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Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues

Sunday, March 27, 2005







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ILLUSTRATION BY DAVID SWANN




Sail the deadly seas

Sea piracy is not the stuff of
Captain Hook, with killings
reaching to 400 a year and
losses as much as $16 billion

A pirate attack on a sea-going tug in the Strait of Malacca this month is a symptom of a major problem for international business that is growing in intensity, complexity and strategic importance. And it is one that continues to get insufficient publicity.

When one hears about "piracy" these days, it still seems to be mostly about copyright piracy, which is, of course, a significant problem, too. Pirate successes in both cases are linked with the power of globalization but sea pirates are breaching international terrorism in a way that copyright pirates are doing in a more understated fashion.

Economic globalization is invading what were only recently sovereign economic, political, social and religious domestic matters. Linkages of every imaginable kind are necessarily and irrevocably following the network of economic interdependence.

These new networks are webs of existing social domains. They don't include those vast areas of the earth where human systems have no roots. The seas remain governed by loose treaties and often-unenforced agreements of international organizations. Among the ongoing disputes and conflicts that already are pervasive, are competition for mineral and natural gas access, challenges on intentional pollution, debates and fears over sea lines of communication, and depletion of fish.

If these weren't enough, sea piracy is spreading and on the rise. While many tend to think of pirates as Captain Hooks in an age gone by or as heroic adventurers in the film "Pirates of the Caribbean," few follow the increasing reports of piracy. Estimates of losses to piracy and maritime fraud run as high as $16 billion a year.

Although pirate attacks, according to the International Maritime Bureau, declined to 325 in 2004 from 445 in 2003, last year there were roughly 400 crew members and passengers killed, injured, kidnapped or missing as a result of these attacks. The number of known killed was up from 2003.

During the 1990s, there were four common strategies in pirate attacks.

The first involved simple theft at sea, where pirates board and rob a vessel and its crew, then depart with their loot.

A second approach was to kidnap crew or passengers and hold them for ransom.

A third targeted the cargo and may involve holding the vessel for some time while the cargo is off-loaded or transferred to another ship.

The fourth is to steal the ship itself. Vessels are given new names and flags, then either sold or used to hijack cargo from unsuspecting shippers.

Among the Asian pirate targets have been oil and gas tankers that form the lifeline for Japan and other East Asian states. These large, technically complex ships have small crews whose skills are not directed at repelling invaders. The pirates usually approach the ships at night in small high-speed boats, throw a grappling hook over the railing, and board with rope ladders. Often armed with machine guns and grenades, they capture and subdue the crew. After robbing valuables from crew members and the ship's safe, they depart, leaving the crew incapacitated. When the vessel is under way, this action can cause great danger in the shipping lanes. If the ship is an oil tanker, any collision, including with reefs or the shore, could cause a spill with extensive ecological damage. While there have been several near misses, none of these disasters has occurred. Nevertheless, industry officials are not sanguine about the future of tanker shipping, especially in the Malacca Strait and the South China Sea, where tanker traffic continues to grow and economic deprivation is driving regional populations to increasingly desperate measures.

One of the more notorious cases occurred in April 1998, when pirates grabbed the Malaysian tanker Petro Ranger in the South China Sea between Singapore and Vietnam. The ship was carrying diesel oil and kerosene. According to the South China Morning Post, 12 pirates boarded from a speedboat in the middle of the night, woke the captain, and led him around the ship with a machete at his throat, forcing him to order his 20-man crew to surrender.

The pirates brought their speedboat aboard, then sailed for China, where they off-loaded fuel worth $1.5 million. The pirates were later arrested by Chinese authorities, but they ultimately were released and repatriated to Indonesia.

These tactics and incidents illustrate several ways that sea piracy affects international business. First, there is the human toll. In this month's incident, the ship's captain and two engineers were kidnapped and are still missing.

Other attacks are typified by that on the bulk carrier MV Cheung Son in November 1998 in the South China Sea. Its crew of 23 were shot and their weighted bodies were thrown overboard. In many other cases, the crew simply disappear.

Second, and at a more mundane level, employees are lost. Businesses have to replace, train, and give experience to new crew members.

Third, sea piracy insurance, covering crew for injuries and with compensation for families, is an increasing burden as the number of incidents rise along with the abilities of pirates to attack more and larger ships in more diverse settings. Insurance is now more often required and the premiums are rising.

Fourth, there are losses of both carriers and their cargo. Cargo, including oil, is often taken and sold on the black market.

Fifth, pirates also attack pleasure boats, killing or kidnapping crew and passengers and discouraging this form of tourism in the South China Sea. This has become a particular problem as the pirates have begun to merge with the terrorist groups Abu Sayyaf from the Philippines and Jemaah Islamiah in Indonesia. Both groups are thought to have connections with Al Qaeda.

But the most critical piracy problems today are strategic ones. The most urgent is potential interruption of oil and petroleum supply lines through the Malacca Strait and the South China Sea. China, Japan and Korea all depend increasingly on these shipping lanes as their life lines. Single acts of piracy are raising the cost of getting oil, but a major terrorist incident could close the strait or bring larger navies into the South China Sea, setting off international conflagrations. A single major incident could also have environmental damage that would be extremely costly.

The second of these strategic possibilities is the destruction of a major port facility if a hijacked oil tanker were to be exploded by terrorists. Especially with the potential of combining a tanker explosion with a nuclear weapon or a so-called dirty bomb, it could destroy an economy like Malaysia's or a complete country like Singapore.

The London-based IMB runs a Regional Piracy Center in Kuala Lumpur, Malaysia, that tracks incidents, promotes defense against pirates and develops strategies for containing the problem. A coordinated effort by the governments of Malaysia, Indonesia, and Singapore has worked to reduce piracy in the Strait of Malacca. Yet the overall problem persists.

After a slowdown following the tsunami that hit the region in December, pirate attacks have risen in the past few weeks. This is a growing problem for international business and it's certainly no movie.


Llewellyn Howell is a senior research fellow at the Asia Pacific Country Risk Institute at the University of Hawaii, Manoa, and international affairs editor for USA Today Magazine.


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Plan now for the right
person to handle your
affairs after you die

The death of someone near and dear can be a stressful time. Your life is disrupted by the loss and your grief. Often, it can be a confusing time, both emotionally and logistically.

Who has what responsibilities? Here's a quick look at different roles involved after someone's death:

» Executor: The executor, also known as the personal representative, has the duty of managing, safeguarding and distributing the assets which the decedent owned at death, in accordance with the will. The executor also must file the estate tax return, if necessary.

» Trustee: The trustee is the person in charge of managing and distributing any assets held under a trust. The decedent may have had one or more trusts. The trustee must follow the trust document, which provides the terms by which the assets are to be held and distributed. Often, the trustee must work with the executor regarding assets.

» Guardian: A guardian is a person nominated in the will to care for the decedent's minor children. While it is up to the court to decide who will get custody of the children, the decedent's choice of guardian will be given due weight.

The first step, of course, is for the family to make any funeral arrangements. Immediately after death, the executor or trustee will need to make sure any assets are safe. For example, if the decedent lived alone, it would be wise to change the locks on the door to prevent someone with an errant key from gaining access.

Next, the executor or trustee should consult with an attorney who focuses on estate planning and administration. The attorney will help guide you through the next steps to be taken, which will include gathering the assets and following the terms of the documents. An appointment for this should be made within two weeks after the death occurs. In the interim, do not re-title any assets of the decedent and make no distributions to any beneficiary, including yourself.

The attorney will help guide you through the next steps, which will be unique to your circumstances.

Attorneys Judith Sterling and Michelle Tucker are partners in the Honolulu law firm of Sterling & Tucker. For more information, call 531-5391or visit www.sterlingandtucker.com.
To participate in the Think Inc. discussion, e-mail your comments to business@starbulletin.com; fax them to 529-4750; or mail them to Think Inc., Honolulu Star-Bulletin, 7 Waterfront Plaza, Suite 210, 500 Ala Moana, Honolulu, Hawaii 96813. Anonymous submissions will be discarded.


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