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Economics of Piracy June 20, 2011

Posted by Chris Mark in Piracy & Maritime Security.
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Geopolicity published a very good study in May 2011 which surveys the earnings of pirates and analyzes the economics of the maritime piracy industry.  While it is no surprise that piracy is increasing significantly off the coast of Somalia but the report articulates why it is growing at such a pace. With an estimated 1500-3000 pirates operating in the Somalian waters alone, attacks are increasing at a breakneck pace.  In the first quarter of 2011, there were 117 identified attacks which resulted in 338 people being taken captive and 7 crew members killed.  Average ransom paid was between $3.5 and $4.5 million US.   According to the survey Somali pirates earn between $33,000 – $79,000 US per year with a potential lifetime earning of between $168,000 and $394,000.  When compared to the US median income of roughly $34,000 per year, it seems like piracy pays well.  When compared to the average per capita income of $500 per year in Somalia, it is easy to see why piracy is so attractive.  The income earned by pirates is between 679% and 1,570% higher than the average Somalian.  The report estimates that the current cost of piracy is between $4.3 and $8.5 billion per year increasing in 2014 to $13 and $15 billion per year.  In short, it is a growth industry.

 

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