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Socio-Economic Consequences of Terrorism. Prepared for the International Conference on Countering Terrorism 18-20 October 2007, BMICH, Colombo Anila Dias Bandaranaike (formerly, Director of Statistics, Central Bank of Sri Lanka ) 20 October 2007. Socio-Economic Development.

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socio economic consequences of terrorism

Socio-Economic Consequences of Terrorism

Prepared for the International Conference on Countering Terrorism

18-20 October 2007, BMICH, Colombo

Anila Dias Bandaranaike

(formerly, Director of Statistics, Central Bank of Sri Lanka)

20 October 2007

socio economic development
Socio-Economic Development

Nations strive to improve the quality of life of all their citizens, which requires sustainable economic development that minimises regional inequalities in well-being, deprivation and poverty.

what drives economic development
What Drives Economic Development?
  • Players – individuals, households, institutions, government
  • Access to Land (physical resources)
    • Land: for cultivation, manufacturing, service areas
    • Transport: roads, rail, vehicle fleets
    • Communications: posts, telephone, computers
    • Utilities: fuel, electricity, gas, water, drainage
  • Access to Labour (human resources)
    • Education: quality and relevance to labour market
    • Health and Nutrition: for productive labour force
    • Labour laws: conducive to productive employment
  • Access to Capital (financial resources)
    • Domestic savings: to finance investment
    • Finances: for investment and production
manifestations of terrorism including impact of armed combat between security forces and terrorists
Manifestations of Terrorism(including impact of armed combat between security forces and terrorists)

On Land

  • Devastation of lands
  • Destruction of physical infrastructure
  • Extortion of goods, services
  • Terrorist/conflict related economic activities

On Labour

  • Killings, injury, abductions of individuals
  • Displacement of communities
  • Psychological intimidation of individuals, communities

On Capital

  • International criminal financial activities
  • Financial extortion from individuals, businesses
socio economic consequences
Socio-economic Consequences

Impact can be

  • Short-term
  • Medium-term
  • Long-term

We also need to address

socio-economic causes of terrorism

towards prevention of its further expansion

consequences short term
Consequences – Short Term

On Land

  • Loss of natural resources from devastation, degradation, inaccessibility
  • Loss of housing, household amenities, economic activity due to destruction
  • Loss of production due to destruction of plant and machinery
  • Loss of production due to inaccessibility of land areas

On Labour

  • Loss of skills, manpower from death, disability, displacement
  • Loss of efficiency, output from fear, uncertainty
  • Loss of judicial, education, health services from destruction, destabilisation

On Capital

  • Higher inflation due to security related costs of transport
  • Lower budgets for development due to higher defence costs
  • Higher interest rates due to higher government borrowing
  • Price volatility and black markets due to disruptions to supply systems
  • Volatility in financial markets due to financial crimes by terrorists
household lifestyles utilities

Household Lifestyles – Utilities

  • Access to power includes high share of illegal connections in N, E
  • Sanitation conditions lowest in N,E
  • Access to safe water lowest in N
  • Conflict has affected access to all utilities in N,E
  • Source:CBSL, CFS 2003/04
defence expenditure sri lanka rs million

Defence Expenditure-Sri Lanka(Rs. Million)

  • Nominal defense expenditure fell during ceasefire in 2003 and 2004
  • Defense expenditure and Government debt have doubled in 6 yrs.
  • In 2006, 43% of Government expenditure was debt servicing.
inflation trend annual average change

Inflation TrendAnnual Average Change %

  • Inflation fell dramatically during ceasefire period from early 2002 to early 2004
  • Domestic production, transportation and distribution of consumer goods improved with improved access and confidence
consequences medium term
Consequences – Medium Term

On Land

  • Lower investment due to
    • reduced access/opportunities
    • economic uncertainty
  • Lost efficiency in goods transport/distribution due to security constraints

On Labour

  • Decline in conflict areas of
    • education levels
    • health conditions
    • living conditions
  • Loss of skilled, unskilled human capital due to internal, external migration
  • Reduction in domestic demand, hence output – e.g. leisure, transport
  • Reduction in external demand, hence employment -e.g. tourism
  • Greater demand for security related goods and services
  • Business opportunities arising from conflict - .e.g. supplies to terrorists, armed forces

On Capital

  • Higher financial costs due to evolving security features in financial institutions
  • Lower domestic savings and capital flight due to extortion
  • Capital flight and reduced foreign inflows due to uncertainty
household population structure by gender and age

Household Population Structureby Gender and Age

  • Male population share lowest in N, E
  • Share of working age population lowest in N,E
  • Males, working age population have left N,E for employment elsewhere or died or gone underground.
  • Source:CBSL, CFS 2003/04
labour force participation by gender

Labour Force Participationby Gender

  • Lower LFPR in N,E for both sexes
  • LFP affected by conflict conditions in NE
  • Workers have moved away from N,E
  • Source:CBSL, CFS 2003/04
household income share by source

Household Income Shareby Source

  • Income share from occupation lowest, from transfers highest in N,E; from property lowest in N
  • Migration for employment away from N,E
  • Unsettled investment, employment climate in N
  • Source:CBSL, CFS 2003/04
some field observations sri lanka
Some Field Observations-Sri Lanka

Output of Goods and Services grew during ceasefire

  • Expansion of economic activities in conflict/border areas
  • Cultivation of previously abandoned lands

Inflation fell and employment rose during ceasefire

  • Prices fell with higher production and lower transport costs
  • Prices fell with resumption of markets between N and S
  • Employment opportunities rose for plantation youth in urban areas

Living conditions improved during ceasefire

  • Agricultural produce from N to S, construction and consumer goods from S to N, raised access to goods and economic opportunities
  • Private transport services expanded, raising economic opportunities
  • Travel time reduced drastically, raising efficiency, convenience
  • Evening movement of persons rose, raising economic activity – e.g.transport, leisure, restaurant services
  • Domestic tourism rose, raising economic opportunities
some field observations international
Some Field Observations- International

Volume and Direction of International Travel

  • Security in airports/seaports has extended travel time, reduced efficiency of business travel
  • Security concerns have changed direction of tourists and students -e.g. Middle East, Asian markets away from West

Adverse Impact of International Media

  • Irresponsible media reporting of terrorism activities has impacted adversely on investment decisions and economic activities globally

New Economic Opportunities

  • Security concerns have created new security related services, financial regulation services, communication features
  • Terrorist needs have expanded arms manufacture, illegal activities, supply of goods to armed forces and terrorists

Loss of Privacy

  • Security related developments have led to invasion of privacy –e.g. registration of persons, tracing of phone calls
consequences long term
Consequences – Long term

Future economic development will be affected by

  • Economic rehabilitation needs of
    • bereaved families
    • disabled citizens, forces, terrorists
    • displaced persons
    • armed forces- manpower deployment in peace time?
  • Psychological rehabilitation needs of
    • armed forces and families, terrorists and families, other affected
    • Children and new generations who grew up in conflict areas/times
  • Polarisation of ethnic/religious groups
    • in work environments
    • In communities and schools
  • Social problems of
    • migrant families-alcoholism, incest
    • migrant returnees-readjustment, re-employment
  • Deterioration from non-use of physical infrastructure
    • hotels and other buildings
    • Commuter roads and railways in conflict areas
risk factors and suggestions to address socio economic outcomes of terrorism
Risk Factors and Suggestions to Address Socio-economic Outcomes of Terrorism
  • Poor focus on prevention - address causes, not consequences, of terrorism
    • raise awareness towards consensus and national consciousness
    • Improve economic access thro’ better infrastructure, education, health
    • Change attitudes towards tolerance, understanding of others’ needs
  • Confrontational approach - self defeating
    • With every innocent citizen/family affected by the annihilation of existing terrorists, new terrorists are born
    • Every displaced immigrant will support the terrorist cause (diaspora)
    • Every affected non-citizen will sympathise with terrorist causes (harrassment)
  • Adverse role of media – Sensational news items attract readers at a cost
    • affect economic decisions by creating undue panic and misconceptions
    • need change to balanced, unbiased, analytical reporting of facts
  • High powered negotiations vs. ground reality – need realistic review
    • impact of “adopted conventions” and “ratified protocols”
    • Impact of local catalysts “in situ”
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