This was the year that the Republic's pharmaceutical produce made front page news. The impotency drug Viagra, an element of which is made in Pfizer's plant in Ringaskiddy, Co Cork, was the human interest story of 1998 and the talk of every pub in the land. It also did wonders for the State's sales of organic chemicals. Exports of organic chemicals in the first eight months of this year were almost double that of the same period in 1997. Shortly after the successful launch of Viagra, Pfizer applied to Cork County Council for planning permission to extend its facilities. If approved, the extension will allow 100 jobs to be added to the existing workforce of 320. Some 400 people would be employed in the plant's construction, which could take three years.

However, Viagra's phenomenal success hit rival manufacturers of anti-impotence drugs hard, and may have cost the State jobs from other sources. Vivus Inc, for example, had plans to manufacture an anti-impotence drug, MUSE, here - a project worth £28 million which would have created 250 jobs. However, the MUSE system, which delivered the drug alprostadil into the urethra using a plastic applicator, became considerably less marketable with the advent of Viagra - a tablet taken orally.

In September, Vivus announced it would have to drop its plans for a new plant here. There was better news in October, when the Cabinet approved an IDA grant package for a 320-job development at the SmithKline Beecham plant in Cork. Worth £219 million in total, it was one of the biggest projects to receive IDA support in 1998. The jobs will be spread over the next five years at the company's Carrigaline plant and the project will involve an expansion of SKB's manufacturing capacity and a significant research and development initiative.

However, perhaps the greatest success story of the year for the IDA in the pharmaceuticals sector was the announcement by Bristol Myers Squibb that it would create 500 jobs in a £300 million investment. The IDA had been chasing the company for eight months but the agency expected to lose out to Singapore. However, the combination of the track record of the company's workers in Ireland, a grantaid package and a hard sell by the Tanaiste, Ms Harney, at the company's headquarters in New York, won the day.

Mr John Lloyd, of the Pharmaceuticals, Healthcare and Consumer Products Division of the IDA, says it isn't the first time and it won't be the last that the Republic has had to compete with Singapore for investment from the pharmaceuticals industry.

"We have a lot more competition for inward investment now than we had before. Singapore has become a genuine competitor because it has an even more attractive tax regime than we have. Only two US companies have decided to locate there so far, but every time we talk to an American concern, Singapore comes up and we're very conscious of that".

The pharmaceutical industry lobbied intensely over the last few years in an attempt to ensure the State's corporation tax rate of 10 per cent was not increased significantly. However, Mr Lloyd feels that the final decision to increase the rate to 12.5 per cent by 2003 will not be a significant disincentive to inward investment.

"They fought very hard to keep the corporation tax rate at 10 per cent. They didn't see it as an increase to 12.5 per cent. They saw it as a 25 per cent increase in their tax burden. But now that the decision has been made they readily admit that they can live with 12.5 per cent, particularly as that rate is now guaranteed and secure."

The industry's political agenda is now likely to switch to seeking tax credits for research and development and calling for a State-wide waste disposal programme. Both demands are likely to be political hot potatoes that the Government would prefer to avoid.

Mr Lloyd feels the public image of the sector has been helped by environmental agencies, whose work has lessened public concern about the impact of the industry on the environment. "The Environmental Protection Agency has been very important in that regard. The industry would consider the EPA to be stern taskmasters. But the high standards they've imposed have worked out to the benefit of all," he says.

Pharmaceutical plants, while requiring enormous initial investment, are not intensive employers but the jobs that are on offer tend to be well paid and stable. On average, some 40 per cent of the people employed by plants in Ireland are graduates, according to IDA figures. According to Mr Lloyd, some of the companies spend £10 million a year just keeping their Irish plants up to date. "They can have 40 to 50 outside contractors working on the site in any given year," he says.

While pharmaceutical companies are now finding it more difficult to attract staff, the skills shortage in the industry is nothing like as acute as in the software sector. However, the Irish Pharmaceutical and Chemical Manufacturers Association expressed concern earlier this year at a 25 per cent decline over the last decade in the number of Leaving Certificate students taking chemistry.

The last few years have seen a frenzied level of merger activity in the industry worldwide, but operations in the State have emerged relatively unscathed. Mr Lloyd is confident the industry will remain stable and predicts employment will continue to grow at a rate of between six and eight per cent a year. With 17 of the top 20 pharmaceutical companies now located here, the bulk of the IDA's work in the sector in the next number of years will be to coax existing investors to deepen and strengthen their roots in the State.