The amalgamation of three industrial development organisations to create a single new agency is part of a fundamental reappraisal of industrial policy, the Tanaiste and Minister for Enterprise, Ms Harney said.

She was introducing the Industrial Development (Enterprise Ireland) Bill which will amalgamate Forbairt, An Bord Trachtala and relevant expertise from the FAS "service to business function".

The Minister said policy needed to be founded on clear principles. It was people and not Governments who created successful businesses. The Government's primary aim was to create an environment in which people wanted to start new businesses.

Ireland's economy was constantly changing and the industrial base had to undergo a similar change, she said. For too long industrial policy "has been dominated by a protectionist tendency, propping up and protecting businesses which have no inherent competitive advantage or long-term prospects of survival".

Ms Harney said many firms were in the traditional sectors with poor growth prospects and intense competition from low-cost producers. Average profitability had increased in recent years but "it remains low in absolute terms at 4.3 per cent for the food sector and 9.2 per cent for general manufacturing".

There were very low levels of research and development in Irish companies and there was insufficient investment in upgrading the skills of workers and management. Another concern was a continuing reliance on home and UK markets with only 44 per cent of small and medium enterprises exported, compared to an EU average of 54 per cent.

"These problems have persisted despite an interventionist industrial policy which has featured widespread availability of grants. "If we intend to take an integrated holistic approach to the development of enterprise and to make a real impact on industrial performance, we need to have an integrated agency - hence the creation of Enterprise Ireland."

In bringing together the key elements of the three agencies the new Enterprise Ireland "will have access to expertise across the range of business functions required by firms".

There were essential elements underpinning the new agency. It would have clarity of mission; clarity of focus in terms of its client base; a close working relationship with client firms to establish their developmental needs; stream lined services to meet those needs and selective deployment of resources to achieve maximum impact on the performance of client firms.

The Bill was based "on a firm commitment to putting the business environment first and to critically reassessing the role of State interventions within that overall context. In that regard it emphatically will not simply provide easier access to funds for firms who have no willingness or potential to grow."

Ms Nora Owen (FG, Dublin North) said she welcomed the concept of Enterprise Ireland where the agencies existing to help indigenous Irish industry were brought together. She asked why the Minister had not included more details on how Enterprise Ireland would operate in the legislation, given that she had published a policy document on the new agency.

Mr Tommy Broughan (Lab, Dublin North-East) criticised the Bill for having no fundamental targets of what the new agency should be and the vast bulk of the legislation was taken up with the structures of the new agency.

Mr Pat Rabbitte (DL, Dublin South-West) questioned the need to maintain the current level of supports for indigenous industries.

He added that there would be "turf wars" between the new Enterprise Ireland and the IDA over their client base and that Forbairt would referee them. This was because Enterprise Ireland was not envisaged as an exclusively indigenously-focused development agency.