A world away from the financial centres of the globe, a business model is raking in profits enough to make heads turn.
Somali pirates lording it over the Gulf of Aden, one of the busiest trade routes in the world, collected an estimated $60 million in ransom last year. As the United Nations’ latest report on Somalia uncovers, behind this massive revenue lies a neat system of investments and returns, and even non-pirate Somalians are cashing in.
To be sure, it is an efficient model—with sophisticated risk to return ratios and investor classes—put to a questionable end. But the phenomenon can be traced back to Somalia’s turbulent political and economic history, and rampant exploitation by a nexus of warlords and foreign companies looking to make an easy buck.
This may be piracy in its most institutionalized form, but there is a larger lesson here: Markets can come up at the most unlikely places, but the outcomes will depend on the environmental factors that breed such exchanges.