SOCIO-ECONOMIC IMPACT OF TERRORISM

SOCIO-ECONOMIC IMPACT OF TERRORISM

The final project submitted on complete fulfilment of the Economics 1 course, during the academic
session 2019-2020, Semester-3.

Submitted by
NAVNEET GANDHI
Roll No.: 1943
Class: BA LL.B. (Hons.), 3rd semester.

Submitted to
Dr. Shivani Mohan, Faculty of Economics 1

August 2019

CHANAKYA NATIONAL LAW UNIVERSITY, NYAYA NAGAR, MITHAPUR,

PATNA- 800001.
 SOCIO-ECONOMIC IMPACT OF TERRORISM

ACKNOWLEDGEMNT

I would like to thank my faculty Dr. Shivani Mohan, whose assignment of such a relevant topic
made me work towards knowing the subject with a greater interest and enthusiasm and moreover
she guided me throughout the project.

I owe the present accomplishment of my project to my friends, who helped me immensely with
sources of research materials throughout the project and without whom I couldn’t have completed
it in the present way.

I would also like to extend my gratitude to my parents and all those unseen hands who helped me
out at every stage of my project.

THANK YOU!
NAME-NAVNEET GANDHI
ROLL NO- 1943
3rd Semester (BA.LLB)
 SOCIO-ECONOMIC IMPACT OF TERRORISM

DECLARATION

I hereby declare that the work reported in the B.A.LL.B (Hons.) Project Report entitled “SOCIO-

ECONOMIC IMPACT OF TERRORISM” submitted at CHANAKYA NATIONAL LAW

UNIVERSITY, PATNA is an authentic record of my work carried under the supervision of Dr.

Shivani Mohan. I have not submitted this work elsewhere for any other degree or diploma. I am

fully responsible for the contents of my project report.

NAVNEET GANDHI

CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

05/09/2019
 SOCIO-ECONOMIC IMPACT OF TERRORISM

RESEARCH METHODOLOGY

Method of Research

The researcher has adopted a purely doctrinal method of research. The researcher has made
extensive use of the library at the Chanakya National Law University and also the internet sources.

Aims and Objectives

The aims of the researcher are:

1. To find out the sudden impact of economy due to terrorism.
2. To find out the ways in which terrorism impact the economy.

Hypothesis:

The researcher has formulated the hypothesis, the validity of which will be checked in the course
of making of the project that:

1. Whether Terrorist activity impact the economy of that particular region in which such
activity occurred or it has a global impact.
2. Do these types of activity only impact the economy or it effect the socio-cultural life of
people too?

Limitation:

The presented research is confined to a time limit of one month and this research contains doctrinal
works, which are limited to library and internet sources and empirical research.

Sources of Data:

Both primary and secondary sources

 SOCIO-ECONOMIC IMPACT OF TERRORISM

Method of Writing:
The method of writing followed in the course of this research is primarily analytical.

Mode of Citation:
The researcher has followed uniform mode of citation.
 SOCIO-ECONOMIC IMPACT OF TERRORISM

TABLE OF CONTENT

ACKNOWLEDGMENT
DECLARATION
RESEACH METHODOLOGHY

CHAPTER- 1: INTRODUCTION
CHAPTER- 2: WAYS TERRORISM IMPACTS THE ECONOMY
CHAPTER- 3: MAJOR TERRORIST ATTACK AMD ITS IMPACT
CHAPTER- 4: TERRORISM IN MIDDLE EAST COUNTRIES AND INDIA
CHAPTER- 5: CONCLUSION

BIBLIOGRAPHY
 SOCIO-ECONOMIC IMPACT OF TERRORISM

CHAPTER 1- INTRODUCTION

Terrorism, the systematic use of violence to create a general climate of fear in a population and
thereby to bring about a particular political objective.1
American political philosopher Michael Walzer in 2002 wrote: "Terrorism is the deliberate killing
of innocent people, at random, to spread fear through a whole population and force the hand of its
political leader.2
Terrorism is a universal threat. Terrorists have access to the free flow of information,
Information and communication technology. The extent of destruction due to terrorist attacks.
Extends the panic among the population that slows down human activities, including investments.
The increase in terrorist attacks has been phenomenal and is often linked to various ideologies,
religious and political goals. Terrorists with their digital network capabilities have expanded
its reach beyond international borders. His unpredictable attacks with a high rate of victims put
Immense psychological pressure on the target society that leads to its success in:
Creating a sense of vulnerability across the world.
• Gaining attention and publicity, by acts of violence and by the use of the media, to enhance the
effectiveness of their violence.
• Gaining support from similar groups around the world.
List of Terrorism Organization in India
• Indian Mujahedeen (IM).
• Hizb -Ul- Mujahedeen.
• Jammu and Kashmir Liberation Front.
• Jamiat -ul- Mujahedeen.
• Muslim Janbaz Force.
• Tehrik -ul- Mujahedeen.
• Lashkar-e-Jabbar.
• Al Umar Mujahedeen.

1
https://www.britannica.com/topic/terrorism ( accessed on 31st Aug 7:30PM )
2
 SOCIO-ECONOMIC IMPACT OF TERRORISM

• Communist Party of India-Maoist3

TYPES OF TERRORISM

1. Civil disorder: it is a form of sometimes violent protest conducted by a group of individuals,

generally in opposition to a political or political action. His goal is to send a message to a political
group that "people" are not happy and require change. The protests are meant to be non-violent,
but sometimes cause serious disturbances in which private property is destroyed and civilians are
injured or killed.

2. Political terrorism: it is used by a political faction to intimidate another. Although the leaders
of the government are those who are destined to receive the final message, it is the citizens who
are victims of violent attacks.

3. Non-political terrorism: it is a terrorist act perpetrated by a group for any other purpose, most
often of a religious nature. The desired goal is more than a political goal, but the tactics involved
are the same.

4. Quassi terrorism: it is a violent act that uses the same methods used by terrorists, but does not
have the same motivating factors. Cases like this generally involve an armed criminal who is trying
to escape from law enforcement using civilians as hostages to help them escape. The violator of
the law acts in a similar way to a terrorist, but terrorism is not the goal.

5. Limited political terrorism: acts are generally unique conspiracies to make a political or
ideological declaration. The goal is not to overthrow the government, but to protest against a
government policy or action.

6. State terrorism: defines any violent action initiated by an existing government to achieve a
particular objective. Very often, this goal implies a conflict with another country.

3
Surinder K Sharma and AnshumanBehera (2014), “Militant Groups in South Asia, Institute for Defense Studies &
Analyses, pp.01-291 (acessed on 31st Aug 09:20 PM)
 SOCIO-ECONOMIC IMPACT OF TERRORISM

Each type of terrorism uses different methods of violence to convey its message. They can range
from assault weapons or explosive devices to toxic chemicals that are released into the air. These
attacks can occur at any time or place, which makes them an extremely effective method of
instilling terror and uncertainty for the general public.

CHAPTER 2 - WAYS TERRORISM IMPACTS THE ECONOMY

The potential of terrorist attacks to shock the capital markets is limited to a short period of time.
In today’s information-oriented world, news travel very fast and capital markets, indirectly or
directly, suffer from the panic triggered by terrorist attacks. It has been found that attacks in
countries, which are better off and more independent, are linked with larger negative share price
returns. Similarly, human capital loss, such as kidnappings of company officials, is also related to
more negative stock returns than physical loss such as bombings on buildings. The reason, for the
negative return in the stock price of affected firm, is because stakeholders consider tangible and
intangible losses as well as increased cost of doing business in a new terrorism- infested
background. It similarly leads to a decision such as when to reopen the market, taking into
consideration factors like safety of personnel returning to work and feasibility of set-up and
communication in systems.

1. Direct economic destruction

The most immediate and measurable impact of terrorism is physical destruction. Terrorists destroy
plants, machines, transport systems, workers and other existing economic resources. On smaller
scales, acts of terrorism can set off bars, churches or streets. Large-scale attacks, the most notorious
attacks of the World Trade Center on September 11, 2001, can destroy billions of dollars worth of
property and kill thousands of meaningless productive workers.

The impact of terrorism and war is always negative for the economy and physical destruction is
an important reason. The productive resources that could have generated valuable goods and
services are destroyed, while other resources are almost invariably diverted from other productive
uses to strengthen the army and the defense.
 SOCIO-ECONOMIC IMPACT OF TERRORISM

Increase in market uncertainty

Even if you don't live near terrorist attacks, they could affect you indirectly. This is because all
kinds of markets hate uncertainty and terrorism creates a lot. Financial markets literally closed
after September 11th and actually did not recover until months after the 2003 invasion of Iraq.

There is a great debate about the depth and omnipresence of the real impact on financial markets.
As threats and publicity for global terrorism continue to increase, markets seem to be increasingly
resistant. Equity indices did not decline long after the terrorist attacks in France killed at least 129
people in 2015. However, the deadly attack in Nice, France, in 2016 only adds to the feeling that
France could be a place every time more unstable to live and do business. The real threat of global
terrorism from an investor's point of view is a broader picture, not individual incidents.
International investments and cooperation are minor in a world full of terrorism.

3. Insurance, trade, tourism and FDI

There are two obvious industries that are particularly vulnerable to the effects of terrorism:
insurance and tourism. Not all insurance companies pay in the event of international terrorism or
foreign wars, so the impact is probably less than one would expect. However, terrorism is a risky
business for everyone and insurance companies hate risk as much as others.

Tourism is even more worrying. In France, for example, tourism represents approximately 7% to
8% of the total gross domestic product (GDP). Vanguelis Panayotis, director of the tourism
consulting company MKG, told Reuters that he expected a 30% reduction in visitors from France
in the month following the Nice attacks.

On a larger scale, terrorism harms international trade. This may be due to imminent threats, such
as trade routes and compromised distribution systems, or due to psychological and physical
reactions to terrorism. This also means less foreign direct investment (FDI), especially in unstable
countries.

War is the health of the state

 SOCIO-ECONOMIC IMPACT OF TERRORISM

There is an old saying in the study of political economy that says "war is the health of the state".
This means that in times of conflict, reactive governments and nervous citizens are much more
likely to give up economic and political freedoms in exchange for security. This could generate
higher taxes, higher public deficits and higher inflation. During the war, the government often
implements price controls and sometimes even the nationalization of industries.

Governments are less effective in managing resources for productive economic activity than
individuals, especially when these resources are co-opted to achieve a strategic military goal.
When governments are militarized, the private economy suffers. As the economist and historian
Robert Higgs demonstrated in his book "Crisis and Leviathan", many government controls remain
in place long after the end of the military campaigns.

5. Increased nationalism and foreign skepticism.

The final risk to the economy is a political risk. This has already been exhibited in the United
States and Europe in 2016, where the skepticism of cultures, businesses, immigrant workers and
foreign refugees has increased. Populist movements have already achieved a sort of victory in the
United Kingdom, where anti-globalist and anti-commercial sentiments have helped to make Brexit
pass. These types of important political events have uncertain economic consequences in
everything from foreign exchange to trade and diplomacy.
 SOCIO-ECONOMIC IMPACT OF TERRORISM

CHAPTER 3 - MAJOR TERRORIST ATTACK AMD ITS IMPACT

9/11 ATTACK

On September 11, 2001, 19 militants associated with the Islamic extremist group al -Qaida
hijacked four airplanes and carried out suicide attacks against targets in the United States.
Two of the planes were flown into the twin towers of the World Trade Center in New York
City, a third plane hit the Pentagon just outside Washington, D.C., and the fourth plane
crashed in a field in Shanksville, Pennsylvania. Almost 3,000 people were killed during
the 9/11 terrorist attacks, which triggered major U.S. initiatives to combat terrorism and
defined the presidency of George W. Bush. 4

ECONOMIC IMPACT OF IT
The 9/11 attacks had both immediate and long-term economic impacts, some of which continue to
this day. While it cost al-Qaeda an estimated $400,000 to $500,000 to plan and carry out the attacks
on the World Trade Center and the Pentagon, a 2011 report from the New York Times put the total
costs to the U.S. at $3.3 trillion.
The 9/11 attacks had an immediate negative effect on the U.S. economy. Many Wall Street
institutions, including the New York Stock Exchange, were evacuated during the attacks. On the
first day of trading after the attacks, the market fell 7.1 percent, or 684 points. New York City’s
economy alone lost 143,000 jobs a month and $2.8 billion wages in the first three months. The
heaviest losses were in finance and air transportation, which accounted for 60 percent of lost jobs.
The estimated cost of the World Trade Center damage is $60 billion. The cost to clean the debris
at Ground Zero was $750 million.5

4
9/11 attacks , History.com (1st Sep,2019 12:40 AM)
https://www.history.com/topics/21st-century/9-11-attacks
5
How the 9/11 Attacks Affect the Economy Today, The balance(1 Sept, 2019 12:45 AM),
https://www.thebalance.com/how-the-9-11-attacks-still-affect-the-economy-today-3305536
 SOCIO-ECONOMIC IMPACT OF TERRORISM

MUMBAI ATTACK

A decade has passed since Pakistan-based militants struck the Indian Afinancial capital of
Mumbai, killing 165 people (not counting the nine terrorists that were killed by Indian security
personnel) and creating panic among the city’s populace. The attacks drew comparisons with the
September 11, 2001 tragedy in the United States. Yet, the Mumbai attacks (or “26/11”, for the day
that they happened, 26 November 2008) not only provoked public outrage but also gave birth to
expectations that the government would finally begin to address the deep-seated, systemic
shortcomings in the country’s security apparatus. A decade seems like long enough, and while
there have been some changes, a lot remains unachieved. ORF examines the causes and
consequences of the 26/11 attacks in this volume of articles that focus on the multiple dimensions
of this crisis and its aftermath: strategic, operational and tactical.

LOCATION OF ATTACKS:
CHHATRPATI SHIVAJI TERMINAL - Approximately 58 people are killed during a 90-minute
attack. As the gunmen leave the train station, they fire into a crowd gathered around a police
barricade. Ten additional people are killed outside the station.
CAFÉ LEOPOLD - Approximately 10 people are killed in an attack which lasts 10-15 minutes.
CAMA AND ALBLESS HOSPITAL - Outside the hospital, gunmen ambush a group of police
officers and kill six of them.
NARIMAN HOUSE - Seven people are killed in a three-day siege at a Jewish community center
OBEROI -TRIDENT HOTEL – Approximately 30 people are killed in a three-day siege
TAJ MAHAL PALACE AND TOWER HOTEL – Approximately 31 people are killed in the four-
day siege.
 SOCIO-ECONOMIC IMPACT OF TERRORISM

IMPACT OF IT

The terrorist attacks of 26/11, however, did not only produce a negative impact on the economy,
but also adversely affected the airline and tourism industry. The airline industry, together with the
tourism industry, obviously suffered the most from the terrorist attacks. Indian cricket league
matches was cancelled. Ongoing test-series between India-England was cancelled. Bombay stock
exchange and national stock exchange remain closed on 27th Nov. shooting of Bollywood movies
and TV series was cancelled. Local trains, school, colleges, private and government buses were
not functioning properly in the city. Security was increased in Metropolitan city likes Delhi,
Chennai, Kolkata, Bengaluru etc.
 SOCIO-ECONOMIC IMPACT OF TERRORISM

CHAPTER 4 - TERRORISM IN MIDDLE EAST COUNTRIES AND INDIA

Ten countries most impacted by terrorism according to the global terrorism index are Afghanistan,
Iraq, Nigeria, Somalia, Syria, Pakistan , Egypt , CongoDRC, Central African republic and India.

Among these countries Iraq and Syria are two countries which are effected very badly due to the
terrorist activity in their region.

The Islamic state of Iraq and Levant (ISIL) also known as the Islamic state of Iraq and Syria is
mainly responsible for the terrorist activities responsible in these region while in India Kashmir is
worst affected by the terrorist activity and The responsibility for the attack is mainly claimed by
the Pakistan-based Islamist militant group Jaish-e-Mohammed. Some of the recently terrorist
activities in Kashmir are : Pulwama attack in which a convoy of vehicle carrying security personnel
on the national Highway of Jammu and Kashmir was attacked by a bomb suicide bomber. The
attack resulted in the death of 40 CRPF personnel.

In 2019 Sri-Lanka was on the target of ISIS. out of 5 terrorist attack carried out by them Sri-Lanka
witnessed two if them. On the eve of Easter on April 21, 2019 6 suicide bomb attacks killing 253,
including 45 children and 38 foreign nationals. Targets were 3 churches, namely St Anthony's
church - Kotahena, St. Sebestian church - Negombo, Zion Church - Batticaloa and 3 leading hotels
in Colombo namely Kingsbury Hotel, Shangri-La Hotel and Cinnamon Grand Hotel. There were
2 other suicide explosions in the afternoon in a small lodge in Dehiwala killing 2 and in the house
of a main attacker in Colombo, killing 7 individuals including 3 police officers.6

Terrorist activity in Afghanistan and Iraq on 17th August 2019 a suicide bomber detonated a bomb
killing in a wedding hall suicide bombing attack leaving at least 63 dead, more than 180 others
wounded.7

All these types of terrorist activity hamper the country economy very badly. According to the
global terrorism index 2018 there were 2,965 terrorist attacks in Iraq, 1,342 in Afghanistan, and

6
Sri-Lanka bombing, Aljazeera https://www.aljazeera.com/news/2019/04/sri-lanka-bombings-latest-updates-
190421092621543.html ( accessed on 5th Sep 09:20 PM )
7
https://www.foxnews.com/world/afghanistan-wedding-hall-suicide-bombing-death-toll acessed on 5th Sep 10:05
 SOCIO-ECONOMIC IMPACT OF TERRORISM

366 in Syria. though the Global Terrorism Database notes that the number of terrorist attacks in
Europe is rising, the situation in the Middle East is exponentially worse—a region where attacks
are essentially a part of daily life for many citizens.8

The costs of terrorism, however, extend far beyond physical destruction. In the Middle East in
particular, there are serious cultural and economic impacts as well. In Iraq and Syria, ISIS has
ransacked thousands of ancient heritage sites. Given their cultural and historic significance, the
value of many of these sites is priceless. Some reports suggest that the sale of stolen artifacts on
the black market may be ISIS' second largest source of revenue, after oil. A number of these ancient
artifacts have turned up in London antique shops. Many historic places have been added to
UNESCO's list of endangered sites as a result of looting and destruction, including six additional
sites in 2013 alone.9

Tourism and oil

In 2011, before the Syrian civil war entered its most destructive phase, 8.5 million tourists visited
the country, adding almost $8.3 billion to the nation's economy (around 13.5% of Syria's GDP).
In contrast, only 400,000 tourists visited Syria in 2014. A number of other nations, such as Tunisia
and Egypt, have suffered similar declines in tourism in the wake of terrorist attacks, dealing a
devastating blow to their economies.

Terrorism has also had a major impact on one of the Middle East's other most critical industries,
oil. Terrorists have targeted oil facilities in several Middle Eastern nations, causing supply
shortages. At one-point, Iraqi oil production had fallen by as much as 320,000 barrels per day
because of ISIS attacks. ISIS' territory includes a number of oil facilities. The proceeds of oil sales
go to the terrorist group, diverting revenue that would normally be used to finance national
infrastructure projects. In 2014, ISIS controlled 60 per cent of Syria's oil capacity and the group
made almost $3 million per day from the illegal oil trade. Even though ISIS has recently lost a

8
https://reliefweb.int/sites/reliefweb.int/files/resources/Global%20Terrorism%20Index%202017%20%284%29.pdf
(accessed on 5th sep 10:10 PM)
9
https://www.weforum.org/agenda/2018/10/why-we-need-to-measure-the-economic-impact-of-terrorism-in-the-
middle-east/ (accessed on 5th Sep 2019 10:18 PM)
 SOCIO-ECONOMIC IMPACT OF TERRORISM

large amount of territory, the terrorist organization still controls significant wells in northern
Iraq—denying Baghdad of much needed revenue.10

10
https://www.weforum.org/agenda/2018/10/why-we-need-to-measure-the-economic-impact-of-terrorism-in-the-
middle-east/ ( accessed on 5th sep 2019 11:00 PM )
 SOCIO-ECONOMIC IMPACT OF TERRORISM

CONCLUSION

Terrorist activity does affect the economy of the country for long time but for a limited period of
time only. It does not have a long-lasting effect on the economy. Effect of such activity can be
seen only at the time of those activity. Like just after Mumbai attack Bombay Stock exchange was
shut down for one day or after the attack of 9/11 New York stock exchange fall down suddenly.

These types of activities only hamper the economy of that region in which terrorist activity has
occurred to a large extent but not the Global economy. Bombay blast does not have much impact
on the economy of the America and European countries.

Terrorist activity mainly impact the economy of under developing countries like – Syria, Iraq,
Nigeria, Somalia, Yemen etc. youth joins these group due to many factors. One among them is
that the people belonging to those group sway the mind of young blood on the name of religion.
Other factors are also responsible like they got a good salary in hand (provided by ISIS to its
soldier). Youths in Kashmir or Syria despite of government support joins those group in the name
of religion.

Terrorist activity in Syria has destroyed not only the economy but also the cultural heritage of the
country. ISIS second source of income after oil is from the sell of those antique material of Syria
in the black market of London.
 SOCIO-ECONOMIC IMPACT OF TERRORISM

BIBLIOGRAPHY

JOURNALS
1. https://journals.sagepub.com/doi/pdf/10.1177/0015732516681882
2. https://amity.edu/UserFiles/admaa/dc90dPaper%206.pdf
3. https://www.amrita.edu/publication/international-tourist-arrival-india-impact-mumbai-
2611-terror-attack

4. Global terrorism index

5. Brittanica.com
6. Aljazeera
7. Weform.org

Websites
8. https://www.history.com/topics/21st-century/9-11-attacks
9. https://www.rit.edu/~w-cmmc/literature/Grote_2004.pdf