A New Image for Belfast : Development: Sporadic violence persists. But the British investment of billions is luring investors, creating jobs and changing the skyline.

BELFAST, Northern Ireland —  Mention Belfast, and world opinion conjures up images of a derelict city where two decades of the Troubles are assumed to have bled the economy dry.

But such perceptions do not square with the complex reality of modern-day Belfast, which, despite its stubborn, sometimes violent political divisions, is no Beirut. The British government’s Northern Ireland Office has spent billions on projects to revive retail and investor confidence and, after pouring money down the sinkhole for so long, is finally seeing a return on its investments.

“When it came to placing the company in Europe, Belfast came out on top of just about everything.It fell down very badly on reputation,” said Dr. Chris Hendry, manager of a Nebraska-based pharmaceuticals testing firm, Harris Laboratories, which opened its doors in Belfast last September with the help of a $2.4-million government grant.

“People come over here expecting to find a war zone. I know part of me did,” said Hendry, a native Londoner. “But it’s quite a pleasant place to live in many ways. And safe. It’s just unfortunate that so much good is being done in Belfast and doesn’t get reported.”

Good works in this corner of the United Kingdom go overshadowed by isolated deeds of the Provisional Irish Republican Army.

The paramilitary group is expert at grabbing world headlines as it demonstrated again last month, lobbing mortar shells at Prime Minister John Major and his cabinet meeting in Downing Street, then exploding a bomb in a crowded London train station, killing one civilian and wounding 35 others.

None of which changes the fact that in Belfast today are abundant signs of government-led private investment:

* The crown jewel of the burgeoning business district is CastleCourt, Northern Ireland’s biggest retail development. The government has paid at least $20 million of its $260-million price tag.

The 420,000 square-foot mall opened last April to thousands drawn by such attractions as the Gap, Debenham’s and Laura Ashley--the kinds of businesses that would not previously have set foot in Northern Ireland.

* The once-barren cuisine scene is improving. A gourmet supermarket in the Marks & Spencer’s department store downtown has been copied at several suburban shopping centers, which have found in Belfast’s middle class a growing clientele with more disposable income on average than its English and Scottish counterparts.

Restaurants, from Kentucky Fried Chicken to candle-lit bistros, have sprouted along the “golden mile” of shops stretching south from downtown. Indian, French and Chinese restaurants compete head-on with traditional “pub grub” and fish & chips “take-aways.” (Sadly, a good pizza remains a rarity.)

* High-rises with 600,000 square feet of office space are reshaping the long-stagnant skyline. People worry, however, where all the tenants will come from. Said one economist: “The developers claim they’ve got ‘em rented, but there’s deep suspicion. There’ll be fingers burnt and a lot of vacancies.”

The government hopes to sell Northern Ireland as a cost-effective site for “back office” operations, cheaper than the high-rent, higher-wage English southeast.

* The French firm Montupet has moved into the abandoned shell of the DeLorean motor works on the edge of west Belfast, bringing an expected 1,000 jobs, but at a steep cost to taxpayers. The $180-million factory, which produces aluminum cylinder heads for Ford engines, was enticed by an unprecedented $70 million from the government’s Industrial Development Board--the equivalent, critics note, of $70,000 per job. Government ministers maintain it was worth it.

* The first phase of Laganside, a potential $550-million redevelopment of 120 acres of the city’s neglected riverfront, has broken ground east of the major shopping district. A private developer there is putting up $36 million for a multistory garage, retail shops and 24 penthouse apartments.

To an outsider, such developments might seem like small potatoes. But in Northern Ireland--with only 1.5 million residents, 100,000 of them unemployed--such investment is a phenomenon.

Last year the Northern Ireland Office spent $3.4 billion on development projects, about $2,200 for every citizen. Policy-makers admit that the huge expenditure, out of proportion with the rest of the United Kingdom, has a decidedly political dimension.

It reflects an attempt to “kill the Troubles with kindness.” By expanding the economic pie, the argument goes, the majority Protestant community and Catholic minority won’t have to compete so fiercely over the existing slices.

A naive goal, many here would say, even as they appreciate the striking change that has already occurred. A decade ago, much of Belfast’s business community was on its knees after the IRA’s “commercial bombing” campaign of the early 1970s claimed scores of civilian lives and decimated retailing.

The 1980s effort to forge a new commercial face for Belfast has produced a downtown on a par with most mid-sized British cities: modern, tidy and by most measures “normal.”

Yet the hallmarks of a city center under incessant IRA threat are never far from sight.

Police wearing flak jackets stop traffic, ask drivers where they’re headed and open car trunks; vehicles may not park within a certain “control zone” to thwart car bombs (a Belfast invention); the oft-attacked Crown Court is a virtual fortress of iron walls and sandbags; camouflaged soldiers patrol shop-lined streets, nonchalantly pointing submachine guns out the backs of their Land Rovers.

All this has ingrained in Belfast shoppers a certain “business as usual” stoicism.

An announcement to evacuate a shop is met with plenty of frustration but little fear. Hand-drawn signs advertise bomb-damaged goods on sale at a discount. The institutional security presence has become, in the words of one shopper, “just part of the scenery, is all.”

In the weeks before Christmas, the IRA carried out almost daily harassment of city center shopping, tying up traffic and hiding suspicious packages in shops. One shopper found a phony firebomb inside a jacket she was trying on.

Few bombs proved genuine. But all did economic damage. Merchants reported their poorest Christmas since the early 1980s, a slump that could be blamed only partly on the British economy’s recession.

It would be a mistake to pin Northern Ireland’s economic ills on the Troubles, argues Liam Kennedy, an economic historian at Queen’s University in Belfast. It faces many of the same difficulties as other industrial, “peripheral” areas of the United Kingdom and in the jobs-poor Irish Republic.

“The Troubles did turn off the tap of foreign investment. But blaming the British and the conflict is kind of a green herring in all of this,” Kennedy said, noting that studies have placed the number of jobs specifically lost to civil disorder at 20,000 to 40,000.

A more vexing problem, he maintains, is the decline of traditional industries since the industrialized six counties of northeastern Ireland were partitioned from the rest of the island in 1922.

A graphic example is Belfast’s Harland & Wolff shipyards, which in their heyday employed 30,000 workers building luxury vessels, including the Titanic.

Although the twin H&W; cranes still tower over the landscape, the Protestant-dominated shipyards are nearly an empty husk. Before the government successfully financed an employee-buyout of the sinking firm in 1989, Harland & Wolff employed 3,000 at an estimated public cost of more than $32,000 each annually.

Replacing lost jobs is a daunting task in Northern Ireland, which remains a hard sell for those whose job it is to promote outside investors’ interest in the region.

“I deal quite closely with American companies and try to woo them here,” said Dr. Robert Mollan, who directs a medical research unit for the University of Ulster in Belfast. “The Americans were here last week, but one of the boys welshed on coming. He welshed because he was scared. I presume he’s heard this place is a disaster area. . . . That’s ignorance.”

“We won’t even get on many people’s lists, despite all the advantages we have to offer,” agreed Terry Morahan, an investment recruiter for the Industrial Development Board.

The Industrial Development Board has built a worldwide marketing machine. Offices in Los Angeles, Chicago and New York work with top public relations firms to persuade business people to visit Belfast.

Those who do are treated to a slick sales pitch, which attempts to answer the obvious: Why on earth invest in Northern Ireland?

Glossy brochures and slide shows illustrate the area’s genuine social perks: outstanding fishing, championship golf courses, plentiful sports centers, low mortgages and the UK’s best school system. Economic assets likewise are spelled out: good transport links to the European Community, a surplus of well-educated young workers and consequent cheaper labor, plus moderate corporate taxes.

Surely a major consideration for any investor, however, is what the Industrial Development Board bills as “the most generous financial package in Europe.” In its eight years, the agency said it has spent more than $1.5 billion on grants and aid to attract about $2.5 billion in investment.

The industrial board provides up to 50% cash grants for buildings and machinery, tax writeoffs on equipment purchases, sizable aid for research and development, and grants to reduce interest on loans. The agency also has a stockpile of 20-plus vacant factories, many left by failed companies but others actually built upfront by the government.

In some business sectors, such as medical technology where Northern Ireland is particularly competitive, grants and lower operating costs mean that “one American dollar will get you three in Northern Ireland,” Morahan asserted.

“Certainly we spend public money, but we’re getting a return on it,” he said. “The company’s payoff is profits. Our payoff is jobs.”

This approach has come in for heavy criticism, in particular the agency’s practice of awarding “maintenance” grants each year to firms to “protect” job levels. Independent studies scrutinizing this widespread subsidy for industry have found many Northern Irish plants overstaffed and inefficient, with jobs created and maintained at too high a cost.

“We have locked ourselves into the situation where we feel obliged to bribe companies to stay,” said Ronnie Scott, an analyst for the Northern Ireland Economic Research Centre, an independent think tank.

Most multinationals in Northern Ireland could operate profitably without the aid, yet “the vast bulk of large investment would not come here if they didn’t get the money,” Scott said. “To foreign investors, this place is still the back and beyond . . . the offshore island of an offshore island.”

Twenty-six American companies operate in Northern Ireland, including Du Pont, Ford Motor, Federal Express, 3M, Harris Tools and McDonnell Douglas.

Most are branch factories of long standing, having survived the crunch years of 1973 to 1983 when oil crises, recession and the Troubles fueled an exodus of multinationals. About 40 major firms, including nine American-owned factories, closed from 1980 to 1983 alone at a cost of 12,000 jobs.

Now American and other foreign money is creeping back in, and the new arrivals appear to be footing more of their own expenses.

The industrial board spent about $185 million in fiscal 1989-90 to attract investment worth $880 million, a marked improvement over the agency’s early years when on average the agency bore half of its client companies’ start-up costs.

Besides Montupet, South Korea’s Daewoo consortium in 1989 set up a videocassette plant that employs 500. Fruit of the Loom is putting a cloth-production plant in Derry, the province’s second-largest city, that will add another 500 jobs.

Another notable recruit is Data-Design Laboratories Ltd. Last year the Rancho Cucamonga-based firm opened a $17-million state-of-the-art electronics assembly plant in a former Goodyear synthetics factory.

“Northern Ireland has a bad reputation, but it’s undeserved,” said Bruce Alsip, a resident of El Monte who has coordinated the DDL project in Northern Ireland since 1988.

Data-Design chose Northern Ireland as a platform into the European market, Alsip said, because of the government’s aid package--which the company declines to specify--and because it has a highly skilled, English-speaking work force hungry for jobs. Starting workers on the line earn about $250 a week, a competitive wage in Northern Ireland.

Northern Ireland’s chief export remains young people. Thousands must emigrate each year to England, North America and Australia in search of work. Unemployment is more than 14% in Northern Ireland, nearly double that of Great Britain, where wages are on average 17% higher and prospects for promotion often greater.

Kennedy, the economics historian, said any jobs-creation policy such as the Industrial Development Board’s is doomed to be outpaced by the region’s demographics. Chronic emigration will remain the economic safety valve.

“Northern Ireland has the highest birthrate in Europe. There are limits to job-creation policies in any industrial society,” he said. “It’s very difficult to think of a formula for the economic salvation of Northern Ireland. There isn’t one while the Troubles persist.”

Meanwhile, firms in Northern Ireland must sell the merits of their home as much as their product.

“We’ve made a conscious effort to market Northern Ireland in all our materials,” said Chris Hendry of the Harris drugs-testing lab.

He picked up a brightly written, company-produced pamphlet titled “Welcome to Belfast,” which provides the company’s visiting business clients with a guide to the city under the candid heading, “The joy of the unexpected.”

“See, we know Northern Ireland is a good base. We wanted a European base where the work ethic is very similar to the people of Lincoln, Neb., and we found it here,” Hendry said. “The workers are well-qualified and motivated. We have liaison with a good academic medical community. The people here are open and prepared to listen. We have a volunteer pool of 2,000 people. We’re booked up with work for the next 28 days straight. And it’s all new business.”

The major stumbling block to attracting new business is “the image problem,” Hendry asserted.

“Not too long ago,” he said, “this lady from an Israeli company based in Tel Aviv phoned up and goes: ‘Look, I’d really like to work with you. But my president is worried about flying to Northern Ireland because of all the problems with violence there.’ ”

Hendry shook his head and laughed. “And this from a lady in Tel Aviv, where . . . they have Scud missiles raining down on them! To think that they think we have Troubles.”

NORTHERN IRELAND’S EMPLOYMENT PICTURE

Northern Ireland’s unemployment remains stubbornly high, especially when compared to Britain’s. However, as a massive economic aid program finally bears fruit, jobless rates have edged down.