A decade after the Good Friday peace agreement, Northern Ireland's economy is blossoming
Belfast - Just a few years ago, the old shipyard at Queen's Island in Belfast was a wasteland, with only the red brick pump house—where the Titanic had its final fitting—providing testament to Northern Ireland's former shipbuilding prowess. Today, the district is buzzing with activity. Dubbed the Titanic Quarter, it will see some $10 billion in investment over the next 15 years as it is transformed by offices, apartments, and shops. Citigroup (C), GE Healthcare (GE), Microsoft (MSFT), and a growing number of homegrown high-tech outfits have moved into gleaming steel and glass buildings. The dockyards' old Paint Hall has become a movie studio; the $50 million Hollywood fantasy flick City of Ember, due out in October, was filmed there.
Belfast? That's right. The battered city that for 30 years defined sectarian violence and civil strife is thriving. It has been a decade since the Good Friday peace agreement ended the conflict between the predominantly Catholic republicans, who want a united Ireland, and the mainly Protestant unionists, who prefer to remain part of the United Kingdom. Now that accord is finally starting to pay off with economic growth. Bombed-out storefronts and armored police vehicles have been replaced by office blocks, swanky shops, and malls such as the $640 million Victoria Square, which is topped by a vast glass dome offering panoramic views of a city skyline dotted with construction cranes.
The real estate boom is a reflection of Northern Ireland's turnaround. Over the past decade the region has averaged growth of 3%, vs. 2.5% for Britain. During that time more than 100,000 jobs have been created, bringing unemployment to a 26-year low of 3.9%. The government plans to inject $36 billion into infrastructure and regeneration projects over the coming decade. And last year, the north saw net inward migration for the first time, boosted by both returning émigrés and an influx of Eastern Europeans. "We have come a long way economically, socially, and politically," says Nigel Dodds, the region's Finance Minister. "Northern Ireland is open for business."
That increasingly means foreign business. While a handful of multinationals came to the north before the Good Friday Agreement, foreigners have plowed $2.6 billion into the province over the past six years. Canadian aircraft manufacturer Bombardier Aerospace has invested $2.4 billion in Belfast since 1989, including a $140 million expansion this year of its plant in the city, where it will make a sizable chunk of its new 100-seat regional jet. Japan's Fujitsu Services (FJTSY) has pumped $60 million into its Northern Irish operations in the past 18 months to create a new software development center, doubling its workforce there to more than 1,000. India's biggest PC maker, HCL, came to the north seven years ago and employs 2,000 people in call centers in Belfast and Armagh. And Canadian telecom equipment maker Nortel Networks (NT) has 500 workers at a supply-chain management center in Monkstown. The recent stability is "very conducive to business and investment," says Nortel CEO Mike Zafirovski.
Northern Ireland's attraction is simple. It boasts a well-educated, English-speaking workforce, lower costs than in the rest of Britain and the independent Republic of Ireland to the south, and generous government incentives. Salaries for tech professionals, for instance, stand about 30% below rates in London or Dublin. Stock exchange giant NYSE Euronext (NYX) was drawn by the skilled graduates in software engineering and finance from Belfast's two universities, Queen's and Ulster. In March, NYSE acquired Wombat Financial Software, which employs 150 people at its Belfast engineering center and is expanding. "Here we can attract a higher caliber of technology talent than we can in the U.S.," says NYSE Euronext CEO Duncan L. Niederauer.
Yet you don't have to look far to see that old divisions remain. Across Northern Ireland, only 5% of primary and secondary students attend integrated schools, and most neighborhoods are segregated by choice. Just minutes from the city center, more than 40 "peace lines"—concrete walls up to 30 feet tall—run for miles, separating Catholic and Protestant neighborhoods.
One of the walls, covered with greetings of peace from visitors all over the world, divides the Catholic Falls Road area from Protestant Shankill Road. The small backyards of brick row houses are covered with steel mesh to deflect bottles and stones that occasionally are hurled over the wall. On the Catholic side, a meticulously tended "martyrs' garden" features a plaque with the names of those who lost their lives during the violence. On the Protestant side, Union Jack flags dangle from windows, and giant murals depict imprisoned or murdered unionist militiamen.
Nonetheless, tourism is on the upswing—both despite and because of what locals call "the troubles." Nearly 7 million tourists came to Belfast last year. Buses and cabs take visitors on "terror tours" highlighting sectarian flash points such as the peace lines. And Crumlin Road Gaol (the prison where leading politicians such as Reverend Ian Paisley and Gerry Adams did time) has reopened as a museum.
These days, though, both sides seem to be willing to put aside their differences, at least in the business sphere. "The economy is the one area where we can build true consensus," says David Dobbin, CEO of Dale Farm, Northern Ireland's largest dairy, and chairman of IntertradeIreland, an agency that promotes economic links between the north and the south. "If we could sustain business in the middle of a war," he says, "think what we can do in peace."
The north's relatively low costs proved a major draw for Internet payment outfit CyberSource (CYBS). In May, the Mountain View (Calif.) company announced it would open a software development center in Belfast, its first outside the U.S. The government kicked in $1.6 million in assistance, and the company estimates that overall expenses will be 40% below those in Silicon Valley. CyberSource considered investing in China, India, and Russia, but "none of our managers were keen to spend a lot of time in those markets," says Chairman William S. McKiernan. "Everyone wants to come to Ireland."
For most foreigners "Ireland" still means the south—with good reason. After all, the Republic of Ireland shares many of the same advantages as the north: a young, educated, English-speaking population and close proximity to the U.S. and Europe. The south has one continuing advantage: a 12.5% corporate tax rate, while the north is saddled with the 28% rate of Great Britain. But costs in the Republic have dramatically increased as the economy has boomed. Although property prices in the south have fallen as a result of the global credit crunch, housing is still pricey after more than a decade of growth, and staff shortages in areas such as info tech and financial services are increasingly common.
Northern Ireland wants to borrow a page from its southern neighbor and create an international financial center. Over the past two decades, the Republic of Ireland turned a desolate area around Dublin's docks into a home for 430 finance companies doing everything from trading to fund administration. Growth has been so rapid, however, that there is an estimated shortage of 8,000 financial workers in Dublin.
Belfast hopes to plug that gap. Its nascent financial-services industry includes Citigroup, U.S. insurers Liberty Mutual Group and Allstate (ALL), British bank Abbey National (STD) (STD), and Indian banking-software outfit Polaris. The industry employs more than 20,000 people, a 40% increase from 1995. Northern Ireland is betting that its pool of lower-cost workers just two hours' drive from Dublin will encourage many service firms to expand there. Dublin-headquartered Bank of Ireland (IRE) last year opened a new hedge fund administration business in Belfast after it was unable to fill the jobs in Dublin. Though the north hasn't been able to cut tax rates—despite repeated entreaties to London—officials reckon the lower cost of doing business coupled with generous grants for employment, training, and startup expenses make up for that. "We will beat the Republic of Ireland on cost, and they'll beat us on tax," says Jeremy Fitch, managing director of Invest Northern Ireland, an economic development agency.
Despite its recent gains, Northern Ireland faces some challenges. After years of strife, when the safest thing to do was keep your head down, few seek to stand out by launching their own business. So the north has almost no big indigenous companies and little entrepreneurial drive. Today, the public sector accounts for 62% of the economy, compared with 42% in Britain and 27% in the Republic of Ireland. "For years, there was no need to take risk," says Philip McDonagh, PricewaterhouseCoopers' chief economist in Northern Ireland. "You knew you and eventually your kids could always get a job in the public sector."
That attitude is beginning to change. With more opportunities in the private sector, Northern Ireland's best and brightest are choosing to remain at home for the first time in generations. During the troubles, 75% of graduates from the north's two universities emigrated, and many other promising students went to Scotland or England to study and never returned. "In the past, Northern Ireland's biggest export was its people; it was almost part of our DNA," says Sean Canning, who left in 1983 to study. He finally returned in 1995, and now serves as operations director at the Belfast office of Indian outsourcing shop Firstsource. "Back then, if you wanted to develop a career," Canning says, "you needed to do that outside of Northern Ireland."
From the IRA to Iraq
What worked in Belfast might just work in Basra. Martin McGuinness, a former IRA commander and now a leading figure in Northern Irish politics, is helping Sunnis and Shiites in Iraq find common ground, London's Telegraph reported on Apr. 30. Belfast has emerged as a hub of efforts to achieve peace in Iraq, the paper writes, and officials from Basra have visited to see how the city has transformed its economy.