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Political Risk

The Implications of Recurring Terrorism for Business

Daniel Wagner | May 1, 2004

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It seems clear now that if governments and businesses are to win the battle against terrorism, they must take a completely proactive stance—anticipating likely targets, substantially beefing up security, and establishing countermeasures to prevent future attacks from occurring. It is crucial for governments and businesses to coordinate a definitive approach to creating a more secure environment.

The Madrid bombings have proven to be a watershed in the fight against global terrorism. For the cost of less than $1,000, Al Qaeda succeeded not only in its objective of punishing the Spanish people and government for their support of the war in Iraq, but also in what was undoubtedly its other objective: achieving a Spanish pullout from the American-led coalition forces in Iraq. The added bonus was the ability to change the Spanish government, with the Socialists being swept to power in the wake of the bombings. With the shift to the Left in elections in France last month, one wonders if Al Qaeda may be prompting a more widespread shift in global politics to the Left. The trend in Europe is becoming clearer.

Spending so little to achieve so much is nothing new for Al Qaeda. It is estimated that for less than half a million dollars they achieved September 11, which resulted in the loss of some 3,000 lives and more than $50 billion in property damage. For little more than the cost of the Madrid bombings, Jemaah Islamiah (an Al Qaeda affiliate) killed more than 200 and temporarily ruined the tourist industry in Bali. And without even launching a successful attack on land-based modes of travel in the United States, Al Qaeda is succeeding in further ramping up the cost of travel-related security, at great cost in terms of time and effort expended by millions who travel by train or bus and the firms that operate those modes of transportation.

A New Definition for Value for Money: What Can Be Done?

I had an opportunity to meet and speak with Homeland Security Secretary Tom Ridge in Singapore in March. I asked him, before the Madrid bombings, what could be done to secure trains and buses. He said not much, and that the cost and resources required to implement airport-style security for trains and buses is simply too prohibitive and unrealistic. Subsequently, the Bush Administration has announced an effort to make an attempt at enhancing security on trains. However, doing this after the Madrid bombings is actually a central part of the reason why Al Qaeda continues to be successful—governments still tend to be reactive rather than proactive on the subject of terrorism.

We have known for some time now that Al Qaeda prefers to attack "soft" targets because they usually lack proper security and there are many more soft targets than hard targets. Hotels (Mombassa), restaurants/night clubs (Bali), banks (Istanbul), places of worship (Istanbul), and now trains are targets of choice. This being the case, there should greater effort made to at least implement minimal security for soft targets that have any reasonable appeal to terrorists. If this can be done in developing countries with meager financial resources, it should be achievable in the developed world.

In Manila, for example, the entrances to the metro rail system are checked in the same way entrances to department stores, office buildings, and shopping centers are checked. Security personnel check everyone's bag or purse as they enter. Is this a guarantee that a bomb will not be smuggled onto a train? Of course not, but apart from providing some peace of mind, it is a sufficient deterrent to prevent would-be bombers from attacking with impunity. Had such a system been implemented in Madrid, my guess is that most, if not all of the bombs would have been detected. Surely, Manila would have experienced many more bomb attacks on its metro rail system if it did not have this rudimentary system in place.

Will countries in the developed world that currently do not have security systems and personnel in place in shopping malls, movie theaters, office buildings, and other public places ultimately need to do as the Philippines has done? The answer is '"yes." And businesses should be prepared to share the cost of implementing these measures. The threat from Al Qaeda is certainly not going to diminish in the near or medium-term, and I concur with the views of some analysts that we have a decades-long problem on our hands. This is just the beginning.

Al Qaeda's Success, or a Failure to Respond?

How did Al Qaeda become so successful? It is not through the use of high tech gadgetry or the possession of greater resources than its foes. Rather, Al Qaeda has masterfully combined low-tech means of destruction (TNT, ammonium nitrate, and fuel oil) with low-tech communication methods (handwritten notes, couriers, and cash-driven transactions) so as to avoid detection by the West's high tech gadgetry. More importantly, Al Qaeda possesses something the West does not have in the Muslim world—the ability to influence hearts and minds. Its success is due in large part to its ability to tap into the concerns of hundreds of millions of people who either are, or perceive themselves to be, disenfranchised, poor, hungry, and left behind in the era of globalization. This approach to fighting a war is very difficult to combat.

Another part of the answer, however, is that Western governments have been too slow to respond to the threats posed by Al Qaeda. The September 11 Commission's report, which is due in July, will probably criticize both the Bush and Clinton Administrations for not doing enough to fight Al Qaeda. My own view is that the Clinton White House bears a good deal of the blame for where we stand today in the fight against global terrorism. It knew all about Usama bin Laden and Al Qaeda shortly after it first came to office, yet allowed the training camps in Afghanistan to continue to operate—churning out the tens of thousands of trained terrorists who now populate most of the world's countries. Had the Clinton Administration taken a firmer line on Al Qaeda, we might not be where we are today.

The same appears to be true with the Bush White House. If, as Richard Clarke (author of the new book, Against All Enemies) says, the Bush Administration had treated the CIA's information that an attack on the United States was likely in the summer of 2001 as the Clinton Administration did toward such threats at the end of its tenure (apprehending an Algerian terrorist attempting to enter the United States from Canada with the intention of attacking Los Angeles), it is possible that one or more of the attacks that resulted in the events of September 11 might not have happened. That is what I expect the 9/11 Commission to conclude.

The point is that now, tens of thousands of terrorists populate most of the world's countries. They appear to have the ability to operate independently of the Al Qaeda leadership in hundreds or perhaps thousands of "cells" with their own objectives, resources, capabilities, and special modes of operation. They have become adept at marshalling personnel and resources from a variety of countries to achieve their attacks. And, most importantly, they are staying a step ahead of law enforcement and intelligence agencies. There are simply too many of them and they are overwhelming government tracking capabilities. That is why the U.S. government has just added 27 countries to the list of countries whose citizens will have to provide fingerprints and photographs before they can enter America in the future. These include many of America's historically strongest allies, as well as countries that are strong allies in its war on terrorism.

Unfortunately, regime change in Iraq and much of the world's reaction to it has succeeded in creating a new generation of terrorists to Al Qaeda's cause. I agree with Richard Clarke—the United States fell right into Al Qaeda's trap by invading Iraq. Bin Laden had been saying for years that the United States would invade and occupy an oil rich country in the Middle East. To many in the Muslim world, this appears to be exactly what happened, and until the day when all U.S. and coalition troops are out of Iraq, Al Qaeda can continue to claim that the long-term U.S. objective is to control the flow of oil out of the Middle East, resulting in thousands more recruits to its ranks. It may be years before the United States and its coalition are completely out of Iraq, which means that tens of thousands more Al Qaeda sympathizers are likely to be joining its ranks.

It seems clear now that if governments and businesses are to win the battle against terrorism, they must take a completely proactive stance—anticipating likely targets, substantially beefing up security, and establishing countermeasures to prevent future attacks from occurring. While the U.S. Government has done a credible job of enhancing its ability to identify terrorists and prevent them from entering the country through its airports, it has done a poor job of screening the commercial cargo that accompanies commercial airline flights. It therefore remains relatively easy for a bomber to smuggle an explosive device aboard a commercial airplane today.

Similarly, the Government is losing the battle along America's southern border. Thousands of illegal immigrants enter the country monthly by penetrating the inadequately monitored border with Mexico—and it is not just Mexicans looking for a better life in the United States that are doing so. Al Qaeda operatives are undoubtedly successful in doing the same. The border represents a gaping hole in the nation's security that is so problematic, it may take radical measures to solve the problem. And although programs such as the Container Security Initiative have been made operational since September 11, this screens, at most, 5 percent of the containers that enter the United States. Once (not if) the next major terrorist attack hits the United States, there will be greater attention paid to some of these holes in the security apparatus. Unfortunately, it appears that it may take another attack to focus minds on these issues.

Implications for Business

What is to be done? We have little choice now but to tighten the vise on terrorists more firmly. Border controls and identity checks must become even greater, intelligence sharing across borders must become easier, and, unfortunately, countries that are unaccustomed to implementing strict security precautions on their citizenry will need to begin doing so. Since it appears likely that the days of being able to casually walk into a shopping center without undergoing a security check are numbered, it would be sensible for business leaders to engage in a discussion with governments now about how this is going to be accomplished. It is not just governments that have an obligation to stay a step ahead of the terrorists, it is business as well. The sooner this is done, the sooner the general public will be conditioned to accept the inevitable—we face a future when security will permeate every aspect of our daily routines.

Terrorism has and will continue to affect how business operates, and how much it costs to operate. It has become necessary for businesses to begin to bear the cost of installing security systems and personnel to safeguard their customers and employees on a widespread basis. Governments cannot possibly bear this cost alone. Governments and businesses must reach an understanding about how the problem of providing meaningful security is going to be addressed in the future.

Business leaders need to call for a summit with their respective governments to address this problem. A coordinated, purposeful, definitive approach to creating a more secure environment must be achieved if the West is to stay a step ahead of the terrorists. It is surely in the mutual interest of business and government that this occurs sooner rather than later. Businesses may as well embrace the reality that providing funding to achieve meaningful security to protect their physical operations, employees, and customers is not only necessary, but also a smart investment. All one needs do is consider the enormous costs implied in enduring political violence, terrorism, or business interruption losses—and heightened insurance premiums that result from them—to realize that preventive action is prudent and sensible.


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1 The views expressed herein are the author's and do not reflect the policies of the Asian Development Bank (ADB) or any other entity.