Somali Pirates: an insight into a thriving illegal trade $150 million

[General Duke]

Kenya Puts $150 Million Estimate on Payments to Somalia's Pirates

 

This is IN THE NEWS in VOA Special English.

 

Kenya wants to organize a major international conference to discuss how to fight piracy off the coast of Somalia. The conference may also deal with ways to rescue Somalia from seventeen years of civil war. More than forty percent of its people depend on food aid.

 

Kenyan Foreign Minister Moses Wetangula says the world cannot end piracy without also dealing with Somalia's political problems. He says the piracy is partly born out of a "collective failure" to solve the problems of Somalia. He says the lawlessness there has created a breeding ground for the current threat.

 

Somali pirates operate in the Indian Ocean and the Gulf of Aden. The Gulf of Aden connects the Red Sea to the Mediterranean by way of the Suez Canal. The pirates have fast boats, modern weapons and equipment like satellite phones and global positioning systems.

 

 

Pirates hijacked the Sirius Star off the coast of Kenya and moved it to waters off Somalia

The hijacking a week ago of an oil supertanker from off the coast of Kenya has brought new attention to the maritime criminals. Somali pirates have attacked more than one hundred twenty ships this year and hijacked almost forty of them.

 

The United Nations estimates that pirates have received about thirty million dollars in ransom money for hijacked ships. Kenya's foreign minister says his government believes pirate networks may have earned as much as one hundred fifty million. There are concerns that some of the money could go to Islamic terrorists in Somalia.

 

The tanker Sirius Star, at three hundred thirty meters long, is the biggest ship ever known to have been captured by pirates. It also happened farther south than most attacks, and farther out at sea -- more than eight hundred kilometers from land.

 

The ship was headed for the United States with two million barrels of oil, worth an estimated one hundred million dollars. A Saudi Arabian company owns the tanker. The pirates have reportedly demanded twenty-five million dollars in negotiations to release the ship and its crew of twenty-five.

 

Somali pirates generally do not steal goods or kill hostages. They are believed to be holding seventeen ships with about three hundred crew members. Among the ships is a Ukrainian vessel hijacked in September with a load of military weapons including tanks.

 

The increase in piracy is raising the cost of insuring ships. Also, oil from the Middle East and exports from East Asia could take longer to arrive.

 

Some of the world's heaviest shipping traffic passes the Somali coast. But major shipping companies have begun to consider new routes. One of the world's biggest shippers, A.P. Moller Maersk, says it will avoid the Gulf of Aden. A move away from the Suez Canal could hurt Egypt's economy.

 

American and other foreign navy ships are now watching for pirates. This week the Indian Navy destroyed a heavily armed "mother ship" in the Gulf of Aden. But the area to protect covers more than one hundred sixty million square kilometers.

 

And that's IN THE NEWS in VOA Special English, written by Brianna Blake. I'm Steve Ember.

[General Duke]

14 Reasons Why Somali Pirates Run a $150 Million Per Year Business

Your business can actually learn a thing or two from these swashbuckling swindlers.

 

By Inside CRM Editors | November 24, 2008

 

Hosted CRM Buyer's Guide

 

 

With a global financial slump, daily layoff announcements and major corporate implosions, businesses need all the help they can get to stay afloat. Though a seemingly unlikely source of economic guidance, the multimillion dollar Somali pirate operation off the coast of northeast Africa has plenty to offer struggling companies today. Here are 14 lessons your business can learn from the illicit but profitable Somali pirate trade:

 

1. Low Overhead: Somali pirates use nothing but the basics to run their business. They operate off of a mother ship — nothing more than an old fishing boat — from which they launch speed boats that handle the actual attacks on the targeted vessels. They carry hooks, ladders and basic Somali military weaponry to achieve their goal of infiltrating the victim ships.

 

2. Diversified Labor Force: The Somali pirate labor force is split into three main groups. According to BBC analyst Mohamed Mohamed, their pirate gangs are comprised of ex-fishermen, which are considered the brains of the operation due to their knowledge of the ocean waters; ex-militia, which have fought for former Somali warlords and handle the muscle behind the operation; and technical experts that operate the necessary high tech communications equipment, such as GPS, satellite phones and military hardware.

 

3. Flexible Business Operations: The pirates frequently move their central operations from port to port for several reasons: one, to achieve proximity with targeted vessels; two, to keep naval ships at a distance; and three, to increase their reach.

 

4. Dominant Market Share: The International Maritime Bureau estimates that 30 percent of all pirating activities worldwide come from Somali operations.

 

5. Good Location: According to the Associated Press, more than 10 percent of petroleum shipments to North America and Europe travel through this region.

 

6. Access to Key Industry Knowledge: Somali expats living in nearby Middle Eastern port cities notify pirates of large vessel departures with valuable merchandise.

 

7. Good Distribution of Profits to Employees and Shareholders: The demise of most organized crime operations normally comes from infighting and internal power struggles. Somali pirates have a unique distribution of profits that reaches friends, family and clan members across the region. There have been few reports of conflict from within Somali pirate groups.

 

8. Running a Cash Business: The best business is one in which you operate with cash. Somali pirates of course do not accept credit cards or checks, nor do they offer terms. Everything is handled in cash — which provides for a very healthy cash flow statement.

 

9. Negotiating to Optimize Return on Inventory (Albeit Stolen): Somali pirate spokesman Sugule Ali commented that the pirates are not greedy — they're just trying to protect themselves from hunger. Although a $20 million ransom might seem like a ridiculous sum to feed themselves, the pirates have become effective negotiators in asking for amounts that will get paid.

 

10. Reinvesting a Big Portion of Profits into the Business: The Somali pirates have grown their business from a small fleet of fishermen trying to keep international boats from poaching their waters to a multinational, multimillion dollar enterprise by reinvesting profits into the purchase of new a mother ship, more speed boats and sophisticated weapons.

 

11. Competitive Prices: Though limited to the shores of northeastern Africa, the Somali pirates have an understanding of the world economy. Several affected companies and governments have argued that it is sometimes cheaper to pay the ransom than to mobilize a national navy or hire private security to properly patrol the region’s waters.

 

12. A Repeatable Business Process: The pirates began operations in the late 1990s patrolling their fishing waters. In just under a decade they have improved on their process of overtaking ships by sheer repetition. In 2008 alone, it is estimated that they have seized over 90 boats.

 

13. Good Inventory Turn: Out of the 90 ships the Somali pirates seized this year, they only have 17 left on inventory.

 

14. Diversification: As with any other major corporation, growth and stability come from diversification. It has been rumored that the initial Somali pirating operations were funded by wealthy Dubai businesspersons a few years ago. Somali pirates are now diversifying their operations by lending money to those same executives that have lost millions of dollars in the current financial meltdown.

 

Think the Somali pirates have other lessons to offer struggling businesses? Leave your ideas in the comments box below.