Attributed to Caligula. He was hated, with good reason, but after a while he was no longer feared, and was murdered. Oderint dum metuant is strictly a short-term policy, with limited long-term value.
Not only that but it seems flawed in the sense that suicide terrorists obviously place an extremely limited value on life, even their own. That begs the question: how do you put fear in an enemy that has no other emotion than hate?