The focus is now firmly on attracting high added-value manufacturing projects, such as biopharmaceutical facilities, writes Caroline Madden.

Two enterprising Irishmen have recently made a fortune selling bags of "Official Irish Dirt" to Americans to sprinkle on the graves of their relatives.

The Auld Sod Export Company has even received a $100,000 (€75,000) order from a New Yorker, originally from Galway, who wishes to be buried entirely in Irish soil. But luckily for the Irish economy, it's not just nostalgic Irish-Americans who find our country irresistible.

Over the last few decades, the Republic has become a honeypot for foreign multinationals searching for an attractive investment location. In fact, Ireland's ability to attract foreign investment is considered by many to be the cornerstone of our economic success. But in order to maintain its allure, the State can't afford to rely on its old charms and has had to reinvent itself.

We can no longer compete purely on the basis of being low cost, says Brendan Halpin of IDA Ireland, the Government agency which promotes foreign direct investment for Ireland. "Those days are past us in terms of purely looking for low-cost manufacturing or assembly projects," he says. "It doesn't fit the profile of what Ireland is about today."

"It's clear that Ireland has to go higher up the value chain in terms of inward investment," says Minister for Enterprise, Trade and Employment, Micheál Martin. "That's the key strategy - to improve our capacity on research and development and innovation."

The Minister recently spent a few days in the US where he met companies to discuss foreign investment. "The feedback on Ireland is still very strong. They like the pro-enterprise environment in Ireland," the Minister reports.

"In many ways we're trying to match the country's stage of development with the ambitions of the [ foreign] companies themselves." Ireland is now chasing the biopharmaceutical sector hard, the Minister says. "It's a critical area. If you're bringing in investments of that kind you're copper-fastening the company's contribution to Ireland for another 20-odd years."

And despite the question marks hanging over the State's competitiveness, the IDA has successfully reeled in several big bio-pharma fish this year.

Only this week Eli Lilly announced plans to invest up to €400 million in a biopharmaceuticals manufacturing facility at its existing site in Kinsale, Co Cork. In January, Amgen - the largest biotechnology firm in the world - chose Carrigtwohill, also in Cork, for a $1 billion investment.

Mr Halpin says that the level of inward investment recorded to the end of November has been as good, if not better, than last year. "The big manufacturing projects have tended to come in the bio-pharmaceutical area," he adds.

Ask anyone why multinationals are so enamoured with Ireland and they're bound to mention our 12.5 per cent corporation tax rate. But, interestingly, Ireland's main competitor for the Amgen investment was Switzerland, which actually has a lower rate of corporation tax. So what gives Ireland the edge?

"Ireland is perceived as a one-stop shop," says Mr Martin. Amgen felt everyone was singing off the same hymn sheet, he says, "be it the local authority, the Government, the IDA, the utilities".

According to Mr Halpin, Ireland's track record is also a key factor in winning out on major investments. "Some of the largest projects in biopharmaceuticals have taken place in Ireland. The expertise to design them, to construct them, is very, very high in Ireland," he says.

As well as high added-value manufacturing investments such as Amgen's, research and development (R&D) projects are high on the Government's agenda. An R&D tax credit was introduced in 2004 to encourage companies to undertake such work in Ireland, and stamp duty on intellectual property has been abolished. The IMD World Competitiveness Yearbook 2006 ranks the investment incentives available here to foreign investors as among the best in the world.

Clearly Ireland can't be complacent. The key to continued success is to upskill our workforce and to target the right types of investments, the Minister says.