Ireland has a first rate economy but a third rate infrastructure in some areas, the Tanaiste said last night.

Addressing a group of Japanese businessmen in Tokyo, Ms Harney warned that our recent economic growth had been so accelerated that our infrastructure had not kept pace. "We face an infrastructure deficit relative to our needs and the standards of our EU partners," she added.

But to combat these deficits the Republic was now making unprecedented investment over the next seven years through the £40 billion (#50.8 billion) National Development Plan, the Tanaiste told potential Japanese investors at a meeting of the Japan Ireland Economic Association.

While the plan relates solely to public funded expenditure, Ms Harney said there were also huge investment requirements in other infrastructure such as electricity transmissions and generation, private housing and gas pipeline development.

Ms Harney said Ireland faced an enormous challenge in delivering the National Development Plan, not least because the construction sector needed to expand rapidly.

"To this end we are trying to attract foreign firms to tender for contract and are actively working to make people in other countries aware of the opportunities that exist," she said.

Ireland, she added, was also trying to encourage foreign firms in joint ventures with Irish companies. For example, late last year a Japanese company, Nishimatsu, in partnership with Mowlem, a UK construction company, was awarded the contract to build the Dublin Port tunnel. Another leading Japanese company has expressed an interest in tendering for the proposed metro rail system planned for Dublin.

Ms Harney, who is leading the biggest Irish trade mission abroad to date, said trade and investment relations between Ireland and Japan had never been better with Japan now Ireland's seventh largest trading partner and our largest export market for goods and services in Asia.

Trade and investment between the two states last year was estimated at £4.5 billion with Irish exports increasing by 63 per cent. Japan now accounts for 9.3 per cent of our total exports compared to 8.4 per cent in the same period last year.

Ms Harney said the economic and export growth in both states over the past decade, particularly in information and technologies, had positioned us as natural trading nations and global players with Ireland and Japan having emerged as world leaders in IT and software services.

She said the substantial growth in Ireland in the IT, software and telecommunications industries would not have happened without the appropriate economic factors being in place.

The pillars which have supported the Republic's impressive economic performance, have been a partnership approach to managing the economy, a tax regime that supports enterprise and employment and the promotion of a stable macro economic environment.

The economic benefits of EU membership have also been enormous. Next January's introduction of the euro as a working, tangible currency will add further to this advantage.

"The removal of some of the last barriers to trade and partnerships, - currency costs and risks - and the improvements in market transparency which the euro will involve present us with new opportunities and new risks."

Fifteen of the IT companies on the trade mission, organised by Enterprise Ireland and involving more than 60 companies, yesterday held a seminar for leading Japanese IT companies. Today the Tanaiste officially opens a new Enterprise Ireland incubator unit in Tokyo which will help Irish firms develop initial contact and establish operations here.