Dáil Éireann – Statement of the Supplementary Budget by Minister Jimmy Devins TD, Minister of State for Science, Technology and Innovation

Wednesday 8^th April 2009

There can be very few people who are now unaware of the very difficult circumstances facing the Irish Economy. This Government has had the unenviable task over the past weeks of taking some very hard decisions and making some very stark choices. We have remained resolute to our task and it has taken both courage and conviction to devise the package of reforms that has been presented in yesterday’s Budget.

While the announcements contained in the Budget include strong medicine, we are today in a much better position in that a diagnosis has been made of the ills of the economy and the prescription written – the economy has now been put on the road that will, in time, lead to recovery.

The strategy adopted by the Government has combined the efforts of reducing Exchequer costs to bring them into line with Government revenue, and of putting in place a strategy that will lead to economic renewal, while at the same time selecting the instruments to do this task that will minimise the negative spin-off effects on jobs and on enterprise. It has been necessary to deal with the problems of the present while at the same time keeping a careful eye on building for future recovery.

It is a difficult balancing act, but an honest effort has been made, and now the solution to the present difficulties and the resolution of future opportunities lies as a responsibility on all of our shoulders.

We will only get out of the present situation by drawing together and striving as one for the good of the State, for the benefit of the whole community of people that live in Ireland, and with hope and determination to create a better future for all.

When tackling the Budget, the emphasis has been on fairness, on economic renewal and on building a better future. In this context, the elements of the Budget covering the area of Science, Technology and Innovation have sought to achieve a proper balance the between the scarceness of the resources available and the need to keep up the effort to develop an innovation-driven economy that will allow Irish enterprise achieve competitive advantage and increase productivity and jobs in the future. This, I believe, has been delivered.

Funding has been concentrated in the areas where greatest economic benefit can be achieved speedily. In a difficult economic environment, the Science and Technology subhead of the Department of Enterprise Trade and Employment Vote has been kept at a level above the level of spend in this area in 2008. What is being done is to hold the line in terms of the level of support provided to allow the consolidation of the investment made over recent years in the whole area of research, development and innovation.

I would particularly like to welcome the introduction of a scheme of tax relief for the acquisition of intangible assets, including Intellectual Property. The details of the scheme remain to be worked out by the Department of Finance in conjunction with the Revenue Commissioners. This measure will help to attract high quality employment to this economy.

Budget for Science, Technology and Innovation

The expenditure provision for Science, Technology and Innovation provided in the 2009 Budget of my Department is €311 million, which is €2m more than was spent under this heading in 2008. In addition, there will be a further €6 million made available as capital carried over from the 2008 Budget allocation, allowing for a total science, technology and innovation budget of €317 millions for 2009, which is 2.6% of an increase on last years spend.

The fund of €317 millions will be used by the development agencies Enterprise Ireland and Science Foundation Ireland, and supplemented with IDA funding to:

• provide an important support to Irish business in their efforts to be innovative and stay competitive, by increasing in-company research and development,
• assist IDA Ireland in winning research investments for Ireland,
• promote the commercialisation of research and bring the outputs of Ireland's research base to the marketplace,
• and strengthen collaboration between industry and the education sector, and consolidate the investment made in Ireland's Third Level research base.

Enterprise Ireland

Enterprise Ireland will receive a science, technology and innovation budget of €133.7 million. This together with a capital carry over sum of €500,000 will give a fund which is a 3.5% increase over the 2008 spend. This funding will enable the Agency to provide all important supports to industry with a sharp focus on identified industry needs, and seeking to create a real impact in terms of the commercial spin off from research and development.

This level of support provided in the budget for Enterprise Ireland’s Research and Development activity will drive industry-led research, enhance collaborations between third-level institutes and companies and maximise the commercial potential of publicly-funded research. The development of a dynamic and innovative enterprise sector will be a key factor in creating and maintaining employment in these difficult times.

Enterprise Ireland will continue to promote and foster start up companies with the potential to develop new products and services and create high-value jobs. Through it’s suite of Research and Development programmes, Enterprise Ireland is ideally placed to provide financial support and advisory assistance on the ground for young and innovative companies. This investment will stimulate growth of more competitive companies and ultimately create long-term sustainable employment

Enterprise Ireland has adopted a lead role in driving the effective commercialisation of research in Ireland, through stimulating collaboration between industry and the third-level institutes. Through its Commercialisation Fund, Enterprise Ireland will secure the commercial potential of the output from our investment in the Irish research community to the benefit of Irish companies.

By encouraging greater collaboration between industry and third level research through initiatives such as Innovation Vouchers and Innovation Partnership, Enterprise Ireland will further the development of an innovation culture among Small and Medium Enterprises.

Science Foundation Ireland

The Science Foundation Ireland funding will be €170.5 million. In addition a sum of €5.5 million in capital carry over will be available, giving a total budget of €176 millions which is a 3.2% increase over last year’s spend year. The allocation of €176m will enable SFI to continue to build a critical mass of internationally competitive research teams in the sciences and engineering underpinning Biotechnology, Information and Communication Technologies, and Sustainable Energy and Energy Efficient Technologies.

This funding will primarily assist SFI to continue to support and grow its Centres for Science, Engineering Technology (CSET) and Strategic Research Clusters (SRC) programmes. Currently SFI is supporting a total of 26 centres with a number of new CSET and SRC awards anticipated later in 2009. It is through these industry-embedded research groups, which are formally linked to over 150 multinational and small to medium high-tech enterprises here in Ireland, that SFI is supporting the retention of employment of over 60,000 people in high-value jobs in this country. This employment figure will grow when new industrial partners become involved in the CSET and SRC programmes on the back of further SFI investment.

SFI funding provision will increase Ireland’s global reputation as a location of excellent scientific research and as a source of human and knowledge capital, such that business creating next-generation products, services and related employment are attracted to and retained in Ireland.

Overall, SFI funded activities are consistent with promoting research and development as a key part of the enterprise agenda, assisting as they do the retention and attraction of quality employment in Ireland, and thereby increasing the value of Irish industry.

IDA Ireland

The growth that has already taken place in Ireland's research base has brought to Ireland world-class researchers, and made available high quality graduates and PhD graduate output, and this has been of demonstrable assistance to IDA Ireland in their effort to win highly competitive research investments for Ireland. In 2008 IDA provided funding for 56 internationally mobile research-related investment and in 2009 IDA Ireland will continue to support a similar number of R&D projects.

Strategy for Science Technology and Innovation

The Government’s commitment to investment in Science, Technology and Innovation has never been more relevant than it is today. While the current economic crisis is creating real challenges for businesses, continued investment in research, development and innovation is essential to maintain competitiveness, address shifts in markets and to prepare for economic recovery. The development of the ‘smart’ or innovation-based economy is a key opportunity that we must grasp. We require, a sharp focus on the fundamental principle that a small open economy must compete globally and be competitive globally. We must continue to invest in Ireland’s research base as an important cornerstone underpinning our future competitiveness.

There are indications that research and development is counter cyclical - as markets contract, the importance of developing new products and services, and the importance of using innovation to increase competitiveness becomes much more clearly relevant to business. Irish companies are keen to exploit the benefits of innovation, and it is incumbent on us to facilitate them. Already, there are real, tangible benefits arising from the Government’s commitment to Science, Technology and Innovation.

Direct investment in enterprise yields a positive return to the Exchequer and the economy, generally within a short timeframe. Some recent major projects illustrate the point:

• Between 2000 and 2007, EI supported 430 High Potential Start-ups. EI HPSU’s yielded sales of €638m, exports of €344m and generated employment of 5,500.
• In March of this year, Hewlett Packard announced an investment of €18 million to create 500 highly skilled multilingual technical support positions over the next 12 months expanding its Global Service Desk operation in Dublin.
• In February, Intel announced a €50 million major expansion at its research and development facility in Shannon, which will create up to 134 new jobs and bring employment at the facility to approximately 300.
• In November, Houghton Mifflin announced a €350 million expansion of its R&D facilities which will create 450 high-value jobs.

These are not isolated cases. Over the last year we have had research and development announcements from a wide base of world class companies: Aon Corporation, Boston Scientific, CITI, Diageo, ON Semiconductor, Oriflame, Business Objects, Synopsys International, Houghton Mifflin Harcourt IP, three separate announcements from IBM, announcements from Pfizer, EMC, Intel, HP, PayPal and Helsinn Holdings.

Overall, the level of investment totals to €842 million and will contribute to almost 1,700 high value jobs in our economy. These companies were attracted to establish R&D operations in this country as a direct result of the Government’s investment in, and commitment to developing Ireland’s science, technology and innovation base.

The return on our investment in enterprise is dramatically improved when coupled with and underpinned by strategic investment in R&D, because the outputs and impacts of such investment are a significant draw for Foreign Direct Investment firms and a significant catalyst for adding volume and value to the activities of indigenous firms. The establishment of a strong research base in Ireland is proving to be a vital driver of major investment decisions by overseas and indigenous companies as the following illustrates -

• In 2007 IDA concluded negotiations for 114 new investments, 40% of which were in the area of R&D. In 2008 43% of IDA investments won were research related and are valued at €420m.
• Almost one third of RD&I investments involved collaboration with Irish third level institutions and research institutes, many of which have been supported by Science Foundation Ireland.
• EI client companies continue to open up new markets with innovative products and services. Our R&D support is vital to keeping these companies competitive.

Finally -

In this difficult economic climate, the development of the knowledge economy in Ireland is key to maintaining competitiveness. A strong science base matched by a paradigm shift in the capacity of our enterprise sector to create knowledge, to innovate, and to exploit new knowledge across global markets is critical to Ireland’s future.

In the current economic circumstances, we will have to ensure that the return on our investment in science, technology and innovation is maximised, by a prudent application of resources, by active management, and by careful coordination of the resources available. The structures to do this are in place, and I have every confidence that we will continue to build on the achievements to date.

What I wish to do to-day is to send a strong signal to Irish business that the way forward lies in staying competitive and maintaining an innovative edge over competition by developing new products and processes, that will assist Irish enterprise to win new markets in the present challenging environment. This exhortation is backed by tangible financial support that will continue to be available through my Department’s Vote, and which will be a sound platform from which to spring forward to deal with the challenges facing them on many fronts.

ENDS/IP95