Who Benefits from Somali Piracy Ransoms?

Dr. Anja Shortland of Brunel University has prepared a fascinating study that analyzes who benefits from Somali piracy ransoms. Published in January 2012 by Chatham House, it concludes that about one-third of pirate ransoms are converted into Somali shillings, benefiting casual labor and pastoralists in Puntland. Pirates probably make a significant contribution to economic development in the provincial capitals of Garowe and Bosasso. Puntland's political elites are therefore unlikely to move decisively against piracy. Coastal villages have gained little from hosting pirates and may be open to a negotiated solution which offers a more attractive alternative.

Piracy has created employment and considerable multiplier effects in the Puntland economy, even if a significant proportion of the proceeds is invested in foreign goods or channeled to foreign financiers. The distribution of ransom money follows traditional patterns in Somalia, involving considerable redistribution and investment in urban centers rather than coastal villages. Piracy-related gains have been largely offset, however, by the rise in international food prices. The poor are no better off in absolute terms.

The total cost of piracy off the Horn of Africa (including the counter-piracy measures) was estimated to be in the region of $7 to $12 billion for 2010, while ransoms brought in about $250 million. Even if Somali communities received all of the ransom money, replacing this source of income with a combination of foreign-funded security forces and development aid would be considerably cheaper than continuing with the status quo.

The report is titled Treasure Mapped: Using Satellite Imagery to Track the Developmental Effects of Somali Piracy.