The people of NI and the Irish Republic can "have the best of both worlds" by maximising trading opportunities, Secretary of State Peter Hain has said.
Peter Hain said both economies would benefit from north-south trading.
Speaking in Dublin on Thursday, Mr Hain agreed the two economies, on some occasions, "could be in competition".
He said, however, it would be possible to identify areas to co-operate "and then play to our respective strengths".
Mr Hain said he and Irish Foreign Minister Dermot Ahern would carry out a north-south economic audit.
"I expect that this will demonstrate other areas in which the historic lack of effective co-operation has hindered both economies and where there is scope to make more progress," he said.
"I want a joined-up inward investment strategy, because very often the real competition is not between north and south, but between the island of Ireland and places like eastern Europe."
The Northern Ireland secretary said "business itself" was leading the way in north-south co-operation, with northern contractors already heavily involved in infrastructure projects in the south, and particularly in Dublin, providing many jobs in Northern Ireland.
"An increasing number of northern companies are already operating on an all-island basis and finding it worth their while, in business terms, to do so," he said.
"Examples are found in virtually all sectors of the economy, but particularly in food and drink, the media, banking, retail and in the industrial sector."
Mr Hain stressed that "energy" was also a priority area.
"Both governments are fully committed to getting the necessary legislation in place later this year to allow the creation of a single wholesale energy market for the island of Ireland and where we already have companies from one jurisdiction operating successfully in the other," he said.