Fruit of the Loom, which employs 3,500 people in Derry and Donegal, is preparing to invest up to $5 million (£3.3 million) in its Irish operations in 1998 and is currently recruiting an additional 220 workers.

The company's newly-appointed vice-president of European manufacturing, Mr Andy McCarter, said it remains firmly committed to its Irish operations and will continue to make "selective and judicious investment" in Donegal and in Northern Ireland. "These actions speak louder than words. We are striving very diligently to increase the workforce, north and south," he said.

The bulk of any future investment by the US multinational company will be focused towards upgrading and replacing its manufacturing processes, but will not include the building of any further plants here, Mr McCarter told The Irish Times.

A substantial investment programme should ensure that the company will remain competitive in the longer term, particularly ahead of the implementation of new world trade agreements, he said. "The front-end manufacturing operations are first-class and highly competitive and as long as we can keep it that way there is no reason to fear that they will close or that Fruit of the Loom will pull out of Ireland," he added.

But he warned that the impending flow of cheaper products from developing countries into the European market would inevitably create pressures for certain aspects of Fruit of the Loom's Irish manufacturing business.

"We have to be realistic. General Agreements on Tariffs and Trade (GATT) accords negotiated two years ago will open up the European market to developing countries and will obviously threaten labour intensive industries." For Fruit of the Loom the impact will be mainly felt in the lower-margin end of it business, its T-shirt production, which currently employs up to 600 people.

"It will obviously affect us, but I don't think it will be a big bang affect. We have been making moves here to reduce the cost base for the past two to three years and we hope to be able to be in a position to remain competitive, but at some stage we will undoubtedly have to move some of the production offshore."

Mr McCarter said the company hopes to be able to reduce costs here with "due deference to the local community". But he stressed that its fleece manufactured products, such as sweatshirts, will not be subject to the same competitive pressures.

This fleece work, which currently accounts for just more than 30 per cent of its total production, he said, is growing rapidly with more and more workers switching from T-shirt production to fleece work.