Piracy costing global economy $7-12bn

A new study commissioned by London think tank Chatham House, based on research by Colorado-based One Earth Future Foundation, estimates sea piracy is costing the global economy between US$7 billion and US$12 billion. This relates to ransom money paid, higher insurance premiums (war risk premiums and ransom payments up ten-fold respectively), naval patrols, security equipment, piracy protection, vessel re-routing and other indirect costs such as higher food prices in East Africa. “What is even more disconcerting,” asserts One Earth Future Foundation researcher, Anna Bowden, “is that all these are simply treating the symptoms – almost nothing is being done to treat the root cause.” Scrutinising the problem in three major affected areas – the Horn of Africa, Nigeria and the Malacca Straits – the study suggests the biggest cost, some US$2.4 billion, lies in re-routing ships from risky areas. Bowden estimates the total cost of piracy has increased roughly five-fold since 2005. The average ransom last year was around US$5.4 million as opposed to only US$150 000 in 2005. The study finds that the 20% drop in Suez Canal traffic over the past two years cannot be ascribed solely to piracy, but rather to the global economic crisis, though it is thought around 10% of shipping is avoiding the area due to the threat of ocean banditry. Some 1 600 incidents of piracy have been recorded since 2006 with the loss of 54 lives, while 1 181 hostages were captured in 2010, 1 016 of them by Somali pirates. Of the 53 vessels seized worldwide last year, all but four were by Somali pirates.