Wednesday 23 October 2013

Captain Phillips & The Somali Pirates.

Captain Philips' is the new Hollywood blockbuster staring Tom Hanks. It describes an attack by Somali pirates on an American container ship. In Judas Goat - The Kennet Narrow Boat Mystery, precisely the same thing happens to a Taiwanese vessel which is carrying an illegal arms shipment. In my book it is the Chinese boat which is the villain. Surprisingly they are not real pirates - although they seem to be and look like Somalis - because in fact they are British Special Boat Service personnel who take control of the boat. Their mission is to dump the arms which are found on board. This is a subtle twist to the similar story of Captain Philips, the well heralded Tom Hanks film. My book explains how the arms business works, and asks the question of how it has somehow become a legitimate form of international trade. The fact that it kills thousands of innocent people each year, seems to have escaped most peoples attention, but not the readers of Judas Goat - The Kennet Narrow Boat Mystery!    

Meanwhile Hollywood films are made at considerable profit, using - in this case - the familiar subject of Somali Piracy as a platform for the estimable Tom Hanks to play out this drama. But will it change peoples minds. These Somali's are armed to the teeth with AK47's and the various derivatives including grenade launchers. In their most recent report on the subject of piracy in the Arab Sea  SIPRI has actually analyzed the whole subject as an economic fact. It tells us what the blueprint is for successful Piracy, and makes an interesting story.

More trouble on the high seas: the real story behind Captain Phillips

Posted by Editor at Oct 23, 2013 09:00 AM |
Filed under: ,

(Author: Anja Shortland) Last week I was asked by the BBC to preview the film 'Captain Phillips', the true story of the failed hijack of the Maersk Alabama by Somali pirates. Critics had pointed out that, although brilliantly villainous, the Somali pirates were also portrayed as 'victims' of their circumstances, perhaps 'pawns' in a game not of their choosing. Did I think this was a fair depiction?

For the pirates in the film, the story starts on the beach in Eyl, from where a pirate organizer sends two crews off to sea. The captains choose their teams from a mob of young men desperate to get their lucky break. A bribe does not go amiss in the heavy competition, meaning that the young men in the boat start off their adventure in debt and are absolutely determined to risk their life in order to succeed.
Even more revealing, shortly later the pirate Captain Muse boasts to his hostage, Captain Phillips, about his past exploits, including the fact that not long ago he had hijacked a ship which was ransomed for $6 million! “So, why are you here?” asks Captain Phillip. Captain Muse has no answer.
However, the question is answered in the World Bank’s report on Somali piracy released earlier this year. In it we analysed the business model of Somali piracy, conducting detailed interviews with people in the pirate anchorages and drawing on a wealth of secondary material. Based on our research, it can be confirmed that the ‘beach scene’ in the movie - in which dozens beg to be taken on the pirate mission - has indeed been drawn from life.
So, if the pirate organizer faces a perfectly elastic labour market, how much does he pay the pirates? The answer is that he incentivizes his crew with ‘no win–no fee’ contracts and offers the risk-adjusted market wage. We calculated a ball-park figure: given the prevailing average wages, low life expectancy, a 5 per cent probability of death or imprisonment and an 80 per cent probability of return without prey, the pirate organizer only had to offer around $10 000 per pirate to fill his boats. This squares perfectly with the reported $10 000–15 000 offered to successful pirates in 2008–10. The first man on board received an additional premium in the form of a sport utility vehicle (SUV). This partially reflected the additional risk involved in being the first to put his head above the parapet, but also amounted to an ‘efficiency wage’ encouraging a particular kind of work effort.
A payout of $15 000 would effectively amount to one man’s expected lifetime earnings. But with a large, poor family in the background, an expensive drug habit (most pirates were addicted to khat) and quite possibly several creditors asking for a 'cut', it is not surprising that Captain Muse was back in the boat so soon after his successful hijack. So, how was the million-dollar ransom divided up: who made the money?
My work with Federico Varese shows that the pirates relied heavily on land-based elites to keep their ships safe during the ransom negotiations and after release. The hijack-for-ransom business model was based on hulls, cargo and crew being returned intact promptly after the payment of the ransom. Roving gangs of criminals violently contesting possession or the re-hijacking of recently released vessels would have made ship-owners reluctant to pay top-dollar for ransoms.
Protection theory shows that in the absence of a state, specialist ‘protectors’ (e.g. mafias) emerge to order markets and provide governance. In Somalia this role was played by clan, warlord and Islamist militias. Pirates had little choice but to pay them off to secure their prey in plain sight of the coast for periods of up to three years!
The World Bank’s business model shows that up to 86 per cent of the average ransom ended up being redistributed on land: as ‘anchorage fees’ to local militias, in bribes to regional elites, in inflated prices for supplies and hospitality in the anchorage, as well as in wages for a large number of local guards for the ships. The men in the boats and their financiers only received risk-adjusted returns.
We could stop piracy by permanently lowering the success rate of pirates on the high seas to below 3 per cent. Then, the risk-adjusted returns for financiers and pirates make up all of the average ransom. However, this is very expensive, requiring tight co-operation between merchant ships using ‘best management practice’ in self-defence and our highly professional navies patrolling the Indian Ocean and Gulf of Aden indefinitely.
Unfortunately, there is no realistic prospect of alternative livelihood projects outbidding the pirate organizers. We are not just dealing with the men in the boats but also with the hundreds of willing volunteers on the beach and those inland who have not yet made it to the beach. Even a doubling of average wages in Somalia would not make an appreciable dent in the pirates’ business model.
The World Bank therefore urged a paradigm shift from focusing on the men in the boat to the enablers of the crime, arguing that it would be better to engage with the protectors of pirates in the underdeveloped coastal areas of Puntland and Central Somalia and offer them a contract out of piracy: no hijacked ships in the anchorage in return for development money. This would require local elites becoming accountable and hence a federal Somalia with legitimate local and regional governance institutions.
The film ends with Captain Muse being sentenced to 33 years in a federal jail in the United States. There are too many brave and desperate young men in Somalia to solve the piracy problem this way. Pirate attacks in October 2013 on a super-tanker and a fishing trawler show that if we let down our guard the business model can be easily resurrected after the lull of late 2012 and early 2013. Let’s hope that this excellent film — do go and see it! — reminds us to redouble our efforts on the state-building project in Somalia.


Anja Shortland, King’s College London
This blog post has been cross-posted at the International Network for Economics and Conflict blog, and is part of a collaborative series in partnership with Economists for Peace and Security (EPS) and the United States Institute of Peace (USIP).

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