Markets have a knack for popping up in some very unusual places. The most recent may be fishing villages on the lawless desert coasts of Somalia that many pirate gangs call home. Piracy can be an expensive undertaking, so the gangs of Haradheere have set up an exchange of sorts to fund their expeditions with outside capital and materiel.
Piracy has become a lucrative industry in the war-torn land. Famine and conflict have stifled the economy—GDP per capita was a meager $291 in 2007. Without the protection of a functioning navy or coast guard, Somali waters are routinely looted by foreign fishing vessels, depriving coastal villages of their former livelihoods. Shady companies also use the coastline as a dumping ground for toxic waste. With pirate ransoms running in the millions of dollars, hijacking ships has become a beacon of hope for many impoverished Somalis.
The market at Haradheere helps the gangs spread the risk and expense of piracy. “Four months ago, during the monsoon rains, we decided to set up this stock exchange,” former pirate Mohammed told Reuters. “We started with 15 ‘maritime companies’ and now we are hosting 72. Ten of them have so far been successful at hijacking.”
Michael Fishman, professor of finance, said Haradheere’s exchange probably functions “more as a primary market” with each pirate company raising capital and equipment (like rocket propelled grenades) from direct investors. Criminal ventures in developed nations operate in much the same way, he said, but without the openness that characterizes the Somali version.
“This sounds like its pretty above ground. The authorities know about it. They tax it,” Fishman said. But, he added, it doesn’t sound like a true stock exchange yet. “I’d be surprised if there’s something like active trading volume.”