How piracy off the Horn holds thousands hostage

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8 February 2010

Pirates off the Horn of Africa — a 21st-century hotspot of maritime hit-and-run — are usually reported as victimising the crews of yachts or oil tankers straying into ‘their’ territory. The ordeal suffered by British couple Paul and Rachel Chandler is a case in point.

But there are thousands more who are effectively held hostage by this situation — and, surprisingly, some who indirectly benefit.

First, the bad news. Aside from its direct victimisation, piracy is effectively driving local recession — and hitting thousands of rural smallholders in the Horn. This hidden ‘hostage crisis’ in rural Kenya and beyond is an example of how maritime lawlessness can, like all bad or absent governance, take its toll on development.

As piracy in these waters shows no sign of stopping, this constitutes a significant problem. Pirates have been attacking ships off the Horn since 2005 and attacks are rising — along with the ransoms paid. In January 2010 alone, two cargo ships and a chemical tanker were captured. Last week the Greek-owned MV Filitsa was released following payment of a US$3 million ransom.

The price of lawlessness

So how does piracy hit local economies? One way is that the increased costs and risks due to piracy in the area has reduced the quantity and changed the mix of shipping. This has the effect of reducing overall economic activity (shipping) in the area — an effect in many ways like a local recession.

This piracy risk to shipping meanwhile increases the cost of insurance. The Fresh Produce Exporters Association of Kenya (FPEAK) reports that the cost of insuring a 40-foot shipping container from Kenya has risen by US$2500. That translates into a loss of US$12 million to their members since October 2009.

The bumped-up cost severely disrupts the practicality of shipping from Kenya to Europe and is making the shipment of some products unviable. As a result the rural poor who rely on this export market are directly affected. The majority of Kenya’s fresh produce exports are grown on small-scale farms of under an acre.

Who ‘wins’?

Although largely hidden, these knock-on effects are unsurprising. As we have seen in other Due South postings, recessions rarely limit themselves to local effects.

What is more counterintuitive is that these are not universally bad effects. Piracy off the Horn creates winners and losers, some of which may be unexpected.

Any decrease in shipping from Kenya to Europe means, for instance, that competing exporting countries such as South Africa and Chile — who don’t have to pass through the pirate-infested bottleneck at the entrance of the Red Sea — win out.

Meanwhile, the coastal poor are apparently benefiting too. Traditional fishermen in Kenya have reported their best season in 40 years as 2009. What’s happened is that the large factory fishing vessels from the Far East that were trawling the area are leaving — again, partly due to the raised cost of insurance. This allows the small local fishermen in their dhows improved access to what would appear to now be a recovering fishery.

Piracy has previously been portrayed as a kind of resource swap, with the risk of paying ransoms the price for accessing the rich fishery off Somalia. By focusing on the insurance aspect, it could be argued that the pirates create at least some indirect payment for this resource and limits on its use where previously there was a free-for-all and degradation of the fishery.

Piracy is clearly a block on sustainable development in the region, helping some but harming many others. That piracy is behind much death and suffering is insupportable , but as this story and Johann Hari’s analysis in the UK newspaper the Independent reveal, the morality of different player’s actions is far from clear cut.

Here to stay?
The pirates keep the eyes of the world focused on the Horn and they don’t appear to have sufficient incentive to stop. They are in part a local response to both the ‘failed-state’ nature of Somalia and the exploitation of this situation by foreign interests. In the medium term they may be a fact of economic life which must be adapted to, however reluctantly.

Back on dry land, the situation presents a clear opportunity for Kenya’s government and coastal communities to invest in their small-scale fisheries. However, basing investment on the continued disruption to shipping is itself risky. Organised political means to deal with the activities of the larger foreign vessels to maintain local access will be required for the day when the pirates tie up their boats.

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