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How have global events during the past year affected ECA’s Location Ratings?

ECA’s Location Ratings Analyst, Dan Flear, discusses the impact events of the past year have had on our Location Ratings scores, which are used as the basis for determining location (or hardship) allowances.

As predicted in our article last year, 2016 continued on the same path as 2015, with positive developments to the international security situation few and far between. Unfortunately, events throughout 2016 only furthered the apprehension and uncertainty felt by international assignees and HR professionals alike.

Determining ECA’s Location Ratings
A series of factors are analysed and classified according to set scoring criteria*. The individual scores from each category are then added together to provide an overall score for the location.
 
Locations are then grouped into bands according to total points scored, and an appropriate location allowance recommended for the band.
 
The higher the score, the greater the level of hardship and adaptability required, and thus the greater the location allowance recommended.

One trend that has characterised ECA’s latest hardship scores is the worsening of already difficult locations. In Sana’a (Yemen), following the breach of a very loose ceasefire agreement in October, civil war rages on, with airstrikes responsible for the destruction of much of the city’s infrastructure. In Bangui, capital of Central African Republic, a flare up in the interreligious conflict between Christian anti-Balaka and Muslim ex-Seleka militiamen led to the deaths of 77 people in September 2015. Security noticeably improved in early 2016 but this was not to last and religious violence broke out in June, further highlighting the fragile security situation in the country. In South Sudan, heavy fighting erupted in Juba that saw at least 300 people killed (local estimates are much higher), and a UN compound was targeted in one of the worst attacks on foreigners in the new country’s brief history.

These locations highlight an important element of the Socio-political Tensions component of the Location Ratings score, which considers the potential for upheaval and violence. As such, the deteriorating situations did not necessitate an increased violence score for Sana’a, Bangui or Juba because these locations already scored the maximum available points for the violence element (although Juba did see a slight increase for the restrictions on movement element).

Nevertheless, just because the potential for upheaval or violence is considered in the chosen setting, that is not to say that these locations did not see overall score increases due to other factors. In fact, locations in Yemen, the Central African Republic and South Sudan have seen some of the largest increases this survey. This is because when a country faces a period of increased political or ethnic tensions, instability or an outbreak of armed conflict, it is inevitable that there will be consequences that have an impact on expatriates in that location and, potentially, their location allowances. These consequences vary, often affecting several of the factors that we analyse in determining the hardship of a given location.

For example, typically, one of the first outcomes of a worsening security situation will be that airlines cancel flights to and from that location, isolating expatriates there. We saw this in Tripoli in 2014 when the Second Libyan Civil War erupted. These events necessitated a change in the External Isolation score as it became nearly impossible to fly to or from the city. This year, with tensions seemingly cooling for the time being, international flights are available into Tripoli, and as such, the External Isolation score has reduced in line with this.

Another consequence, which has been particularly apparent this year, is the effect armed conflict can have on the medical services available to expatriates. In Yemen, the civil war has brought the Yemeni medical system to the brink of collapse, with warring militias and airstrikes targeting hospitals and medical facilities in the city, meaning that basic drugs and prescription medicines are now prone to serious shortages. Another example can be seen in Venezuela, where the Socio-political Tensions score has increased due to the fragility of the state, and where the extreme nature of the economic crisis has led to a continual deterioration of the country’s medical infrastructure, with public health services facing major underfunding and private facilities feeling the brunt of over-crowding and critical supply shortages.

Additional score changes we have seen as a direct result of changes in the security situation can be seen in Sana’a, where the closing of Sana’a International School has led to an increase in the location’s Education score; in Juba, where the violence that erupted in July led to an exodus of foreign nationals, increasing the Expatriate Community score; and in Dhaka in Bangladesh, where the News and Media score increased amidst the murder of four bloggers and a publisher and the continued threats and nonfatal attacks against writers and journalists by militant Islamists.

A wave of terror in Western Europe

The locations touched on so far have all been characterised by relatively high Socio-political Tensions scores for some time. Contrastingly, this survey period has seen some locations score in this element of the hardship system for the first time - perhaps the most notable examples are in Western Europe.

Map showing recent terrorist activity in Europe

While French locations have traditionally scored some Socio-political Tensions points due to the history of violent attacks in the country, this year the threat posed by terrorist networks and lone gunmen in Western Europe materialised in the form of several attacks in Germany and Belgium as well. The increased Socio-political Tensions scores for locations in these countries reflect the increased regularity with which violent attacks have taken place over the latest survey period and the difficulties that the authorities are facing in addressing them. Following the attacks on Paris in November 2015, our post-survey article explained that no interim assessment was necessary for French locations because, as mentioned previously, the potential for such attacks was already considered. However, as the infographic above illustrates, France is now facing violent extremist attacks on a regular basis and as such, the previous score was no longer appropriate. As a result, French locations are now seeing the highest Socio-political Tensions scores in Western Europe.

Tensions in Turkey

Looking to the eastern edge of Europe, any insight into the major global security developments of 2016 would be incomplete without some mention of Turkey. Once a beacon of stability in an unstable region, in its recent history this stability has been threatened by both the onset of the Syrian Civil War (and its fallout) and the attempted coup against President Erdogan. Whilst Turkey is no stranger to violent attacks, after all the PKK have been active in the country since the 1980’s, Turkey’s proximity to Syria and its apparent Western-leaning principles have made it a prime target for Kurdish militants and ISIS operatives alike. Since the publication of my colleague’s blog post in August, the situation has remained much the same, with the regularity of violent events not abating. There has been a bombing of a wedding party in Gaziantep, two explosions outside Besiktas’s football stadium and a gun attack in a nightclub on New Year’s Eve, amongst others. Nevertheless, at present the current violence setting remains appropriate and there has been no increase in the score for violent attacks. However, the result of the coup against President Erdogan and subsequent events, such as the crackdown on internet freedoms and the increase in state-sponsored attacks on journalists, other media workers and opposition politicians, have resulted in an increased overall score for News and Media and the corruption element of the Socio-political Tensions score.

A look ahead to 2017 - speculation in uncertain times

Clearly 2016 has been an unstable year for global security, but what will 2017 bring? While it is impossible to predict the future, there are some developments that are more likely to affect allowances than others. Without doubt, events in the Middle East will continue to have an impact on global security. With ISIS forecast to lose its strongholds in Iraq and Syria, some commentators are anticipating an intensification in violent attacks as skilled bomb-makers return from conflict areas. This could cause further increases in Socio-political Tension scores across countries that, until now, have been largely spared, but also to locations that have already seen an increase in terrorism-related incidents recently.

In Latin America, the populist, leftist regimes that traditionally dominate South American politics have faced stronger, more popular opposition. Nowhere is this more evident than in Brazil and Venezuela, both of which have faced internal unrest following corruption scandals and poor resource management. Locations in these regions could see the exacerbation of existing threats to personal security as crime and kidnapping levels increase as a result of declining economies. And in Africa, political stability remains an issue; at the time of writing, tensions run high in The Gambia as a regional military coalition, led by Senegal, has entered Banjul and enforced a democratic transfer of power, sending ex-President Yahya Jammeh, who had initially refused to accept the election results, into exile. With several important elections set for 2017, the democratic process and outcomes of each will no doubt affect assignees based in the region in some way.

While the above is speculation at this point, the following 12 months are certain to be turbulent. If and how this turbulence will affect expatriate location allowances, however, remains uncertain. As always, ECA will continue to closely monitor developments, ensuring that our assignee location allowance recommendations remain fair and reflective of expatriate experiences.

*    Updated annually, ECA International's Location Ratings System measures the quality of expatriate living conditions in over 470 locations around the world. Factors evaluated include climate; availability of health services; housing and utilities; isolation; access to a social network and leisure facilities; infrastructure; personal safety; socio-political tensions and air quality.

ECA Location Allowance Calculator 

ECA's Location Ratings are delivered through ECA's Location Allowance Calculator which offers a transparent and detailed system for calculating location allowances for expatriates relocating to a new country. The system recognises that where an employee is coming from as well as going to can affect the level of adaptation required. Users can select region-to-city allowances or city-to-city allowances, so that depending on a company's policy the system reflects the level of detail required.

To find out more about how ECA can help you determine your expatriates’ location allowances, please get in touch!

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