Manufacturing will remain the backbone of the economy, despite a strategy of pushing the Republic up the "value chain", the chief executive of IDA Ireland said yesterday.

With the sector accounting for two-thirds of exports and two- thirds of jobs in IDA-supported companies, it is clear that manufacturing will play a crucial role as the State adjusts to its new standing as a relatively high-cost economy, Mr Seán Dorgan said.

He added: "Despite much comment to the effect that manufacturing is in decline, the fact is that it continues its substantial output growth and like many other developed economies in Europe, Ireland remains a competitive and attractive location for new manufacturing investment."

The Republic's emergence as a knowledge-based economy may have altered the profile of multinationals investing here, but this should not be seen as manufacturing's death-knell, Mr Dorgan told the annual general meeting lunch of the Institute of Certified Public Accountants in Dublin.

"Without doubt, manufacturing remains as important as ever to Ireland's economy, though its future in Ireland will be vastly different from the past as the sector progresses and develops beyond its traditional roots."

In coming years it will be the State's ability to offer quality employees, management and facilities rather than low costs that will woo investors, he said. "It is fashionable to look at low-cost locations as Ireland's main threat and competition, but... low costs don't always present the required strategic solution."