Marketers must practice anti-terrorism compliancy

The speech made by Director Economic Affairs of the Government Peace Secretariat, Rohantha N.A. Athukorala - The guest speech at the Rotary Club of Centennial.

“With the recent attacks by LTTE the Central Bank is getting tough with the Financial Investigation Unit (FIU) having the powers to fine upto Rs. one million from anyone having information of anyone involved in such acts to terrorism directly on Indirectly. Marketers must audit all suppliers and other service providers in an organisation for anti-terrorism compliancy”.

Terrorist activities in the world, has changed the rules of the game on international trade in a significant way. Since 9/11, there has been an effort globally to monitor and regulate the policies on international trade, investment and finance related areas to counter terrorism.

Even though South Asia is in a most remarkable period of time with outstanding Economic growth and sustained development

 with a GDP closing on 7-8 percent, becoming the most watched region for launching of new products, new acquisitions and joint ventures for all global companies the threat of terrorism keeps looming across the region threatening the opportunity that the region can exploit globally.

Latest estimates has emerged that almost 10 billion dollars of trade has been lost due to terrorism in the South Asian region with Sri Lanka accounting for thirty five percent of this potential business. It estimated that the war has costed Sri Lanka 4.5 billion dollars todate.

The Sri Lankan economy has experienced accelerated growth over the past two years despite adverse shocks such as oil price hikes, the tsunamis and the escalation of terrorism. Growth has averaged at 6.5 per cent during the last 2 year and 4-5 Per cent historically.

The Per capita income rising above US $ 1355 has made it a middle income country. The higher economic growth has been accompanied by a declining unemployment to 6.4 per cent which has come about through successful structural and economic reforms implemented.

The private sector accounts for 85 per cent of GDP and some blue clip companies listed on the stock exchange are highly competitive, profitable and financially strong and beginning to invest overseas.

Sri Lanka growth has outperformed countries in the region and has been rated as single B and BB. On the key poverty ratios of those earning a $1 and below coming down to just 2 percent and those earning $2 and below to 32.8 percent augurs well for the country.

The inflation observed through 2005 and early 2006 reversed, due to the passing down impact to consumers the high oil prices. The high interest rate that has come into effect has become a drag to the economy.

However, the growth momentum has been sustained. The GDP growth as at 3rd quarter 2007 has been 7.0 per cent. But it is how we manage to keep our fiscal deficit to seven percent and below and inflation will be the challenge. It is time that the private sector that understands that political and economic measures alone cannot counter Terrorism.

The private sector that contributes 85 per cent to the overall GDP of the country needs to get involved in the national efforts. We need to tactfully scrutinise every partnership nationally or international that we get in to, so that objectively we can weed out terrorism in a similar way to driving business and trade. The private sector must assist the Government in the ‘War against terror’.

Finance institution, Industries, the fast expanding service sector as well as trade departments and associations must help prevent the flow of goods and services and technology and funding the terrorist organisations.

The 1st air attack on the military base of Katunayake by the LTTE shocked the business community to the extent that market capitalisation lost Rs. 11.8 billion the next day.

The Telegraph’s South Asia correspondent Peter Foster has estimated that the recent attack on the Anuradhapura Air Force Base will cost the country several million doallr’s which is sure going to add pressure to the countries exchange rate and there by have a negative impact on Sri Lanka’s trade balance.

Even with all the damage control done in the last 3 air attacks by the LTTE, we have to keep in mind that we are dealing with one of the most lethal terrorist organisations in the world and as the anti-terrorism expert Dr. Gerard Chaliand said at the recently concluded anti-terrorism conference ‘unless there is a collective effort by every Sri Lankan it is a threat to whole of Sri Lanka and they cannot be militarily defeated’.

This statement left ripples in the board rooms of Corporate Sri Lanka as the media has reported has been bombarded with statements where the Sri Lankan public has been made to believe that the LTTE can be defeated. (Source: anti-errorism Conference Colombo 2007)

Given the recent developments like the Anuradhapura attack by the LTTE the marketing community must also play apart in the national agenda of fighting terrorism. We have to understand that terrorism by nature in a covert activity organised by groups or movements working underground to achieve certain extreme objectives.

We must also keep in mind that being vigilant and by carefully gathering intelligence we can protect our self and the organisations that we work in from such acts of terrorism.

We call this being anti-terrorism compliant. It is a new term in the corporate world but it is time we understand its elements and practice it. The government on the other hand has set up a Financial Investigation Unit (FIU) which have powers to fine upto Rs. One million from anyone having information of anyone involved in such acts to terrorism directly on indirectly.

The key actions that marketers can take locally;

1. Background check on all suppliers of the links locally and internationally.

2. All suppliers make money. Try to find out what these moneys are used for.

3. Identify any banking loopholes which can be used for funding terrorism.

4. Who owns our company’s shares and if large parcels of shares are bought, the funding source.

5. Investigate sudden trading of shares in large quantities just before a LTTE attack.

6. Who the silent directors are on Supplier organisations.

Reliance to global economy

Given the turbulent local environment organisations are spreading their risk by developing overseas markets. If we analyse Sri Lanka’s economy we are very strongly reliant on the global economy for our trade.

Our imports annually cross a value of over 8 billion dollars and exports is estimated to pass the seven billion dollar mark. This makes our economy very vulnerable to terrorist attacks with Sri Lanka boasting only one international airport and sea port.

The development of the South Port and the Weerawila airport is strategically a prudent one. However, it will take some time to making this a reality.

The challenge is how we link our International Marketing strategies to be in line with this global trend of being anti-terrorism compliant.

Given this global economic back drop, marketers need to be sensitive that on the merchandise we import and export and the impact it can have in fuelling terrorism activity. The areas of focus should be;

1. The nature of the export and has it have the potential for any military implications.

2. Carefully scrutinise the destination country or the Individual.

3. Who the consignment is addressed to and who will be the end beneficiary of the merchandise shipped.

4. The supply chain internally and who collects these funds and what these monies are used for.

5. Identify any banking loopholes which can be used for funding terrorism.

6. Adhering to regulations in both domestic and international banking.

7.Be sensitive to practices like under invoicing and over invoicing.

Social responsibility

With the development of this concept of anti-terrorism compliancy we need to be sensitive to the information we supply to our overseas partners on electronic or digital transmission related items, the release of maps on Sri Lanka where there are details on key economic landmarks, software or technology that can be used for terrorist activity.

We must also be sensitive to goods which are prohibitive in particular countries or that require special permits, inspection condition as per local regulations. May be an organisation can bring this initiative in ones CSR initiative so that a local perspective can also be brought in.

This can be a critical analysis of the supply chain and the recipients of these earnings so that we can boast that our company is anti-terrorism compliant.

In the United States for example the Export and Import control Bureau (EICB) monitor traders. May be Sri Lanka needs to set up a similar body to regulate trade for a anti-terrorism perspective. Lets now understand some global initiatives where global corporations have integrated.

C-TPAT

If we focus on the one of our key business partners - the United States that account for 29 percent of Sri Lanka’s exports in 2006. A monitoring body was set up as an anti-terrorism body that regulates trade from and to, the United States. It is called the Customs Trade Partnership against Terrorism more popularly referred to as C- TPAT.

For one to get membership in this association every supplier needs to be cleared from a supply chain perspective, so that one is free of any facets of terrorism. This can create an opportunity for that country to brand them self and claim a tag ‘Anti terrorism compliant”.

Initially, C -TPAT was focusing on high risk cargo but today it has moved away from certifying the end product to scrutinising the total supply chain on security compliance. It cuts across the importer, carrier, broker, financier, warehouse operator, and manufacturer. This must include the total value chain. This ensures the continuity of international trade and commerce from anti-terrorism insulator perspective too.

Terrorism creates security issues

Terrorists have been able to develop their own sources of financing, which range from NGOs and charities to illegal enterprises such as narcotics, extortion and kidnapping.

The terrorist threat in the globalise world is also changing in ways that make it more dangerous and difficult to counter.

International terrorism once threatened the US only but today it cuts across the world in every city. If we do not become sensitive to these global trends and align our businesses with tags like ‘Anti terrorism compliant” we become in advent aiding and abetting terrorism.

If we do not develop strategies in our companies to this new trend called terrorism we might have to face economic sanction someday. These sanctions can come in many forms; restrictions on trading, technology, foreign assistance, export credit and guarantees, foreign exchange and capital transactions and finally economic access.

Hence it is time that we drive to use global technology in the areas of bar-coding, electronic data transmission. From a government perspective we must drive membership in organisations like C-TPAT and invest in large scale container inspection technology like Gamma ray inspection machines and radiation detectors.