Post by earl on May 2, 2008 15:52:47 GMT
A beauty parade for foreign investors turns the spotlight on blemishes too
THE last big set-piece of Northern Ireland's new post-conflict dispensation takes place in Belfast from May 7th to 9th. Billed as a conference to encourage American investment, it will be launched by Paula Dobriansky, George Bush's envoy to Northern Ireland, and the Rev Ian Paisley in his final public outing as first minister. More than 70 important American executives have promised to attend.
Whatever new investment the conference produces, the occasion is all that remains of Mr Paisley's boast that he negotiated financial help from Gordon Brown, Britain's prime minister, to bed down power-sharing at Stormont with Sinn Fein, the republican party loathed by his grassroots supporters as the IRA's political offshoot. The message from London is now that the new Belfast administration must make its own luck: self-reliance is the watchword, with no special incentives to encourage foreign investment in Northern Ireland that Scotland would then demand.
Despite the troubles, Northern Ireland has attracted investment in recent years. Historically, much of it has come from America—and four New York City employee pension funds announced a $150m (£76m) investment in the province on April 11th. But American investment has dropped of late as a percentage of the total, while increasing amounts have come from far-flung places such as India, as well as from the Irish Republic next door. Although output per person in the region is still low by the standards of the rest of the United Kingdom, GDP has been rising faster than anywhere except London. Attractions for investors include £18 billion of government spending on infrastructure planned for the next decade, a young workforce and—an especially big selling point—a land border with the booming neighbour to the south.
But that border is also a cause of what Northern Irish businessmen, and politicians of all stripes, regard as the biggest impediment to attracting investment: the Irish Republic's 12.5% corporate tax rate is less than half of that levied in Northern Ireland and the rest of the United Kingdom. They want a big cut in their own tax rate—but a report in December from Sir David Varney, a trusted advisor of Mr Brown, has probably dealt that notion a fatal blow. In Westminster eyes, this would mean the end of fiscal union between Northern Ireland and mainland Britain.
And there are other reasons for foreign investors to hang back. Northern Ireland has a bloated public sector, its workforce is mostly badly trained and integration with its southern neighbour is limited. In a second report, published on April 30th, Sir David prescribes some bitter medicine, rather than the tax sweetener locals still hanker after. He proposes cutting civil-service pay—high compared with that in Northern Ireland's private sector—and selling off public assets, such as Belfast's port, bus and rail services. Sinn Fein is unlikely to be keen; it remains staunchly left-wing. Sir David also urges stronger cross-border links with bodies such as the Irish Development Agency; on this point, the unionists will balk.
John Bradley, an economist in Dublin who has been studying Northern Ireland's economy since the early 1990s, reckons there is a deeper reason why investors may drag their heels. Northern Ireland's oldest problem has not yet been laid to rest: sectarian tensions are quieter but remain, and anti-Britishness is still acceptable among former IRA supporters. This, he says, must change, for “if the North is not an attractive place for British firms, it will be unattractive to foreign firms.”
www.economist.com/world/britain/displaystory.cfm?story_id=11293949
THE last big set-piece of Northern Ireland's new post-conflict dispensation takes place in Belfast from May 7th to 9th. Billed as a conference to encourage American investment, it will be launched by Paula Dobriansky, George Bush's envoy to Northern Ireland, and the Rev Ian Paisley in his final public outing as first minister. More than 70 important American executives have promised to attend.
Whatever new investment the conference produces, the occasion is all that remains of Mr Paisley's boast that he negotiated financial help from Gordon Brown, Britain's prime minister, to bed down power-sharing at Stormont with Sinn Fein, the republican party loathed by his grassroots supporters as the IRA's political offshoot. The message from London is now that the new Belfast administration must make its own luck: self-reliance is the watchword, with no special incentives to encourage foreign investment in Northern Ireland that Scotland would then demand.
Despite the troubles, Northern Ireland has attracted investment in recent years. Historically, much of it has come from America—and four New York City employee pension funds announced a $150m (£76m) investment in the province on April 11th. But American investment has dropped of late as a percentage of the total, while increasing amounts have come from far-flung places such as India, as well as from the Irish Republic next door. Although output per person in the region is still low by the standards of the rest of the United Kingdom, GDP has been rising faster than anywhere except London. Attractions for investors include £18 billion of government spending on infrastructure planned for the next decade, a young workforce and—an especially big selling point—a land border with the booming neighbour to the south.
But that border is also a cause of what Northern Irish businessmen, and politicians of all stripes, regard as the biggest impediment to attracting investment: the Irish Republic's 12.5% corporate tax rate is less than half of that levied in Northern Ireland and the rest of the United Kingdom. They want a big cut in their own tax rate—but a report in December from Sir David Varney, a trusted advisor of Mr Brown, has probably dealt that notion a fatal blow. In Westminster eyes, this would mean the end of fiscal union between Northern Ireland and mainland Britain.
And there are other reasons for foreign investors to hang back. Northern Ireland has a bloated public sector, its workforce is mostly badly trained and integration with its southern neighbour is limited. In a second report, published on April 30th, Sir David prescribes some bitter medicine, rather than the tax sweetener locals still hanker after. He proposes cutting civil-service pay—high compared with that in Northern Ireland's private sector—and selling off public assets, such as Belfast's port, bus and rail services. Sinn Fein is unlikely to be keen; it remains staunchly left-wing. Sir David also urges stronger cross-border links with bodies such as the Irish Development Agency; on this point, the unionists will balk.
John Bradley, an economist in Dublin who has been studying Northern Ireland's economy since the early 1990s, reckons there is a deeper reason why investors may drag their heels. Northern Ireland's oldest problem has not yet been laid to rest: sectarian tensions are quieter but remain, and anti-Britishness is still acceptable among former IRA supporters. This, he says, must change, for “if the North is not an attractive place for British firms, it will be unattractive to foreign firms.”
www.economist.com/world/britain/displaystory.cfm?story_id=11293949