Monday, 22 October 2012

Are there advantages of Somali piracy?

When we think of piracy, many of us imagine long-bearded, English or Spanish-speaking buccaneers sailing in the waters of the Caribbean, pillaging ships of all insignia sometime during the early 18th century. But lately, the term piracy has been attributed to another group of seafarers - the former fishermen of Somalia. Exploring their socio-economic backgrounds and history, this post aims to explore the economic effects of their activities.



Modern Somalia bears a strong heritage of tribalism and localism - throughout it's history, while culturally homogeneous, the Horn of Africa was never united by a single political power. The current borders - like that of virtually all African nations - were demarcated by the Italian and British colonists, who arrived in the late 19th century. Following the colonial period, a republic was established in 1960 - yet since the country's economy (especially in the South) is dominated by nomadic shepherds and coastal fishermen, and around 70% of the population lives in rural areas, attempts at establishing a necessarily urban-based, democratic central government were difficult at best.
They didn't work out. The Somalian army performed a coup d'etat in 1968, and much of the subsequent 20 years were spent with an unnecessary war trying to establish Greater Somalia, uniting all areas of Somali majority - and since the leader, Siad Barre has sought help from both the Soviet Union and then the USA, the Somali Army became the continent's largest. The war demanded virtually every resource of the economy, and was hugely unpopular among the local elite - all paving the way for a civil war.
In 1991, the regime of Siad Barre collapsed, as violently as it was established. Local warlords - with the weaponry inherited from the disbanded army - were now free to play out their power struggles, and central authority has collapsed. As James Bishop, the last American ambassador put it: "there is competition for water, pasturage, and [...] cattle. It is a competition that used to be fought out with arrows and sabres... Now it is fought out with AK-47s."

Fishing problems

So much about the History lesson - but where does all this leave the aforementioned coastal fishermen? We will shortly see how their change of professions was a straight consequence of the political situation.
After 1991, the collapse of the Somali Navy along the army prevented any governmental supervision over it's waters. This meant that international companies from Europe and Asia started to fish illegally along Somali coasts, devastating local wildlife indiscriminately and taking away the livelihood of the fishermen. On top of this, some even used the Somali sea-banks as an impromptu toxic waste, which further contributed to the eradication of fish stocks.

The solution 

So what does a fisherman do when he is unable to catch fish, central power can't provide their protection, yet has huge supplies of post-Cold War weapons and ammunition? He turns to piracy. Ever since the Ethiopian intervention in the civil war in 2006 - opening a new era of hostilities - the number of pirate attacks has steadily been on the rise.

As it can be seen in the graph, most of the attacks occurred in Somali domestic waters, or in the important trade route of the Gulf of Aden. The number of attacks has also been increasing - no wonder, since in 2011, pirates earned $146m via ransoms, an average of $4.87m per ship. 

Economic effects

So how did the pirates' regions of origin benefit from these massive inflows of cash? According to data by BBC, the regions of Nugal and Mudug, home to most pirate ports, have seen huge growth in comparison to their neighbours.

Meanwhile, piracy is not only advantageous for the Somalis - as a report by the German Institute for Economic Research (DIW) explains, the security and insurance costs associated with trade ships passing along the Gulf of Aden bring benefits to insurers (who don't demand security measures from ship captains in order to keep premiums high) and the German arms industry (who sell weapons for ship security), while shipowner's financial incentives (safety measure costs) have lead them to disobey navy guidelines of protection. According to the research, "from the costs caused by piracy, only 20% go to Somalia." That leaves us with a 730,000,000 $ industry benefiting from Somali piracy.
While the civil war has been raging for more than 20 years, the end is nowhere in sight - and with such yearly revenues, the war might provide enough financial incentive for some not to help it end.


Graphs from BBC

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