Despite the fact that balanced regional development is a key element of the National Development Plan (NDP), the difficulties facing major sectors of the Irish economy are not being addressed.

It seems Ireland Inc has effectively given up on "old-economy" companies and industries, and is placing all its bets on the "new" economy. This is a foolish and shortsighted strategy by the State and its agencies.

Furthermore, difficulties in the telecom and IT sectors in the past year show that the new economy suffers from the same economic realities as the old, i.e. downturns in demand and business closure, even though they have been prioritised by the development agencies.

Major increases in labour, energy and insurance costs have dramatically increased the cost of doing business in the Republic. This surge in costs has had a particularly detrimental affect on engineering, plastics, clothing and textiles, and parts of the food sector, which together account for 130,000 jobs i.e. almost 50 per cent of manufacturing employment in the State. The problem these sectors face is not simply that costs have risen but that the prices they receive as manufacturers have not moved in line with costs.

The forces of global competitiveness drive downward pressure on prices of manufactured goods and components. If we can't meet the price, our competitors in Britain, eastern Europe and the Far East can - and will. In essence, losing competitiveness means that the cost of purchasing goods from the Republic is more than the "market" will pay. Thus businesses and jobs are being lost.

The closure of these traditional indigenous companies will leave particular regions of the country bereft of industrial activity.Clothing and textiles account for 40 per cent of manufacturing employment in Donegal for instance. The plastics industry is among the biggest employers in the Midlands. The engineering sector employs more than 80,000 people throughout the country.

Four of the 12 automotive companies operating in the Northwest region last year have now closed with the loss of 400 jobs, while a further two are on short time.

The skills acquired by people in these industries are not easily transferred to new activities.

What can be done? The reality of the cost /price squeeze is that, as costs grow, companies must produce higher value products. This is being addressed first and foremost by the companies themselves.

At national level, the first and most important step must be a refocusing on competitiveness. This means producing goods and services at prices that the market will pay, which in turn means that labour and manufacturing cost movements in the Republic must be benchmarked against competitor countries and also reflect the reality of cost recovery.

The Government's actions in areas such as energy and insurance prices must take into account the disproportionate impact that these cost increases can have on specific sectors. Energy costs alone account for 20 per cent of turnover in the textile sector for example. Thus major increases in energy costs such as those agreed in late 2001 could completely undermine a whole industry sector.

Rather than cobbling together task forces post-closure, a mechanism must be introduced to fast- track the measures that have been already identified in the NDP to assist industry.

Effectively this means supporting innovation, research and development, and human resource development. The only way to achieve this is to engage directly with the industries affected so that schemes and supports are tailored to the needs of specific industries.

IBEC sectors and federations have detailed industry information whereby it is possible to identify the most vulnerable companies and fast-track assistance while the companies are still viable. IBEC has also highlighted the need for the Government to introduce a tax credit system to further encourage R&D capability.

Support for innovation and R&D will help companies that are struggling to survive as assembly line manufacturers to move to higher value-added activities such as design and distribution.

The experience of many traditional companies, however, has been that there is a reluctance to make this support available for old-economy companies.

The measures set out in the NDP include assistance for people development as well as support for new processes and new products. For these measures to be effective, the link between individual sectors and the development agencies is critical.

The forthcoming mid-term review of the NDP presents an opportunity for this to happen in a meaningful fashion. Indeed, the first step in this process should be a campaign geared towards informing companies of the types and levels of assistance available to them.

Secondly, the schemes must be constructed on the basis of direct input from industry. The current nightmarish application system must be short circuited to encourage smaller companies in particular to apply.

It has become a cliché to state that R&D capability in Irish companies is the lowest in Europe. Yet Irish people in new-economy companies are heavily involved in R&D and innovation. Surely this demonstrates that where schemes are designed to suit the user, they will be taken up.

Ciaran Fitzgerald is a director of IBEC.