Dublin Economic Workshop: The Enterprise Strategy Group report does not properly reflect the importance of competition in economic development, according to Dr John Fingleton, chairman of the Competition Authority. In particular he has criticised its call for rationalisation to create bigger companies in the food sector and its recommendation that the State part-fund the placement of 1,000 marketing graduates in Irish industry over the next five years.
The report had made positive points, Dr Fingleton told the Kenmare conference. However he strongly criticised its call for competition policy to take account of the need for scale to compete internationally and said in general the committee did not adequately deal with the role of competition.
This was the mistaken "national champions" argument, according to Dr Fingleton. Rather than trying through State policy to foster the development of major companies, the correct approach was to let firms develop through intense domestic competition, he said.
The Competition Authority has already acted to try to block a plan being promoted by Enterprise Ireland - the state agency responsible for domestic industry - to rationalise the beef sector, following a report from McKinsey consultants. The matter is currently before the courts, following the authority's objection to the creation of a fund to effectively "buy-out" some of the smaller processors in a bid to rationalise production.
However, speaking about industry in general, Dr Fingleton added that competition law would not block merger deals where the promoters could demonstrate increased genuine efficiency gains and where domestic competition is not adversely affected. Where there may be a competition problem, remedies may be possible through disposals of part of the business or other means
Dr Fingleton also criticised other aspects of what he called the "state knows best" approach. The proposal by the Enterprise Strategy Group that 1,000 marketing graduates be placed in Irish firms over the next five years was mistaken, he said, as competition should be the factor driving the allocation of resources.
He also renewed his call for the abolition of the Groceries Order - which bans below-cost selling - and restrictions on retailing, which are to be reviewed by the new Minister for Enterprise, Trade and Employment, Mr Martin.
The case for the Enterprise Strategy Group's recommendations was put by one of its members, Professor John Sutton of the London School of Economists. He said that what the group had proposed was not "more intervention" but a "necessary refocussing and rebalancing in order to redirect funds currently spent in this area in more efficient and effective directions".
Action was needed to change the "capability profile" of industry here, he said, with a need to build world class expertise in areas such as international sales and marketing, operations and research and development. This lay behind the recommendation to fund the placement of sales and marketing professionals and the call for support the development of business networks through €20 million spending per annum.
Other key points were funding research and development, a responsive higher education sector and continued investment in infrastructure.
"A decade after Culliton the big issue is implementation," he concluded.
An inter-deparmental group is due to report to the new Minister shortly on implementing the Enterprise Strategy Group recommendations.
