Plan urges firms to deepen roots and increase research

The National Development Plan has sent a clear message to indigenous industry that the emphasis is changing from expanding capacity to developing capability, according to industry and state sector spokesmen.

For foreign-owned industry the focus is also changing, with extra emphasis being placed on "embedding" industry already here, attracting companies involved in particular sectors, and increasing the presence of foreign-owned industry in the Border, Western and Midland region, or so-called BMW region.

Details on how the new regime will be administered are being finalised and will be submitted to the European Commission shortly for approval. The new regime should be in place by January.

The plan spells out in some detail what the challenges are. It says the conditions to further develop an indigenous enterprise culture which "recognises the importance of high-tech, high value-added business" is of paramount importance. It says it must also "have at its heart" a deep commitment to the role of research and innovation and recognises the strategic role of marketing in the global economy," according to the plan.

The most remarkable aspect of the figures contained in the plan is the shift towards research and development (R&D). Out of an allocation of £4.5 billion (€5.71 billion) for the productive sector, £1.9 billion has been earmarked for research, technological development and innovation (RTDI). The funding is available for both indigenous and foreign-owned industry.

As grants are likely to only be available for up to 30 per cent of particular projects, the plan involves spending by industry of two to three times the figures proposed for public spending. At present the economy spends about 1.4 per cent of Gross Domestic Product on R&D, while the norm for the world's most developed economies is 2 to 2.5 per cent.

"Ireland is going to come of age in terms of R&D," said Mr Dick Kavanagh, managing director of the Industry Research and Development Group (IRDG), the IBEC research and development lobby group. "This is our chance. This money will bring us up there with the top guys."

According to Mr Kavanagh, only 1,300 of the economy's 4,500 indigenous manufacturing firms have any spending on R&D, with half of the 1,300 only spending a few thousand pounds per annum. He says that if indigenous industry is to survive it must very rapidly transform itself into the type of "knowledge rich" operations common in Finland, Sweden and Germany.

At present the budget for R&D projects is only about £20 million per annum so the £1.9 billion budget for the years 2000 to 2006 represents a huge increase.

Among the new features is a £210 million allocation for the promotion of "collaborative networks", both within industry and between industry and third-level institutions. Industry is to be urged to prose suitable large projects.

Although the details have not yet been published, it is likely firms with R&D proposals will be invited to apply to Enterprise Ireland. An independent committee will then select projects which it believes deserve support. Grants of up to 30 per cent and perhaps as high as 50 per cent in some cases, are likely to be allowed. As the increased RTDI allocation is also available to foreign-owned industry, it forms part of the drive to deepen such companies' roots here.

A further £1.9 billion allocated to industry is divided by the plan with £973 million going to indigenous industry and £930 million going to foreign-owned firms. For indigenous industry the breakdown includes: business planning for rapid growth, £57 million; manufacturing technologies, £267 million; human resources, £200 million; finance (seed and venture capital, plus grants) £226 million; the creation of regional networks, £85 million; and industry marketing, £128 million.

Enterprise Ireland will be putting a particular emphasis on challenging companies to devise plans for increased competitiveness and growth. The agency has 100 development advisers who work with particular indigenous companies, helping them devise company plans and putting those plans into operation.

The National Development Plan states that public investment in marketing is appropriate for assisting the indigenous sector. The programme will be especially geared towards small and medium-sized firms. The programme is earmarked to assist increased exports from the indigenous sector; the marketing of companies based in peripheral locations; sectors which have not yet fully embraced marketing; and the marketing of Ireland as a tourist destination.