N. Ireland’s Peace Requires Economic Retooling : Planning: It will take a fine balance to dismantle sectors that thrived on ‘the troubles’ of the past 25 years while attracting investment and tourism.

BELFAST, Northern Ireland â€”  Near a tall wall, called the “peace lineâ€� because it was built to keep Catholic and Protestant neighbors from fighting, sits a factory that epitomizes Northern Ireland’s problems and recent changes.

Most of the 400 workers at Mackie International’s textile machinery plant are Protestant, although it is on the Catholic side of the fence. Protestants go through a separate factory gate from their Catholic co-workers, but they work together on the shop floor.

“We have Catholic dogs and Protestant dogs; we have Catholic cats and Protestant cats,� says Mackie’s chief executive, Patrick Dougan.

He hopes these attitudes change.

As Northern Ireland lives through the early days of peace declared by paramilitary forces on both sides of the dispute over British rule, Dougan is one businessman who says reinvigorating the sickly economy is crucial to ending the violence for good. But it will take a fine balance to dismantle portions of the economy that thrived on “the troubles� of the past 25 years while attracting investment and tourism.

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One problem is Northern Ireland’s disproportionate number of state employees, notably police. About one in three workers are in the public sector, while just one in six is employed in manufacturing.

With peace, Northern Ireland might trim a well-paid, 20,000-member security force made up of police officers, prison officials and locally recruited British soldiers known as the Royal Irish Regiment.

About 14,000 of those jobs can be expected to vanish within five years, with fallout eliminating 6,000 more jobs, according to Graham Gudgin, director of the Northern Ireland Economic Research Center.

Even jobs in private industry would be lost. Likely economic victims of peace would be companies that repair bombed-out windows, or dealers who sell security devices that people have used to keep gunmen from crashing in at night.

But Gudgin believes tourism could double over the next five years, adding 10,000 jobs.

“We’re now in the realm of speculation, but we might gain another 2,000 jobs a year through inward investment,� Gudgin said. “In about five years, we might break even. The problem is, the people losing jobs won’t be the ones getting jobs.�

If job loss outpaces job creation, the fragile economy could weaken further.

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The troubles have been economically as well as socially and politically painful.

The Confederation of British Industry says up to 40,000 jobs were lost as the violence escalated in the early 1970s, compounding problems from a general deterioration of heavy industry.

Inward investment slowed dramatically, although some companies moved in. Before the cease-fires, Hilton said it would put a hotel in a downtown development, giving Northern Ireland’s business community a psychological lift.

And Belfast’s Europa Hotel, bombed about 30 times since the early 1970s, has undergone a dramatic refurbishment to bring itself up to international four-star standards.

British Prime Minister John Major chose a Northern Ireland executives lunch at the Europa to announce Oct. 21 he would assume the Irish Republican Army’s truce was intended to be permanent. This ended weeks of British government insistence that the Catholic-based paramilitary group spell out its intentions more specifically.

Major was saying peace will help the economy. But business leaders are leery of being too optimistic, knowing that many international investors never even think of Northern Ireland as a plant location.

“They say, ‘You’re like Beirut,’ � said Stan Mallon, an executive director at the Industrial Development Board. “A businessman doesn’t want to invest in a country plagued with violence. We say that perception is not correct.�

At first glance, visitors might have their doubts.

Armored military vehicles patrol the streets, as do soldiers toting submachine guns. Moving from one Catholic area to a neighboring Protestant district, a metal barricade blocks traffic so soldiers can punch each license plate number into a central computer. Assuming the car is not stolen or owned by certain paramilitary figures, the barricade is electronically moved out of the way.

Just as Mackie’s factory has a Catholic gate and a Protestant gate, some parts of town have segregated taxi services that ferry people only from their own areas to “neutral� turf. The threat of sectarian assassination has underpinned work for many of the more than 100 taxi firms in Belfast alone.

Unemployment remains chronic in Northern Ireland, where 12.8% of the work force has no job. The British average is 9.1%.

Catholic men remain about 2 1/2 times as likely as Protestant men to be unemployed. Discrimination by Protestant employers was a main root of the troubles when Catholics campaigned for civil rights in the late 1960s.

The imbalance is eroding, in part because the collapse of traditional industries dominated by Protestants has pushed up unemployment in that community. But at some factories, a “chill factor� in the form of harassment and threats deters Catholics.

At Mackie, once a bastion of Northern Ireland Protestantism, Dougan hopes to exemplify a better way.

A Catholic who left Northern Ireland in his youth for fear of job discrimination, Dougan began a successful career in the auto industry of the British Midlands.

He took control of Mackie in 1991 by assuming debts of its bankrupt owners. Since then, the proportion of Catholics at Mackie has risen from 11% to 30%.

This shows the two sides can set aside their differences and work together, Dougan says. It remains to be seen whether investors agree.