The ESRI's report on priorities for the next century illustrates clearly the changing circumstances facing the Republic's policymakers. The report will form a key input into the next National Development Plan for the years 2000 to 2006, the document put forward to Brussels outlining the State's investment plans with EU support. Previous plans aimed to get as much money as possible from Brussels and spend as much as possible on creating new jobs. However, it is now clear - after the Taoiseach's announcement yesterday - that the Government will now accept that just 13 counties will qualify for the maximum level of EU funding in the next round, while the rest of the State will get less. And the ESRI report argues that, in the light of our new-found prosperity, a new approach is needed to consider where the money should be spent.

No longer, it says, should the focus be on securing large amounts of structural funding and chasing every last job. Now the challenges are more about how to manage success and to ensure the momentum of economic growth can be maintained. It is optimistic on the growth outlook, arguing that if we plan our affairs properly, Gross National Product growth could average 5 per cent between 2000 and 2006, compared to around 6.5 per cent over the past few years. This steady growth would allow the Government to plan for some £50 billion of infrastructural spending between 2000 and 2006, despite the expected run-down in EU funding to be negotiated in Brussels next week.

The ESRI is calling for a complete rethink of the way we do business. The new focus for the Republic must be on avoiding bottlenecks to allow growth to proceed. This means making the State a more attractive place to work and do business.

If the report is accepted, it will mean a sea change in political thinking. There is no need, the report argues, for major job creation projects to take priority they have done in the past.

With unemployment falling and infrastructure and skills shortages emerging, the Republic should move to a more selective approach to attracting inward investment and grants to industries locating in already developed areas should be run down, the report argues.

This may fit in with the splitting of the State into two regions, with significant grant aid likely only to be available in the 13 Objective One countries.

The current high level of grant support to project locating in areas such as Dublin will not be allowed as the rest of the State loses the Objective One tag.

However with competition high for mobile investment, IDA Ireland will argue that it will still need some attractions to offer. Also, cutting backs on grants for industry may prove politically difficult, with ministers always keen to announce new businesses in their areas.

The old days of ad hoc development should now be put behind us, the report argues.

Many of the problems we currently face, particularly in the housing market, are a direct result of a lack of vision and - specifically - the failure to come up with any sort of strategic plan for national economic development.

The Government is likely to take on board large parts of the report, although there are a few areas in the detail which it may find unpalatable - such as the call for the abolition of mortgage interest relief and new charges on consumers.

Much of the report, particularly where it calls for increased capital spending on infrastructure projects, such as urban transport and land servicing, is likely to find favour with the Minister for Finance, Mr McCreevy, who is already going down this route.

The main proposals on housing - calling for a significant increase in investment in providing serviced land and other supporting infrastructure are likely to find a home in policy, with the price of new housing now a hot political issue.

Public transport is also generally considered to be a major cause for concern. However, the Government will need to take on board the need for a real strategic approach to development and planning in this area.

The idea of developing so-called "nodes" - or centres - for regional development may also find some favour, although there will be intense competition for the honour.

Of course, as the ESRI points out, some towns and cities are obvious candidates. These include Galway, Cork, Limerick, Waterford and Letterkenny to link in with the Derry hinterland. The economic benefits of becoming such a node could be large with additional funding for telecommunications, transport and recreational facilities.