Sheane's resignation puts Dail spotlight on Shannon Development

The Dail Committee of Public Accounts is to make a preliminary examination of Shannon Development, the regional development agency for the Midwest, following the abrupt resignation of its chief executive, Mr Paul Sheane, and revelations that a pub run by one of its subsidiaries is losing about £3,000 a week. Mr Jim Mitchell TD said the company was accountable to the committee which he chairs and that the present state of affairs at the Limerick-based company would be examined to "see if any more detailed consideration should be undertaken in the near future".

The company was last examined by the Dail committee in 1994 as part of an examination of the Kilrush Creek marina project in Co Clare between 1988 and 1991 which the State agency championed. The State paid almost double the original estimation of its share of the £6.5 million project but "got only half the project planned", in the words of the committee.

There was some surprise last month at the sudden departure of Mr Paul Sheane, Shannon's chief executive, who worked for the organisation for 20 years. It has again drawn attention to the semi-state company which has survived more or less intact as a development agency since it was set up as the Shannon Free Airport Development Company (SFADCo) in 1957.

Mr Sheane was chief executive for the past eight years, a period during which it escaped the streamlining of State agencies carried out by the Tanaiste, Ms Harney, in 1998 when Forbairt, An Bord Trachtala and the industrial training division of FAS were merged to form Enterprise Ireland. At the time Ms Harney said she wanted to iron out the "duplication and confusion" of the multi-agency approach.

Since then, Enterprise Ireland has looked after indigenous company development in the Republic, apart from the areas in Shannon Development's dominion - north Kerry, Co Clare, Co Limerick, north Tipperary and south Offaly. Shannon Development also promotes tourism and rural development in the region, not Bord Failte, and there has been criticism locally of the agency because of the market share it is losing in tourism.

Traditionally Shannon Development also had the role of attracting foreign companies into the region but Mr Des O'Malley TD, as Minister for Industry and Commerce in the early 1990s, extended the remit of the IDA to cover all of the State, with Shannon Development retaining a small role at the Free Zone, which no longer carries any special tax designation, and a promotional role in the Midwest region.

It was an unpopular decision at the time but one he does not regret. "If I was in Government, I would look hard at it [Shannon Development] now and see how the interests of the region could be advanced in current circumstances," he says. In 1995, the then Minister for Transport and Energy, Mr Michael Lowry, handed over promotion of Shannon Airport to Aer Rianta.

That and the phasing out, because of EU competition law, of the special corporation tax rates which the `Free Zone' enjoyed, means that the company has moved away from its roots. There is no longer anything distinctive about the region which merits it having a separate development agency. Its nearest counterpoint, Udaras na Gaeltachta, aims to sustain the Irish language in Gaeltacht regions through economic development.

If Shannon Development is to continue in its present form, its board structure will face continued criticism. Unlike Udaras, most of whose board members are elected by the people of the Gaeltacht, Shannon Development's board members are ministerial appointees.

Ms Patricia McCarthy, a Shannon Town Commissioner and member of Clare County Council, has called for public representatives to be put on the board. She is supported by the Fianna Fail TDs Mr Willie O'Dea and Mr Tony Killeen who have adjoining constituencies in the region. Mr O'Dea says the lack of accountability at local level is "old fashioned and undemocratic" and Mr Killeen believes that "some of the mistakes that were made might not have happened if there was more common sense and local input".

He cites the recently highlighted case of the Castle Tavern Pub, next to King John's Castle in the centre of Limerick. A flagship project which hosted the US president, Mr Clinton, two years ago, it has lost £300,000 under the management of Shannon Heritage, a Shannon Development subsidiary, and is now being offered as a 35-year-lease after it failed to get a tenant under a four-year, eleven-month lease arrangement.

The case is illustrative of a series of failures by the agency to manage some of its commercial properties. Past commercial failures include a venture into holiday cottages and the operation of MacCloskey's at the Bunratty folk park.

But one of the quirks of the agency is that it has been allowed continue to have a property portfolio four years after it became State policy to minimise its involvement in the ownership of properties. IDA Ireland has been selling off its industrial properties ever since.

In a property boom, the asset value of Shannon Development's property assets, principally as a landlord at the industrial parks at Shannon and Limerick, have increased dramatically. The company has more than 2,000 acres of land, including undeveloped land banks and 5 million square feet of factory/office space.

Mr O'Dea questions whether the agency should be involved in property management. "I think they should be shedding their property portfolio and developing industry in the mid-west region."

The acting chief executive, Mr Kevin Thompstone, defends the property portfolio, saying traditionally the company was able to use it to leverage industrial development where the private sector was reluctant to invest in greenfield sites. Now, he says, the revenue stream from sales and leases is ploughed back into further developments.

The company has become a major employer in its own right, adding to the local political clout it has. It employs up to 550 staff at peak season, most of whom work for Shannon Heritage at visitor attractions, principally at the Bunratty Castle complex. By comparison, IDA Ireland has 280 staff and Enterprise Ireland, with 38 overseas offices and nine regional offices, has more than 1,000 employees.

Mr Thompstone also argues that instead of selling off the Bunratty venture, which includes the medieval banquets, the company use the revenue for further tourism development. The Castle Lane Tavern was one such venture.

"Our idea was not to do Castle Lane to make an arm and a leg out of it, but to do a high quality development in a run down area of Limerick and hopefully lead the way and see private development follow on."

He argues that, having met its employment targets in recent years and now concentrating on development outside the Ennis-Shannon-Limerick triangle, the Shannon Development model is one to be applied in other regions, rather than handing its role over to a national agency.

It has integrated functions which make it adaptable to diverse enterprises and its mere presence means that it has a close relationship with local communities. That said, he accepts that in an era of transparency, the "democratisation" of the board could be on the cards. "We would not have any difficulty with the principle of coming up with some formula to tackle that," he said.