Piracy costs economy $ 22 b

Monday, 17 October 2011 00:00 - - {{hitsCtrl.values.hits}}

The cost of piracy to the global economy is estimated at $ 22 billion, and $ 804 million of dirty money is estimated to have left Somalia since the beginning of the civil war in 1991.

A report by Centre for American Progress reveals that more than 154 ships were attacked in the first half of 2011 — 21 of those were successfully hijacked, with a total 362 hostages on board.

Countries are increasingly being forced to spend millions of dollars on ransoms, excess insurance premiums for ships travelling through the Gulf of Aden, re-routing ships to avoid high-risk regions, security costs, naval forces and the prosecution of Somali pirates in foreign courts.

These costs are likely to get even higher because the entire Indian Ocean was classified as a war risk zone in January, meaning that ships transiting through the region are subject to excess premiums.

Piracy is not the only illicit source of money in Somalia.

Since the beginning of Somalia’s civil war to the present, $ 804.4 million has left the country in illicit capital outflow according to watchdog group Global Financial Integrity.

These illicit financial flows include proceeds from bribery and theft by government officials, as well as resources generated through drug trafficking, racketeering, counterfeiting and commercial tax evasion.

About $ 12.4 million is estimated to have left the country in illicit flows at the beginning of the civil war in 1991.

By 2000, this had risen to $ 32.9 million, and in 2008 it had surged to $ 128 million, as pirate attacks intensified in the region.

The report also states the CIA made payments to Somali warlords totalling “hundreds of thousands of dollars” in an effort to capture suspected terrorists believed to be hiding in Somalia.

The cash involved is difficult to ascertain, but the report states that “even a modest $ 5 million a year in payments over the course of the conflict would suggest that $ 105 million has been expended in cash payments. Actual figures are likely higher.”

Counterterrorism efforts, including the cost of aerial attacks, intelligence tracking, and intelligence agency assets operating on the ground are likely in excess of $ 495 million, “using a fairly conservative estimate of $ 45 million in annual spending for a period of 11 years.”