NCPA - National Center for Policy Analysis


December 1, 2008

The increased risk of hijacking in the Suez Canal -- the main route for ships plying their trade from Asia to Europe and the East Coast of the United States -- has resulted in higher insurance premiums, crew costs and security costs.  All this makes the voyage more expensive, and these costs get passed on directly to consumers, says Arthur Bowring, managing director of the Hong Kong Shipowners' Association.

But even though countries are doing what they can to stop piracy by redirecting ship routes, it isn't helping.  Because if piracy is repressed in one area, it always seems to reappear in another:

  • An increasing number of owners are persuading their charterers to allow them to make the much longer voyage around the Cape of Good Hope, despite the higher cost; however, the hijacking of a 320,000-ton oil tanker proved that even this route is no longer secure.
  • This means that piracy is now affecting both of the main trade routes between Asia and Europe and the East Coast of the United States, and are a threat to the economies of the countries where the goods are intended to end up.
  • In the current financial climate, the potential increase in the price of goods is just one more factor that will not help to restore economic confidence.

The long-term solution will not be found at sea, but on the ground in Somalia.  It is only through a properly functioning government and law enforcement agencies that the problem of piracy can be mitigated.

But right now, a better solution is to coordinate ships' transits with naval presence and to monitor International Maritime Bureau reports to avoid areas where attacks are taking place. Countries should also adopt and enforce legislation that criminalizes piracy at sea, so that pirates may be caught by navy ships and prosecuted, not returned to the beach to pirate again, says Bowring.

Source: Arthur Bowring, "The Price of Piracy," Wall Street Journal, November 25, 2008.

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