Skip to main content
Loading…
Chamber and committees

Economy, Energy and Tourism Committee

Meeting date: Wednesday, March 2, 2011


Contents


International Trade (Scottish Development International)

The Convener (Iain Smith)

I apologise for the slightly late start. We have apologies from Stuart McMillan; from Rob Gibson, who has another commitment; and from Wendy Alexander, who is tied up with Scotland Bill Committee business, as is our clerk, Stephen Imrie. I think that he was up all night preparing that committee’s report, so he cannot be with us today. Nigel Don, our regular substitute, is here. I am pleased to see him back. David Whitton might turn up as a substitute, too.

I welcome members to the Economy, Energy and Tourism Committee’s seventh meeting in 2011, which we hope will be our final meeting in this parliamentary session. We have several agenda items. Item 1 is evidence on progress on the recommendations in the report on international trade that we published last year. I am pleased to welcome Anne MacColl, who is Scottish Development International’s chief executive. I ask her to introduce herself and her team and to make opening remarks, after which we will open up the meeting to questions.

Anne MacColl (Scottish Development International)

Thank you for inviting me to attend the meeting. I am here with Ed Payne, who is one of our senior managers in Scottish Development International.

I was appointed as SDI’s permanent chief executive in January. In the four months before that, I worked as the interim chief executive. Just before that, I was the operations director in SDI with responsibility for the Europe, middle east and Africa region.

It has been a great privilege to represent Scotland abroad and I am very fortunate that Scotland has such a good story to tell, both in the excellent products and services that are produced in Scotland, which are world class and will continue to help to grow our reputation and export markets, and in Scotland’s reputation as a business location to invest in, with a skilled workforce, academic strengths and a renowned reputation for innovation, warm people and a can-do attitude.

As members can imagine, I take a keen interest in the committee’s work. I very much welcomed the report and its recommendations. The report helped to raise the profile of the importance of international trade and investment for Scotland and ensured that we had an evidence-based discussion of how we could all improve delivery to support that. At the business in the Parliament event in November last year, I ran a workshop with the convener that allowed us to build on the committee’s work and to learn further from Scottish businesses how we could support greater trade from Scotland.

I will touch on two aspects in my introduction: my three key priorities as SDI’s new chief executive and how we have responded to the committee’s recommendations.

The first of my priorities is that customers—existing and potential customers, Scottish businesses and inward investors—come first. They are the key stakeholders whom we will continue to emphasise the most and to drop everything else for.

My second priority is that we should play to win in the competitive business environment of international promotion agencies. We need to put Scotland on the map internationally and—just as important—put international ambition on the map in Scotland.

My third priority is for us to provide active leadership to support greater international trade and investment. SDI has a good reputation among peers and colleagues and I want us to build on that by delivering high performance, being a key team Scotland player and helping to align the efforts of public and private sector partners for the benefit of greater international trade and investment for the Scottish economy.

The development of actions arising from the committee’s recommendations was summarised in the written response, but I will reiterate a few points. Increasing the number of active exporters from Scotland is critical. We need all businesses to consider whether they have the potential to export and how they can convert that into international sales. Our support is open to all Scottish businesses, whatever their size or sector. We have a key role in raising awareness and ambition, and we will focus more attention on that.

When working abroad, as I have done in the past 10 years—five of which have been with SDI—I have spent 60 to 70 per cent of my time on travelling to meet customers in locations that suited them. One of my first actions as chief executive was to review our approach to overseas coverage. We need to work smartly and to use all the overseas assets that are available to us to deliver against our customers’ demands. That includes deploying our staff flexibly as well as the significant resources of UK Trade & Investment and our global Scots.

Presently, customer feedback is not suggesting that we are underdelivering on our overseas presence or that there is any unmet need. The bigger challenge is still stimulating demand from Scottish businesses to go international.

Education is an area in which Scotland excels. We have a dedicated team working with Scotland’s 10 universities and 43 colleges to support them to develop and exploit the commercial opportunities that exist overseas.

We have recently reorganised to strengthen our approach to the attraction of inward investment, in particular by focusing on strategic investments that strengthen the competitiveness of our key sectors and embed such investors in the Scottish economy in a sustainable way. In the next few years, a key priority for us will be a focus on attracting investment to support the growth of Scotland’s renewables sector. The attraction, in December last year, of Mitsubishi Power Systems Europe to establish a presence in Scotland through the creation of a centre for advanced technology shows that Scotland can compete, and my staff are out there globally, on a daily basis, selling the strengths of the Scottish proposition.

That concludes my opening remarks, which I hope have given you some useful context. I look forward to our discussions.

The Convener

Thank you very much for those opening remarks.

You indicated that you recognised the issue that the committee highlighted—the need for a step change in the number of companies in Scotland that are involved in exporting. What steps do we need to take to make that step change? How are you realigning the services that SDI provides to achieve that?

Anne MacColl

We work very much on the approach of raising Scottish companies’ ambition and their awareness of the benefits of internationalising. We look at companies’ capability and capacity, we help them to prepare an international business strategy and then we look at how they can best exploit the opportunities and expand their reach internationally. That is the approach: awareness and ambition; capability; expansion and exploitation.

Some of the key steps that we have taken most recently revolve around a programme that is called smart exporter, which is a new and innovative programme that is designed to broaden the reach of SDI in helping Scottish businesses to internationalise. We run the programme in partnership with Scottish Chambers International, and it is also supported by the European social fund. We launched it on 6 September last year, and we are just about to launch it across the Highlands and Islands. Highlands and Islands Enterprise is a very important part of what we do. Many companies in that part of the world are looking to see what growth opportunities there are internationally. Following the launch of smart exporter in the HIE area, that programme will develop on a pan-Scotland basis to allow a high level of access and interaction between ourselves and companies.

An area in which we look to provide help is around preparing companies prior to looking at markets overseas. We have a programme called international business manager for hire that helps them to look at skills in that area, we provide them with research on markets that they are interested in, and we have a significant series of trade missions and exhibitions to which we bring Scottish companies in a number of different markets, again with a view to helping them to look at international opportunities.

The Convener

You mentioned that the first of the three steps is raising awareness and ambition. How do you get that message through to the whole of the enterprise network, right down to the business gateway, so that all businesses are encouraged to look at their ambition and to realise that the barriers to international trade are not as great as they are perceived to be?

Anne MacColl

We have been working hard to look at how we make that message much more widely known. We are also working hard to ensure that accessibility to the services that we provide is as far-reaching as possible. It is about broadening the scope of the services that we provide to Scottish companies that are looking to internationalise. Raising companies’ awareness and ambition is about helping them to think about developing their international mindset.

There is also quite a significant play on leadership within Scottish companies, by looking at how we develop those leadership skills to raise their ambition for what they could be doing. I am convinced that we have world-class services and products in Scotland that stack up against a number of international benchmarks. It is not that there is a lack of products and services that we can export. It is much more about companies developing an international mindset and ensuring that that message is communicated across the business community, regardless of company size or sector, and across the agencies that companies work with.

10:15

Could you explain a bit more about what services the smart exporter scheme provides? It was being introduced as we were concluding our inquiry, so we were not able to consider it. How will the success of that scheme be measured?

Anne MacColl

The smart exporter scheme was launched in September last year. It is a partnership that we are operating with Scottish Chambers International and it is open to all Scottish companies. We have, for example, put in place a series of 39 seminars, which will run right across Scotland this year. They are intended to bring together Scottish companies that are interested in internationalising, to put them in front of some of our experts who know and understand exporting, and to give them the opportunity to ask questions and think about the areas of exporting that they could get involved in. The scheme is also going to be launched in the HIE area next week, which will open up the market even more.

Some of the services that we offer revolve around international preparedness, or how a company thinks about its international strategy; what budget it has prior to taking the step to go international; what capacity and capability it has to grow its business internationally; and where it is currently operating and how that can be replicated on an international basis. A lot of our products and services look at preparing organisations prior to them taking the step into the international market.

The other part of the scheme is about how we support those businesses once they are in the market. That involves, for example, our trade and exhibition missions programme. In the past six months, we have delivered 33 exhibitions and missions to all parts of the world. The missions focus on particular sectors of industry in which Scotland has strengths. For example, there was Bio Korea in Seoul in September last year, and a number of Scottish food and drink companies recently went to Gulfood in Dubai to look at the opportunities in that part of the world. If you would like it, convener, I am happy to provide you with a list of those exhibitions to give the committee a flavour of what they look like and the breadth and scope of our exhibition programme.

I am sure that members would welcome that.

Lewis Macdonald (Aberdeen Central) (Lab)

During our inquiry, we discovered that, although some sectors are strongly engaged with export opportunities and are active overseas, other sectors appear not to have thought about or actively considered export opportunities. The percentage of Scottish companies that are engaged in exporting is something like 5 per cent of the total number of United Kingdom companies, but we have 8 per cent of the UK companies that pay VAT. That is probably quite a good indicator of the deficiency in export orientation in Scotland compared with other parts of Britain. Do you have a view on the roots of that disengagement? Why is it that many smaller companies simply see exporting as something that someone else does and not something that they should be part of?

Anne MacColl

I have just taken part in two recent events. At the Scottish construction forum I spoke about internationalisation as a route to economic recovery in the construction sector. The other event was the Publishing Scotland conference, which took place last week. I focus on those two sectors as examples of areas in which we think that there is much greater scope for developing exporting.

Some of the companies that we are talking about are small companies, but some are larger, and often a lack of confidence, ambition, and awareness of what the opportunity looks like overseas means that those companies do not think about exporting. From evidence that we have gathered, we know that many small companies underestimate the benefits of exporting and overestimate the risks. For example, they might think that it is much riskier to work in overseas markets because of language and culture barriers or currency differentiation. The message that we try to get across to them is that it can be much riskier to try to grow their business in the domestic market. Growth in the domestic market, across the United Kingdom, is currently about 1.4 per cent, whereas in high-growth emerging economies, such as those in China, Brazil, Russia and India, growth is 7, 8 or 9 per cent and beyond. China is now the second-largest economy in the world, and there are massive opportunities for exporting there.

We try to debunk some of the myths around what exporting means and the risks that are involved in it. That is an important message for companies in Scotland.

Lewis Macdonald

That confidence issue can in part be addressed by businesses that have already successfully made that move. Do the presentations and engagements that you have described involve exporting companies alongside SDI in conversations with potential exporters?

Anne MacColl

We put companies in touch with as many organisations as possible that have already taken that step. An example is a recent event on doing business in Asia that took place in Murrayfield in Edinburgh in February, which we ran in partnership with UK Trade & Investment and at which I spoke. We had more than 70 companies at the event. One of the key speakers was one of our global Scots—a chap who now lives and works in Scotland, but who has done a significant amount of business in Singapore and throughout Asia. He is a good role model, as he has been there, done that and seen it. Putting him in front of that audience and providing access to such individuals is important to break down barriers to exporting, which are often more perceived than real.

I mentioned one measure of the level of export activity in the economy. Do you use that measure, or others, to track improvement or otherwise in the level of exporting?

Anne MacColl

That is a useful measure of where we are now and where we want to go. Scottish Development International is working on its strategic plan for the next five years, from 2011 to 2015, and considering the key areas of business that we want to grow and develop in Scotland. That measure is one of the tracking measures that we are considering using as a measure of performance. Another measure is to look at the number of companies that we assist to upskill in the international arena. That involves the number of companies that we work with on the international preparedness programme; the number of companies and individuals who access the manager for hire programme; and the number of companies that attend exhibitions and missions. Importantly, we consider the impact of all those activities and how they translate into sales, increased growth and profit for those organisations. We track all those measures carefully with our companies.

Lewis Macdonald

That is helpful. The question of how you work with business in overseas markets and with UKTI, which has a broader network in some parts of the world than SDI does, came up firmly during the inquiry. Do you foresee changes in that? In particular, are there ways in which SDI can make more use of Scottish companies that already operate in emerging markets, alongside UKTI, as potential centres or focal points for your activity and the activity of new exporters that go into those markets?

Anne MacColl

We are actively considering how we make the most of our overseas presence. At present, SDI has 22 offices overseas, with just over 80 staff. We are actively considering how to develop the reach of our network, particularly through the UKTI network. There are 150 UKTI offices overseas, covering 96 countries that account for 98 per cent of gross domestic product. If you imagine using that level of leverage to help Scottish businesses consider how they can develop further contacts and work more closely in market, you will appreciate that that is a very important part of what we are doing.

A second important area for us is utilising the skills and experience of our globalscot network overseas. We have more than 600 global Scots across the world—experienced individuals with a high level of understanding of working and doing business in international markets. It is extremely important to ensure that Scottish companies that trade overseas and that go over for the first, second or third time have access to UKTI networks, to global Scots and to our key people on the ground across our 22 offices.

A number of people have told us that there are global Scots and established exporters who would be quite happy to provide a work base for people arriving in the country for the first time. Are you engaged in facilitating or encouraging that?

Anne MacColl

Absolutely. We are considering how we can use some office spaces as touchdown points. We have incubator offices over in the States: in Boston, Houston and in San José, on the west coast. Those incubator offices can serve as touchdown facilities for companies that are looking to get into the market and understand it better, or companies can take on a semi-permanent lease in those offices. More than 100 businesses have gone through our incubator spaces over in the States, with more than a 30 per cent success rate among the businesses as they go on to trade in the markets there.

Nowadays, people tend to do business using a mobile communication model. Some companies still want a space, a desk and an office, but many more are much more keen on understanding and overcoming the language and culture barriers in a market, and on understanding the knowledge and experience of global Scots, rather than just getting a desk and a phone. People do business in a much more mobile way than they did previously. It is not just about the office space; it is more about the knowledge and experience that we can bring to help accelerate people’s entry into the market.

In your opening remarks, you rightly suggested that we need to increase the number of active exporters in Scotland. How many active exporters do we have today in Scotland?

Anne MacColl

We estimate that about 5,500 businesses are currently exporting overseas, which represents 5 per cent of the total number in the UK—a figure that tells us that we are punching below our weight when it comes to the number of Scottish businesses that are exporting. Under our strategy plan and our business plan for this year, and on a strategic, medium to long-term basis over the next five years, we will consider, through the measures that we will be tracking, how we increase that scope and develop from 5 per cent up to 6, 7 or 8 per cent. That will be important. There is a recognition that the number is below the level that we think it should be at, and there is a lot more scope and capacity in the market to develop that work further.

Gavin Brown

I am not sure that there is an easy answer to this question, but let us take 8 per cent as the desired figure—the committee was reluctant to specify a fixed target, although we coalesced around the idea that we should be punching at our weight, which is 8 per cent. You have been producing plans. Do you have a rough feel for how long it might take us to get to 8 per cent, or is that a question that we simply cannot answer right now? I will not hold you to a year, but you might have a rough feel for how long it might take.

Anne MacColl

Sure. I will give you the example of one of the key measures around the smart exporter initiative. It was launched in September, and the measures will take place over the next three years, when we want 8,000 more organisations to be exporting and developing markets overseas. That is an example of a figure that we are currently looking at.

10:30

Gavin Brown

We talked about having a step change in the number of companies that export—it would be fair to describe increasing the figure from 5 to 8 per cent as a step change. We have the smart exporter initiative, and you have touched on one or two other areas. Is the totality of what you have described to us today enough to create that step change, or will other ideas have to come forward?

Anne MacColl

My first response is that a medium to long-term strategy is required. Such a step change cannot be delivered overnight. Although the number of companies that are taking an interest in internationalisation is really starting to ramp up, that will not happen in the space of a year. It is realistic to look at three to five years and beyond.

Gavin Brown

Smart exporter has been going only since September, so we have had only five months or so of it. I accept entirely that this is a medium-term problem, but have there been any early quick wins from companies that have been involved with smart exporter and have suddenly taken the plunge, or is it too early to say that?

Anne MacColl

Many companies have come through that are now equipped with the skills to develop international markets. It is too early to be able to demonstrate quick wins, but a number of companies that three or four months ago had no international strategy, no idea of the markets in which they were looking to trade and no idea of the budget or capacity that they needed now have a much more focused approach to their strategy, the key markets that they want to target first and the budget and capacity that they need to deliver that. The first results that are coming through relate to upskilling what companies do.

Last week, there was an announcement about the export support initiative. Can you give us more details on that?

Anne MacColl

The export support initiative is a new project. It is a one-year intensive programme for small and medium-sized businesses that are new to exporting, so it is a new, innovative way of focusing on the issue. The idea is to work with around 100 companies. We will develop a comprehensive programme with those companies to help them to develop the capacity and skills to exploit international opportunities. The programme will include measures such as one-to-one support from specialist advisers; delivery of tailored services, depending on what companies are looking for; training; research, on which we work in partnership with UKTI; and market entry strategies and plans.

It is also about generating awareness of the new programme among potential businesses more widely than among the 100 companies on which we would like to focus. This is a fantastic opportunity to communicate more widely across Scotland about what can be achieved. There is a wider strategic play to the programme that goes beyond the one-year intensive support that we plan to give to companies.

The details were announced only last week, but when do you hope that the 100 companies will be on board and the programme will be operational?

Anne MacColl

We hope to ramp it up quickly, so we are working hard to put in place our plans to launch the programme and to open the door for applications from companies that want to come on board. We realise that the programme is intensive and that we have a small window of opportunity in which to make it happen. We are working hard to ensure that it does.

Marilyn Livingstone (Kirkcaldy) (Lab)

I have a question about operating budgets. The committee understands that the Government has cut next year’s grant-in-aid budget by 7 per cent for SE, by 18 per cent for HIE and by 12 per cent for VisitScotland. It is hard for us to ascertain what SDI’s budget is, because it is incorporated. What is your operating budget for 2010-11 and how is that changing for 2011-12?

Anne MacColl

You are right that SDI’s budget is integrated into the Scottish Enterprise budget, so staffing costs, salaries and so on in some budget lines are integrated. Our budget for next year is £25,933,000. That represents a modest reduction from last year’s budget, so we are not immune to the budget cuts that everyone across the public sector has experienced. However, the importance of the internationalisation agenda for Scottish Enterprise—it is one of Scottish Enterprise’s cornerstones for growth and development along with innovation, for example—has meant that the cuts that have come our way are smaller than in some of the other areas. That is because of the scope and opportunity that we believe exist for internationalisation and inward investment to be a route to economic recovery for Scotland.

Marilyn Livingstone

As the convener outlined, partnership working obviously goes on outside your organisation throughout the whole enterprise network. It has to be a team event. I presume that the budget cuts will hurt. Even though your organisation may have fared better, the cuts have implications. In particular, the 18 per cent cut to HIE and the 7 per cent cut to SE must have an impact. What representations have you made to the SE board or ministers about that? Have you been in any discussions about the need to sustain budgets if you are to achieve the ambitious targets that Gavin Brown explored with you?

Anne MacColl

The SE board clearly recognises the importance of internationalisation for the whole of Scotland. Scottish Development International is the international arm of Scottish Enterprise, the Scottish Government and Highlands and Islands Enterprise, so it is a pan-Scotland organisation that responds as a specialist service on internationalisation to all companies throughout Scotland.

We recognise clearly that we must ensure that we do more with less overall and in partnership with our other agencies because the cuts have been difficult for some other agencies. It is all about taking a collaborative approach and ensuring that what we have is available and accessible to all so that we can grow overall the economic recovery for Scotland.

Have you had to make any reductions to staff or cut back any projects because of budget reductions?

Anne MacColl

There have not really been specifics around staff reductions. We recognise that the overseas office network of 22 offices and just below 80 staff is critical to retaining and developing further internationalisation for Scotland. I have been careful about ensuring that the people, knowledge and experience that we have within SDI are fully retained.

If we could and should consider reductions in any area, it might be in facilities rather than people. We could consider more efficiencies by co-locating some of our offices, which we already do with UK Trade & Investment. For example, we have a new regional manager who has just gone out to Toronto. He will be co-located in UK Trade & Investment offices out there, together with a colleague from VisitScotland and one from the Scottish Government. That gives us a level of collaboration and a way of driving efficiencies without risking losing the knowledge and experience that we have in our overseas staff.

Christopher Harvie (Mid Scotland and Fife) (SNP)

I will ask about four areas. The first may have been asked about earlier. How much are you affected by fluctuations in currency levels when it comes to planning an export strategy? It has been extremely difficult to call the shots over the past three years.

Anne MacColl

We recognise that currency exchange rates can go up as well as down. We are sensitive to that and ensure that all the companies with which we work also understand what that looks like.

That said, because of the current level of the pound against currencies such as the yen, the dollar and the euro, we believe that there is a window of opportunity for Scottish exporters to get a toehold in some of those markets. We are encouraging them to use that window of opportunity and to start to sell their products and services. We acknowledge that that is not the only strategy on which to build an export strategy and we are careful to ensure that the companies also know that, but that is an element of confidence that we can provide right now that will help companies to move into those markets.

Christopher Harvie

I could have done with a bit of narrative about specific company experiences in your report. There are a lot of generalised statistics in it, but not information about how particular companies fared in particular markets.

I turn to an area that must be important, because it includes a few major enterprise initiatives. It concerns the physical region of Scandinavia and the exporting and, to an extent, the importing of renewables. The representation of that area in Scandinavia is comparatively light, but we are dependent so much on inward investment from Scandinavia with companies such as Vattenfall and Statoil. What are your plans in that region?

Anne MacColl

That is a good question. We looked carefully at the Scandinavian region over the past 18 months. We felt that we wanted to increase the level of resource in that region and that resulted in the appointment in August last year of a new senior executive. She is based in Denmark in Copenhagen, but she works flexibly across the Nordic region. We put that individual in place at no cost, which is an example of driving efficiencies around facilities. She is home based, but she taps into all the UKTI offices across that region and works closely with them to help drive inward investment in areas such as life sciences and energy, which are the two key areas in that region that are important to the Scottish economy on the inward investment side of things.

More broadly, SDI is sensitive to demands and the ways in which inward investment opportunities and internationalisation can change quickly. We must be opportunity driven and retain a flexible model for where to put our people and why.

Christopher Harvie

We had interesting interviews with people from small businesses who said that exporting was not the problem. Some of them preferred to export because it meant that they were not being held to ransom by supermarkets. Those who said that were Lossie Seafoods Ltd, Mackay’s Ltd, which makes jams, and the irrepressible Boyd Tunnock. This ought to be a major area for intervention pressure because we are so dependent in Scotland on a few major retailers that small and medium-sized enterprises require a counter-strategy to cope with the inevitable attempt to drive down prices. Can you do anything about that?

Anne MacColl

That is a valid point. You mentioned Mackay’s of Arbroath, which is now a globally competitive, family-run business that has been making marmalade and jams for 70 years. They have grown over the past 10 years and employ about 90 people. They have won a significant share of the international retail market by changing their strategy and looking boldly at where the opportunity is for growth overseas. Mackay’s is a fantastic example and we continue to communicate with them and with a number of other companies. The salmon industry is another excellent area of growth and export that has developed well, particularly over the past year.

Mackay’s has a strategy across Russia, the middle east and the USA, and 35 per cent of its products are now exported. We would like lots more companies to follow that model. I spoke to a company a couple of weeks ago and was told, “Times are hard—I’m now having to export 50 per cent of my stuff outside the UK.” We have to change the mindset among Scottish companies from negative to positive, so that people say, “Times are hard—but guess what? We now export 50 per cent of our products outside the UK.”

10:45

Christopher Harvie

I have one further point and it, too, relates to mindset. I am a former university person, and I have had lots of university people on to me in the past couple of weeks about the behaviour of one particular university in Scotland about its modern language programmes. We are succeeding rather well in exporting Scottish university education, but it looks as if we are stripping out, at a very important level, Polish, Russian and other languages that could be very important for exporters in Scotland.

In Tübingen, I was joint head of the international economics course, which was half languages and half economics. It was reckoned by the Baden-Württemberg government to be extremely important in developing the general economy, which it has done with enormous success. Manufacturing has risen from 30 per cent to 35 per cent over the past decade; and people are thinking of 50 per cent for Scotland.

A view that we have heard expressed in other meetings is, “They all speak English anyway.” That just does not work at the manufacturing level. Voith is the biggest manufacturer of turbines in the world. I spent a day there and asked people about the shop talk and about the language that the technical board talked. They said that 95 per cent of it was in German. If we are to make renewables work, we have to get abreast of them on that. SDI will have to take a view on the way in which we treat modern languages in this country.

Anne MacColl

Language skills can be an important element of the mix that companies can use to help them to develop their international strategy, to get under the skin of distributors and buyers, and to understand their culture and work with it. It can depend on the market, and SDI can help. For example, in our overseas offices we have a mix of ex-pat Scots—like me, when I was out there—and people hired locally. In Asia, we have a number of locally hired people right across Japan, China, Taiwan and so on. They really understand the culture and obviously have the language skills as well. It is exactly the same in Germany and France. SDI offers language skills as a support element to companies.

We acknowledge that languages are important, but companies also have to develop many other things if they want to export internationally. Having a strategic and international mindset is a big part of that, of which modern languages are a piece.

Christopher Harvie

I still see some of my students when I go back and do compacts in Tübingen. One or two of them have said to me, “We like coming to your lectures because they are the only ones where someone talks to us about real situations and real economists like Adam Smith or Keynes,” because what they will have been taught in the economics faculty is the higher algebra directed at algorithms and all the marvellous trades that have totally wrecked the Scottish financial sector in the past two years. I was quite proud of my notion of an integrated international economics course that stressed society, economic history and the study of industry.

Certain leaders of universities in Scotland require a seminar on those things. Could SDI not emphasise that our economics and enterprise teaching at universities should be practical and concentrated on the sort of fields that you are rightly anxious to build up? That would require internships and working abroad. We have hardly any British students in Tübingen. We have lots of Spanish, French and Greeks, but no one from Britain. That is the sort of thing that we would like to see change.

Anne MacColl

It is a core objective of SDI to look at how we leverage the Scottish education sector to develop further internationally. We recognise the contribution that Scottish universities and colleges make to the international dimension of Scotland. High-quality learning and teaching, research, knowledge transfer—all those areas are key.

We have a dedicated education sector team within SDI who work closely with the 10 universities and the 43 colleges to develop areas around continuing professional development and consultancy, which then have an application internationally. For example, the University of Strathclyde business school opened its new campus in India in October to very great effect, working in collaboration with SKIL Infrastructure Ltd, which is a company out there. We are seeing Scottish universities and colleges reaching out internationally a lot more because of that.

Your main point was about developing the skills of undergraduates. The Saltire Foundation has been supported and funded by Scottish Enterprise over the past four years. It supports undergraduates and entrepreneurship. Internship applications for this year have just opened and 41 internships with 20 organisations across seven different countries have already been secured. We have internships in America, Poland, Australia, Germany, Hong Kong, China and Italy. That is a great example of how the Scottish education sector is developing that international feel.

I have met some of the interns—they are very good.

Anne MacColl

That is good to hear. Thank you.

Nigel Don (North East Scotland) (SNP)

Good morning. I endorse Christopher Harvie’s comments about the teaching of economics. I have a degree in engineering and my mathematical skills were good enough to get me through that; however, I had to abandon an attempt to get a diploma in economics because it demanded statistical skills that seemed completely irrelevant to me and wanted me to analyse data that surely did not exist.

I represent the north-east and the two finest counties in Scotland—Angus and Aberdeenshire.

That is a matter of opinion.

Nigel Don

That raises a few hackles—sorry. I just wanted to wake everybody else up.

The tourism opportunities there are plain, and I am conscious that you have identified tourism as one of the key sectors. Of course, tourism is a very different kind of business. You are trying to get a very large set of the world to come, through the funnel of an airport perhaps, to a very small section of the world, which is Scotland. You do not have the focus of a business or even a business sector. I wonder how that fits into your strategy and how you make that work in the context of the rather more obvious challenges of how to export a jar of marmalade or a box of shortbread.

Anne MacColl

As you rightly say, tourism is a key sector for Scotland’s economy. We have a dedicated tourism team within SDI whose focus is on attracting inward investment that will help to develop the tourism infrastructure in Scotland.

We recognise that the business tourism sector is very fast-growing at present—Edinburgh and Glasgow were ranked among the top 30 cities in the world based on the number of conferences that they hosted—so we are focusing on that area.

More than 200,000 people are employed in the tourism industry in Scotland, and it generates more than £4 billion annually for the Scottish economy. We focus on the high-value end of tourism to try to bring in some of the developers who will consider building five-star hotels in Scotland, for example, and develop that part of the sector. Golf tourism is also extremely important for Scotland: there is a growing market in China with an interest in that.

We always try to work collaboratively with our colleagues in VisitScotland to help grow the tourism industry in Scotland. The Ryder cup, which is taking place at Gleneagles in two or three years’ time, will be an opportunity for us to examine how we can develop golf tourism and bring potential inward investors to Scotland to consider it as a place to live, learn, work and invest. We are positioning tourism as a key part of the overall economic strategy in the international framework.

I will give you an example of how we work collaboratively with VisitScotland. Our new regional manager, who is based in Toronto in Canada, will be working and co-locating with VisitScotland and with someone from the Scottish Government. That means that there will be three key people from three organisations working together in Canada to look at how we grow and develop tourism in some of the other sectors from that region into Scotland.

Nigel Don

I am trying to get a handle on how we improve what I will describe, for want of a better phrase, as general tourism. I see your point about getting in someone who wants to develop a golf course. Much of that has happened: people build a hotel but, sadly, they then build some high-value houses that they may or may not be able to sell in order to make the whole thing add up—but that is another problem.

I am trying to find out to what extent you contribute to tourism in terms of tourists visiting Scotland as an ancestral place from which a large number of people overseas originally came. You may see that as being something that just VisitScotland does, which might be a fair answer, but I am trying to see how all these things relate.

Anne MacColl

In Scottish Development International our focus is twofold. It is about economic development and attracting inward investment to Scotland from the key sectors of industry in which we have strengths—one of those sectors is tourism. It is also about helping Scottish companies to internationalise.

The focus on attracting additional visitors to Scotland is very much in the realm of what VisitScotland does. There is crossover with SDI in areas such as business tourism, which I mentioned, where part of our remit is about working to attract further business conferences to Scotland. If we can attract business tourists to Scotland, there is a greater opportunity to attract inward investment on the back of that.

We need to ensure that we make the links between the two, but that we leave the specialists in VisitScotland to do their job, because that is what they do best.

Nigel Don

I want to go back to where we started, which in a sense is nothing to do with visitors. You mentioned earlier many things about working with Scottish companies to try to get them to export, but I do not recall your saying how you tried to identify or make contact with those companies in the first place.

A couple of weeks ago I visited an engineering business in Forfar, which—amazingly—sells metalwork to China. One would not have expected that it would be able to do that, but it does. How would you identify that business, if it was not exporting to China, as a business that perhaps should be?

Anne MacColl

We work in tandem with the whole Scottish Enterprise network, including the business gateway, and with Scottish Chambers International, as those organisations are in touch with companies on a daily basis. We try to ensure that any opportunities that they spot in relation to companies that are either currently exporting or that have an opportunity to export are channelled into SDI so that we can provide those companies with extra support and assistance. Therefore, there is an overall network effort to ensure that that happens. We cannot possibly work in isolation around such an important area, and we do not have the reach to do that. We recognise that the other agencies on the ground have a big and important role to play in ensuring that they identify opportunities, and we work with them to ensure that we are not missing any of those opportunities.

11:00

The Convener

I will touch on a couple of areas that we have not covered yet. We have talked a lot about exports, which the committee has stressed are key, but we have not talked much about inward investment. The committee has received evidence that, over the past decade, Scotland’s performance relative to other regions and nations in the United Kingdom has not been as good as it once was. Have you had an opportunity since you took over as chief executive to review SDI’s inward investment strategy? Will you propose any significant changes to it?

Anne MacColl

I have had an opportunity to review it. We have carefully considered the evidence on how Scotland fares with inward investment. It has maintained its position as second in the UK for attracting it—it has been beaten only by the south-east, which includes London. Scotland also has a very good track record in attracting a higher proportion of research and development projects in comparison with the rest of the UK. In 2009, Scotland attracted 21 per cent of the UK figure for research and development projects. Those are the latest data that we have.

We believe that we have a strong proposition for inward investment. We are looking at attracting high-value jobs to Scotland—that is, jobs that pay 20 per cent above the Scottish average salary—and research and development jobs. We very much focus on high-value and sustainable inward investment.

The Convener

At the top of that list is obviously the renewable energy sector, which is crucial. Can you give us a little bit more information about the work that Scottish Development International is doing in the energy sector, particularly to attract inward investment in renewables and in the supply chain for renewables? How is SDI trying to ensure that we have a long supply chain for the renewables sector and that things are not simply bolted together in Scotland before they are floated out to sea?

Anne MacColl

Renewable energy is obviously a key issue for Scotland and we are working carefully with a number of partners to ensure that Scotland grows the size and scale of the opportunity that exists as well as it possibly can. We have identified some high priorities, such as offshore wind and marine energy, which includes wave and tidal energy. There is a lot of competition for attracting new projects, but we think that Scotland has a strong proposition.

We know that a number of factors determine inward investment in those areas, such as the size of the site for putting turbine structures in place, access to port facilities, which is important for inward investors, and the availability of and access to research and development. As I mentioned earlier, we are strong on bringing research and development projects into Scotland. Scotland competes very well in all three of those key areas and we are working with industry and public and private sector partners to fully exploit that competitive advantage. That is where we are with renewable energy.

The Convener

One issue that we identified in our enterprise network review was disjointedness in the skills sector. When you are considering inward investment opportunities, do you take an active role in trying to ensure that the education side is in place? For example, a major issue in the past year has been Siemens and wind turbine modern apprenticeships. If Siemens had gone to SDI and said what it was trying to do, would you have been able to assist at all, even by just banging heads together?

Anne MacColl

We would work with Skills Development Scotland on such issues to ensure that there was a join up between the demand for skills and what inward investors were looking for.

SDI has a focus on education and we have an education team that works with the universities. That means that we can make that join between industry and universities and the skills that they are developing to ensure that there is the best possible match with the skills that are being supplied into industry.

Supply chain development is critical to the renewable energy sector. It is about ensuring that the heavy engineering muscle that large organisations such as Mitsubishi bring into Scotland, coupled with the high-tech of Artemis Intelligent Power, which Mitsubishi has acquired, make a strong play for developing Scotland’s supply chain into that industry. We should be looking not just at supplying into that industry in Scotland, but at how the supply chain develops its own play internationally. There is a clear link between inward investment and exporting and internationalisation.

The Convener

I have a question about finance. One of the barriers facing companies that might be looking to export is the initial finance that they need to set up and there have clearly been some problems with export guarantee schemes and so on during the past few years. Does SDI have any thoughts about how Scotland can help companies to get over the initial costs of getting into exporting?

Anne MacColl

Part of any company’s business plan must be to consider the budget that will allow it to access new international markets. One part of the smart exporter programme that will help considerably is the international manager for hire programme. Small companies often say that the barrier for them is that they do not have an in-house, dedicated resource to help them to look at how they get into market X, Y or Z. They cannot afford to pay for someone new to come in to do that and the international manager for hire programme provides such companies with that resource. That clearly means that there is a financial implication for the company.

That is how we are looking at the issue. We cannot provide companies with a grant to help them to break into the international market, but we can look at the overall play, at what the barriers are and help to bring those barriers down. That is one example of what we do.

One of the issues is that it is harder to get finance from the banks for such schemes than it might have been three or four years ago. Could the Scottish Investment Bank play a role in helping companies to develop internationally?

Anne MacColl

Indeed. The Scottish Investment Bank has provided £55 million of cornerstone funding to the Scottish loan fund, which is partly funded by the European regional development fund. We are looking at how that can be an instrument that will help Scottish companies to grow.

There are some rules about what companies qualify for Scottish loan fund loans. They need to have an established operational trading base in Scotland and an annual turnover of more than £1 million. However, that SME base of companies can benefit considerably from the Scottish loan fund.

I will conclude by welcoming your report to the committee on increasing our overseas footprint. That report is clearly a direct result of the committee’s inquiry. How will it change the way in which we operate on the ground?

Anne MacColl

That piece of work was spurred on by your committee’s findings. It is an evidence-based way of helping us to understand what Scotland’s overseas footprint looks like and what areas or opportunities there are to grow it.

The evidence demonstrated that the 22 SDI offices are based in the areas of highest export and inward investment opportunity for Scotland. We think that there is a good fit between where our offices are and where the opportunity for Scotland lies. That said, we are prepared to be flexible. The example that I gave earlier of putting an additional resource in to the Nordics and taking part of that resource from elsewhere is an example of that flex.

The second piece of evidence that we looked at was about the reach of UK Trade & Investment and the importance of SDI working in partnership with UKTI. With 150 offices in 96 countries, UKTI clearly has a significant play for Scotland. The third element of our overseas footprint is the globalscot network. We have 600 global Scots across the world and how we can access and use their skills and experience to help to accelerate companies’ growth is also important. The fourth element that we looked at is how we work with the private sector to fill any gaps or address any areas that we cannot service ourselves.

Our report was very much evidence based. It looked at setting out or mapping what we currently do and what we should do more of. That was the purpose of our report.

The Convener

That concludes our questions. I thank Ed Payne and Anne MacColl for coming along this morning. I am sure that our successor committee, whatever it might be, will keep a watching brief on the issue. As part of our legacy paper, we will recommend that it does so.

11:10 Meeting suspended.

11:15 On resuming—