x Abu Dhabi, UAESunday 21 January 2018

Is the Somali piracy industry becoming too big to fail?

Piracy is a booming business, and not just for the Somalis who roam the waters as far as 2,000km from their own coast.

Talk about inflation. One of the first modern-day ransoms - US$50,000 (Dh183,645) - was paid in 2005 for a ship hijacked off the coast of Somalia. The average ransom paid for each ship is now about $4 million.

Piracy is a booming business, and not just for the Somalis who roam the waters as far as 2,000km from their own coast. In his speech to delegates this week in Dubai at an international conference on counter-piracy efforts, the foreign minister in Somalia's transitional government noted regretfully the "gradual emergence of a new industry" surrounding piracy.

There are the private security companies that protect ships; insurance companies and consultants that specialise in calculating risk (and collecting escalating premiums); and translators and negotiators who deal directly with the pirates once ships are seized.

And, of course, there are the brokers of "defensive technologies" that are the maritime industry's must-have accessories of the season, such as barbed wire, high-pressure fire hoses and even powerful lasers that can disable pirate engines from great distances.

The total cost of piracy to the global economy is about $12 billion, and a fair chunk of that goes to paying people to keep the pirates away.

"It is huge. I have three business cases on my desk right now," said Peter Ford, the chief executive of the Omani port of Salalah, the second-biggest in the region after Dubai's Jebel Ali.

Mr Ford said there were 10 maritime security companies with offices in Salalah, and probably more on the way.

It is little wonder, then, the Somali minister would wonder whether there is actually much urgency to shut the whole enterprise down.

"We want to be convinced that the international community has the will to combat piracy," said Mohammed Abdulahi Omar Asharq in his remarks to more than 25 foreign ministers and a few hundred industry executives, some of whom began to squirm.

Mr Asharq's argument, essentially a fund-raising pitch, was that there is a lot being done to fight Somali pirates but not as much to help Somalia. Or, as the Tanzanian foreign minister put it, Somalia has been left "like a wounded bull to die alone in the bush".

It was not the first time that argument has been made but the Somalian minister must have been pleased there were signs his audience agreed with him.

Sultan Ahmed bin Sulayem, the chairman of the ports operator DP World, which co-hosted the event, noted "stable and effective economies are the only effective solution to piracy" and described his company's extensive efforts to promote economic development in nearby countries including Yemen, Djibouti and Mozambique. Yesterday the company announced it is working with several other firms to expand a network of community centres and health clinics in East Africa.

But Somalia remains lawless and thus largely off limits, and after two decades with a failed state in that country companies can hardly be blamed for investing in short-term measures.

As delegates shuttled out of the Madinat Jumeirah, it was easy to imagine the flurry of deals being concocted in the suites of the Burj Al Arab next door. The challenge they confront grows taller by the day as piracy mutates into increasingly sophisticated organised crime.

"It's not just the guy holding the gun on the hostage. It's the guy paying the guy holding the gun on the hostage. He's getting 50 per cent of the profits," Mr Ford said.

(One of the briefing papers handed out at the conference was entitled Pirate Financing: Understanding and Combatting a Complex System.)

Last year, pirates collected an estimated $85m in ransom payments and should their investors be greedy for more, they will be pleased to know their crews are sitting on a pipeline of receiveables for the coming year: they are believed to hold more than 50 ships, putting the industry on pace for record revenues.

And these attacks are creeping closer and closer to the Gulf. As we spoke in the hall outside the main conference room, Mr Ford pulled out his iPad to produce a digital map of the latest pirate attacks, showing how they are creeping further beyond the Somali coast and the Gulf of Aden and into the Gulf of Oman and the northern Indian Ocean.

"They can do this because they've got smarter," he said.

Mr Ford said governments needed to produce a co-ordinated response because pirates have retaliated against vessels of countries that take tougher stances on enforcement. One option is to adopt a more punitive approach as countries have in South East Asia where the rules of engagement are, to put it delicately, more flexible.

"It's not about technology. Bullets and rocket-propelled grenades work just fine," said Mr Ford.

But he acknowledged there are few easy solutions, even if the financial incentives for finding them are greater than ever.

"There are really two arms to it," Mr Ford said. "How do you make it more attractive for Somalis to want to stay on land and work? And how do you make it more unattractive for them to go to sea to be a pirate?"