Increased maritime security cheap at the price

by Suzi Fraser Dominy
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Anti-terrorist measures will be expensive but less than the potential cost of a major terror attack, says a new OECD report.

New maritime security measures to counter the threat of terrorist attacks will require an initial investment by ship operators of at least U.S.$1.3 billion, and will increase annual operating costs by U.S.$730 million thereafter, according to estimates in a new report from the Organization for Economic Co-operation and Development (OECD).

However, the added spending is substantially less than the potential cost of a major terror attack, concludes the report, "Security in Maritime Transport: Risk Assessment and Economic Impact." Moreover, savings from increased efficiency may offset some of the additional cost.

The world’s maritime transport system, comprising more than 46,000 vessels and nearly 4,000 ports, is open and flexible — attributes that make it vulnerable to terrorist attacks or misuse, concludes the report. A large, well coordinated attack could shut down the entire shipping system, forcing drastic government emergency security measures, such as the complete closure of ports, and create slowdowns from measures such as duplicate and lengthy cargo checks. The cost of such an attack on the U.S. alone could run as high as U.S.$58 billion, according to a simulation by the Conference Board and consulting company Booz Allen Hamilton Inc.

Against this backdrop, governments have stepped up security in the maritime transport network, for example by requiring ship and port security plans, as well as alarm systems for most vessels. Most of the measures become effective in July 2004.

Additionally, the United States has developed its own set of maritime security measures, ranging from advance notification of cargo contents for U.S.-bound ships, to pre-screening of high-risk cargoes in the port where they are loaded.

To comply with the new rules, ship operators will need to install security equipment and add staff at an estimated cost of at least U.S.$1.3 billion. The new equipment and manpower will also increase operating costs by an estimated U.S.$730 million every year.

Seaports will need to upgrade security also; however, accurately projecting the cost is more difficult. These costs may be partly offset by greater efficiency, says the report, as new security measures could have positive side-effects, such as reducing theft, shortening delays and lowering insurance costs.

The report can be downloaded at a PDF download from the OECD website: