Cindy Vallar, Editor & Reviewer
P. O. Box 425, Keller, TX 76244-0425
Cost of Piracy
Modern Piracy, Part 3
By Cindy Vallar
From an economic perspective, piracy barely makes a dent in the $2 trillion industry of maritime commerce. Any figures attributed to such losses are estimates because no one keeps statistics on those costs and only 40-60% of the attacks are reported each year. Statistical data provides an overall view of the problem but it is by no means a true indicator of the actual criminal activity that takes place. (Captain David N. Kellerman, founder of MaritimeSecurity.com, Worldwide Maritime Piracy, June 1999) Jack A. Gottschalk and Brian P. Flanagan, authors of Jolly Roger with an Uzi, calculate that those losses amounted to $.32 for every $10,000 of goods shipped in 1997. Therefore, there is little financial incentive for companies to deal with the problem.
Not only is the economic cost inconsequential to companies, so is it to some governments. One hot spot with a large concentration of pirates is Southeast Asia. To combat the problem, Thailand set up an anti-piracy unit eleven years ago. Although they spent over $13 million dollars, they haven’t caught a single pirate. They may have deterred pirates from attacking ships, but the expense involved may not seem economically feasible to governments when compared to the cost of absorbing the losses.
If the problem of piracy continues to grow—and there are indications that it will—higher insurance premiums may cause companies to take action. Shippers may also discover that they can’t find coverage if they continue to visit ports where pirates abound. This may have dire consequences for poorer countries because goods will travel farther to reach their destinations and prices for those goods will increase accordingly. Two factors that are more likely to force industries and countries to suppress piracy are the environmental cost and the human cost.
When pirates attacked the Baltimar Zephyr in 1992, they killed the ship’s master and first officer and threw three seamen overboard. The pirates absconded with several hundred dollars, leaving the moving ship’s bridge unattended for ninety minutes until the crew freed themselves. What if pirates attacked an oil tanker at night and incapacitated the crew while the ship traveled the Phillip Channel between Indonesia and Singapore, one of the busiest and narrowest of the world’s waterways? If the tanker went aground or collided with another ship, the resultant oil spill would be disastrous. Apart from the pollution concerns, there is every possibility that the seaway would have to be closed to shipping and the fishing in the area would be ruined for many years. (Captain Jayant Abhyankar, Deputy Director of ICC International Maritime Bureau, An Overview of Piracy Problems, 1999)
During a five-year period from 1980-1985, the UN High Commissioner for Refugees estimated that pirates raped 2,283 women and kidnapped 592 people amongst the Vietnamese boat people. In 1992 ten badly burned corpses were discovered in the refrigerator aboard the Hai Sun. Although that mystery was never solved, another was. The Hai Sun was actually the Erria Inge, which had disappeared several months before. Earlier that year, the seven-month-old daughter of the master of the Valiant Carrier was injured when pirates attacked the tanker near Indonesia. Jangay Ajinohon suffered a head wound when two pirates attacked the Normina in 1996. He survived by jumping overboard, but the other nine members of the unarmed crew were killed. In 1997 the fourth engineer aboard the Yi He bled to death after being shot by four armed pirates. When pirates boarded the Fione last year, the captain was injured by a hammer and one of the crew suffered a skull fracture. At the end of February 2000, the Hualien No. 1 disappeared. The fate of 21 crewmembers is unknown.
These incidents demonstrate the human cost of piracy. When the International Maritime Organization released its first and second quarterly reports for 2000, ships attacked by pirates numbered 182. Almost half of the reported incidents that occurred in the South China Sea involved violence or implied violence against the crews. According to figures provided in the Worldwide Maritime Piracy, June 1999 report, 24% of personnel aboard ships who reported being attacked by pirates suffered injuries. In An Overview of Piracy Problems Captain Abhyankar writes: A total of 202 incidents were reported in 1998. The majority of these attacks were violent. At least 79 persons have been killed and 35 injured during piracy and armed robbery attacks worldwide during 1998. Other figures show that 238 crewmembers were taken hostage. In 45 incidents the pirates were carrying guns and in 39 they possessed knives.
In light of these issues, why aren’t all pirate attacks reported? Port authorities are likely to detain the ship and its crew while they investigate the attack. If the cost to do so exceeds the sustained loss, the owners are unlikely to make a report. In 1997 those operating costs amounted to $10,000 per day whereas Captain Abhyankar estimates the average loss per attack at $5,000. Higher insurance costs and salaries for future crews may also be a factor in their decision to keep silent. If local law enforcement is suspected of being in league with the pirates or is turning a blind eye to their activities, then the likelihood of the attack being reported is nil. As Captain David Kellerman writes: “It is understandable to have financial concerns given the fierce competition within the maritime industry, but the reluctance or failure to report acts of maritime crime is the basis for the continued proliferation of the problem.”
Not everyone is ignoring the problem though. By pooling their resources, some shipping companies have established international organizations that educate and combat piracy in various ways. Among these are the IMB Piracy Reporting Centre, the Baltic and International Maritime Council, and the Singapore Shipping Association.
© 2000 Cindy Vallar
Read Part 4 of this series on Modern Piracy
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