Hovid, a Malaysian based pharmaceutical firm, is to create 145 jobs in the Donegal Gaeltacht as part of a £5 million (€6.35 million) project to establish a manufacturing operation in Dungloe. The firm will manufacture soft gelatin capsules for the European marketplace but will generate most of its revenue by sub-contracting contracts from other pharmaceutical suppliers.

Management of the company said an additional 250-300 jobs could be created in a second phase of development after three years.

The Dungloe investment by Hovid was originally scheduled to come on stream in 1997 but was put on hold following the financial crisis in Asia.

Udaras na Gaeltachta has provided grant aid of some £1.7 million to support the project. An additional £1.75 million is being provided to aid modifications to an existing factory which will be used by the firm. This is the largest grant package from Udaras in 12 years.

Hovid will be based in a 6,000 sq m factory which was built for Fruit of the Loom in the early 1990s at a cost of £3 million but was never used after the company downsized its operations in the Republic. Planning permission has already been received to begin substantial modifications to the facility to meet the clean-room requirements of Hovid. It is expected this work will commence in early September and most of the jobs could be in place by early next year.

Contracts were signed yesterday in Dungloe by Hovid's director, Mr David Howe, and the chief executive of Udaras, Mr Ruan O Bric.

An Udaras spokesman Udaras na Gaeltachta said the substantial project was a major boost for the region and would create jobs for people currently on the unemployment register. Hovid is a pharmaceutical company producing health supplements and herbal products. It exports to more than 30 countries.