How Terrorism Drains the Economy

The University of Nairobi held a dialogue forum on ‘Strengthening Community Resilience against Radicalization and Violent Extremism’. The high profile meeting brought together participants from government, academia and organizations that are actively involved in the disengagement and rehabilitation programs for terrorists returnees in Kenya. Defence Cabinet Secretary Raychelle Omamo, challenged the academia to conduct further research on terrorism. “Research is critical, it gives us a depth of understanding on who the terrorists are,” she said.

She described terrorists as actors who thrive in ungoverned spaces for instance, porous borders, cyber space and in the minds of youth. Amb. Martin Kimani, the director of National Counter Terrorism Centre (NCTC), said that terrorists are primarily driven by ideology and aim for, ‘a specific end’.

Terrorists will often identify a locale grievance narrative that will help drive their agenda in the local community. However, the terrorists do not aim to solve the grievance, but rather to drive a political agenda using the grievance. The Al Shabaab terrorist group effected this strategy during the June 2014 terrorist attack in Mpeketoni, Lamu, and in the Garissa University attack in April 2015. The terror group profiled their victims based on religion, with the intention to cause division between Christians and muslims.

The one day dialogue forum was organized by University of Nairobi in partnership with the Africa Policy Institute (API). The participants also deliberated on the economic impact of terror activities. Tourism is the backbone of the coastal region’s economies. Terrorism has had a dire effect on tourist numbers in Kenyan coast. In fact, once upon a time, tourism was Kenya’s leading foreign exchange earner. The 2016 Global Terrorism Index established that, “tourism’s contribution to GDP is twice as large in countries with no terrorist attacks compared to countries with attacks.” Dr. Gerrishon Ikiara of the University of Nairobi stressed the importance of the hospitality industry in Kenya’s economy.

The sector contributes to 43 percent of the country’s GDP. Dr Kiara said that international terrorism aims at targeting installations that are symbols of economic success. For instance, the Al-Qaida terrorist group tactically attacked the Pentagon and World Trade Centre buildings. The Islamic State (ISIS) terrorist group has similarly launched numerous attacks in Paris – the world’s top tourist destination, London and Belgium – EU headquarters.

Cost of Terrorism

Terrorism was the main reason for Kenya Defence Forces (KDF) moving to Somalia. This was after series of abductions by Al shabab on foreign humanitarian workers and tourists in the country. On September 11, 2011 the Al shabab kidnapped British tourist Judith Tebbutt and killed her husband David Telbutt in Kiwayu, Lamu. On October 1, 2011, Marie Dedieu, a French woman, was kidnapped by Al shabab in Manda Island, Lamu.

The two incidences led to issuance of travel advisories by British, French and USA governments to their citizens. Many hotels in Mombasa, Kwale, Kilifi and Lamu were shut down. Thousands of employees were laid off as the tourists’ numbers dropped.

Hotel workers, tour guides, artists and workers in the tourism industry were adversely affected. According to the 2016 Global Terrorism Index, the cost of terrorism was US$ 89.6 billion in 2015. This was a decline by 15 percent from US$52.9 billion in 2014, which was the highest cost of terrorism since 2001.

The September 11 2001 terrorist attack in the US, led to the first rise of economic impact from terrorism. In the past 15 years, the economic and opportunity costs arising from terrorism increased eleven fold. The report noted that, “ten countries suffering the biggest economic impacts of terrorism are all conflict affected states in the Middle East and North Africa, Sub- Saharan Africa and South Asia regions.”

In 2015, Iraq suffered the highest economic impact from terrorism, which was 17 percent of its GDP. In Africa, Nigeria had the greatest economic impact of terrorism reaching 4.5 percent of the country’s GDP. The Global Terrorism Index is compiled annually by the Institute for Economics and Peace.

The report measures the direct and indirect cost of deaths and injuries and value of destroyed property. The direct costs comprise victims’ and government expenditure on recovery processes. On the other hand, the indirect costs include the loss of productivity, income and psychological trauma endured by the victims, their families and dependents. Kenya now spends more money on the security of the country.

More funds are allocated to purchasing weapons, rebuilding destroyed infrastructures, compensation for victims, medical and burial expenses. For instance, according to Lamu County government, the cost of terrorism in the County between 2013 and 2016 was Ksh 2 billion. Yet, if we didn’t have the challenge of terrorism, the funds would have been channeled to other areas such as health, education and infrastructure.
Terrorism also propagates the fear factor, which makes local and foreign investors to shun investing in a country that is deemed insecure. Still, investors in the security sector are reaping big from the terrorism phenomena. Security firms provide employment opportunities, and there is increasing demand for security gadgets and surveillance equipment. In the face of the negative economic impact caused by terrorism, there’s need to transform economies to be resilient to terrorism shocks.

Diversification to other income generating ventures should be incorporated in order to achieve economic growth. The Ksh 2.5 trillion Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) project was commissioned in March 2, 2012. LAPSSET is a component of Kenya’s Vision 2030, the country’s development blue print, which aims to transform Kenya to a middle income economy by the year 2030.

The entire project involves the construction of Manda Sea Port in Lamu, 1,500 km standard gauge railway line connecting Lamu to Addis Ababa, Ethiopia and Juba in South Sudan. Construction of 2,240 Km oil pipeline from Lamu to Juba, the pipeline will branch off from Isiolo to Addis Ababa via Moyale.

An oil refinery will also be built in Bargoni, Lamu. When the project is successfully implemented, it will bring a turnaround to Lamu and Kenya’s economy. However, improved security will be essential for development and economic growth.
Florence Gichoya is an Associate Fellow with the Nkrumah Center for African Affairs and Global Peace (AAGP), at the Africa Policy Institute. Email: flogichoya@gmail.com

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