The Republic is facing increasing competition for high-tech investment from emerging economies in Europe and Asia, Forfás warned yesterday.

The industrial development policy body's chief executive, Martin Cronin, said in its annual review and outlook that China, India and central European countries were targeting the same sectors that have driven Irish growth over the last 15 years.

He said these countries and regions were competing for investment in pharmaceuticals, electronics, software, financial and other services, as well as catching up with the US in R&D spending.

"For example, the number of foreign R&D units in China has increased from a standing start in 1993 to 700 today," he said.

Mr Cronin added that China's spending on R&D reached $102.6 billion (€84.3 billion) in 2004, around 1.44 per cent of all the wealth generated in the country that year.

He pointed out that this put China behind only the US, with $312.5 billion and Japan, with $112.7 billion. "Ireland's goal must be to sustain levels of competitive performance in line with the world's best," Mr Cronin said.

"We must focus squarely on our core strengths and on high-value niche areas to achieve success in this highly competitive environment."

According to Forfás, in 2005 average earnings rose to €30,726 a year. By the final three months of the year, there were 1.99 million people at work in the Republic, the highest number in the history of the State.

Over 300,000 of them were in industries supported by agencies like the IDA and Enterprise Ireland.

But it acknowledged that domestic spending and the building boom were now key drivers of growth, whereas a decade ago it was strong export sales.