presentation describes the various effects of terrorism and disaster activities on economy of a nation

1. EFFECT OF
TERRORISM &
DISASTERS ON
ECONOMY

2. EFFECT OF
TERRORISM ON
ECONOMY

3. Introduction
 Hitting economy is terrorism’s major aim
 Terror Economy : Incredible Facts
 Terror Economy is bigger than UK GDP
 Grows faster than the US economy (Loretta Napoleoni,2004)
 Learning the impact of terrorism on economy is important

4. Financing Of Terrorism
Four Major Sources:
 Inheritances and investments of Osama
 estimated $300 million inherited
 invested in bank accounts and a host of legitimate
and illegitimate businesses
 Arab supporters
 wealthy Gulf citizens, especially Saudi bankers
and businessmen
 Annual supplies about $16 million

5. Financing Of Terrorism (contd.)
 Islamic charities
 “Zakat”: requiring all Muslims to give at least 2.5 % of
their income to charities
 Some merely serve as money laundering and terrorist
financing apparatuses
 Criminal activities
 Smuggling, counterfeiting and the narcotics trade -Al
Qaeda earned millions of dollars through opium
production in Afghanistan
 Extortion-Abu Sayyaf Group relies on ransom from
frequent kidnappings

6. Damage Caused By
Terrorism- Effect On FDI
 Terrorists can quite easily attack and damage
foreign owned firms, seriously disrupting their
activities.
 Terrorism can affect the decision of firms
investing money in foreign assets.
 Even quite mild terrorist activities reduce the
inflow of capital to host country.
 From 1975 to 1991, terrorism reduced annual
FDI inflows to Spain by 13.5% and to Greece
by 11.9%

8. Damage Caused By Terrorism-
Effect On Stock Market
 Stock prices reflect expected future gains of a
company, and the likelihood that the expected
gains materialize.
 Terrorist attacks influence both :
 Expected profits are lower
 Risk premium is higher
 Stock market in Israel reacts with a similar
magnitude to suicide bombings - without
terrorism, it would’ve been 30% higher in June
30, 2003

10. Damage Caused By Terrorism-
Effect On Investment
 Increased risk perceptions undermine investor
confidence, reducing willingness for new projects
 Investors turn to lower risk, lower return and
shorter term investments-Cumulative effect is
reduction in overall Investment
 Without terrorism in Israel, overall investment
would’ve been 18% higher

11. Damage Caused By Terrorism-
Effect On Foreign Trade
 Countries targeted by terrorism are not
preferred
 Two direct ways:
 Risk of a direct destruction of traded
goods
 Security measures put in response to
terrorist attacks increase transaction costs
 Doubling of terrorist incidents reduces the
bilateral trade flows by 4%

12. Effect On Tourism industry
Tourists are a frequent target of terrorist activities :
Luxor 1997-58 foreigners shot
Bali bombing,2001-200 tourists killed
 Visitors less likely to choose a destination with a
higher threat of terrorist attacks
Host countries are negatively affected
After Bali tragedy, Indonesia’s 2002 tourist
arrivals fell by 2.2 %, reducing GDP by 0.8%

13. 9/11 Impact
 The estimated property loss in the city of New York
21.8 billion $ which is 0.2 % of the GDP for a year.
 Defense and Security spendings increased by a
massive from 2002 to 2003 amt. over 100 billion$
now US spends 500 billion $ anually around 20%of
federal budget.
 Spendings on defense and security are essential but
they also come with an opportunity cost that can
be spent on health , education and tax
reductions.Higher the risk of terrorism simply
raisesthat cost

14. 9/11
 The stock marketclosed for four days after
the attacks,Dow promptly fell 7.13% was the
dow’s one day loss ever, it also aggrevated
the 2001 recession. currency prices fell down
sharply
 Tourism industry has also suffered form huge
losses there is 40% fall in hotel occupancy in
New York city and air travel also fell
drastically across the nation , due to
increased fear of repeat attack.

15. ISIS in Iraq
 More then half Iraq’s GDP comes from the oil
sector ,which employs around 40% of the
workforce,The govt. derives an astonishingly high
93% of its revenues from oil.
 ISIS controls a few small oil fields in north.It sells crude
at a steep discount at a rate of 30$/barrel (whereas
price as of oct. 2014 is 80-85$/barrel) in black
market.
 The presence of ISIS in the state and on border
crossings effected the trade between neighouring
countries as they have to change the route which
reduces the profitabilty almost to zero.

16. Cyber crimes
 1.Tax refund fraud –The city of tampa in FL alone
estimates that cybercriminals have cashed $450
million in fraudlent tax refunds.
 2.Corporate account takeover – SMBs and their
financial institutions suffered $120million losses in 3rd
quarter of 2009 in U.S
 3.Identity Theft – It occurs when a cybercriminal
successfully steals a person’s personally identifiable
information. E.g –credit card fraud in target and
customer information of sony psn.
 4.Theft of intellectual property – According to New
York Times article chinese hackers have stolen
product blueprints,manufacturing plans,pricing
documents etc. in U.S including coca-cola,Lockheed
martin and many others.
 http://www.aicpa.org october 2013

17. Present Scenario: Terrorism
Expanding its Base
 Sincere efforts to eradicate terrorism are lacking
 Only $140 million of terror money frozen
 Only 6 of 241 controversial charities closed
 Security measures has facilitated trade:
 Reduced exposure to terrorism
 Advanced electronic techniques speed up
passenger movement and cargo processing

18. Counter Terrorism-Global
Strategy
 Deny Safe Heavens
 Improve Governance
 Secure Weapons of Mass Destruction
 Attack Terrorist bases
 Develop partnerships
 Economic development
 Education and Training
 Contribute to establish conditions that deny
ideological support to terrorists

19. Conclusions
 Terrorism has negative effect on
various aspects of economy
 Future threat may be higher
 Security measures are important
 Suitable understanding can make
economy comparatively resilient to
terrorist attacks

20. Disaster and
Economy

21. Disaster and Economy
 Economy is quite unprotected to occurrences
like War, Technological innovations and
Disasters (Manmade or Natural Disasters)
 While Proactive Safety Preparedness Efforts can
Protect Economy from Collapse All Disasters
including Chemical, certainly affect the
economy
 We witnessed this in our country and in other
places as well
 But public memory being short we tend to
forget the impact of Disaster on the Economy
we jump from one Crisis to another Crisis

22. Extent of Affliction to
Economy by Disaster
 Disaster affects economy in many ways:
death, destruction, extensive damage to
property and infrastructure
 Further modes of Affliction are trade and
Commerce, National & International
 While the former impact lasts till
reconstruction, the latter impact may go
beyond duration of reconstruction and
involves political dimension which is
difficult to address
 Further, disasters obviously have its
cascading effect on Globalised
economy

23. Most Expensive Natural
Disasters in History
 Earthquake and tsunami, Japan (2011)
Cost: $235 billion (by the World Bank)
 Kobe earthquake, Japan (1995)
Cost: $100 billion (by the World Bank)
 Hurricane Katrina, U.S. (2005)
Cost: $42 billion (by NOAA)
 Northridge earthquake, California, U.S. (1994)
Cost: $42 billion (by NOAA)
 Sichuan earthquake, China (2008)
Cost: $29 billion (by the World Bank)
 Indian ocean earthquake & tsunami (2004)
Cost: $15 billion (by wikipedia)

24. Details of Impact of
Disasters on Economy
 The first impact is economic loss to
individuals affected by disaster,
immediate and long term
 Production not obtained, and
corresponding higher production costs
 Changes in economic flows caused by
the disaster.
 They are measured in monetary terms at
current prices.
 Impact on trade & commerce, short and
long term, could be quite hurting

25. Details of Impact
….Contd…
 Unexpected expenditures (humanitarian
assistance,demolition and debris
removal, relocation of human
settlements)
 Higher operational costs and lower
revenues in the provision of essential
services
 They occur from the time of the disaster
until full reconstruction and economic
recovery are achieved

26. Details of Impact of
Disasters on Economy
 Second is Damage occurs during or
immediately after the disaster.
 Total or partial destruction of assets,
including buildings,infrastructure, stocks,
natural resources
 Damage occurs during or immediately
after the disaster
 Damage is measured in physical terms,
and a monetary replacement value is
assigned to it.

27. Impact Sector wise
 Social sectors-
Housing, Health, Education, Cultural and
Religion
 Productive sectors-
Agriculture and Livestock, Fisheries, Industry
and Trade
 Infrastructure-
Transport, Communications, Energy, Water
and Sanitation, irrigation works
 Cross Sectoral-
Environment, Governance and
administration Bank and Finance.

28. Sichuan Earthquake China,
(2008)
 China is one of the countries most
affected by natural disasters. It had 5 of
the world's top 10 deadliest natural
disasters.
 In the city of Shifang, the collapse of two
chemical plants led to leakage of some
80 tons of liquid ammonia, with hundreds
of people reported buried
 2008 Chinese winter storms, the 2008
Sichuan earthquake, and the 2008 South
China floods affected national economic
growth.

29. China GDP growth rate (2005-2015)

30. Sichuan Earthquake
China,(2008) ..contd..
 but did do major damage to local and
regional economies and infrastructure.
 China's earthquake reconstruction cost
$150bn
 Growth rates for Sichuan dropped to 4.6%
in the 2nd quarter
 Both the Shanghai Stock Exchange and
the Shenzhen Stock Exchange suspended
trading of companies based
in southwestern China.

31. Sichuan Earthquake
China,(2008) ..contd..
 Chinese economy is significantly
affected by the 2008-9 global financial
crisis due to the export oriented nature of
the economy which depends heavily
upon international trade.
 However, government economic-stimulus
has been hugely successful by nearly all
accounts

32. Indian Ocean Earthquake
and Tsunami, 2004
 Affected many countries in Southeast Asia and
beyond, including Indonesia, Sri Lanka, India ,
Thailand, Somalia, Myanmar ,Malaysia and
others.
 Damage and losses were sustained by the
productive sectors of agriculture and
livestock,fisheries and aquaculture, agro-
industry, commerce and tourism.
 The main reason for the limited economic
impact was that the tsunami missed the
industrial and commercial centres of all
affected countries other than Maldives.

33. Phuket,Thailand tourism-
120000 people have lost jobs in the tourism sector in Thailand
(Source UNDP)

34. Indian Ocean Earthquake
and Tsunami,2004 ..contd..
 In Thailand Tourism contributes to 5-6% of the
country s GDP‟
 Informal and home industries (fishing, food
vendors to handicraft making) are
connected to tourism
 Salt intrusion causing major environmental
changes will affect the livelihoods based on
freshwater aquaculture and agriculture
 It (money) does not apply to the measures
of human lives lost. "A total of about 250,000
deaths in the Indian Ocean Tsunami can
never be compared by economic loss."

35. Impact of Disasters on
India:
 The impact of Certain Disasters on our
Economy were significant.
 To name a few the following are
significant in today's value:
 Bhopal Disaster (1984)
 Fire in Jaipur Oil Depot (2009)
 Flood in Jammu & Kashmir
 Very Severe Cyclonic Storm Hudhud in
Andhra Pradesh

36. Note : Figures in million $
Source: Global Assessment Report 2015 of UN office for
Disaster Risk Reduction
GAR 2015 – Assessment Report from
2005-2015

37. Details of Impact
….Contd…
 In respect of Bhopal Disaster, Factory is
Closed and the City’s population is yet to
recover from the disaster even after 30
years
 Country’s Safety Record in International
arena took a beating
 Quality,efforts relating to Environmental
Conservation are becoming increasingly
critical to Economy including disposal in
the context of Global warming and
Climate Change

38. Details of Impact
….Contd…
 Fire in Jaipur Oil Depot- a defective pipe
line leak that set fire to 50,000 kilolitres
of diesel and petrol out of the storage
tanks at the IOC Depot.
 Globalised Economy means Slender Profit
Margins, Fierce Competition among
Countries.
 There will be serious problems in regard to
Trade dealings Nationally and
Internationally

39. What is the Solution
 The solution to these problems lies in improving
Safety Level and Emergency Preparedness for
mitigating the impact of Disasters
 We need an overview approach to success in
every walk of Life particularly in regard to
Business
 Training in alternative livelihoods
 Promotion of Eco Tourism
 Communicating and incident assessment
 Communication revolution and our Strengths in
IT & IT enabled Businesses
 Community based livelihood recovery
programme

40. What is the Solution
 Link Environment and Natural Resource
Management with Livelihood enhancement and
Disaster mitigation
 We need a collective will to achieve this. Shall we
Call it National will.
 The above will be possible by well meaning
Nationalists to bring about an awakening among
Population
 Risk awareness & Knowledge development
including education, training, research and
information are of the important fields of action for
Disaster Risk Reduction

41. Thank You