Echo Editorial: Hain’s view

Hain admitted frankly that Northern Ireland is, in economic terms, “not sustainable in the long term,” predicting that it would become “increasingly difficult to look at the economy of North and South except as a sort of ‘island of Ireland’ economy.” He foresaw “increasing synergy” between the economies of the two parts of the country, and in terms of business.
By any objective standards, Hain was being kind to the North. The stark reality is that six northeastern counties of Ireland are now close to being an economic basket case.
The latest data exposes the massive dominance of the British exchequer in the North’s economy, a life-support machine without which the patient would have died many decades ago. Public expenditure in the North is running at a whopping 70 percent of GDP.
Local and central government jobs in health and education alone account for as much as 30 percent of the economy. Most of the North’s private sector is heavily reliant on government contracts.
Investment by multinationals is rare, and has tended to come at the low-value, manufacturing end of the industrial value chain.
The North’s old Industrial Development Board, had an at-best patchy record, marred by accusations that down through the years it channeled most new employers into unionist areas. The new agency, Invest Northern Ireland, is making progress, but often finds its hands tied by conditions outside of its control.
For example, as if to add a further disincentive to entrepreneurial spirit, public-sector wages are significantly higher than their equivalent in private enterprise, and the benefits and pensions are usually far better.
The North’s performance looks all the more tragic compared with the rest of the country. The Republic is now a global investment powerhouse, with most vibrant economy in the European Union. Its low-tax regime and status as an English-speaking country within the euro zone has encouraged hundreds of U.S. multinationals to base their European operations there.
The South has moved away from low-value assembly and service operations, and its industrial strategy is focused on world-class innovation, research and development.
The North badly needs to join with the rest of Ireland on this upward curve. Hain is planning a major investment conference in the United States next year.
Irish America, with all its financial weight, stands ready and willing to help. But the British government needs to make investment make sense for Irish-American industrialists.
For example, Britain’s 30 percent tax on business profits should no longer be applied in the North. Instead, the British exchequer should offer investors the same corporation tax rate as in the Republic, 12.5 percent.
Britain could permit businesses in the North to choose to operate in euros, and pay their taxes and their staff in euros, eliminating exchange-rate risk for those with operations elsewhere in Ireland or in the rest of the euro zone.
It would be helpful, too, if the North’s infrastructure were designed to operate for an all-Ireland economy. The poor decision not to upgrade the Northern part of the Belfast-Dublin highway to full motorway standard should be reversed.
And the industrial strategy specialists on both sides of the Border, IDA Ireland and Invest NI, should fuse their efforts, offering investors the best the entire island has to offer.
With intelligent planning, the future for the North could be very bright indeed. Irish America has long dreamed of a united, peaceful, modern, prosperous Ireland, and the transformation of the North’s economy represents an essential first step.