Wednesday, 18 February 1998
Dáil Éireann Debate
17. Mr. Timmins asked the Tánaiste and Minister for Enterprise, Trade and Employment the reasons for ending the export credit insurance scheme; and the number of Irish companies that will be affected by this decision. [4215/98]
38. Mr. Yates asked the Tánaiste and Minister for Enterprise, Trade and Employment the reasons for ending the export credit insurance scheme; and the number of Irish companies that will be affected by this decision. [4216/98]
43. Mr. Connaughton asked the Tánaiste and Minister for Enterprise, Trade and Employment the reasons for ending the export credit insurance scheme; and the number of Irish companies that will be affected by this decision. [4212/98]
46. Mr. D'Arcy asked the Tánaiste and Minister for Enterprise, Trade and Employment the reasons for ending the export credit insurance scheme; and the number of Irish companies that will be affected by this decision. [4214/98]
77. Mr. Deenihan asked the Tánaiste and Minister for Enterprise, Trade and Employment the reasons for ending the export credit insurance scheme; and the number of Irish companies that will be affected by this decision. [4213/98]
116. Mrs. Owen asked the Tánaiste and Minister for Enterprise, Trade and Employment the reasons for ending the export credit insurance scheme; and the number of Irish companies which will be affected by this decision. [4338/98]
The decision that the State should withdraw from the provision of export credit insurance followed a review of the scheme carried out by my Department. The review demonstrated that only a very small proportion of our total exports were covered by the scheme. This meant that a reasonable spread of risk — an inherent part of any insurer's portfolio — was not available to the State. In addition, the past few years had seen a considerable advance in the involvement of the private sector in this market with ongoing development of new products designed to meet the needs of exporters. The total number of companies which availed of the restructured scheme was fewer than 20. Only four of these were what might be described as core clients. Having regard to this and the developments in recent years in the private market I am satisfied that the decision to withdraw will have minimal effect on industry.
Mrs. Owen: When was the report prepared? Is the Minister satisfied that companies who wish to export to the more troubled parts of the world will not be prevented from doing so because of the lack of export credit insurance?
Miss Harney: The review was commenced by the then Minister, Deputy Kenny, when the trade division of my Department was part of the Department of Tourism and Trade. I think the review began early in 1997. After the controversy which surrounded export credit insurance in the late 1980s and early 1990s, the then Minister decided to review the scheme. At that time, 80 per cent of exports covered by the scheme were dropped. We were left with a small scheme covering short-term political risk and medium-term political and commercial risk.
Since the restructured scheme was introduced in 1991, only 20 companies or 44 renewals were covered, involving £66 million of exports. To put that in context, we exported over £30 billion of goods in 1997. The scheme was almost defunct and covered only four core clients at the time it ceased to operate. The private insurance market  is providing cover for all these markets. Most of our exports to the markets covered were not covered by the scheme.
Insurance must have a balanced portfolio or it is not insurance. If one is covering only emergency or crisis markets then that is not an insurance scheme. If the State wishes to support companies to access those markets then it must do so by methods other than insurance. If taxpayers are funding only companies exporting to emergency markets where the likelihood of not being paid is extremely high, then they are carrying a heavy risk. In that context taxpayers are not involved in insurance. One has to balance the good cases with the bad and strike the premium on the basis of such a balance. I am satisfied from the review and the consultations in which we have engaged that no Irish company will be adversely affected. The private sector will be able to cover the needs of exporters.
Mrs. Owen: I accept that the Minister is satisfied, at present, that no one will suffer and that the need for the scheme is not as compelling as before. However, is she keeping an open mind on the situation? The scheme may be required at a future date if the Celtic tiger becomes quieter.
Miss Harney: It is not the conditions in the Irish market which dictate whether the State should be involved in export credit — it is the conditions in the markets to which we export. The private sector has developed enormously in this area since 1991. This is why only 20 companies were covered by the scheme since it was restructured in 1991. At the time the scheme ceased, only four companies were involved covering a relatively small amount of exports. The State's liability was £18 million at the time of the cancellation of the scheme. I am optimistic that all that money, which is covered by the scheme in the event of those companies not being paid, will be met by export credit insurance. We will continue to honour any commitments entered into. That is the nature of insurance.
I am satisfied that there is no longer any need for the State to be involved in export insurance and the Government accepted my recommendation. It was costing my Department about £400,000 per year to administer the scheme. The staff and administration resources involved in the scheme can now be deployed in other tasks.
Mr. U. Burke: Will the Minister agree that the poor uptake of the scheme prior to its abolition was due to the constant attacks on the meat trade by the Minister and other members of her party? Will she also agree that because of the serious situation in the beef trade, she should consider some State participation in export insurance for beef exports to certain countries?
Miss Harney: At the time the scheme was cancelled none of the four companies covered was involved in the agricultural sector. One exported cranes, one exported pressurised vessels, the third exported floor coverings and I cannot recall the products exported by the fourth company. I do not accept the comments made by Deputy Burke. In one nine month period in the late 1980s, one company received £100 million of cover to export to one market. That was not right or fair for that sector and was rightly criticised by members of the Deputy's party.
Miss Harney: We do not wish to go back to those days. This is why the scheme was restructured in 1991 and there have been very few takers since then. The majority of Irish exports into the markets covered were not covered by the State scheme but by the private sector. This proves that extensive cover is available from the private sector. If a future Government wishes to re-enter this area there is nothing preventing the legislators from doing so. It is a decision for Government.
The State will vigorously defend a well known case whenever it comes to court. I do not know when that will be. There are no ongoing costs because the case has not come to court. Whenever this happens there will be legal costs. I hope these costs will not have to be paid by the State. I am confident that the State will win its action but if it had to pay its costs it would be a small amount of money in comparison to the benefit derived from avoiding these policies.
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