Rising trade costs: Pirates

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There’s a great, long piece on Somali piracy in the FT by James Blitz and Robert Wright. Here are the trade-related highlights, but follow the link for lots more interesting details.

There have been 95 attacks by Somali pirates on vessels this year, with 39 ships captured and nearly 800 crew held. More than $20m has been paid in ransoms by shipowners and insurers… These pirates of the Horn are worrying governments around the world for several reasons. Their activities are bringing sclerosis to one of the world’s main trade arteries – the Gulf of Aden, which sees the passage of 20,000 ships a year. Shipping companies are beginning to divert their vessels round the Cape of Good Hope, increasing journey times by 30 per cent…

People in the shipping industry have for some time been irritated by the word “pirate” – with its romantic and exotic connotations – and like to remind the public that the hijackers are hardened criminals… In a society stricken by poverty, their boldness, organisation and technical savoir-faire impress one security expert: “They treat this as a business. They’ve upgraded what it means to be a pirate.”…

Attacks during shipping’s last piracy crisis – in the Malacca Strait separating Indonesia from Malaysia and Singapore – were less frequent and limited mainly to armed robbery of crews and ships’ offices. But that problem – which Pottengal Mukundan, IMB director, calls “maritime mugging” – has been largely eliminated since 2006 by improved security co-operation between the three coastal states…

“This Somali piracy problem is going to be on the international security agenda for some time,” says a senior UK official. “It is a highly lucrative business, providing a job-creation scheme in a country with very few other outlets and which also happens to be in a very sensitive part of the global trading system.”

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