Breaking away from past Troubles

Since the 1998 signing of the Belfast Agreement, the North has become both an economic basket case and a place of great hope, writes DAN KEENAN, Northern News Editor

THERE ARE at least two ways of looking at the Northern economy following a decade of the Belfast Agreement.

You can marvel at the evident and dramatic improvements, especially in Belfast, or you can wonder if Northern Ireland will ever escape from the prison of economic dependency and pay its way in the world.

Both viewpoints are valid - it is both an economic basket case and a place of great hope.

On a visible level, Northern Ireland is a place transformed. Travel north along the new motorway and the only clue that the Border is being passed is the warning sign that speed limits switch to good old "British" miles per hour.

Onward travel takes drivers around burgeoning dual-currency Newry, past the latest road upgrade work and on towards The Outlet - a US-style retail park of cut-cost designer stores.

A few minutes later the motorway weaves around cosily-affluent Hillsborough, past more huge retail developments at Sprucefield, outside Lisburn, and close to the site of the former Maze prison.

There are no paramilitary prisoners there any more and demolition of the jail where the purveyors or products of conflict (take your pick) were held is well under way.

A multi-million-pound development of the site, including a shared sports stadium, exhibition centre and show grounds, could be built there if the new powers-that- be at Stormont can agree on it.

The newly-widened M1 then takes drivers into a refashioned Belfast, although progress into the unrecognisable city-centre could be slow thanks to the ongoing massive re-engineering of the Westlink, which joins the two main motorways through the heart of the city.

For any visitor absent since the paramilitary ceasefires of 1994 the changes are arguably more spectacular that those in Dublin, which came courtesy of the Celtic Tiger boom.

Belfast is not quite Manhattan, but it's equally distant from the grime, despair and destruction of the Troubles.

However, there is another side to the Northern economy than the new roads (part-financed by the Republic) and the stainless steel and plate glass of another new shopping centre would suggest. For the North's 1.7 million inhabitants, the British taxpayer forks out something around £7 billion (€8.8 billion) a year - that's nearly £4,000 a head - and the figure is rising.

Although the numbers have varied over the decades since Partition, it has always been thus. Partition seemed to present the new Northern state with a good deal. The island's main industrial sectors were concentrated around greater Belfast while the poorer, agricultural sector was much more prevalent in the then Free State.

Belfast was unlucky, however, in that what industrial muscle there was - ship-building and textiles - was on the cusp of a slow death.

That bad luck was further compounded by the choice of man-made textiles as the replacement.

That, too, proved to be a sunset industry, leaving Northern Ireland where it is today - with a massive public sector, comprising some two-thirds of the economy (the British figure is some 42 per cent and under 30 per cent in the Republic), and little by way of a wealth-creating and skills-based exporting sector with the exception of occasional bright spots dotted here and there.

The economy today is heavily reliant on services, retailing and public-sector employment.

Despite the North's new façade, a private enterprise culture has yet to emerge as the driver of a newer and more sustainable wealth. Research and development statistics are low, with the bulk of what research actually takes place being done by the universities.

The place is wracked with other structural weaknesses: labour productivity is low and economic inactivity is staggering. More than 500,000 people (over 40 per cent of the working-age population) are economically inactive.

The education system, while producing excellence at the top end, is not fit for purpose. Last year, some 1,100 children left school with no passes at GCSE level - the equivalent of the Junior Cert. More worryingly, some 12,000 students - nearly half of all school-leavers - left school without GCSE passes in maths or English.

With the UK as a whole expected to shed some three million unskilled jobs by 2020, the signs for the labour market in the North are ominous.

In contrast, the Republic has performed relatively well in the areas where Northern Ireland is particularly troubled. More than half of the South's 17/19-year-olds are in further education, while the economy is among the world's top flight when it comes to labour productivity, growth in that productivity and investment in training and innovation.

Some 40 per cent of those workers under 34 in the Republic have a third-level degree or better, reflecting an awareness that, in an era of globalisation and the migration of lower-skilled jobs mainly to Asia, knowledge and specialisation is the key to high levels of employment and salaries.

That said, there are abundant signs to give optimists - and finance minister Peter Robinson - enough scope to sound positive about the future. Employment is at a record high in Northern Ireland despite the loss of the traditional manufacturing base and the loss of many jobs associated with the security response to the conflict. Unemployment (under 4 per cent) is at a historic low; it is 4.3 per cent in the Republic, the lowest rate for an EU state.

Northern GDP is outpacing most other UK regions while operating costs are the lowest in the UK. Northern Ireland also pays less tax than England and Wales thanks to its unique local government rating system, which is subsidised by the treasury in London. Households in the North pay some 40 per cent of that forked out by households across the water while public expenditure per head in Northern Ireland is significantly ahead of that awarded in Britain as a whole.

However, everyone from Peter Robinson down knows that the levels of subvention and public expenditure cannot continue at current rates. The Stormont Executive's budget, formally agreed last January, is aimed specifically at retaining current levels of services while trying to alleviate the region's addiction to treasury handouts and simultaneously growing the private sector.

There are three strands to this: encouraging private enterprise, investment in creaking infrastructure and modernising (and streamlining) the bloated system of public administration. Of these, developing the private - and particularly the exporting - sector is the prime objective.

Cambridge economist Bob Rowthorn once famously referred to Northern Ireland as a "workhouse" economy, one which was dependent on outside financial support, while those on the inside serviced only one another, making virtually no contribution to the world outside. Rowthorn insisted at the time of writing (1988) that he meant no slur on the "inmates"; rather, it was simply the most appropriate metaphor to describe Northern Ireland.

In a sense, his comparison still holds, although the economic indicators are less bleak than in the 1980s. There have been dramatic and even unforeseen changes in the two decades since Rowthorn's assessment.

The next 20 years will determine whether the North's drive to follow the Republic's example and the "new politics" of the Belfast Agreement will succeed.