SINGAPORE'S NEW STRAITS:
Piracy on the high seas is on the rise in South-East Asia

 
  FORTUNE
September 29, 2003
Eric Ellis, Bintan


WHEN Captain John Melaa steams his container ships out of Singapore these days, there’s no more creeping through the busy, narrow waterways.

“Our ships now go full power ahead,” he says. “And with all the floodlights on.” The Norwegian skipper isn’t being reckless: In these pirate-infested waters, safety lies in speed.

Piracy in Southeast Asia is a big worry for the international shipping industry—and it’s getting worse. The International Maritime Bureau in London reports a record 64 attacks in Indonesian waters in the first six months of this year, compared with 44 for the same period in 2002. Another 20 raids were reported in the Malacca Strait and adjacent Malaysian waters, four more than last year. That means that more than a third of the 234 known piracy acts worldwide this year have taken place within a few hundred miles of Singapore.

Alan Chan, who owns Petroships, a Singapore company, knows the problem only too well. In 1999 he lost one of his ten oil tankers, worth $10 million, in seas just north of Singapore. The tanker was hijacked by armed Indonesian pirates, who sailed it to southern China, where the cargo was fenced on the black market. “The pirates went free,” says Chan.

That attack transformed Chan into one of the region’s most vocal antipiracy campaigners, and it’s easy to see why. He estimates that insurance premiums have jumped about 30% during the past two years. And he tallies the cost of piracy at about $500 million a year, as shippers like him are scuttled by higher premiums, delays, and added onboard security costs.

The Singapore and Malacca straits are the shortest and least expensive way to transport goods between Europe and Asia. Some 80% of Japan’s oil comes through those waters. Every day 800 ships transit chokepoints like the 1.2-mile-wide Philip Channel near Singapore. Singapore itself has not had an act of piracy in its sovereign waters for a decade, but as Southeast Asia’s economic hub, it cannot ignore the issue.

Some of the more brazen attacks have occurred off Indonesia’s Bintan Island, an hour’s sail from Singapore. Bintan’s north coast is a playground of lush golf courses and five-star resorts. Its south coast, however, is poor, undeveloped, and studded with secluded inlets that provide shelter for well-armed Indonesian bluebeards. “The bandits tend to go for oil and commodities like tin and aluminum,” says Noel Choong, who manages the maritime bureau’s Kuala Lumpur antipiracy center.

Singapore patrols its waters efficiently, and Malaysia is setting up a coast guard to police its western flank. But distracted by Islamic militancy and burdened by having to monitor some 17,000 islands, Indonesia seems powerless to stop the raids. Attacks in Indonesian waters this year are running three times higher than in 1998, and shippers and insurers privately say that renegade Indonesian naval and coast guard officers are behind many of the raids. “The average villager can’t afford the types of guns and boats these guys have,” says one Norwegian cargo insurer.

The coast of Indonesia’s Aceh province, on Sumatra’s northern tip, has also emerged as a serious hotspot. The maritime bureau suspects Acehnese rebels might be involved in some of the attacks, seeking funds and materiel for their independence movement. In August bandits claiming to be Aceh soldiers raked a cargo ship and its crew during an hour-long pursuit off Aceh. The Taiwanese vessel managed to escape—as did its attackers. It was the eighth such attack in Aceh waters since May, when fighting flared up in the breakaway province.

The ninth came a day later, when a Malaysian oil tanker was attacked by pirates toting assault rifles. This time the bandits kidnapped three crew members and stripped the vessel of cargo and valuables. Choong says that when he points out piracy hotspots to Jakarta, the Indonesians act, but the problem only springs up elsewhere. Chan’s assessment: “They have no political will to change the situation.”

Mohamed Sidik Shaik, chief executive of Tanjung Pelepas, the Malaysian port near Singapore, says Malaysia, Indonesia and Singapore “really do need to sit down and sort this out before it gets out of hand.” Sidik worries about terror groups like Al Qaeda and Jemaah Islamiah hijacking ships and causing havoc in world trade. But given the regional propensity to avoid finger pointing, talks on the subject have gone nowhere. The three countries have not even been able to agree on where their maritime boundaries are.

For now, most global shippers prefer facing the risk of pirates than suffering the delays involved in avoiding them. Skirting Southeast Asia’s trickier waters means an extra four days’ sail at an added cost of as much as $500,000. Bypassing Indonesia altogether means another expensive week at sea. In one of the world’s most cutthroat industries, hazarding a flotilla of modern-day Long John Silvers is still apparently a risk worth taking.


                                                      Home