Piracy costs global economy about $18b a year – World Bank

A new World Bank report launched in the Somali capital, Mogadishu puts the cost of piracy to the global economy at about $18 billion a year.

In a statement issued today April 11, 2013 and copied to ghanabusinessnews.com, the World Bank says although piracy episodes off the Horn of Africa have fallen in the last 12 months, its human and economic costs means that Somalia cannot buy its way out of piracy; nor can the international community rely solely on its law enforcement agencies to defeat pirates whether at sea or land.

The report titled; ‘The Pirates of Somalia: Ending the Threat; Rebuilding a Nation’, suggests that a sustained solution to ending piracy will only come with the recreation of a viable Somali state that can deliver essential services throughout the entire country to reduce poverty and create opportunity.

The World Bank indicates that, “because of its scale, geographic scope, and violence that have created considerable public anxiety throughout the world, piracy costs the global economy roughly $18 billion a year in increased trade costs, an amount that dwarfs the estimated $53 million average annual ransom paid since 2005.”

The Bank also notes that not only has piracy imposed a hidden tax on world trade generally, “it has severely affected the economic activities of neighboring countries.”

Since 2006 East African countries have seen a marked decline in tourist arrivals and fishing yields, the report says.

In the booming tourism sector, spending in East Africa since the surge in pirate activities has grown 25 percent more slowly than in other sub-Saharan African countries, it says, adding that, “Similarly, exports of fish products from piracy-affected countries compared to other regions have dropped by 23.8 percent since 2006, in part due to falling production. Total catches of tuna in the Western Indian Ocean have declined by 26.8 percent as vessels relocated to safer fishing grounds.”

Noting the effect of piracy on Somalia, the Bank says, “Somalia itself has also suffered considerably from the impact of piracy. Increased trade costs are estimated to cost the country $6 million annually; and this figure does not take into account that Somalia cannot develop and expand its maritime trade and fisheries as long as pirates are allowed to operate in its waters.”

In terms of the human cost of Somali piracy, as many as 3,741 crewmembers of 125 different nationalities have been captured, with detention periods as long as 1,178 days. As many as 97 sailors may have died either during the attacks, in detention after poor treatment, or during rescue operations, it the Bank says.

“On the Somali side, the toll is also high; hundreds of pirates are believed to have died at sea,” it adds.

According to the report, the fact that pirates can anchor their hijacked vessels freely along the Somali shoreline reflects their ability to win support from government officials, business people, clan elders, militias, and local communities. It is estimated that commanders and instigators in the Somali piracy business split 70 to 86 percent of piracy proceeds with these stakeholders, without whose support anchoring hijacked boats would not be possible.

The report notes that the 300:1 ratio of piracy’s global cost to the pirates annual ransom payments offers a powerful reason for international support for Somalia. It further argues that current onshore or offshore policies for curbing Somali piracy are either ineffective or likely unsustainable.

It therefore calls for onshore interventions such as local economic development or law enforcement initiatives intended to discourage young Somalis from becoming pirates by increasing the attractiveness of alternative jobs or by promising long prison terms in case of capture.

By Emmanuel K. Dogbevi