A small net loss in employment in the indigenous sector was possible for 2002, the chief executive of Enterprise Ireland said yesterday.

Mr Dan Flinter said employment in the indigenous sector grew by 14,000 gross - but only 1,000 net - in 2001. He was speaking at the publication of the Enterprise Ireland annual report for 2001. He said this was a "robust performance in an increasingly difficult international economic climate, particularly in the second half of the year".

"The current environment is still very difficult and Enterprise Ireland believes international conditions will remain tight for the period to come," he said.

Exports by indigenous companies grew by 6.9 per cent in 2001, to €10.9 billion. "People might be gently surprised by the performance of Irish companies," said Mr Flinter. "It is quite a strong performance by indigenous companies in the circumstances."

Last year indigenous companies continued to invest in research and development, and continued to target international markets. These two factors played a key role in maintaining employment in the indigenous sector. Job losses were evenly distributed across the sectors, he said.

There was a significant increase in R&D spending during 2001, with a total of €100 million spent, of which approximately 30 per cent came from Enterprise Ireland. "In half of all manufacturing sectors, expenditure by Irish-owned businesses on R&D now equals or exceeds the OECD average."

Mr Flinter said it was encouraging that manufacturing industry was maintaining its interest in R&D. In the first half of this year, Enterprise Ireland had assisted 35 new engineering firms with R&D.

The flow of start-ups was in line with the position at this time last year and 50 new high-technology companies are expected by year-end. The venture capital sector, which had ceased to make investments in the second half of last year, has begun to re-enter the marketplace. This was particularly so in the past 12 weeks, Mr Flinter said. Pricing had changed quite dramatically, with substantial reductions in valuations.

Enterprise Ireland remains committed to new high-tech start-ups. "In the last three years, 164 new start-up companies supported by Enterprise Ireland generated €180 million in exports and over 6,000 jobs."

Enterprise Ireland has committed €40 million to the development of new sectors such as digital media, biotechnology, photonics and nanotechnology. Investment in such areas is in the expectation of a medium-term return, similar to the return now being achieved from the targeting of the software sector some 15 years ago.

The software sector put in a particularly strong export performance in 2001, with exports up by 28.6 per cent to €1.48 billion.

Mr Flinter said the early indications were that exports generally were up by 4 to 5 per cent in the first half of this year.

Exports to Britain in 2001 were up 14 per cent, to €4.86 billion, and accounted for more than 40 per cent of the total. Britain still continued to be a hugely important market, Mr Flinter said, and for some Irish companies, Britain would always be their primary market.

Exports by Enterprise Ireland-supported firms to the Americas were up 11.5 per cent in 2001, to €1.5 billion. Software and services companies repeated the 44 per cent sales growth they achieved in 2000, despite the difficult conditions. Exports to continental Europe were up 0.7 per cent to €2.66 billion. Asked about the coming referendum on the Nice Treaty, Mr Flinter said the markets of central and eastern Europe were hugely important to Irish companies, accounting for exports of €1 billion per annum.

Many companies had made huge investments in these markets and it was vital that these companies continued to have high-quality access. At present, companies in central and eastern Europe had access to EU markets, but the same access was not available for Irish companies to central and eastern European markets.

Mr Flinter said Irish telecommunications prices were an inhibitor to technology firms setting up in the regions.