After a difficult three years of company closures and downsizing in the multinational sector, Mr Seán Dorgan, chief executive of IDA Ireland, finally has good news to celebrate this Christmas.

Total employment at IDA Ireland client companies increased this year for the first time since 2000 and the outlook for 2005 is more positive than it has been for some time. Add to this a succession of big wins in the medical device, technology and pharmaceutical sectors in 2004 and it is no surprise that Mr Dorgan is wearing a smile throughout our interview at IDA headquarters.

"It has been a year of creating quality jobs. The depth and nature of the investment and the skills the jobs demand auger well for our knowledge economy," says Mr Dorgan, who pinpoints investments by Intel, Centocor, and Bell Labs as key successes.

Greenfield investments by multinationals are also only part of the success story, as existing clients add higher value functions.

"There is a continual transformation in the activities that are being undertaken by our clients, even though the job numbers may not be changing," says Mr Dorgan, who cites the example of Apple, which has moved from a pure manufacturing firm to a services and customer centre.

The Government's new focus on research and development is also paying off, with 36 new investments in 2004 worth a total of more than €140 million. Increasingly, client firms are tying research to their manufacturing bases, a move that should make them more resilient.

Mr Dorgan says that some sectors have changed radically over the past three years, with the emergence of China and eastern Europe as competitors. The electronics contractors, such as Celestica, are mostly focused on Asia but the IDA has managed to hold its own in value areas.

"China has attracted a mass of manufacturing investment but it hasn't won an Intel Fab or any serious pharma or advanced medical device projects."

Two incentives introduced in the 2004 Finance Act - a tax credit for research and development and tax changes to encourage firms to set up headquarters - are adding to the State's attractiveness for business, says Mr Dorgan, who cites Kellogg's decision to relocate headquarter functions to Dublin as a key win.

But the main requirement for companies looking at Ireland as a location for their business is still a skilled and flexible workforce.

"We probably won't see a skills gap in 2005 but we do need to keep adding science, technology and engineering students and persuade people to go on with their research to PhD level."

This focus on attracting higher value projects to the Republic is also reflected in the higher salaries that IDA client companies pay their staff. In 2004, some 48 per cent of new multinational jobs will pay salaries in excess of €37,000, up from 40 per cent of jobs in 2003, says Mr Dorgan.

The outlook for 2005 is more of the same with further high value investments in the pharma, ICT, financial and international services. There are several big projects already in the IDA pipeline, according to Mr Dorgan.

However, one challenge facing the IDA in 2005 will be its ability to bring projects into regional locations, in line with Government policy.

During 2004, not one IDA project was delivered to Donegal, while multinational firms such as Unifi and Fruit of the Loom announced job cuts.

"We expect to announce some new jobs for Donegal in the new year," says Mr Dorgan, who acknowledges that Dublin is still the major draw for employers.

"Galway is an example of a regional town that is successful. The challenge for us is to make Letterkenny a new Galway."

He says the spatial strategy and an impending decentralisation of Government departments should help create critical mass in the regions and help with the roll out of new infrastructure.

But a potentially big challenge on the horizon for the Border, midlands and west region will be the loss of objective one status by 2007. This will make it more difficult for the State to grant aid jobs.

Mr Dorgan says he is broadly supportive of the State's new blueprint for industrial policy, the Enterprise Strategy Report.

"It hit all the right buttons and drew together where we need to go as a Government," says Mr Dorgan, who emphasises its point on sales and research skills.

He says it makes sense for the IDA to take over Shannon Development's function of attracting multinational investment to the Shannon Free Zone. But he is less supportive of a proposal to give Enterprise Ireland, Forfás and the IDA a common chairman.

As for the IDA, Mr Dorgan says that as Ireland is one of the world's most international economies, its future is secure.