"The first question for any company looking to put an operation in Europe is why not Ireland?" according to Ms Deborah Lange, senior vice-president of Oracle Corporation. "Because most senior executives have heard such good stories about Ireland, you almost have to get over the Irish hump if you want to go somewhere else."

Such pro-Irish sentiments are not uncommon among executives in US technology and pharmaceutical companies interviewed last week about why they chose the Republic for investment. But when asked about future direct US investment, especially in a period of a slowing US economy, they also identified downsides in the Republic, including skills shortages, house prices and traffic congestion, as problems for investors.

More than 600 US companies have invested in Ireland and exports sent back across the Atlantic have put the US on a par with the UK as an overseas market. As the Washington Post noted: "An American worker running Oracle's database software with Windows on a Dell computer with a Pentium IV microprocessor who takes Prozac in the morning and Viagra at night could have received all those products from factories in Ireland."

Almost all the leading US companies are in Ireland, including household names like IBM, Dell, EMC, HewlettPackard, Apple and Compaq in the technology sector, and Pfizer, American Home Products, Schering-Plough and Johnson & Johnson among pharmaceutical firms.

Microsoft, the world's biggest software provider, was among the first to arrive 15 years ago. Its positive experience helped persuade similar companies, such as Oracle, the biggest software company in Silicon Valley, to take the same route.

"They were able to show us that the infrastructure was in place," said Belfast-born Ms Lange, at "Emerald City", the green-and-white Oracle headquarters at Redwood Shores, California. Oracle also looked at Scotland, Switzerland and the Netherlands before deciding in 1991 to establish a centre in Ireland, which now employs more than 750 people, she said. What swung it for the Republic was the calibre of employees, according to Ms Lange.

This was a "critical issue", and on education "you were ahead of the pack".

The high-school education level was well above other countries, people were innovative and colleges had even "targeted our industry to be churning out the graduates at the right time". The fact that the Republic had the lowest corporate tax rate in Europe - 10 per cent until the end of 2000 and 12.5 per cent until 2025 - was not decisive. "It never wags the dog," she said. "You've got to have the business make sense first."

On the other hand, prices have gone up, she added. "It's now quite costly, especially if you move people to Ireland. Then there is traffic congestion. You try to go to a meeting and it's just a three-hour nightmare at times."

Another concern was the high demand for qualified workers, making US companies ask: "Have we sucked up all the good people and what's left?"

Competition was so intense that "you can basically go and cherry-pick your people," she said, and some firms felt they just became training grounds for rival companies.

The lack of direct air flights from San Jose or San Francisco was also a serious irritant to Silicon Valley executives. "That's a big issue when you have pretty senior people travelling," she said. An Aer Lingus spokesman said it had to adhere to the terms of a bilateral Irish-US agreement that allows Aer Lingus to operate routes only to New York, Boston, Chicago and Los Angeles. The airline's Baltimore/Washington service was introduced last year on an extrabilateral basis but another exception would be "difficult to achieve".

Despite the US slowdown, Oracle is still recruiting. "I hope what we are seeing is companies just tightening their belts," said Ms Lange. "This is one of the industries where you can't cut back in development. If you miss a beat in the development cycle, you're gone."

For Xerox, the low Irish corporate tax rate was "the cream on the cake rather than the cake itself," said Mr Bill Goode, deputy managing director of Xerox in Europe. He added, however: "If you are going to be there for 25 years, you need to make sure the ongoing economics make sense." The world-famous copying company, which employs 1,600 people in Dundalk and 1,000 in Dublin, chose Ireland in 1998, when it decided to make its autonomous European operations more cost effective and efficient. Scotland and the Netherlands were in the running but Ireland topped a checklist of language, demographics, education and infrastructure.

What tilted the decision was the people. "They are different from Scotland," said Mr Goode in a telephone interview from his UK office. "They are a lot more like Brazil. There are more people in the 18-28 age group than in many other countries."

There was also the Republic's "incredible education system", with Dundalk prepared to tailor technical courses to Xerox's needs. Like other companies, Xerox found the turnover rate of employees quite high "because there's a massive pool of employers all vying for the same population".

When Xerox first arrived, the Republic was ranked in the top three countries in the world for telephone call centres, which make up one-quarter of Xerox's Irish business, he said. "Currently, you'll find it's not in the top 20." Mr Goode blamed the high turnover of workers. Like everyone else, he was appalled by the traffic congestion. "I heard traffic wasn't freeflowing, but you've really got to live there to appreciate how it can snarl up at an unbelievable rate," he commented. The big threat to the next generation of investment, he believed, was an overheated economy.

Technology giant HewlettPackard chose the Republic six years ago over Puerto Rico, Spain, San Diego and Oregon. "These sites didn't have the capacity to grow at the rate and pace desired, and we needed the product off the production lines yesterday," said Ms Una Halligan, the company's Irish public affairs manager, speaking from Dublin. "What was decisive was the availability of a technically skilled workforce."

This was "payback time" for the free education service initiated in the Republic by Donogh O'Malley in 1967, she said. Hewlett-Packard found that Irish trainees performed extremely well, and showed enthusiasm and innovation, and that the Irish Government was prepared to be reactive to its needs.

For example, three years ago Hewlett-Packard, Intel and IBM