Saturday, January 14, 2012

Piracy: Plea for Negotiated Solution to Somali Piracy

By Jerome Mwanda
Courtesy IDN-InDepth NewsReport

NAIROBI (IDN) - "It's not like three people split a million bucks. It's more like three hundred," says Somali pirate chief Abshir Boyah, questioned on how he spent his considerable profits from piracy, referring to his extended clan network. Another pirate boss, Mohamed Abdi, laughs off the United Nations threat to freeze pirate assets: "What assets?" The two remarks underline a deep-rooted culture of sharing. In fact a Somali proverb says: "The man who owns one hundred goats, but his relatives have nothing, he is poor."

A new study underlines that dispersing "assets" geographically but within the clan is a common practice in Puntland, a region in northeastern Somalia, declared an autonomous state in 1998.

The practice serves as an effective risk-reduction strategy when entire herds are regularly wiped out by drought or conflict, says the paper titled 'Treasure Mapped: Using Satellite Imagery to Track the Developmental Effects of Somali Piracy', published by Britain's Royal Institute of International Affairs, better known as Chatham House.

The 28-page paper by Anja Shortland, released on January 12, uses recent forms of nightlight emissions and high resolution satellite imagery to look at the effects of piracy on the Somali economy and establish which groups benefit from ransom monies.

The significance of the study lies in the fact that the total cost of piracy off the Horn of Africa, including the counter-piracy measures, was estimated to be between US$7–12 billion for 2010, while ransoms were said to be in the region of US$250 million.

Shortland, a senior lecturer at Brunel University, finds that pirates appear to be investing money principally in the main cities of Garowe and Bosasso rather than in the coastal communities where pirate activity is located.

The positive economic impacts of piracy are widely spread, so a military strategy to eradicate piracy could seriously undermine local development. Villages that have gained little from hosting pirates may be more open to a negotiated solution which would be to their benefit.

Shorland writes: "A negotiated solution to the piracy problem 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 crack-down on the other hand would deprive one of the world’s poorest nations of an important source of income and aggravate poverty."

Somalia is one of the poorest countries in the world with per capita GDP (Gross Domestic Product) estimated at less than US$300. A quarter of the population relies on food aid provided by the World Food Programme. Agricultural activities are the main contributors to GDP, and there is a service sector based around telecommunications and the transfer of remittances from the Somali diaspora.

Estimates of piracy ransoms are significantly lower than those of diaspora remittances, but the vast majority of remittances are used to cover basic household expenses. Shorland, therefore, compares piracy with other economic sectors and the ability of the government to raise taxes.

She finds that piracy creates considerable employment: for the crews directly involved in hijacking and for local militias who guard ships moored in Somali territorial waters. Up to fifty pirates on each hijacked ship and another fifty people on the coast will be involved in guard duties.

Some hostages are imprisoned on land in order to discourage the ship’s crew or foreign troops from attempting to take control of the hijacked vessel.

"As the piracy business is based on ransoming the crew, hostages are treated reasonably well. The International Maritime Bureau (IMB) reported that 1,016 hostages had been captured by Somali pirates in 2010, and taking care of them created employment for local cooks, producers and traders," says the study.

It adds: Ransoms for single pirate hijacks ranged from US$690,000 to US$3 million in 2008 but climbed to a record US$9 million in 2010. The amount of ransom paid is often kept a commercial secret, and so estimates of the total income from piracy in Somalia vary widely, and are mostly vastly inflated.

"About US$40 million was paid in ransoms in 2008. A realistic figure for 2009 is in the region of US$70 million. To put this into context, the official government budget of Puntland in 2008 was US$11.7 million and in 2009 was US$17.6 million. Cattle exports from Somalia in 2009 were worth US$43 million," the paper points out.

In fact the amount of foreign exchange and income generated by piracy is potentially a large proportion of Puntland's GDP.

"Land-based solution"

Shortland is convinced that Somali piracy needs "a land-based solution". An important reason is that several years of naval counter-piracy missions have "failed to strategically deter piracy". Pirates have simply shifted their attacks to ships that have not adopted best management practice, and operate in the open sea to evade counter-piracy measures in the Gulf of Aden.

Since mid-2010, the nature of piracy off the coast of Somalia has changed. Pirates and navies have become considerably more violent. Because of the increased difficulty of hijacking ships in waters monitored by warships from over thirty nations, pirates invest more resources in maximizing the return from each captured ship.

Ransom negotiations now drag on for longer and result in record payments. Moreover, there are as yet unproven assertions that al-Shabaab is offering attractive cooperative agreements to pirates, meaning that piracy could at some stage fund regional instability and terror.

"There are therefore strong incentives to try a fresh approach to resolving the issue of piracy off the Horn of Africa. A land-based solution might involve replacing piracy as a source of income to relevant local communities," says the paper.

However, it is unclear where the beneficiaries from piracy are located, whether revenue from pirate activity is mostly channelled abroad or used domestically and how widely the benefits are spread. Owing to the absence of central government, conventional data on economic activity in Somalia have been lacking since 1989.

This paper seeks to understand the on-land impacts of piracy, in order to assist those seeking to find on-land solutions. The paper proposes and evaluates a number of alternative indicators for economic activity in Somalia:

First, data collected by internationally funded NGOs (non-governmental organisations) monitoring commodity prices show that a significant proportion of pirate ransoms are converted into Somali shillings; that cattle prices have risen with the development of the pirate industry; and that piracy is not driving food price inflation but on the contrary has offset the loss of purchasing power of local wages after the 2007/08 food price shocks.

Secondly, satellite imagery shows that none of the pirate towns on the Puntland coast have enough power output to feature on global nightlight images. This indicates that coastal communities have not greatly benefited from piracy. Instead the regional centres of Garowe and Bosasso, which provide the material inputs and the fire-power of the pirate operations, appear to benefit from piracy-related investment.

Thirdly, analysis of changes in the built environment based on high-resolution satellite images corroborates these results. Garowe has seen massive investment between 2002 and 2009, much of the development being concurrent with the explosion of pirate ransoms. The 'pirate capitals' Eyl and Hobyo, however, have seen little investment.

Shortland writes: "While each of the data sources has significant weaknesses, a consistent story emerges regarding the impact of ransom money on the Somali economy. Piracy appears to lead to widespread economic development and therefore has a large interest group behind its continuation."

However, she adds, most beneficiaries are located in the provincial capitals. Puntland's coastal communities could therefore easily be made considerably better off through activities other than hosting pirates. "The international community should bear these results in mind when developing land-based strategies to resolve Somalia’s pirate problem," she adds.