What next for al-Shabab?

The decision to launch a terrorist attack abroad might reflect its inability to mount a successful offensive against African Union troops on the ground but it is also a mark of al-Shabab’s enduring strength.

It didn’t take long for the Somali militant group al-Shabab to claim responsibility for the deadly siege on the Westgate shopping centre in Nairobi. The group, which maintains an active social media presence despite repeated attempts to close its accounts, announced on Twitter that it was carrying out the attack in retribution for Kenyan troops now fighting militants in southern Somalia.
 
Al-Shabab, which means “the youth” in Arabic, first emerged as a radical youth arm of the Union of Islamic Courts, an Islamist coalition, and gained prominence as part of the armed resistance to Ethiopia’s invasion of Somalia in 2006. It flourished in the lawlessness that followed Ethiopia’s withdrawal in 2009, bolstered by funding from Eritrea. In 2011, African Union troops forced al-Shabab out of the Somali capital, Mogadishu, but swaths of the country are still under al-Shabab control. Al-Shabab officially joined al-Qaeda in February 2012 but has long aligned itself with al-Qaeda’s narrative of global jihad. In 2010 al-Shabab suicide bombers killed 67 people in the Ugandan capital, Kampala, and since 2011 it has carried out smaller attacks in Kenya.
 
The group’s latest and most ambitious strike on a foreign target reflects its changed circumstances in Somalia, as well as a shift in al-Qaeda’s global strategy. Militarily, al-Shabab’s position in Somalia is weakening. In September 2012, it was forced out of the strategic port town of Kismayo. The same year, Somalia’s first formal parliament in over two decades was sworn in, and just five days before the Nairobi attack the Somali government secured a pledge of €1.5bn from the EU to rebuild the country.
 
The decision to launch a terrorist attack abroad might reflect its inability to mount a successful offensive against African Union troops on the ground but it is also a mark of al-Shabab’s enduring strength.
 
“I’ve seen a lot of commentary that says this has been one of the dying throes of the organisation,” says Raffaello Pantucci, a senior research fellow at the defence and security think tank the Royal United Services Institute. “But really the organisation is showing that it still exists and is able to carry out complex operations.”
 
The Westgate siege follows a period of infighting. Al- Shabab’s co-founder Ibrahim al-Afghani was killed earlier this year and several highprofile members fled or turned themselves in after a coup by his leadership rival Ahmed Abdi Godane. Godane is seen as a keen advocate of greater foreign involvement and closer association with al-Qaeda.
 
Meanwhile, there’s al-Qaeda’s organisational structure following Osama Bin Laden’s death. “Al-Qaeda, with al-Shabab as a key affiliate, wants to set up an East African arm,” says Jonathan Russell, a Middle East analyst at the Quilliam Foundation, which researches counter-extremism. “There’s a high proportion of Muslims there, plus the power vacuum in Somalia offers a real strategic opportunity for al- Qaeda.” This mirrors a broader trend, with al-Qaeda evolving from a monolithic organisation into looser groupings of regional affiliates.
 
The Westgate attack was a chilling reminder of al-Qaeda’s global reach and the disastrous consequences of Somalia’s civil collapse, but Russell believes al-Shabab has “bitten off more than it can chew”. A nephew of Uhuru Kenyatta, Kenya’s president, was killed in the attack, adding a personal dimension to his pledge to redouble his country’s military offensive in Somalia. The US, UK and Israel have already announced their support.
The spokesperson for Somalia's Al-Shabaab militant group, Robow Abu Mansur (C), is escorted on December 14, 2008 by bodyguards to a press conference just outside Mogadishu. Image: Getty

Sophie McBain is a freelance writer based in Cairo. She was previously an assistant editor at the New Statesman.

This article first appeared in the 30 September 2013 issue of the New Statesman, The Tory Game of Thrones

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Labour's investment bank plan could help fix our damaging financial system

The UK should learn from the success of a similar project in Germany.

Labour’s election manifesto has proved controversial, with the Tories and the right-wing media claiming it would take us back to the 1970s. But it contains at least one excellent idea which is certainly not out-dated and which would in fact help to address a key problem in our post-financial-crisis world.

Even setting aside the damage wrought by the 2008 crash, it’s clear the UK’s financial sector is not serving the real economy. The New Economics Foundation recently revealed that fewer than 10% of the total stock of UK bank loans are to non-financial and non-real estate businesses. The majority of their lending goes to other financial sector firms, insurance and pension funds, consumer finance, and commercial real estate.

Labour’s proposed UK Investment Bank would be a welcome antidote to a financial system that is too often damaging or simply useless. There are many successful examples of public development banks in the world’s fastest-growing economies, such as China and Korea. However, the UK can look closer to home for a suitable model: the KfW in Germany (not exactly a country known for ‘disastrous socialist policies’). With assets of over 500bn, the KfW is the world’s largest state-owned development bank when its size is measured as a percentage of GDP, and it is an institution from which the UK can draw much-needed lessons if it wishes to create a financial system more beneficial to the real economy.

Where does the money come from? Although KfW’s initial paid-up capital stems purely from public sources, it currently funds itself mainly through borrowing cheaply on the international capital markets with a federal government guarantee,  AA+ rating, and safe haven status for its public securities. With its own high ratings, the UK could easily follow this model, allowing its bank to borrow very cheaply. These activities would not add to the long-run public debt either: by definition an investment bank would invest in projects that would stimulate growth.

Aside from the obviously countercyclical role KfW played during the financial crisis, ramping up total business volume by over 40 per cent between 2007 and 2011 while UK banks became risk averse and caused a credit crunch, it also plays an important part in financing key sectors of the real economy that would otherwise have trouble accessing funds. This includes investment in research and innovation, and special programs for SMEs. Thanks to KfW, as well as an extensive network of regional and savings banks, fewer German SMEs report access to finance as a major problem than in comparator Euro area countries.

The Conservatives have talked a great deal about the need to rebalance the UK economy towards manufacturing. However, a real industrial policy needs more than just empty rhetoric: it needs finance. The KfW has historically played an important role in promoting German manufacturing, both at home and abroad, and to this day continues to provide finance to encourage the export of high-value-added German products

KfW works by on-lending most of its funds through the private banking system. This means that far from being the equivalent of a nationalisation, a public development bank can coexist without competing with the rest of the financial system. Like the UK, Germany has its share of large investment banks, some of which have caused massive instabilities. It is important to note that the establishment of a public bank would not have a negative effect on existing private banks, because in the short term, the UK will remain heavily dependent on financial services.

The main problem with Labour’s proposal is therefore not that too much of the financial sector will be publicly owned, but too little. Its proposed lending volume of £250bn over 10 years is small compared to the KfW’s total financing commitments of  750 billion over the past 10 years. Although the proposal is better than nothing, in order to be effective a public development bank will need to have sufficient scale.

Finally, although Brexit might make it marginally easier to establish the UK Investment Bank, because the country would no longer be constrained by EU State Aid Rules or the Maastricht criteria, it is worth remembering that KfW’s sizeable range of activities is perfectly legal under current EU rules.

So Europe cannot be blamed for holding back UK financial sector reform to date - the problem is simply a lack of political will in the current government. And with even key architects of 1980s financial liberalisation, such as the IMF and the economist Jeffrey Sachs, rethinking the role of the financial sector, isn’t it time Britain did the same?

Dr Natalya Naqvi is a research fellow at University College and the Blavatnik School of Government, University of Oxford, where she focuses on the role of the state and the financial sector in economic development

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