Harney stresses need to work together as new council meets

"It is only by working together that we can continue to eliminate the constraints and develop our resources," said the Tanaiste, Ms Harney, after the inaugural meeting of the North-South council in Armagh yesterday.

But just how far can economic co-operation extend in the competitive world of attracting investment?

According to Mr Bruce Dic kinson, chief executive of the North's Industrial Development Board, its contacts with the IDA have increased substantially over the last five years. "There is certainly a greater awareness of how they [the IDA] tackle the job of attracting inward investment," he said yesterday, pointing out that the challenges the Border regions face, both in Northern Ireland and the Republic, were very similar.

He identified continuing discussions with the IDA which are examining the prospect of developing a digital corridor in the Mongahan and Armagh areas, but anything more than local co-operation had to be determined at ministerial level, he added.

"There are parallels in what we are doing but we don't exchange market information," according to a spokesman for the IDA, Mr Colm Donlon.

With the IDA and IDB competing for investment in the same high technology sector, political realities on both side of the Border are likely to halt greater co-operation.

If projects that suited towns in the Republic suddenly started going to Northern Ireland, local politicians would be in uproar, said Mr Donlon. Unionists are not overly excited about greater North-South co-operation either. "While there are gains to be made through greater co-operation within Ireland, Northern Ireland shouldn't become introspective," said Ulster Unionist, Mr Dermot Nesbitt, who is expected to be appointed junior Minister of Economics today.

Former SDLP spokesman on economic affairs and now Minister of Further and Higher Education, Mr Sean Farren, was less convinced that maintaining the status quo was the best strategy for attracting inward investment.

He said that despite a huge "psychological uplift" provided by the formation of the Northern Ireland Executive, the IDA retained a competitive advantage over the IDB.

"Until we get similar privileges and incentives that the South offers, it will be difficult to compete," said Mr Farren.

"One of the problems is that we don't have fiscal discretion in the new assembly - the SDLP will be arguing for a complete review of fiscal policy to see what discretion we could and should have."

However, any attempt to review such discretion is likely to be opposed by Unionists. This includes the issue of a higher corporation tax in the North which has prompted some companies to push for a special case exclusion for Northern Ireland from the rest of the United Kingdom. Unionists such as Mr Nesbitt believe there are more gains to be made by staying within the British fiscal unit.

Another senior source close to the First Minister, Mr David Trimble, was quick to discourage the idea that practical economic concerns would sway unionists to accept measures that would equalise taxation North and South of the Border.

"Northern Ireland's economy is very highly integrated with that of the United Kingdom and corporation tax can't be touched," he said.

He added that unionists would favour changes to the grants offered to companies. "A lot of grants go to companies that are already here," said the source.

As the Minister of Higher Education in Northern Ireland, Mr Farren controls the portfolio with the third largest budget of £500 million sterling (€802 million), and is keen to boost skills to encourage business.

"There is a skills' shortage which is created by more jobs than people and a greater degree of mobility in the workforce," said Mr Farren. "A lot of trained graduates are going South now. The scale of the investment down South has created a magnet for workers."

Before the establishment of the Executive, an additional 2,500 third-level courses had been destined for Northern Ireland within the next three years. "This figure will be increased more rapidly," he said. "If you have a highly skilled workforce, you have the essential human infrastructure for economic development."

Technical courses will be promoted and there will be a high priority on the development of the software industry in Northern Ireland, which Mr Farren sees as having huge potential. He is due to meet the Software Federation soon and is hoping to mobilise the resources of Northern Ireland's universities, allowing them to co-operate more closely with industry, business and commerce.

In terms of enhancing cross-Border trade, Mr Farren said devolution would encourage companies in Northern Ireland to look to the island and source more from the Republic.