Ireland is ranked third in `economic freedom' index

The National Development Plan helped propel the Republic into third place in a US index of "economic freedom", according to its editors.

The index, compiled by Heritage Foundation and the Wall Street Journal, ranks the world's economies according to 50 economic variables in 10 categories.

Ireland has risen to third from seventh place in the index and now ranks behind Hong Kong and Singapore.

Mr Erin Schavey, a policy analyst covering international trade issues at the Heritage Foundation, said: "We did upgrade Ireland's ranking because of the National Development Plan. It is being viewed as being very positive in its support and development of investment."

The US was placed sixth in the survey which assesses banking and finance systems, capital flows, foreign investment, monetary and trade policy, wages, prices and government intervention strategies.

"Ireland continued to thrive, with tax cuts, an openness to foreign investment and a competitive banking system," the report said.

Recent growth was the result of free-market reforms adopted during the late 1980s in response to a budgetary crisis, it added.

The report's co-author, Ms Melanie Kirkpatrick, said: "In the original index [seven years ago] Ireland was ranked in the mid-20s. It has moved up enormously in the past five years and that is to do with government policy." Ms Kirkpatrick works for the Wall Street Journal.

However, Ms Kirkpatrick warned the Republic may lose its position next year due to price controls imposed by the Government in response to the EU's monetary policy.

Ms Kirpatrick said pressure to adopt social provisions seen in EU labour markets - on the length of the working week, for example - may affect the rating next year.

The Government's proposed investment fund, set up to partially pre-fund social security needs in the future, constitutes a new threat to "economic liberty".

The fund eventually could make the Government the largest owner of private capital, with an equity stake of 29 per cent in the firms listed on the Irish Stock Market, the editors said.