Cease-Fire Could Help Economy

THE cease-fire ordered in Northern Ireland by the Irish Republican Army (IRA) is boosting hopes that the province - scarred by a quarter century of sectarian violence - is about to begin reaping an economic peace dividend.

The Confederation of British Industry, representing the United Kingdom's major companies, holds that a peaceful climate would attract inward investment and give manufacturers breathing space to develop new products.

It would also help reduce unemployment, now running at 13 percent of the potential work force, compared with 9 percent for the United Kingdom.

Nigel Smyth, CBI director for Northern Ireland, says investments likely to flow from the United States under a plan the Clinton administration is considering will be important in restoring the region's economy. Equally vital, however, will be sustained aid from the British government, which now spends 3 billion ($4.6 billion) a year supporting the economy of Northern Ireland.

The European Union has also said that it is prepared to increase aid to the province if peace prevails.

''If the cease-fire can be made permanent,'' Mr. Smyth says, ''we can expect to see a lot of business opportunities in the medium and long term.''

For inward investment to pick up, he adds, Northern Ireland must get rid of its ''image problem,'' and before that can happen, it must be proved that ''destructive violence'' has come to an end.

Since the cease-fire, however, extremists have killed a Catholic man, and a car bomb exploded outside the Belfast offices of Sinn Fein, the IRA's political wing. No injuries were reported in that incident.

President Clinton confirmed his readiness to support a Northern Ireland aid package at talks on Martha's Vineyard in Massachusetts Sept. 2 with Dick Spring, the foreign minister of the Irish Republic (southern Ireland).

The two leaders agreed that the International Fund for Ireland, to which the US already contributes $20 million a year, should decide on potential opportunities for US investment in the province.

Mr. Spring said after his 45-minute meeting with the president that he was ''very satisfied that the US administration will assist through an economic package.'' Mr. Clinton has since stressed that a stepping up of US contributions to the IFI would depend on congressional approval.

Aid package on horizon

Press reports in the US have mentioned a US aid package to Northern Ireland worth up to $200 million. Gerry Adams, president of Sinn Fein, will visit the US this month to argue publicly in support of an enhanced IFI aid package, sources in Belfast say.

Economists, however, are cautious in predicting a sudden upturn in the province's industrial fortunes. Although Smyth supports the growing consensus that 30,000 new jobs could be created in the medium term, initial problems may exist.

If peace begins to take hold, and Britain's security forces are thinned out and eventually withdrawn, many civilian jobs dependent on the British presence will disappear. Graham Gudgin of the Northern Ireland Economic Research Council fears that as many as 20,000 such jobs could be lost in the next three to four years.

The Department of Economic Development in Belfast believes that initial job losses are inevitable. But a department spokesman says inward investment would correct the trend ''over time,'' and that government money that would not be spent on security should be redirected into development projects.

Businessmen in the province argue that Northern Ireland needs more than handouts to surmount the problems created by many years of virtual civil war. The government in London spends one-third more per province resident than elsewhere in the United Kingdom, but several official aid schemes to Northern Ireland have ended in failure.

The most notorious scandal occurred when John Z. De Lorean, an American automobile designer, was given 80 million to develop a new automobile in Northern Ireland, with the prospect of creating 2,000 jobs. The project collapsed in 1982, and the company ended up with 40 million in debts.

Smyth says such an experience persuades him that new investment has to be carefully managed. He says he is hopeful, however, that past lessons have been learned by the British government as well as aid recipients, and that there is a ''new environment'' in Northern Ireland suited for companies that are prepared to be competitive and to pursue quality production.

Need more than investment

Smyth welcomes the prospect of substantial American investment. But, he warns, companies willing to help ''should not just pump money in. Projects should be carefully researched, and there should be exchanges of executives and technology.''

Tourism is one of the most hopeful areas for rapid expansion. According to official figures, Northern Ireland receives one-third as many tourists as the Irish Republic and one-quarter as many as Scotland. Currently, tourism accounts for 1.5 percent of economic activity in Northern Ireland, compared with 7 percent in the Irish Republic.

Given a sustained peace, 10,000 new jobs could be created in the tourism industry, the CBI calculates.