Pirate Economies: the Somalian Pirate Stock Market

Pirates are becoming increasingly media savvy and their international profile has achieved new levels of sophistication in recent months if press coverage is anything to go by. While the news increasingly covers attacks thwarted by international navies, and new ships in the waters: here, here, here, and here.

Media attention is increasingly turning to feel good followups of the Maersk Alabama, Editorial analysis of the approaches begin taken to protect shipping, and like the concept of "victory in Iraq" can we "win against pirates?"

While the debate about piracy is also framed in two interesting ways "the downtrodden impoverished native" versus "the pimping playboy" these two simplifications are interacting in a fascinating cultural development that shows how modern technology is creating a new black-market economy in Somalia. In fact, a Pirate Stock Market has been established and is going strong.

Distributed infrastructure, like cell phones, coupled with the availability of weapons and technologies that allow start ups to make high risk business endeavors (pirate attacks) that put their human capital at risk but yield very high profits if they are successful have led to a new upper class of gang-leaders and warlords on mainland Somalia, who are not only living lavishly by comparison to their employees but also, reinvesting their earnings in these pursuits from the relative safety of their strongholds. The evolution of this business model has hit a new threshold, as years of ransom profits have fueled the creation of a Stock Market in Haradheere.

The Haradheere Market as reported by Reuters, comprises 72 'maritime companies' and investment in stock in the companies is publicly available. This investment opportunity is significant in several ways: It is protected by local government, and benefits the district-

"Piracy-related business has become the main profitable economic activity in our area and as locals we depend on their output," said Mohamed Adam, the town's deputy security officer.

"The district gets a percentage of every ransom from ships that have been released, and that goes on public infrastructure, including our hospital and our public schools."

and provides economic opportunity and a community center for those in the pirate industry.

"Given the choice of moving with his parents to Lego, their ancestral home in Middle Shabelle where strict Islamist rebels have banned most entertainment including watching sport, or joining the pirates, he opted to head for Haradheere.

Now he guards a Thai fishing boat held just offshore.

"First I decided to leave the country and migrate, but then I remembered my late colleagues who died at sea while trying to migrate to Italy," he told Reuters. "So I chose this option, instead of dying in the desert or from mortars in Mogadishu."

Haradheere's "stock exchange" is open 24 hours a day and serves as a bustling focal point for the town. As well as investors, sobbing wives and mothers often turn up there seeking news of male relatives missing in action.

This example of economic development shows capitalism in action, the options provided by the pirate industry are high risk, but the risks are not that much higher than other economic options in the region, in fact, with such significant rewards and the implementation of a stock market to increase investment profits are up.

"Ransoms have even increased in recent months from between $2-3 million to $4 million because of the increased number of shareholders and the risks," he said.

"Let the anti-piracy navies continue their search for us. We have no worries because our motto for the job is 'do or die'."

Piracy investor Sahra Ibrahim, a 22-year-old divorcee, was lined up with others waiting for her cut of a ransom pay-out after one of the gangs freed a Spanish tuna fishing vessel.

"I am waiting for my share after I contributed a rocket-propelled grenade for the operation," she said, adding that she got the weapon from her ex-husband in alimony.

"I am really happy and lucky. I have made $75,000 in only 38 days since I joined the 'company'."

In Foreign Policy, Elizabeth Dickenson has been covering the Somali pirate situation and says the following in regards to enforcement of international law:

As I argued earlier this year, piracy is becoming increasingly like drug trafficking: it's not the little guys who you want to go after. It's the big financial gurus who are making bank. In that vein, news of a 'stock market' of sorts might just be good news. That money must be being laundered somewhere... meaning there's a chance financial sanctions could cut deep. It's pirates' pockets that are their Achilles heels.

Until then the western world has to ask, at what point does a 'pirate economy' become a regular 'economy'? Both in our definition of the crimes, and whether or not this criminal market infrastructure won't eventually lead to legal economic development?