I went through a very interesting and very comprehensive new report on Somali piracy by the World Bank (pdf, 12MB).  Some highlights:

Fact 1. Piracy incidents and hijacks have gone down dramatically last year (click to enlarge)

Somali piracy attacksFact 2. Nevertheless, piracy still imposes a high cost on trade

piracy imposes a distortion on trade that has a high absolute cost. When the shortest shipping route between two countries is through piracy-infected waters, the additional cost of trade between them is equivalent to an increase of 0.75 to 1.49 percentage points (with a mean estimate of about 1.1) in total ad valorem trade costs. In absolute terms, the impact is large: since about US$1.62 trillion in global trade traveled along routes affected by piracy in 2010, that year Somali piracy cost the global economy an estimated US$18 billion, with a margin of error of roughly US$6 billion. If piracy continues to disrupt global trade as it has done, similar amounts will be lost every year.

Fact 3. Impact of piracy on tourism

Somali piracy and tourism

I wonder how credible this is. The report says that the argument is difficult to show quantitatively but it is supported by anecdotal evidence

anecdotal evidence does suggest that pirate attacks have suppressed tourism in countries like Kenya and Seychelles, popular cruise-ship destinations (Oceans Beyond Piracy 2010; Mbekeani and Ncube 2011). While those on cruises are not a large fraction of total visitors, they tend to spend substantially more than other tourists

Fact 4 (my favorite). The Somali pirate stock exchange

At the outset of an operation, an instigator provides or gathers from investors the funds needed to launch the operation and identifies a pirate commander to organize the attack. At least 10 instigators are known to be active in Puntland (Lang 2011). Some attacks, however, are launched opportunistically without being prefunded, in which case investors are solicited as necessary to fund ransom negotiation costs

The initial investment can be provided in seed money or goods, such as an engine, skiffs, or weapons. In exchange, the financiers are entitled to a share of the ransom if the operation is successful. Reuters (2009) and Kraska (2010) mentioned a stock exchange in Harardheere, where anyone could invest in pirate operations.

The Wall Street Journal  wrote a story on this as well:

The world’s first pirate stock exchange was established in 2009 in Harardheere, some 250 miles northeast of Mogadishu, Somalia. Open 24 hours a day, the exchange allows investors to profit from ransoms collected on the high seas, which can approach $10 million for successful attacks against Western commercial vessels.

While there are no credible statistics available, reports from various news sources suggest that over 70 entities are listed on the Harardheere exchange. When a pirate operation is successful, it pays investors a share of the profits. According to a former pirate who spoke to Reuters, “The shares are open to all and everybody can take part, whether personally at sea or on land by providing cash, weapons or useful materials. . . . We’ve made piracy a community activity.”

Much more here (pdf)

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