Poland, the Czech Republic, Slovakia and Hungary all fell in the rankings in the E&Y European Investment Monitor, which measures annual FDI activity, reflecting declines in the number of inward investment projects initiated in those countries in 2006.

Poland saw the steepest drop in investment announcements from 2005 to 2006, booking 15.6% fewer projects, while Slovakia dropped out of the top 15 altogether as large automotive investments dried up.

Ireland, by contrast, enjoyed a 10.4% growth in FDI . . . below the European average of 15.2%, but in the top half of countries in terms of the number of investment announcements last year.

E&Y said the numbers show that the EU accession countries from 2004 have hit a plateau in investment wins as companies seeking lowcost manufacturing locations are seeking opportunities in India and China, while the services sector still prefers western Europe. In fact, western Europe attracted twice as many FDI investments as central and eastern Europe last year.

This is good news for Ireland, which has built its industrial base on inward investment in manufacturing but is now trying to evolve into a more knowledge and services-intensive economic model. Many commentators feared that central and eastern Europe, with their competitive tax rates and cheap labour, would become the favoured location for FDI after joining the EU in 2004, displacing Ireland in the process.

The IDA declined to comment on other countries' performance, but emphasised its commitment to securing "knowledge intensive and innovative investment".

"We've been saying for some time that we'd lose jobs to low-cost countries, but we don't compete on that kind of investment anyway, " said a spokeswoman for the IDA.

"Companies are looking for skills, good standards and expertise."

Ironically, Ireland's FDI profile might even have improved in unexpected ways from EU accession, as tens of thousands of educated and skilled workers have moved here from the east in recent years, depriving competitor countries of key human resources, said Trinity economics professor and director of the Irish Institute for Integration Studies, Philip Lane. But he cautioned against complacency.

"FDI data can fluctuate from year to year and these countries in the long term might be still be good bets, " said Lane. "The big hope is that we differentiate ourselves in the knowledge economy, but many of those countries have strong scientific traditions."

Despite the dip in the number of investment projects, however, central and eastern European countries are still leading the continent in job creation. Poland was the overall winner with 31,115 new jobs on the back of FDI, 15% of all such jobs created across Europe last year. E&Y said lower labour costs led to a higher number of jobs per project than western Europe.