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Home rule will restore N.Ireland potential

LONDON: Foreign investment and tourism, which have powered the Irish Republic's economic transformation, will never take off in Northern Ireland unless home rule is restored to the province, say private economists, business leaders and academics from the both sides of the border.

"If we go back into limbo land, the economy would continue to do all right, but we'd have no sense of direction and we wouldn't realise our full potential," said Nigel Smyth, director of the Confederation of British Industry in Belfast, one of 13 people interviewed by Reuters.

"Uncertainty is no good for business whether for existing business or bringing business and visitors in," he said.

Northern Ireland, its fortunes stunted by years of sectarian violence, has a long way to go to catch up with the Irish Republic whose economy is expected to grow by close to a blistering nine percent this year.

Hopes soared that the province might become a smaller 'Celtic Tiger' with the establishment of a new power-sharing government in Belfast two months ago.

That scenario, however, now looks at risk following the British government's suspension of Northern Ireland's coalition of majority Protestants and minority Catholics on the grounds that the Irish Republican Army had failed to give a clear commitment to disarm.

SENDS WRONG MESSAGE

While reinstatement of direct rule from London means only a return to the status quo, it sends a bad message abroad, according to those interviewed.

"It tells the world that once more we have political problems," said John Stringer, head of the Northern Ireland Chamber of Commerce. "People interested in inward investment are mostly American and very sensitive to the political situation."

Northern Ireland's economy has been hamstrung for three decades by what have been known as "the troubles". But since the IRA began its ceasefire in 1994, its economy has experienced a remarkable transformation.

Inward investment has risen, home-grown enterprises have sprung up and many of the new firms offer hi-tech, good quality jobs -- all of which has become known as the 'peace dividend'.

The peace process last year leading up to the opening of the elected assembly resulted in an unprecedented burst of foreign investment. "In the environment of an active and dynamic peace process, half of all North American software projects that came to the U.K. in 1999 ended up in Northern Ireland," noted Ann Shaw, chairman of Northern Ireland's Institute of Directors.

"Northern Ireland at peace is one of the most attractive inward investment locations in the European Union with an excellent infrastructure and communications and one of the lowest operating cost bases in Europe," she said.

NEEDS INVESTMENT

Northern Ireland's economy urgently needs foreign investment.

Average income is around 80 percent of the British average. Unemployment at 6.6 percent is significantly higher than the national rate of 4.5 percent. And its dependence on subsidies -- three billion pounds a year -- puts in the per capita leagues of East Germany and Italy's poor south known as the Mezzogiorno.

None of those questioned felt a resumption of the violence that racked the British province before the 1994 ceasefire was likely. "I think it is quite clear neither community wants it to happen," said Smyth.

But if hostilities did start again, the economic impact could be considerable."It would do incredible harm," said Bill Jeffrey, vice-chairman of the Federation of Small Businesses in Northern Ireland. "The business community has been very long suffering. To return to that violence would severely prejudice the economy's potential."

In contrast, the rewards of a durable peace could be enormous with tourism seen as one of the biggest winners. "It's only contributing around 1.6 percent to GDP while in the Irish Republic, the contribution is six to seven percent," said Smyth.

Peace would also give the province a better chance of emulating the success of the Irish Republic in luring more "new economy" industries.

The province needs high-tech investment to replace its struggling "old economy" sectors such as textiles and manufacturing. Indeed, with the south experiencing skilled labour shortages, the north with its well-educated workforce, is well-placed to benefit.

While reducing the British security presence could pose some economic hardship for the province short-term, "those influences would be absolutely swamped by the positive impact from foreign direct investment, tourism and financial aid from overseas", said Jim Power, economist at the Bank of Ireland in Dublin.

"And, of course, the overriding thing would be business and consumer confidence which would improve dramatically."-Reuters