Factors to Prevent Piracy Issues in Maritime Industry

The problem of piracy has had a negative impact on both commercial and humanitarian aid shipping, as a result of rising commodity prices, income from commercial activities are being disrupted, and caused delays in the delivery of humanitarian assistance and increased costs. The economic impact of piracy is becoming great. The insurance rates payable has reached alarming and prohibitive levels and become one of the biggest problems faced by shippers and shipowners. 

The shipping company hopes to pass on the soaring insurance premium to the shipper. Container shipping companies now pay higher premiums for war risk and kidnapping and ransom insurance. Shippers are paying a new risk that may even pay ransoms, negotiation costs and the opportunity cost of loss of charter. Shippers are also paying big fees for anti-piracy protection. They may also pay for security personnel and armed guards on board.

The economic impact on the owners and operators of ships attacked by pirates is more obvious. They have to cover the direct costs of piracy. One obvious cost is a rise in insurance premiums for ships travelling in pirate-infested areas. Crews traveling through these hot spots are also receive “danger money” which increases transportation costs.

There are alternatives to paying these exorbitant premiums, but they can also have a negative economic impact on operators. Alternatives include using expensive security measures or private security companies to protect ships directly, or training crews on how best to avoid pirate attacks. To protect the cargo, ship and sailors, the owner may employ a naval safety company. The goal is to stop the pirates before they get on board. A key factor in combating piracy is government involvement. Cooperation between nations is also important, because nations' rights prevent one country from pursuing pirates into another country's territorial waters. Another option is to reroute the ship to avoid the pirate zone, or speed it up because 'slow' ships are often more likely to board and become victims. Both options have a negative impact on operators, with higher fuel and wage costs.

In addition to owners and operators, pirated ship’s crews have also suffered negative economic effects. Crew members that as the hostage and demanded for large ransoms often fail to return to work because they have lost their income and their trauma has had a negative impact on their families. Piracy in Southeast Asia affects not only the crews of large container ships and oil tankers, but also small fishing boats. The loss of such a ship by pirates can be financially devastating for many families because they cannot afford the financial hardship.

Piracy can have a great influence on sailors. Crossing high risk areas can cause stress and concern for seafarers. Attacks put sailors at risk of death or injury, and can be terrible. Abuse is common and often serious when sailors are held as hostage for ransom. Shipowners are going through a difficult period to prove that seafarers are in danger. The shipowners are trying to find crews willing to travel to certain areas, especially those likely to be attacked by pirates. In this case, ships will have to look for alternatives to navigate other regions, which means they will have to endure more days to navigate. As a result, this is bound to increase transportation costs, increase oil and fuel prices and, to be exact, have a huge impact on the global economy.

The nature of seafarers' profession may affect seafarers' vulnerability to post-traumatic effects of piracy in both positive and negative ways. More positively, pre-departure training specifically for seafarers to manage pirate attacks is on the rise. Such training gives seafarers a sense of control and effectiveness in responding to pirate attacks, it is the factors that have long been considered potentially important predictors of recovery from traumatic events. On the more negative side, prior exposure to other traumatic events predicted an increased risk of their continuing impact. Seafaring is risky, and there is good evidence that seafarers are at considerable risk of exposure to traumatic events on board ships. This may make seafarers more sensitive to lasting pain after an attack.

In addition to behavioral health, there may be implications for seafarers' work decisions. There is strong evidence that psychological stress reduces productivity, performance and employment. In the case of seafarers, the contractually driven nature of seafarers' work means that seafarers have many opportunities to make decisions on whether to continue their work at sea.

All people who have commercial interests in stolen goods are also considered victims of piracy. Stakeholder groups include suppliers, buyers, intermediaries and suppliers, and end consumers. Anyone who profits from the sale of these goods will be negatively affected, which means that local and regional piracy will have a truly global impact. It is estimated that hijacking a ship will increase the cost of sea transport. As transport costs rise, this has a trickle-down effect, causing everyday consumers to pay more for goods such as petrol, oil and manufactured goods.

Global supplies of commodities are under threat as shipowners try to avoid the most dangerous routes and all but the most necessary are bound to decline. Other transportation methods, such as air freight, are being considered, which could further increase costs. Land transport can also be more expensive and time-consuming, and not without risks. In terms of overall economic impact, whichever approach is chosen to reduce the threat of piracy will lead to increased commodity costs. When these goods are finally delivered, these higher costs will eventually be passed on to consumers, reducing the availability of affordable food through cheap bulk transport.