Somalia Piracy Leads to Economic Development
While certainly damaging to the international shipping industry, the fruits of Somali piracy are benefitting more than a handful of criminals—they’re being shared with the greater community, a new report based on satellite imagery has found.
“The international community should bear these results in mind when developing land-based strategies to resolve Somalia’s pirate problem,” stated Dr. Anja Shortland, the author of the report for British think tank Chatham House.
The context of the research was to shed light on the financial impacts of piracy in Somalia to help the international community develop a land-based approach to fighting the scourge of piracy on the Horn of Africa. It is estimated that in 2010, piracy cost the international community between $7 billion and $12 billion.
Somalia has been without a central government since 1989, making it difficult for analysts to obtain data on economic activity in the country.
Culture of Sharing
Shortland points out that Somalia has a deep-rooted, sharing culture, which means that wealthy people raise their status by sharing with members of their clan. “Significant amounts of ransom monies are spent within Somalia, but conspicuous consumption appears to be limited by social norms dictating resource-sharing,” says the report.
The weight of the cultural element is illustrated by a Somali proverb cited in the report: “The man who owns 100 goats, but his relatives have nothing, he is poor.”
According to the report, when he was questioned, pirate chief Abshir Boyah said, “It’s not like three people split a million bucks. It’s more like 300.”
Mohamed Abdi, another pirate boss, “laughed off the United Nations threat to freeze pirate assets,” according to the report in asking: “What assets?”
However, most of the investment by pirates appears to be occurring in the main cities of Bosasso and Garowe, rather than in the coastal areas, where the pirates are actually based. This has benefited casual labor and farmers in Puntland most.
To glean the situation on the ground, researchers took into account two types of data. One set, compiled from international nongovernment organizations, showed that large portions of the ransom money were being converted into the local currency, that cattle prices had gone up along side the rise of piracy, and that piracy earnings helped offset the impact of food price spikes in 2007-2008.
Secondly, they looked at nighttime satellite imagery to see where power output had increased, and found inland cities glowing in ways that the coastal Puntland towns, such as Eyl and Hobyo, had not.
Several years of international counterpiracy measures combining the efforts of over 30 nations has helped reduce the number of successful pirate hijackings.
A report from the International Maritime Bureau found that although in the first nine months of 2011, hijack attempts were up compared to the previous year—199 attempts versus to 126 during the same period of 2010—the success rate of piracy was down. Pirates only managed to capture the target ship 12 percent of the time in 2011, compared to 28 percent the year before.
The Chatham report notes that with the increase in patrolling warships and security on board merchant vessels, pirates have attempted to get more out of the ships they hold ransom. “Ransom negotiations now drag on for longer and result in record payments,” it said.
In 2010, the average ransom for a ship was at $10 million and about 40 percent of that went directly to local employment. Roughly $250 million total was paid out in ransoms.
Given the situation, international strategists are looking at the options for land-based solutions, such as substituting piracy income for another source. Shortland notes that even if all of the ransom income was replaced directly, it would still be considerably cheaper than the upward of $12 billion piracy has cost.
Based on the findings, Shortland says a strategy should take into consideration that coastal Puntland communities are not benefiting from the spoils of piracy.
A solution “should aim to exploit local disappointment among coastal communities regarding the economic benefits from piracy and offer them an alternative that brings them far greater benefits than hosting pirates does.
“A military crackdown on the other hand would deprive one of the world’s poorest nations of an important source of income and aggravate poverty.”