Tuesday, January 18, 2011

A Study on the "Costs of Piracy"

From the One Earth Future organization, "Oceans Beyond Piracy" web site - "The Cost of Piracy" in three pdf units. Their bottom line (which I will examine soon) is that piracy costs the global community somewhere between $7 to $12 billion annually.

From the Executive Summary at the beginning of the full report:
At the end of 2010, around 500 seafarers from more than 18 countries are being held hostage by pirates.1 Piracy clearly affects the world‘s largest trade transport industry, but how much is it costing the world? One Earth Future (OEF) Foundation has conducted a large-scale study to quantify the cost of piracy as part of its Oceans Beyond Piracy project. Based on our calculations, maritime piracy is costing the international economy between $7 to $12 billion,2 per year.
This report details the major calculations and conclusions made in the study. The project focuses on direct (first) order costs, but also includes some estimates of secondary (macroeconomic costs), where data is available. It concentrates on the supply-side costs to both industry and governments. The study set out to analyze the cost of piracy to the Horn of Africa, Nigeria and the Gulf of Guinea, and the Malacca Straits. The focus is inevitably on the costs of Somali piracy because this is the region where contemporary piracy is most highly concentrated and is the greatest source of current data and information.3
From Oceans Beyond Piracy Presentation
 UPDATE2: Is it just me that finds it ironic that pirate ransoms for 2010, estimated at $238 million (page 10 of the full report) are one of the lower costs identified in the report? My math (which may be wrong) says that ransom costs were under 4% of the total costs identified above). Insurance, however, against piracy losses was around 7 to 25%.

UPDATE: Just to put this number in perspective, cargo theft in the U.S. alone has been estimated to be about $30 billion a year -see here.

Further, consider the costs involved in actually taking those actions that might reduce the level of piracy. Hmmm - what would it cost to mount an amphibious operation and stage a punitive raid or more?

1 Countries include: Bangladesh, China, Ghana, Greece, India, Indonesia, Kenya, Korea, Myanmar, Pakistan, the Philippines, Sri Lanka, Sudan, Ukraine, United Kingdom, Turkey, Yemen, and Vietnam.
2 Unless otherwise indicated, all dollar costs throughout this paper are in United States (US) dollars.
3 In 2010, 44 successful ship hijackings out of a global total of 48, were conducted by Somali pirates.

No comments:

Post a Comment