An Exploration into How Terrorism Impacts Business Environment in MENA Region

Abstract

The relationship between security and business has been an important issue for social theorists and policymakers. In recent decades, terrorism, especially at international level, has emerged as an important threat to the business. It reflects the risk of violent acts to attain political goals via fear, coercion or intimidation. According to literature, global trade and foreign investments require to strengthen and maintain the economic security. In some countries, terrorism can increase political risks and lead to isolation of these countries from the rest of the world. There are limited studies that show how the business reacts on terrorism. Few economists have examined the economic forces of the terrorism formation and its impact on business performance and environment. Hence, present study with its descriptive nature, tries to explore economic origins of terrorism and its relationship with business environment in MENA countries. We have classified our research into three areas including terrorism impact on foreign direct investment, tourism industry and doing business (four sub-indices of World Bank project of doing business including starting a business, getting electricity, paying taxes and trading across borders) in MENA countries. Our results suggest that regional terrorism in the recent decade has had significant negative impact on indicators such as foreign investment, tourism and doing easily business in MENA countries.