Impacts of VE and Terrorrism to Business Investment in Kenya

June 13, 2018
June 13, 2018 admin

According to the 2017 GTI report, deaths from terrorism accounted for 81 percent of the global economic impact of terrorism with indirect GDP losses at 15 percent off the total which is calculated for countries having more than 1000 deaths. In addition to that, property destruction was estimated at two percent and injuries from terrorism was at one percent of the total economic impact of terrorism. There has been significant increase in the deaths from terrorism with a range of 7 percent from the year 2015 to 2016.

UN Security Council Resolutions recognizes that terrorist groups function like international criminal businesses. Tactics that have been used by these terrorists and criminals to reach their operational objectives have been identified in the international standards developed by the Financial Action Task Force (FATF) to combat money laundering and terrorist financing. Smuggling and illicit trade are established and profitable activities which international terror groups, rebel guerrillas, and crime rings normally used to finance their activities. Many countries in Europe, Africa or South America have been badly affected by terrorism that report a direct link between illegal drug trade, trafficking in firearms, smuggling of migrants as well as terrorism.

Terrorist groups use the advantage of ingrained and deep-seated corruption present in countries who are trying to fight this vice hence making them vulnerable to be exploited by extremist groups. The rule of law, corruption in institutions especially in the army, the police, the Judiciary as well as the Defense sector is critical as they are largely targeted by extremist due to the important role they play in the country. The UN Secretary General’s Plan of Action on Preventing Violent Extremism suggests that countries that fail to control corruption (amongst other indicators like poverty, unemployment, diversity management in accordance with human rights obligations), tend to witness greater number of incidents linked to violent extremism.

Terrorism and Violent Extremism affects business through the direct and indirect cost of deaths and injuries, as well as the destruction of property. The direct cost includes cost borne by the victims of terrorists acts and associated government expenditure such as medical spending. The indirect costs include loss of productivity and earning as well as the psychological trauma to the victims, their family, and friends. As one of the largest earners of foreign exchange in Kenya, Tourism, and tourism-related services such as aviation and transport, are some of the sectors that have suffered the most from terrorism. Regardless of whether the attack was directly targeted towards tourists, as of the incident that sent KDF to Somalia , the economic effects are felt on a national scale. Some direct effects of terrorism on the tourism sector include decreased tourist numbers, leading to decreased spending and lower GDP. Indirect costs include decreased employment in the tourism sector and reduced flow-on effects to other industries, such as food service and cleaning and maintenance businesses.

Scofield Associates understands that Violent Extremism and Terrorism not only affects the security sector in Kenya but also the economy and the private business sector in terms destruction of property and infrastructure, loss of human resource, cost of insurance, loss of business and other forms of investment. The National Government through the National Counter Terrorism Center has mentioned and invited the private sector to participate as a stakeholder in countering violent extremism. To this end, Scofield Associates is conducting a research to evaluate how the private sector, government, and other stakeholders can contribute to the National Strategy to Counter Violent Extremism by providing insights as to how the private sector has been affected, what measures/precautions can be taken and any other suggestions towards the same efforts.

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