Piracy REPORT:
Analysis
Plunder, Politics, Presumption and Puntland
Is Piracy Driving Growth in Puntland?
By ROBERT YOUNG PELTON 01/14/2012
Bosaso Harbor
Bosaso Harbor

British Professor Anja Shortland recently presented her latest report on piracy in Somalia at Chatham House. Like many recent piracy reports that build on other piracy reports, this academic project is designed to add clearer understanding to the international community that seeks to help solve (and often profit by) problems in Somalia and the maritime region.

Dr. Shortland teaches Finance and Banking at Brunel in the UK and has previously delved into popular and obscure topics that range from “The Effect of US Television News on Demand for Tourism in Israel” and “Political Violence and Excess Liquidity in Egypt”. Her credentials are impeccable and her reputation secure, but her grasp of piracy dynamics and geography should be examined. Her latest report is entitled "Treasure Mapped: Using Satellite Imagery to Track the Developmental Effects of Somali Piracy”.

This recent report builds on her previous paper which did not get much media pickup and was entitled, “The Business of Piracy in Somalia” authored with Sara Percy. Essentially the original form of the academic paper claimed that piracy has fueled Puntland's growth and that piracy will actually increase as the Puntland politicians spread governance. Let's coin a new word and call what she is describing as a "piratocracy". She also makes the obvious point that pirate money does not stay in the coastal towns from where they operate, but in the main cities where the elites live. She specifically focuses her attention to the government city of Garowe and the port of Bosaso.

The second largest city in Puntland (and pirate capital) of Galkayo is ignored. Perhaps because it might remind readers that the largest center of piracy, hostages and kidnapped vessels are actually based in the central state of Galmagud. What is bothersome is her presumption that the success of Puntland,, its people and their government is tied to piracy. Relying on the lack of interest to double check what is actually proven in the sources she cites and the general first hand unfamiliarity of her audience with the region and players.

To understand where Shortland is going, it is helpful to see where she is coming from. Specifically, the conclusions from her original version of this piracy paper last updated in August 2011 are as follows:

1) Somali piracy is a land-based problem and naval control mechanisms are not changing the incentives for pirates.

2) Improving Somalia’s anarchic political situation will not necessarily stop piracy but will actually increase it.

3) Piracy is an organized criminal activity, and like other organized crime groups will be difficult to control, especially if it becomes embedded in state structures.

4) Few of the relevant players have any real incentives to alter their behavior.

Her most recent report recycles some of her previous research and some of the same general conclusions (with less strident accusations) and adds more research to show urban development and economic indicators of the effect of pirate money. The assumptions and tone of this report follows a well worn path typically taken by those who have never been to Puntland. But it is an important report, created by a respected researcher and presented by a world renowned institution. How seriously should readers take the author's new suggestions when her piracy report from August 2011 is reviewed in context with this new January 2012 iteration?

A review of recent events appears to indicate that her four conclusions from her first report are no longer correct:

1) Naval forces have no effect: Clearly pirates come from land, but piracy occurs at sea. In the ocean around Somalia naval mechanisms, albeit under resourced, have significantly enhanced and supported the shipping industry’s attempts to increase safety, situational awareness and resulted in numerous interdictions. Yes the few ships and aircraft that patrol the vast oceans could be more plentiful and their actions more meaningful but currently pirate groups are tracked from the time they leave land to logging incidents at sea. These naval resources currently provide mariners a real time warning system and complex system of tracking and information sharing among security groups and governments. The truth is that the naval presence along with industry steps (like hiring security teams) has significantly lowered the success of piracy and the resultant cash flow.

2) Enhanced governance supports enhanced piracy: Increased governance and political cohesion in the north has enhanced the ability to identify, arrest, prosecute and even deter pirates. Puntland currently has arrested and put more pirates in prison than any other nation. Better systems in country and coordination also aid the ability to track finances, associates and deter planning of future attacks. Although Puntland passed the first anti-piracy law in Somalia and has focused on arresting, prosecuting and jailing piracy, the author chooses to cite a 2010 UN Report that accuses the government of Puntland of accepting proceeds from piracy. The report was, in fact, written by the very same UN contractor who has tried to shut down the region's anti-piracy efforts.

3) Piracy will become or is embedded in Puntland's government: The UN report is in direct contrast with actual developments on the ground. Piracy is not embedded in state structures. For example, despite the opposing UN efforts to prevent the creation of an indigenous anti-piracy force, Puntland has just announced the launch of the Puntland Marine Police Force. They have arrested hundreds of pirates with over 250 in Bosaso prison alone and over 400 in jail region wide. All this has transpired in the last two years because of UAE support for anti-piracy efforts.

The central TFG government and Somaliland have little exposure to piracy. Galmadug has little functioning governance or security institutions, but has just begun to take steps to defeat piracy. They await funding or assistance in defeating pirates.

Even quasi administrations like al-Shabaab have publicly attacked pirates (their recent sale of kidnap victims notwithstanding), has not supported piracy. Coastal communities in Puntland have violently and openly threatened pirates forcing them into more remote regions. Evidence indicates that Somali's across the board do not want piracy in their midst.

There is no argument that the dollars generated by piracy are an enticement to support the criminals but there is clear evidence that Somalis’ no longer see piracy as a noble pursuit and that state structures are fighting back against piracy

4) There is no incentive for key players to abandon piracy: Proof that there are incentives to change major players attitude towards piracy are everywhere. Major pirates like Boyah and Kulan are in jail. The UAE has provided millions to support an anti piracy force. The US, NATO and EU track, arrest and attack pirates on a weekly basis. Political and security elements do not benefit from piracy and see the influx of funds from international sources to defeat piracy. President Farole was invited to the UK to open an anti-piracy conference and has been an outspoken critic of piracy and the inaction of the international community. Pirates, despite increased attacks, are having dismal success, which will lead investors to question the use of their ransoms to fund pirates. There are plenty of incentives for Somali pirates, governments and investors to move away from piracy.

Pirates, Politics and Puntland

The professor’s latest report released in January 2012 and the resultant media focus ignores the erroneous conclusions from her first attempt to define piracy. In her latest document, she removes personal attacks but still singles out Puntland. The new report is powered with photographic proof of the effects of what she maintains is pirate money. This use of matching "before and after" satellite photos and her economic research make the case that Puntland’s economy is driven by piracy. Her research can’t quite figure out how much, where the money came from or where it goes, but it’s an attempt to prove to the world that Puntland is a 'piratocracy' with little chance of redemption.

Dr. Shortland has the right credentials for making this argument, but her contextual confusion and lack of hard proof creates questions on as to her motivation for ignoring other reasons for Puntland’s growth. Despite clearly pointing out that “each of the data sources has significant weaknesses” her latest January 2012 makes the following conclusions:

1) Coastal communities have not greatly benefited from piracy. Instead the regional centres of Garowe and Bosasso, which provide the material inputs and the fire-power of the pirate operations, appear to benefit from piracy-related investment.

2) Piracy appears to lead to widespread economic development and therefore has a large interest group behind its continuation.

3) Puntland’s coastal communities could easily be made considerably better off through activities other than hosting pirates. The international community should bear these results in mind when developing land-based strategies to resolve Somalia’s pirate problem.

She goes on to muddy her conclusions by stating, “it is unclear where the beneficiaries from piracy are located, whether revenue from pirate activity is mostly channelled abroad or used domestically and how widely the benefits are spread.” The oft quoted but incorrect report that states, “the total cost of piracy off the Horn of Africa (including the counter-piracy measures) was estimated to be in the region of US$7–12 billion" for 2010 is trotted out. Somalia Report has shown that not only is this highly inflated number speculative but that is an income number, not a cost.

Her estimates of ransoms are generally accepted numbers using a roll up of US$250 million. Without any hard evidence, the author then assumes that a third of that money hits the ground. If the current population of Puntland is just under 5 million that is about $50 per person or a pirate pay raise of roughly 8% from the average per capita income estimate of $600 per person in Puntland. So just using simple math pirate money must be going somewhere. However if you take Somalia Report's estimate of roughly $150M in ransoms paid in 2010 and spread that over the same Puntland population base, that's not much of an economic boost.

The report goes on to say, “Even if Somali communities received all of the ransom money, replacing this source of income (for example with a combination of a foreign-funded security forces and development aid) would be considerably cheaper than continuing with the status quo”. That is a noble sentiment but there is no proof that providing aid money to replace criminal income would have any effect - much like paying bank robbers not to rob banks.

The report also states that, “A negotiated solution to the piracy problem should aim to exploit local disappointment among coastal communities regarding the economic benefits from piracy and offer them an alternative that brings them far greater benefits than hosting pirates does. A military crack-down on the other hand would deprive one.” There is no proof of a military attack being planned on coastal communities, and she very clearly makes the point that these communities do not benefit from piracy. She provides no proof that these small villages host pirates and does not realize that these ships are held far from coastal towns. Pouring money into angry fishing villages seems like a great idea but once again there is no evidence that pirates, who truck their supplies from inland and do their work far out to sea, will vanish.

Accurate Land Based Solutions Require Accurate Land Based Research

Hobyo, Galmadug  - What happened to the pirate capital of Somalia?
©Somalia Report
Hobyo, Galmadug - What happened to the pirate capital of Somalia?
There is little argument that piracy is land based, that Somalis are generous in the distribution of wealth, industrious in investment and that Puntland is experiencing unprecedented growth compared to the rest of Somalia. But can all that be viewed through the lens of piracy? Should the international community use monkey numbers like "$7 -12 billion in piracy costs" to estimate pirate pay off programs? Where exactly does this junk science come from? Much of the information on Somalia and piracy comes from well intentioned guestimates, cubicle-based research and special interest groups. There is, after all, money to be made in Somalia and the surround waters. "Anti-piracy" is just the latest opportunity to attract the security, development and pundit crowd.

What if Puntland’s success was driven by factors other than piracy? Could it be that Puntlanders are not all criminals and view piracy proceeds and lifestyle as haram? What if the current President of Puntland is actually the most vehement anti piracy proponent in the region?

There is a distinct whiff of colonial recidivism in this report's assumption that pirate waters float all boats in Puntland. There seems to be little interest in proving that Somalis are doing just fine using their own capital and reaping their own regional rewards.

The paper's logic and assumptions are flawed in the use of bad numbers, unfounded accusations, and what appears to be a lack of moral respect for Somalis. Conversely the simplistic assumption that pouring foreign money into a region will defeat a small group of criminals would assume that money will convert the wicked into saints. The reliance of unreliable research and a lofty view via satellite imagery to determine growth all contributes to a sense of good intentions but disconnected reality in this report.

The most glaring error in Shortland’s new report is that she ignores the main pirate center of Galmadug and focuses on Puntland, specifically Garowe and Bosaso. She makes the simple case that Puntlanders are guilty of being more successful than other parts of Somalia because pirates use the northeast coasts to reach the shipping lanes. She provides no direct proof that piracy fuels Puntland's growth or government but forms conclusions within that lack of hard data.

She does not even mention that most pirate ransom drops drops take place in Galmadug or that most hostages are held in the central region of the country. Injecting that critical point and geographic reality would skew her assumptions. There seems to be a complete blind spot to how pirates actually spend their ill gotten gains.

Her point is that piracy drives Puntland’s success and that the success of Puntland's government will bring more piracy. Something that assumes a dark view of Puntland's elders, politicians and people and once again ignores geographic reality.

“This paper seeks to understand the on-land impacts of piracy, in order to assist those seeking to find on-land solutions”. But then she backhands the government and businessmen of Puntland by saying, “Pirates probably make a significant contribution to economic development in the provincial capitals Garowe and Bosasso. Puntland’s political elites are therefore unlikely to move decisively against piracy.”

Somalilanders and certain elements of the UN might applaud her bold stand, but those who live in Puntland would question where that assumption came from. There is no hard data to support this rather aggressive slap, most likely because she forgot that she cited UN speculations in her previous report, but forgot to include this reference the recent report. Local politicians are eager to point out that the 2010 UN Somalia Eritrea Monitoring Group (SEMG) report was written without those researchers setting foot in Puntland.

In her previous report on piracy, there was an attempt to attack the root cause of this economic windfall. Back then she correctly identified insurance payments as the culprit. Most maritime insurance money comes from UK based insurance companies and depending on who speaks out of class, about a third of all pirate money ($44.5M) comes directly from the UK and is specifically approved for payment to criminals by the Serious Organised Crime Agency with an the major balance moved from offshore banks. In addition, the vast majority of maritime security companies are British and the profit and tax derived from piracy mitigation benefits her audience. Why is this missing from this report? Perhaps because her January report was presented in the UK and her previous report was German sponsored?

In her latest report, Shortland also falls into the trap of citing junk science as Somalia Report pointed out, her wildly inflated estimate of $7 to 12 billion cost of piracy is taken by an ambitiously amateur attempt by Oceans Beyond Borders to rope in every possible number to get media attention. The problem is these inflated numbers are actually profit generators for the risk management, shipping and maritime business. It could be potentially embarrassing and career damaging to address an audience that makes more money from piracy than pirates do. Without ransoms paid by insurance companies there simply would be no discussion on the effect of piracy in Somalia. Without the rapidly growing, primarily UK-based business of maritime security, there would be little interest in this report.

Puntland and Pirate Profiteering

Pirates as Investment Bankers?
© Somalia Report
Pirates as Investment Bankers?
In this report Shortland instead focuses on Somalis and specifically blames Puntland’s government for profiting. The overarching warning is that as the Puntland governance becomes more entrenched and pervasive, the greater the spread of piracy. This is never backed up or proven in her report but her assumption is not supported by facts on the ground.

Although she is careful to point out that the “Bosaso’s status as Puntland’s boomtown makes it an attractive location for successful (former) pirates to invest their newly found wealth in businesses and real estate.” She has no hesitation in submerging the non-piracy related growth in the region and chooses to blame the two cities success on pirate money. This is an unfortunate choice of focus since we are to believe that income from piracy makes the region’s growth seem illegitimate and criminal.

It is important to note that her initial August claim that that Puntland’s leaders directly benefited from piracy (quoting the 2010 UN allegations) has vanished. In its place is the term “political elites” as in “Puntland’s political elites are...unlikely to move decisively against piracy.” There is no data to support this or clear identification of who she is referring to but the inference is clear. Shortland's original report said "The UN monitoring group in the area notes that the administration of General Abdirahman Mohamed ‘Faroole’ is “nudging Puntland in the direction of becoming a criminal State” with several key officials receiving payments from piracy (UN Security Council 2010, 39).

The latest July 2011 UN Security Council report actually reverses this unproven accusation and actually makes the opposite point; "In 2010, however, the Puntland administration began to adopt a firmer stance against piracy, and during the course of the year pirate anchorages began to shift southwards from the notorious piracy stronghold of Eyl to the village of Garacad in northern Mudug region." The paragraph goes on to detail specifics of Puntland's aggressive approach against pirates. Ooops.

Let us accept that between $140 and $250 million is paid (in US $100 bills) into the hands of pirates. Her first assumption is that a third of this is exchanged into local shillings. This ignores Somalis deft understanding of exchange rates, physical quantity of notes required and the simple fact that Somalis prefer US dollars over their shaky shilling. But let's just assume that much of that money swirls around somewhere. It clearly does not stay in dusty Galmadug and the first place where the money seems to stick is Galkayo with more construction occurring as you head north. Bosasso is a boom town compared to sleepy Garowe. Supermarkets overflow, traffic clogs the streets and new buildlngs seem to spring up overnight. But that is just a ground perspective not academic discipline. The reader is supposed to assume that this pirate money is behind Puntland's real estate boom and that the state structure is tacitly perhaps even openly supportive of criminal funding.

What If Puntland's Success Didn't Come From Pirate Money?

Pirates in Garowe Prison
©Somalia Report
Pirates in Garowe Prison
The report is creative in its premise and well presented. Before and after satellite photos are convincing proof that that Garowe and Bosaso have grown between 2001 and 2009. Economic expansion in these two business hubs has been exponential since he south fell into chaos. Somaliland has experienced similar growth with its stable, investment-friendly environment. Somaliland has a bustling coast port (Berbera), a jam packed capital (Hargeisa), and nary a mention in this report that this recent success didn't come from piracy? Piracy is not a factor in Somaliland yet it experiences similar success.

Could a growth environment created by democratic elections, fiscal sanity and relative stability be the real reason behind growth in Puntland? These factors are not addressed. The author does note that regional development began in 2005 “with the growth of piracy” and goes on to boldly state that the growth of Garowe and Bossaso further accelerated with the explosion of piracy in the Gulf of Aden in 2008. By her own calculations $40M was paid in ransoms in 2008 but she is probably too embarrassed to mention that less than a million dollars was paid by pirates in 2005...for two ships in Mombassa, Kenya.

So what really happened to lift Puntland's fortunes?

In 2005 newly elected president, General Mohamud Muse Hersi "Adde" began an aggressive development campaign in conjunction with the oil-rich United Arab Emirates. Much of it focused on the healthy export of Somali supplied animals. In 2008, democratically elected banker and PhD candidate turned Puntland President, Abdirahman Mohamud Farole accelerated development and international trade, expanding his relationship with the UAE including funding an anti-piracy police force. The population of Puntland swelled as fighting in the south pushed Somalis north. Along with those newcomers came the impressive support of the Somali diaspora. Somalis not only support their worse off local brethren, but know a good investment when they see it. Real estate, shipping, construction, trading and many other sectors have expanded rapidly with the growing population.

Investment from Somali diaspora centers with easy access to funds from Minneapolis, London, Dubai or Nairobi are also a factor behind the investment surge in the report’s selected cities.

Invisible Money

A 2011 UNDP report on remittances offers some perspective on the impressive impact that invisible money has. This excellent report details the millions in remittances and investments that flow into stable regions of Somalia. This report states the obvious: “Development opportunities are greatest in Puntland and Somaliland, where administrative structures have succeeded in developing, to varying degrees and often with considerable help from the diaspora."

Ground data from over an impressive 350 sources inside Somalia point out that Somaliland, Puntland and its two main cities have directly benefited from two decades of instability in the south. This increased population with the help of far flung diaspora has enabled a population eager to buy the exact same homes, cars and the goods described in this piracy report.

The report does confess that accurate data just doesn't exist but then why build an angry house on a crooked foundation? There is even less academically acceptable data on remittances, piracy, bribery and economic activity. Shortland is sailing in dangerous waters when she mixes real analysis with squishy financial data. Best estimates of the UN report say that remittances to Somalia may be between $1.3 to $2 billion a year with a rough estimate of $700 million to Somaliland and about the same or less to Puntland. Piracy income in Somalia suddenly starts looking like pocket change. The report issued by Shortland however agrees with the UNDP report, sayingthat, “Estimates of piracy ransoms are significantly lower than those of diaspora remittances.”

Shortland seems to be short of useful data when trying to figure out how much comes from where. Despite her honest disclaimer she then starts to feel her oats and states “The amount of foreign exchange and income generated by piracy is potentially a large proportion of Puntland’s GDP.” She provides no proof of what percentage of cash payments from ransoms go into the economy or the government. What about the financial growth caused by simple population growth? Populations have swelled dramatically; Bosaso has grown from an estimated 2.4M in 2003 to 3.9M in 2009 (the date of the report's most recent satellite photos) and there is an estimated 1.3 million IDPs in Bosaso alone. Has piracy attracted 2.8 million people to the bustling port city? Professor Shortland makes attempts to show economic growth but does not have the data to draw convincing conclusions. Wouldn't more people create the demand for more housing and goods?

Violent Attacks on Remote Shores

Her main argument is that piracy has benefited main cities and not the small towns where she assumes the pirates are based. What we see without argument or hint of skepticism is that what she calls pirate centers (i.e. coastal fishing villages in Puntland) have shown little growth while the two largest cities in Puntland appear to be in the midst of a building boom. The conclusion being that is enough proof to conclude that piracy is a state industry, state mechanisms are complicit and pirates by virtue of their need to buy splash cash and spread their wealth are the engine behind this growth.

Pirates do not live in the tiny coastal towns profiled and don’t even use these remote habitations to park their hijacked ships. For example, ships captured by three pirate groups are held at least 20km north of Hobyo because the townspeople refuse to let them dock offshore. Both reports assume then build on this mistaken premise to assume that there will be a violent military attack on coastal communities. The report neglects to point out that there are no communities to attack where the ships are held. Nor does it point out that these communities, many of them a result of forced migration, have never experienced growth.

An argument could be made that violence or the threat of violence against pirates is necessary and has shown to be the single most successful deterrent. But at sea, not on land. Even in those cases of violence against pirates by navies or security companies, rules of engagement and force are carefully controlled.

Piracy is currently defined by the act, not the intent or support of piracy. In other words international forces and ship’s crew may deal violence or death to a group that is actively trying to board a ship. Once those pirates drop their weapons, they are technically not pirates. Laws are being changed, but no country is eager to deal violence on any community simply because they suspect they are supporting piracy. Somalia Report maintains contact information on hundreds of pirates and in our lengthy interface with them, most would rather have an alternative but those alternatives do not exist. International experts accept this reality but none more than the Somalis.

The author of this report makes the mistake of going out past her skis and strays into providing military advice, “A military strategy to eradicate it could seriously undermine local development.” Puntland has chosen to use a law enforcement strategy not a military strategy. Yes, foreign militaries have killed pirates in hot pursuit and at sea but there is no plan by any nation to attack tiny coastal villages.

There is discussion about destroying pirate caches (fuel, skiffs, ladders and weapons) found on land and well away from populated areas. There have been vigorous responses to attacks and dozens of unsuccessful attacks prevented by armed security guards - all an embarrassing reality that highlights her previous incorrect assumptions.

The author also ruminates on the potential of piracy to fund terrorism, the lack of will by politicians to combat piracy and even the idea that the international community needs to “replace” the gains of piracy to defeat it. The last idea would require negotiating equal or greater gains to deter kidnapping or piracy. The idea that Puntland politicians are not eager to defeat piracy is beggared by the recent aggressive attacks and arrests on pirates (in major urban centers) and a overflowing Puntland prisons. The suggestion that the international community simply provide anything other than resistance, protection and sharp penalties for kidnapping, violence and theft is irresponsible. Ask any kidnapped sailor, aid worker or journalist what should be done about piracy and you will find little sympathy. They are criminals who violate human dignity and peaceful merchants for profit. There is serious moral disconnect in this report. A suggestion that “locals” are equal to pirates and that money is the key to Somalis making moral decisions should be held suspect for not only the lack of facts but the assumptions behind the assumption.

Where Are The Roots Of Piracy?

The professor ignores the UK provenance and profits of ransom money and rests her central argument is that pirate money is behind the real wealth of Bosaso and Garowe and that political elites profit by piracy. Her logic is to push money away from the centers of power and into some dysfunctional half abandoned fishing towns created when Siad Barre pushed clans to the sea to bolster food security.

Of course, these tsunamis ravaged remote monuments to a once golden era could be restored and empowered. But those communities will also need to enforce sharp boundaries of laws, enforcement, violence and incarceration. That comes from Puntland's government. The real actions of Puntland's central government have indicated that is not at all a 'piratocracy' but fiercely engaged in a battle against pirates, terrorists and criminals that do violence to its people everyday - something this report ignores. The plea to not violently attack coastal communities has no origin in fact. This report maintains the convenient fiction that Somalis do not know how to eradicate piracy.

Piracy is also mobile and is becoming less and less based in Puntland and more in the central region of Galmadug so her assumption that any support of Puntland's government will encourage piracy may be dead wrong.

Based on the day to day conversations Somalia Report has with pirates, the hostage and payment part of piracy is primarily based in Galmadug region, run out of Galkayo and Haradhere with some major financiers living in Garowe and Bosaso. This report ignores Galmadug and its capital of Galkayo - or for that matter Nairobi, Dubai, Mogadishu or even London. Although real estate is ideal for money laundering, transnational crime has no home. The solution to piracy is on land, through law enforcement, international cooperation and yes, an attempt to provide positive direction in both coastal and central towns. Replacing piracy income, removing the penalty of violence or incarceration for amoral acts and blaming a government who is actively engaged in fighting piracy is not the right approach. A consensus is slowly being reached.

What is needed to defeat piracy in Somali is an indigenous land based approach with a wide spectrum of follow on support to local government - something the government of Puntland and Galmadug have been saying for years and have now decided to do with help from regional sponsors.

Perhaps there should also be an international understanding that bad foreign research does not make for good local solutions.