BELFAST (Reuters) - For years, Northern Ireland was a byword for brutality and fear. But now, the tiny province is selling itself as a central, low-cost land of business opportunity, and investors are buying.
A year after Catholic and Protestant political foes put aside decades of hostility and agreed to share power in a regional government, attention is focused on opening the public sector-heavy economy and attracting investment.
“There is no doubt that Northern Ireland is now seen as being open for business,” Economy Minister Nigel Dodds told Reuters. “People now see a major opportunity.”
Northern Ireland’s proximity to Europe, its English speaking population and still relatively lower cost base than centers such as London are helping to lure foreign money.
U.S. investors lead the pack and accounted for at least half the 1.1 billion pounds ($2.2 billion) invested in the past five years especially in financial services, technology and pharmaceuticals. Asian and European firms are also arriving.
“Increased political stability has improved Northern Ireland’s brand image in the eyes of the world,” said Ulster Bank economist Richard Ramsey.
The government plans to pump almost 20 billion pounds ($39.7 billion) into the economy over 10 years to develop tourism, repair infrastructure and regenerate neighborhoods that were violent flashpoints and scenes of clashes with British soldiers.
But there are hurdles. The corporate tax rate stands at 28 percent compared with just 12.5 percent in the Republic of Ireland, which boasts many of the same logistical and geographical advantages as its northern neighbor. Belfast is lobbying London to cut the rate, so far to no avail.
The global credit crunch, combined with a local housing market slowdown, could also put the brakes on growth in a region that was once a textiles hub and world leader in building ships, including the Titanic.
The province’s success has won admirers especially among those seeking to rebuild their economies after violence or war.
Last month, a delegation from Iraq’s southern province of Basra toured Northern Ireland to learn how inward investment helped transform the economy since violence abated.
A 1998 peace deal largely ended three decades of violence between majority Protestants, who favor British sovereignty in the province, and Catholics who mostly want a united Ireland.
Northern Ireland’s authorities hope that era, which claimed over 3,600 lives and was known as The Troubles, is now closed, and they say they are already reaping a peace dividend.
In the past 10 years, over 100,000 jobs have been created, and the unemployment rate now stands at around 4.2 percent, below the UK average of about 5.2 percent.
Economic growth in Northern Ireland averaged around 2.9 to 3 percent from 1996 to 2007, which was above the United Kingdom’s average of around 2.8 percent.
Aiming to build on this, Northern Ireland will host an investment conference this week, hoping to woo foreign firms to set up operations, especially in financial services.
U.S. firms are among the most active, building on historical links between Belfast and the huge Irish diaspora in the United States.
Former U.S. President Bill Clinton was credited with playing a major role in securing the 1998 peace deal, and his efforts were backed up by solid U.S. private investment.
In April, four New York City pension funds pledged to invest $150 million in a private equity fund that will target infrastructure projects.
“I think ... we have a great window of opportunity as far as the States is concerned,” said Dodds.
Indian banking software provider Polaris said Citigroup’s move to create a Belfast back office had been a key factor in its decision to set up its European operations there, especially since the U.S. investment group was a major client.
“When we actually got there, we realized that we had an opportunity to create a financial and technology hub in the city starting with a few projects that we got from Citibank,” said Bikash Mathur, Polaris’s managing director, EMEA.
Others, including Japanese electronics conglomerate Fujitsu, have expanded their operations and some, like U.S. technology company 3PAR, have set up research and development centers.
Lingering tensions still remain a challenge. Despite the power-sharing deal, armed republican dissidents and pro-British loyalist groups continue to be involved in paramilitary and criminal activities.
But most people, like taxi driver Philip Hanna, do not believe a return to all-out sectarian strife is likely.
“There is no stomach in both communities to go back to war,” said Hanna, 39. “Confidence is growing because of the peace process. We just need more business now.”
One key area ripe for growth is tourism. Northern Ireland has rolling hills, unspoilt coastlines and natural attractions such as the Giant’s Causeway rock formations.
Just over 2 million people visited Northern Ireland last year, a rise of 40 percent from the late 1990s with revenue totaling around 783 million pounds ($1.55 billion), representing 3.5 percent of the total economy’s growth.
“Everybody would buy into the notion that tourism here is incredibly important to the economy going ahead,” said Orla Farren with Northern Ireland’s Tourist Board.
Farren said the government hoped to increase tourism revenue by 40 percent and visitor growth by 25 percent over three years. With the emphasis on high-end spending, there is a need for more “products on the ground,” she said.
Some are already seeking to tap into that need. Donald Trump is looking into options for a golf development, a spokeswoman for the U.S. property tycoon said.
Belfast is also breathing new life into the docks where the Titanic was built. The Titanic Quarter will be home to shops, restaurants, homes and offices and a visitor centre is mooted.
But Northern Ireland’s corporate tax rate could act as a deterrent to investors. London has resisted bids to harmonize the rate with the Republic of Ireland’s, fearing companies might rebase in Northern Ireland from other parts of the United Kingdom.
Developing skills and infrastructure is also important as the province will not be able to compete on lower costs alone. It is currently among the lowest productivity areas in the UK.
Seagate Technology, the world’s largest computer disk-drive maker, decided last year to close its Limavady site and move the plant to Malaysia, mainly due to labor costs. Around 900 jobs will be lost.
“That (Seagate closure) is an example of an investment trying to compete on costs. We can’t to do that,” said Ulster Bank’s Ramsey. “Northern Ireland is going to have to develop its skills and infrastructure.”
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