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Showing posts with label Shipping. Show all posts
Showing posts with label Shipping. Show all posts

Tuesday, January 27, 2009

Piracy at Sea

Blogger - Mandeep Julka

Piracy is in news these days, and not because of Captain Jack Sparrow.

It was a moment of pride for India when INS Tabar took down a Somali pirate ship. The action was touted as India’s arrival as the global marine security provider and won us oodles of laurels. However, keeping the histrionics aside, was this act of aggression a display of India’s strength and bravado or is there more to the story?

PIRACY MENACE

§ Expanding Web

Originally, Strait of Malacca was the center of piracy attacks. Lately, Horn of Africa has come under scanner. The route of Gulf of Aden – Suez Canal, one of the busiest international trade routes and thus extremely lucrative too, connects Asia and Indian subcontinent to Europe and the East Coast of the United States. About a third of India's total fleet of 900 cargo ships deployed in international waters is at risk on this route.

As facts go, pirates attacked 92 ships and hijacked as many as 36 ships with their crews in 2008. Fourteen ships are still controlled by the pirates and of the 682 crews kidnapped, 243 are still held hostage. The culminating point was hijacking of the 320,000-ton oil tanker, Sirius Star, carrying cargo worth more than USD 100million, on November 15’ 2008. Although Sirius Star, due to its size, had taken the alternative trade route through Cape of Good Hope, still it was nabbed by the pirates, showing the extent to which the menace has spread. So effectively, both of the prominent trade routes, between Asia to Europe and Asia to East Coast of the U.S, are severely affected by piracy.

If not checked soon, this crisis has the potential to paralyze major component of world trade, especially trade of Indian sub-continent.

§ A Business?

Apart from the geographical extent, the problem seems to have assumed another sinister twist. Given the political turmoil in Somalia, the economy has been in shambles since ages. What is feared is the rise of piracy as an industry / business in itself. Lack of other means of employment and lure of easy money are attracting an increasing number of unemployed Somali youth in this so-called profession. Lack of deterrents such as internationally coordinated preventive measures or sufficiently damaging rejoinders are fueling this trend. As if this was not enough, political conflict with adjoining Ethopia as well as involvement of US has further worsened the state of affairs. Unconfirmed reports point a finger at US for providing financial assistance

§ Increasing ruthlessness

The situation has become perilous as previously, pirates were known to be armed with knives and pistols, and concentrated on thefts and robberies. Now, however, they are armed with AK47S, M16s, rifle grenades, rocket propelled grenades and the latest technology such as satellite phones and GPS systems making the aggression ruthless and bloody.

§ Greed

Pirates’ ambitions have scaled up too. The hijacked Ship MV Stolt Valor, which carried 18 Indian nationals on board, was reportedly released after a payment $2.5 million by the Japanese firm, which owned the ship. Luxury French Yacht Le Ponant was released after a week in exchange for an undisclosed ransom. Effectively, the revenue of this business model is estimated to be somewhere in the range of $13-$16 billion[1] every yr, considering that countless piracy attacks are not reported in the fear of a rise in insurance premiums!

INDIAN CONTEXT

A large volume of India’s export-import trade, including oil, passes through the Gulf of Aden. In fact, in 2007, the country imported approximately USD 48million and exported approximately USD 60million worth of goods respectively. The human cost of this terror is frightening. Facts say that the 24 Indian flagged merchant ships cross the fatal Gulf of Aden route every month. Also, a lot of foreign vessels also comprise of Indian nationals as India has a very large seafaring community.

The action of Indian navy, in the above context, was thus more than plain brawn. India’s stake is quite high in one of the most important international trade routes of the world, which also unfortunately has become notorious for being worst affected by piracy in recent times.

CONCLUSION

However, no matter how brave and complementary our reaction was, has the piracy menace become just short of insurmountable? Or worse, has sea-piracy spread its tentacles to liaison with other rogue groups, making the menace much more globalized than is currently apparent? Pirates are increasingly becoming organized militia, and there are reports that piracy is coming under the umbrella of terrorism; unconfirmed reports point out that ransom money is being routed to the global terror network, and terrorist organizations are colluding with pirates to fund procurement of arms and ammunition.

The need of the hour is to redefine the mandates of multilateral security arrangements to ensure that political bottlenecks encountered during countering piracy are removed. The importance of a well coordinated international action, keeping Somalia Govt. in loop can not be stressed enough. From a long-term perspective, only solution to the present crisis is to bring an end to Somalia’s political unrest.

On the home-front, India’s forceful response has underlined her ability to protect the security of her own as well as international shipping in the region. The opportunity is there to carry the trend forward and translate India’s growing economic strength into greater global military and political clout. Any takers…?

[1] Source: http://uniorb.com

Friday, October 31, 2008

A Dedicated Shipping Index - Curtain Raiser

Blogger - Prasenjit Gangopadhyay
In the ‘India Inc Investing: a mid-year report 2008’ released by the Assocham in mid September; ports and shipping industry sectors were found to be among the most unattractive for Indian investors. It was found that FDI and PE inflows into these sectors as well as retail and FII trade volumes in the stocks were remarkably low. The reason identified were the usual policy and taxation issues, volatility etc. However, industry leaders, including INSA, were of the opinion that having a separate shipping index on the key bourses was likely to increase investor interest in stocks. This could also lead to more visibility and therefore help in attracting investments.

Whether such an index would actually lead to increased visibility and in turn attract investments needs to be determined. And historical analysis is as good a tool as any. So, an index of shipping, shipbuilding and other maritime companies was conceived, in the same model as Sensex, to see how the index would have performed against the market.

For the readers who are unfamiliar with the market index here is a brief overview. The market indexes (Ex, SENSEX, NIFTY50 etc) give an overall picture of the markets’ performance. They reflect the performance of a select group of shares chosen from across industry verticals and capitalization(s) (to accurately reflect the market), weighted by the respective number of shares available for trade in the secondary market. So if the representative index goes up, it can be inferred that in general the share values went up. For a more detailed picture please visit this webpage. I intend to follow a similar approach to determine the shipping index.

The proponents of capitalism have also upheld the efficiency of the market to incorporate developments and expectations. Though it is too soon to predict the efficiency of the proposed index to do so, over the months the index might be expected to predict the course of the maritime industry in the country.

One of the other benefits mentioned by the INSA officials in developing a shipping index was the ability to generate investments. While, the role of an index in attracting investments is not clearly defined, one can compare monthly FDI inflows in the market to that in the maritime industry for similar growths and determine if there is a significant difference in the behavior historically. This should at least let one determine correlation the maritime industry in India has with the market.

Over the next few posts, this column will be defining the shipping index, determining the benchmarks, identifying the companies that should go into the index and provide the comparative performance of the shipping index with respect to the market (Sensex). I invite you all to provide suggestions to make the index more robust.

So keep your glasses ready, we will be “breaking the bottle” next time!!

Disclaimer

All the content posted in this blog are written by the employees of i-maritime Consultancy unless specified otherwise. i-maritime Consultancy Private Ltd is not responsible for the opinions of the bloggers and the content posted by them are not representative of the views and opinions of the company.