Foreign investment for the first six months of this year fell by 28 per cent compared to the same period last year.

The fall in foreign investment here compares with a stable level of investment in the rest of the EU, and a continuing increase in foreign investment in central and eastern Europe.

There were 26 new investment projects in the Republic in the first half of this year, compared to 36 in the same period in 2001, according to figures released by Ernst & Young European Investment Monitor.

The study found that foreign investment here in software and electronics ventures halved from a total of eight and six projects respectively. Pharmaceuticals also experienced a decline, from five during the first half of 2001, to three during the same period this year.

In the finance sector there were four projects announced in the first six months of 2002, compared to three in 2001. Of the total of 26 foreign investment projects registered in the first half of 2002, 14 were US-generated.

There were two projects registered from both Germany and Japan and one each from: France, the UK, Canada, Switzerland, Denmark, South Africa, Taiwan and Bermuda.

"The number of projects coming out of the US continues to decline and this has impacted disproportionately on Ireland," said Mr Des McCann, head of project finance at Ernst & Young Ireland.

"Ireland's status as an attractive location for inward investment has also been affected by competition from countries in central and eastern Europe, neither of which made much impact when Ernst & Young first began the monitoring study in 1997."

Across Europe there was an increase of new investment projects, from 912 to 928, but a 25 per cent fall in the number of jobs created, from 160,000 in the first half of 2001, to 122,000 in the first half of this year.

For the EU, the number of projects fell by 15 per cent when compared with the first half of last year. For central and eastern Europe, the number of projects rose by 54 per cent.

Hungary saw a large increase in the number of investment projects. There were 64 in the first half of this year, compared with 36 in the first half of last year. Russia also experienced an increase, from 25 to 46. Romania saw an increase from 14 to 34.

Software was the largest sector for inward investment projects in Europe during the period, followed by automotives. Projects in electronics, business services, and telecom sectors were all down.

In the first six months of the year there were 299 investment projects into Europe from the US, a 22 per cent decline on the same period last year. The US remains the largest investor in Europe despite the decline and despite increases in intra-European investment from Germany, France and Italy.

The number of new projects in the UK fell from the 2001 figure by 25 per cent, to 150. London, however, remained the top regional location for new investment projects.