The Government must radically overhaul its existing immigration policy and develop a new "green card" system to enable the economy to continue growing.

It should also address its own "ongoing indecisiveness" over immigration, according to the Small Firms Association (SFA), which says this is causing wide-scale confusion for businesses.

In a tersely worded end of year statement yesterday, the industry lobby group blamed Government for a "fairly ad hoc immigration policy" and implementing no new policies after an extensive three-year review of the system.

The association said the confusion over the right of non-EU immigrants to obtain work visas in the Republic is making it more difficult for businesses to meet labour shortages.

Many small employers seeking to grow are already struggling to recruit staff.

Average wage increases during 2004 for these firms were 8 per cent, says Ms Patricia Callan, SFA assistant director.

Ms Callan said the Government had made no decisions yet on several basic immigration policy issues following its extensive public consultation process.

"No decisions have been made on such basic issues as who should be allowed come to reside in Ireland and whether a quota system or a system of direct market needs should form the basis of deciding how many should be admitted," she said.

The association also called on the Government to clarify what entitlements immigrants should have and to streamline its own administrative arrangements for obtaining personal public service numbers and bank accounts.

The SFA said there was now a substantial increase in the need to recruit non-EU nationals to fill labour market shortages as companies geared up for new growth.

Between 1999 and 2003, there was a 700 per cent increase in the number of work permits issued and, despite the granting of an automatic right to work for citizens of the 10 EU accession states in May, the number of work permits issued to the end of November is still high at 32,170.

Figures supplied by the SFA show that, between 1996 and 2000, employment in the State increased from 1.1 million to 1.9 million people. Average employment grew by 70,000 per annum, of which only 20,000 came from foreign labour migrating here.

Ms Callan said the Government should benchmark its immigration policy with competitor economies and create a two-tiered system.

This would position the Republic as an attractive location for highly skilled and mobile workers but also develop a new "green card" system to enable immigrants to come to the State and take up lower-skilled jobs.

"About 75 per cent of permits issued over the past number of years have been in relatively low-skilled or low-wage occupations... particularly in the services, catering and hospitality industries," said Ms Callan.

The concerns expressed by the SFA follow a study by the Central Statistics Office (CSO)which forecasts that the economy will need 45,000 immigrant workers every year for the next 12 years to sustain growth. At present, there is a net influx of 35,000 immigrant workers every year.

"As a nation, we must realise that non-EU nationals are an addition to our workforce and are not just displacing Irish workers," said Ms Callan.

"What is now required, as a matter of urgency, is primary legislation that will set out rights and obligations on all sides, and which will encompass a more realistic, big-picture approach to the issue of net migration."

A Department of Enterprise, Trade and Employment spokeswoman could not be contacted yesterday for comment.