Sept. 15 (Bloomberg) -- Three days of unrest in Northern
Ireland, the worst rioting in a decade, threaten to overshadow
the economic success that peace has brought to the province,
local business executives and economists say.
Described by Northern Ireland police chief Hugh Orde as
``one of the most dangerous riot situations'' ever, the violence
began Sept. 10 when authorities diverted a Protestant march from
its traditional path through a Catholic nationalist area.
The 1998 Good Friday peace accord between the nationalist
and unionist communities helped prompt companies including
Citigroup Inc., the world's largest financial services company,
and insurer Allstate Corp. to invest 149 million pounds ($272
million) in Northern Ireland last year. Since then, average
growth in the province's economy has accelerated and house prices
are rising seven times faster than Britain.
``In the short term these difficulties won't have too much
impact because of the broader trends that are under way,'' said
Tom Vosa, an economist in London at National Australia Bank who
formerly worked at the Bank of England. ``But if this continues
it may start to have an impact on the strength of house prices
and inward investment.''
Over the past four nights, loyalist protesters burned cars,
threw homemade bombs and fired shots at police, evoking images of
the region's violent past. At least 60 officers were injured.
Northern Ireland's loyalists advocate continued union with
Great Britain, while nationalists and republicans favor a united
Ireland. The Orange Order organizes parades every summer to mark
the victory of Protestant Prince William of Orange over the
Catholic King James II at the Battle of the Boyne in 1690.
Confidence Remains
Investors are likely to look beyond the images of rioters
and focus on growth prospects in the province, said Kevin McCann,
director of transport, construction and tourism division at
InvestNI, a government development agency. The riots are ``a blip
along the way,'' he said in a telephone interview.
``When one sees the headlines on national TV it can't do any
good whatsoever,'' McCann said. ``The investor will go behind the
headlines to understand what is happening.''
Since 1994, growth in Northern Ireland has averaged 3
percent a year compared with 2.7 percent in the U.K., according
to a measure that excludes taxes and subsidies, said Andrew
Burrell, an associate director at economic research firm Experian
in London. Northern Ireland is the U.K.'s poorest region behind
England, Wales and Scotland, he said, with unemployment of 5
percent, above the national rate of 4.7 percent.
Faster Growth
Alan Bridle, head of research at Dublin-based Bank of
Ireland's Northern Ireland unit, said in an interview that he
stood by his forecast of 2.5 percent growth in 2005, on the
assumption police will be able to stop further rioting. The Bank
of England forecast in August that overall U.K. growth will be 2
percent this year.
The U.K. government currently spends 7,731 pounds on public
services for every person in the province, almost twice as much
as in England. ``As time goes on, the economy needs to become
less reliant on government spending, and more reliant on private
entrepreneurs, tourism and foreign investment,'' said Bridle.
``At least in the short term, these images aren't going to
encourage entrepreneurs to take risks and investors and tourists
to come here.''
House prices in Northern Ireland rose 27 percent in the 12
months ended June, compared with a 3.7 percent gain in the U.K.
overall, according to Edinburgh-based mortgage lender HBOS Plc.
Tourist Boom
The peace process received a boost with the July declaration
from the Irish Republican Army that it plans to disarm. More than
3,500 people were killed since clashes between the communities
began in 1969, according to CAIN, an Internet conflict archive
associated with the University of Ulster. In 1972, the worst year
of violence, a total of 472 people died; so far this year, there
have been nine fatalities which may be related to sectarian
violence, CAIN reported.
The power-sharing Northern Ireland assembly was suspended in
October 2002 amid disputes over whether the IRA would disarm.
Since then, the province has been controlled by the U.K.
government. The relative calm in recent years has triggered a
boom in tourism, with a record 2.1 million visitors in 2004,
according to the Northern Ireland Tourist Board.
``It's been our best summer, with occupancy rates of around
95 percent,'' said Kem Akkari, general manager of the Stormont
Belfast, a four-star hotel overlooking Stormont Castle, the site
of the province's assembly. ``Things have really picked up since
the end of the Troubles.''
600 New Jobs
Northern Ireland has among the lowest labor costs in the
U.K. Computer programmers in Belfast earn 42,848 pounds a year,
compared with 52,704 pounds in Dublin and 61,163 pounds in
London, according to a 2004 study by Watson Wyatt & Co. for
Belfast-based InvestNI.
Northbrook, Illinois-based Allstate built its first facility
in Northern Ireland less than 12 months after the Good Friday
accord. HCL Technologies Ltd., India's fifth-largest computer
software maker, said on Sept. 8 it would hire 600 workers at two
call centers in Northern Ireland. The expansion will increase
HCL's workforce in the province to 2,500.
Investors will be counting on police and community leaders
to return calm to the streets.
More than 2,000 police officers and soldiers were involved
in trying to quell this week's violence, the worst since the 1995
Drumcree standoff, also over an Orange Order parade.
U.K. Northern Ireland Secretary Peter Hain stressed the
importance of the economic fortunes of the province when he
condemned the riots Sept. 12 in a British Broadcasting Corp.
interview.
``There are more jobs in Northern Ireland than ever before
in its history,'' he said. The violence is of ``a scale we've not
seen for many years, but taking place in a Northern Ireland which
is increasingly stable, increasingly peaceful and increasingly
prosperous.''