underwriters to share the risk with the State. Such a scheme would be in line with what other EU countries offer their exporters. The IEA also calls on the new Government to facilitate the introduction of competitively priced Invoice Discounting. Currently this trade finance facility is not available in a transparent competitive manner from the Irish-owned banks for the vast majority of export markets. We urge the Government to ensure that exporters to all EU markets can be assured by their local bank that they will be able to discount their sales invoices. Services exporters in most international markets are expected to put in place a performance bond backed by a bank guarantee for 10% of the contract they are bidding for. Such a bond was formerly available at low cost from the Irish banking sector, but, recently it has become increasingly difficult to acquire and when available its cost has become exorbitant. We ask the new Government to ensure that this bonding issue is returned to the normal availability and cost on taking up office.

The IEA recommends the following overhaul of the existing R& D incentives: a) Companies in receipt of RTI grants should automatically be deemed entitled to the R&D credit by the Revenue Commissioners. b) Export Market Development should be considered RTI and approved for the Tax Credit regime offset against corporation tax. The IEA also proposes an export market development tax credit for companies who invest more than a selected percentage of revenue as expenses towards the development of new export markets and the restoration of the patent royalty tax relief scheme which was abolished in the Finance Bill 2011.

Support competitive Transport initiatives for international trade

Transport, the lifeblood of the export industry, has suffered from lack of a comprehensive competitiveness-led approach to the detriment of the sector. The lack of an integrated approach to transport policy and implementation is a situation that must be addressed by the new Government. Despite the National Spatial Strategy calling for transport development in the named international Gateways little was done to facilitate this development. For example, soon after the Spatial Strategy was announced the rail freight lines to Waterford and Cork were discontinued by Iarnrod Eireann and following that the Port of Cork’s Ringaskiddy development plan was rejected on the basis of not having a rail freight connection. Regional airport development is also delayed by the failure to resolve the funding structure and separation from DAA. Seaport development also suffers from a failure to produce meaningful port policy to support industry requirements and has been further frustrated by planning decisions based on narrow interest group interference. With the emergence of the green agenda, with specific targets to reduce emissions in the freight sector, it is even more essential that any New Transport Strategy integrates sustainable transport initiatives while enhancing our economic competitiveness. In the Sustainable Transport Future Document a key commitment was to ensure that the DoT deals with freight policy issues in a more integrated manner and the preparation of a specific strategy for the freight sector.

If we are to rapidly recover our export competiveness it is essential that the new Transport Minister does not call for further consultant reports, but delivers on the existing commitments as a core objective of his/her tenure in office.

Conclusion

Mr Whelan concluded by saying that Irish Exporters Association firmly believes that its recommendations, if implemented, will go a long way towards ensuring that the target of 33% expansion in exports over the next four years with an employment increase of 150,000 will be met. “We urge the new Government to consider these recommendations and to implement them as a matter of urgency. The time for further consultant reports is long gone. Now is the time for action.”

ENDS

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