Piracy Boosts Somali Economy

Piracy along Somalia's coastline represents a very lucrative business — as the pirates collectively earned an estimated $150 million in 2008 — but what is piracy's effect on Somalia's economy?

Somalia's economy is in a fairly grim state. An estimated 73.4 percent of the country's population lives in general or extreme poverty and the average Somali earns only $600 per year, making Somalia one of the poorest countries in the world.

Fishing used to be one of Somalia's most profitable industries. But as piracy has increased — there were roughly 100 attacks in 2008 — the New York Times reports that foreign ships have become reluctant to brave the waters surrounding Somalia's coastline to buy fish and other exports. The amount of goods coming into Somalia, including aid, has also declined.

Pirate money has also skewed prices. In the town of Garowe, near Somalia's central coast, resident Mohamed Hassan told the BBC that "piracy has a negative impact on several aspects of our life," including a financial one:

They have made life more expensive for ordinary people because they "pump huge amounts of U.S. dollars" into the local economy which results in fluctuations in the exchange rate.

On the other hand, pirates are putting wealth back into the Somali economy — an estimated $1 million to $2 million is made from each captured ship.

Whenever a ship is seized, pirates stock up on sheep, goats, water, fuel, rice, spaghetti, milk, and cigarettes in towns up and down Somalia’s coast. Sugule Dahir, a local shop owner in Eyl, a town just off the coast in central eastern Somalia, feels the incoming money has had a positive impact. He tells ABC News that, because of the pirates, more businesses are beginning to emerge and the general public seems better off. "There are more shops and business is booming because of the piracy. Internet cafes and telephone shops have opened, and people are just happier than before."

Government officials are getting a fair sum of pirate money as well. By allowing the pirates to work in controlled areas, the regional Puntland Government is given shares of the pirate's earnings. About 30 percent of the collected ransom goes directly to government officials, Farah Ismael Eid, a captured pirate, tells Time.

Some Somalis are worse off because of piracy. But it's clear that the pirates do spread the wealth.