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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Cost of terrorism on a country

Cost of terrorism on a country

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1Cost of terrorism on a country Empty Cost of terrorism on a country Tue Mar 25, 2014 4:03 pm

Sstar

Sstar
Vice President - Equity Analytics
Vice President - Equity Analytics
The catch-22 situation that Sri Lanka is up against in Geneva is very sad for me personally given that I was part of the larger team that fought the ruthless terrorist organisation in Eelam war IV that brought peace into this country. I still remember the many times I had to travel on military aircraft with the soldiers going to war at the height of the ground operation while I was in the Government Peace Secretariat between 2007-2010.

As a team, we supported the soldiers on the ground by staging industrial exhibitions and sports tournaments in Jaffna. We also ensured that the private sector remained engaged in Jaffna but now I wonder if this effort was worth it. I guess it’s important to understand if it was pre-May 2009 that led to this situation or post-2009. There are many theories floating around on this issue as at now.

“Whilst Geneva votes on Sri Lanka on 28 March, let’s track the cost of terrorism on a country that the world must take into account”

Terrorism cost: $ 200 b
If one were to track the causes of terrorism in Sri Lanka, I am in the middle on two thoughts: did the change to ‘Sinhala’ being the national language start this cancer or was it one man’s ideology that propagated this world force?

Be that as it may, the fact is that in 1983 Prabhakaran apparently had only 12 cadres and just 20 shotguns but by 2006 the LTTE had amassed aircraft, tanks, submarines, missiles and a brigade of more than 20,000 that wiped out a minimum 200 billion dollars of development work from the Sri Lankan economy.

Economic terrorism – GDP
Apart from the estimated 3.5 billion dollars that was required to rebuild the Northern Province post the war, if we compute the taxes that had been levied on the A9 road by the LTTE when the private sector transported goods from the south to the north during the years the LTTE was in control of the Vanni, it will sure run into millions of dollars.

Another key area not captured was that during the peace dividend between the periods of 2002-2004, the GDP in the Northern Province quadrupled to 12.6% while in the Eastern Province it doubled to 10.1%, which is the pent-up demand that existed in this part of the country for over 20 years. If this is calculated in, it will once again be billions of dollars that Sri Lanka would have lost due to the war that I guess people in Geneva will not take into account during the vote.

Economic terrorism – Quality of life
Another interesting point the West must note is that in 2003/2004 the Socio Economic indicators reported that the access to pipe-borne water in the Northern Province was only 3.1% whilst in the east it registers 17.4%. The national average stands at a high 30.8%. The non accessibility to toilets which is a stronger indicator of the quality of life stands in the north at 14.4% and the east, a staggering 29.2% whilst the national average stood at a respectable 5.6%, which again is a result of economic terrorism that has been at play in the last 24 years.

As per the labour force survey of 2002, the labour force participation is at 50.3% nationally, whilst in the north it drops to 33.8% and in the east to 40.3%, which can directly be reflective to the LTTE’s short-sighted thinking which confined the people to restricted business and trade, adding to economic terrorism at its very best.

Economic terrorism – Tourism/FDIs
On tourism in 1983 Sri Lanka enjoyed 337,530 visitor arrivals whilst a country like Cambodia had around 200,000 tourists at that time. Today, Cambodia enjoys over two million tourist arrivals whilst Sri Lanka is at around 0.5 million with a revenue of Rs. 43 billion. Sri Lanka by now should have had recorded around 1.8 million tourists at a very conservative estimate whilst earnings should have touched Rs. 200 billion. On a GDP contribution basis it would have contributed almost 8% to the country.

These are the actual numbers that add to the numbers of the concept economic terrorism that has been ravaging Sri Lanka. The Strategic Foresight Group which has researched this topic on the theme ‘Cost of the war in Sri Lanka’ has estimated through a simple extrapolation that the loss of revenue due to the curtailment of FDIs into the country is around Rs. 3,000 billion, which stacks up to the economic terrorism number that I have highlighted above which one needs to take into account when voting on 28 March in Geneva.

If we examine the FDI inflow to Sri Lanka, it has been fluctuating widely during the last 24 years with the overall performance being below the set targets and way below the performance of the regional counterparts. It is estimated that Sri Lanka has lost around three billion dollars on FDIs during the last 24 years, mainly due to the war. If one digs deeper it could be said that there is a strong relationship between the security situation and the FDI flow into the country.

Especially in the 1987-1989 periods, the trend was very evident but thereafter in the 1990s there was a surge in the inflows due to the higher business confidence experienced. But, after the TNT-laden truck of the LTTE rammed into the Central Bank in 1995, there was another drop experienced in the flow of FDI that clearly reflects the impact of terrorism on a country that needs higher visibility, especially a developing country like Sri Lanka.

Economic terrorism – R&D
For argument’s sake if we take the Rs. 400 billion that that was spent on the war in the period 2007-2009 and divert it to the investment that could have been made on Research and Development (R&D), the numbers will stack up to almost 7% of GDP. This would beat the 4% GDP spend that economic tigers like South Korea invested to build power brands like Samsung. This gives us an idea of the opportunity cost that economic terrorism has had in making Sri Lanka an innovation hub for South Asia.

Economic terrorism – Apparel
A point that can contribute to the concept of economic terrorism in the apparel sector is as follows. If we analyse the Revealed Comparative Advantage (RCA) score for Sri Lanka we see that Sri Lanka scores a high of 16.7 on being a supplier of clothes but scores a low 1.05 on being a textile supplier.

This can be attributed to the non-strategic direction in which this industry has been developed by the State in the 20 years of war due its focus on containing the LTTE. This also accounts for economic terrorism that existed in the face of Sri Lanka that needs to be corrected which I guess is the space that the country requires.

Economic terrorism – The Rice Bowl
We need to note that the Mannar District boasts a 120 square km land area called the Rice Bowl, which was also called the green patch some years back. This rich land area grew the highest yielding paddy that Sri Lanka produced as way back as 1991.

The economic terrorism that existed stifled the growth of this area in the recent past and left policymakers unable to make use of the 150 natural reservoirs fed by the Yoda Wewa to be utilised for other agricultural crop development. I guess there can be implications post-Geneva, which we will need to wait and see.

Conclusion
Hence we see the impact of economic terrorism that ravaged the country for over 25 years. If we were to add all these impacts, the total will exceed 200 billion dollars, which happens to be almost four times Sri Lanka’s current GDP value. These are points that decision makers need to take into account in Geneva when the third resolution comes into play on 28 March.

I believe the vision for this country is that we should be zero poverty, zero unemployment and zero child mortality country whilst boasting economic growth of 7-10% in the years to come. This should be coupled with clear industry strategies on a prioritised basis so that Sri Lanka is in the making of being an ‘Economic Tiger’ in Asia. The challenge is how the Geneva decision will have an impact on Sri Lanka.

[The author is actively involved in the growth agenda of the country and serves the country in the areas of business/economic development in the private and Public sector. Rohantha has a double degree in Marketing, an MBA and currently a doctoral candidate in business administration. He is an Alumni of Harvard University (Boston).]

http://www.ft.lk/2014/03/25/cost-of-terrorism-on-a-country/

2Cost of terrorism on a country Empty Re: Cost of terrorism on a country Tue Mar 25, 2014 5:20 pm

greedy007


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
What is the root cause for the terrorism in our country?

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