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Updated: New York:
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Sep 15 09:45
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Sep 15 17:45
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Northern Ireland Riots Obscure Province's Economic Successes

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.''


To contact the reporter on this story:
Sam Fleming in London at  sfleming5@bloomberg.net
Last Updated: September 15, 2005 03:06 EDT

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