Indigenous Irish exporters outperformed foreign-owned companies here last year by increasing their sales by 10.2 per cent to €11.8 billion, according to the Irish Exporters' Association year-end review.

Export sales by foreign-owned companies rose by 5 per cent to €130 billion in 2006.

It is the first time in more than 20 years that Irish-owned exporters posted stronger growth than their foreign-owned counterparts.

Goods exports at €88.5 billion, were unchanged on the previous year, held back by multinational manufacturers which saw their exports fall by 1 per cent.

"Exports from Irish manufacturing operations increased by 10 per cent, although obviously from a much smaller base," said John Whelan, chief executive of the Irish Exporters' Association.

The rise in services exports continued last year, rising to €53.3 billion compared to €4.4 billion in 1995. The figures are expected to place Ireland as the 10th largest services exporter globally.

While major multinationals are driving the sector, there has been significant growth from the wide range of Irish-owned smaller software companies, which grew exports by 13.3 per cent in 2006.

"It is a welcome sign and an indicator that the recent investment that has been made by the indigenous side in terms of R&D into new product development has begun to pay off," said Mr Whelan.

Food and drink exporters had a strong year, with growth of 8 per cent in food exports and 14 per cent in drink exports, which were boosted by the success of C&C's Magners cider in the UK.

Chemical and pharmaceutical companies grew their exports by 4.7 per cent to €42.2 billion and this is now the State's largest exporting sector, accounting for 48 per cent of total merchandise exports.

But computer hardware continued its decline in exports and fell by 6.6 per cent to €18.4 billion. "Companies in the sector have been most severely hit by low-cost competition from Asia and eastern Europe. However, it is still a very significant industry and must be supported with greater attention by Government to inflationary costs in energy, labour and logistics," said Mr Whelan, adding that inflation is set to rise to 4 per cent this year.

Despite forecasting a 6 per cent rise in export sales to €149.8 billion this year, a number of issues could impact negatively on this, particularly the weakness of the dollar, Mr Whelan said.

"The fact that we had no increase in sales to the US in last year was associated with the dollar. We are obviously open to a major shock in exports if the US economy slows down to any dramatic extent and the dollar continues to weaken," he said.

"We have lost control of the energy cost situation and even have concerns on the supply side. We still have gaps in the infrastructure. The costs of moving goods in and out and around the country are still too high. These are areas the Government can and must address," he said.