Security assurance is crucial in all industries especially in sectors dealing with importation and exportation of goods. In maritime transport industry security is critical since it deals with movement of goods from all over the world. Globalization has brought not only positive effects but has also caused several insecurity issues, especially those related to terrorism. According to Barnes and Oloruntoba, security is an essential factor in maritime transport industry, which is an integral part of international trade. Maritime security in the US became a critical issue after September 11 terrorism attack. Security measures were formulated and implemented in global ports with the aim of ensuring safety during movement of goods across borders. Barnes & Oloruntoba and Peterson & Treat acknowledge that the US has been actively involved in the promotion of security through implementation of trade programs, especially in seaports of North America and in any other seaport that is connected to America directly or indirectly.
Security Issues in Maritime Transport
The increased number of terrorist attacks in the world compelled global governments to tighten their security programs especially at the border zones. Transport sector in particular has strengthened its security programs due to increased vulnerability to terrorist activities. Shipping sector is usually vulnerable to piracy attacks as well to other security issues that affect this sector directly. According to Barnes & Oloruntoba and OECD, risk factors affecting maritime transport can be grouped into three categories of cargo risk factors, vessel risk factors, and people risk factors.
Cargo Risk Factors
Shipping containers are in most cases used in transportation of non-bulk cargo. These containers are uniform in their appearance. This causes a security risk during the movement of goods as it is easy to use these containers for the transportation of illegal cargo. According to OECD, shipping containers pose a security risk since they can be used for transportation of weapon of mass destruction from one country to another. The concern is that criminals and especially terrorists transport dangerous weapons in containers using services of legitimate shipping companies, hence lowering suspicions about the cargo. These dangerous weapons may be nuclear, biological, or chemical in nature. Containers from legitimate shipping companies are rarely examined hence making maritime transport vulnerable to shipment of illegal cargo. In addition, these containers can become centers for criminal activities where terrorists use them as homes when planning an attack on a country. An example provided by OECD informs that in 2001 a container passing through the southern Italian port of Gioia Tauro was found to have residential facilities and other suspicious equipment that were used by a suspicious man.
Moreover, cargo containers are often used to smuggle people from country to country. These people may be illegal immigrants, terrorists, or slaves who are being transported to be sold in another country. As mentioned earlier, illegal movement of goods is easier in maritime transport since containers from legitimate shipping companies are not checked to ascertain the nature of these goods.
Furthermore, containers pose a security threat as they can be used to ship illegal goods such as drugs and contraband products. Drug syndicates have cleverly used shipment containers to transport their illegal goods thus increasing trade of drugs across countries.
Another maritime criminal activity is the theft of valuable cargoes from ports. Criminals may conspire with seaport employees to steal high-value cargoes. This form of crime involves a network of individuals who work together to ensure that cargoes bypass normal checking procedures. These criminals empty these cargoes in a way that it is not easy to realize that containers have been opened.
Furthermore, shipping containers can be used to transport hazardous products such as chemicals and explosive materials that pose a great security risk if they explode. Though these containers are handled with care, sometimes accidents occur leading to explosions that might cause death and severe injuries to individuals. Additionally, bulk cargoes can also explode since they carry highly explosive products such as crude oils and natural gas.
Transportation of highly flammable products can be a target for terrorists who can use these cargoes as explosives in attacking their enemies. Some compounds such as ammonium nitrate are safe products. However, terrorists can open such a cargo and add some other compounds such as fuel oil to create powerful explosives that can be detonated upon arrival at the port.
Vessels Risk Factors
Vessels are used to ship cargoes, and hence it is right to say that they pose similar risks like terrorist attacks and transportation of hazardous materials. According to OECD, terrorists can use vessels in the execution of their attacks on enemy camps along the coastal strip. This is to say that vessels can act as weapons in terrorist attacks, just like war jets. Moreover, vessels can be used to attack other vessels thus posing a greater security risk in maritime transport industry.
However, vessels are used to collect revenues and to register illegal movements such as those of al-Qaida. Piracy is a common crime in maritime transport industry whereby pirates hijack vessels with the aim of getting money by demanding ransom for abducted vessel crew. These funds are in most cases used to finance terrorist attacks. Piracy is a widespread form of maritime crime that goes beyond national borders. Moreover, pirates have been known to attack vessels and demand for huge sums of ransom. These pirates can also board ships and take hostages of the crew either with the aim of stealing high-value cargoes or demanding for ransom from hostages’ governments. OECD also asserts that piracy can lead to assaults and death of crew members, hence posing a great security threat in maritime transport industry.
Furthermore, pirates can take full ownership of hijacked vessels and use them as money making ventures, where they rename them as new vessels and use them to transport cargo. These renamed vessels according to OECD are mostly known as ‘ghost’ vessels. ‘Ghost’ vessels make huge profits through engaging in commercial shipments, whereby once the ship is loaded with cargo, it takes goods to another destination for sale. These ‘ghost’ ships are continually renamed and repainted to make it difficult to trace them and to be able to use them to steal cargo by posing them as genuine commercial vessels. This cycle repeats itself, therefore, making it a responsibility of merchants to ensure that they scrutinize vessels before using them to transport their cargoes.
People as Risk Factors
From the above discussion about cargo and vessel risk factors, it is clear that people are involved in creation of these risks. Firstly, vessel crew is usually targeted by terrorists as well as pirates with the aim of attacking and making money respectively. Secondly, pirates who pose as seafarers use vessels to support their terrorist attacks as well as money making activities. These pirates manage to board on ships using fake documents. Therefore, pirates and terrorists create a security threat for maritime industry since it is difficult to trace these criminals. Moreover, some crew recruitment agencies contribute to a security risk in maritime transport industry when they fail to scrutinize backgrounds of candidates applying as seafarers. This creates loopholes in recruitment systems, which make it is easy for pirates, terrorists, and other criminals to pose as seafarers.
Other Risk Factors
Apart from vessel, cargo, and people risk factors, there are additional factors that pose a challenge to maritime transport security. According to Barnes and Oloruntoba, there is a great security concern that is brought about by poor ship registration procedures that allow registration and ownership of ships by suspicious people. OECD also recognizes that lack of transparency, anonymity of ownership as well as less strict registration procedures give way for criminals such as pirates and terrorists to own vessels and hence threaten maritime transport systems. Barnes Oloruntoba and King further ascertain that current international registration system of ships is so porous that terrorist can own ships under anonymity terms. Funds collected from cargo transportation using terrorists’ ships are then used by terrorists to fund their attacks in enemy territories. This presents a great security concern since terrorist do not necessarily have to use their ships as weapons, but can instead use them to make money for funding attacks. This, therefore, calls for the revision of ship registration procedures to make the identities of owners known.
Another source of risk is a common assumption that sea is an area that cannot easily be governed by policies and regulations. This assumption has led to insufficient implementation of policies that govern international maritime transport industry. This is a critical issue considering the increased levels of piracy attacks at sea. There are several geographical areas that are well known for piracy attacks.
Another risk factor is the disruption of trade during terrorist and piracy attacks. According to OECD, terrorist attacks threaten economic growth since damages caused create a strain on the national budget as well as on individuals’ budgets. Maritime transport is a crucial part of both national and international economies and, therefore, attacks by terrorist in this sector have crippling effects on the economy. Disruption of trade directly disrupts the economy and hence leads to economic losses. Furthermore, costs of renewing destroyed infrastructure will slow down economic growth.
Disagreements between port management and their employees are another source of risk in maritime transport industry. According to OECD, these disagreements disrupt trade and travel, which in turn affects the economy due to losses incurred during lock-outs.
Economic Impacts of Security Issues in Maritime Transport
September 11 attacks in the US compelled both national and international authorities to put in place security measures to counter future terrorist attacks. These measures range from policies to restructuring of security systems. Focus on maritime transport security was strengthened whereby international community came up with a maritime transport security strategy that would cover tracking of vessels, authentication of ship crew, security of ships and ports, and the screening of containerized cargo. US government also came up with voluntary security packages to be implemented in maritime transport systems.
Besides the International Maritime Organization (IMO) security package mentioned above, US government has put in place other security measures to ensure maritime security at American ports as well as in other ports, that are directly or indirectly linked to the US. These security measures include the United Sates Maritime Transportation Security Act of 2002, United States 96-hour advance notification of arrival, Post-9/11 Cargo Security Legislation, Department of State crew visa requirements, United States 24-hour advance manifest rule, and voluntary security programs such as Container Security Initiative (CSI) and the Customs-Trade Partnership Against Terrorism (C-TPAT). All the above security measures present some economic impacts that are in form of financial resources as well as flow of goods and services across borders.
Economic impact of security in maritime transport industry is two-fold. Firstly, costs associated with the implementation of security measures at ports will have impact on the economy. Secondly, losses incurred during attacks in maritime transport systems will affect both national and international trade and travel. According to the National Strategy for Maritime Security: Maritime Commerce Security Plan of 2005 and OECD, any seaport closure due to security concerns could cost the US millions or even billions of dollars. This would in turn affect global maritime trade hence affecting growth of global economies.
According to Barnes and Oloruntoba, security threats to maritime transport lower investment rates in countries hence leading to considerable drops in GDP. For example, threat of terrorism attacks in the US after 9/11 attacks led to a slight drop in GDP, since some investors had withdrawn their businesses from the country. Terrorism threats also affect the flow of Foreign Direct Investment (FDI) across countries.
Another impact is the disruption of trade supply chain by terrorist attacks that leads to the disruption of flow of goods across borders. In addition, this disruption affects business confidence since investors will be hesitant to invest in such high risk business ventures. This effect is felt globally whereby economies depending largely on maritime transport incur some losses. These attacks also cause environmental pollution, which in turn affect the economy due to allocation of funds to mitigate pollution effects. In addition, loss of crew, cargo, and ships due to piracy attacks leads to slower growth of the economy, since it takes time to recover costs of lost cargo and vessels. Moreover, the loss of ship crew affects the labor force negatively. Reconstruction of ports that have been destroyed by terrorist attacks requires billions of USD since estimated construction costs of a 16 ha container terminal are above 32 million USD.
Thirdly, closures of ports due to terrorist attacks or disagreements between port management and employees lead to huge economic losses on the part of businessmen, who deal with transportation of perishable cargo. This is because delays in docking of vessels leads to spoiling of such cargoes. Moreover, more costs will be incurred due to changing of the course of vessels to other ports or due to using air transport, which is more expensive as compared to maritime transport. King also acknowledges that closure of ports in the United States due to terrorist attacks would slow down activities in the port for about 3 months during which huge economic losses of around USD 50 billion will be incurred.
Furthermore, security threats in maritime transport lead to short term costs emanating from uncertainties on investment and consumer behavior. In this case, insurance costs rise, thus increasing the cost of doing business. This is a double sided effect, where on one hand insurance companies gain huge profits because of increased premium rates, wile, on the other hand, shipping merchants may experience decreased levels of returns in business due to high insurance premiums imposed on them.
Cases of insecurity in maritime transport will also indirectly affect other industrial sectors such as the hospitality, tourism industry, and the air travel industry. According to Barnes and Oloruntoba, terrorist attacks affect operations of other industrial sectors within a country since businessmen become hesitant to invest in terrorist prone regions. In addition to this loss of business confidence, people will be afraid to travel in high risk areas and hence travel sector, hospitality sector, and tourism sector will be negatively affected due to reduced number of passengers.
Moreover, installation of highly effective security infrastructures such as vessel tracking and cargo inspection systems is quite expensive. This will, therefore, require the government to allocate extra financial resources for maintaining these security infrastructures.Consequently, economic growth will be slowed due to the increased government expenditure. These increased security costs, according to Peterson and Treat, present an unclear issue about whose responsibility it is to take care of all security inspection costs: is it importers or exporters.
Relying on OECD/ITF it can be said that the implementation of security management strategies in maritime security can bring about positive economic impact e.g. the reduction of damages associated with terrorist attacks. The argument presented is that increased security efficiency leads to increased commercial activities. However, these assumptions are yet to be proven. Additionally, security requirements in smaller ports have been found to result in high fixed costs, which negatively affect operations of such ports.
Shipping industry is a crucial part of international trade since it involves transportation of goods and services across borders. Therefore, security assurance in maritime transport systems is essential in ensuring that the shipment of goods is not interrupted. From the above discussion, it is clear that there are several risks that raise concern in maritime transport security. These risk factors are posed by cargo, vessels, and people. Risk factors associated with cargo and vessels include piracy, terrorist attacks, smuggling of people and illegal drugs as well as transport of hazardous materials. On the other hand, people act as risk factors when they are involved in execution of criminal activities such as piracy, terrorism, and drug trafficking. These security risks call for implementation of effective security measures, which include policies and programs aimed at preventing piracy and terrorism attacks in maritime transport systems. In the US voluntary programs as well as legislations have been implemented with the aim of improving security in shipping industry. However, these security measures bring along several costs that impact the economy negatively. These economic impacts include disruption of the supply chain of goods, lowered GDP due to damages to basic transport infrastructures such as ports, increased economic expenses, and loss of business confidence leading to lower investment rates. It is, therefore, highly recommended that a cost-benefit analysis is performed in order to reveal real economic gains associated with implementing effective security measures in maritime transport industry.