DENMARK’S Maritime Anti-Corruption Network has published a study that graphically quantifies the cost of criminal practices in the port and maritime sectors.

MACN says for over a decade it has been gathering first-hand data to map the extent of but had not hitherto  undertaken a comprehensive assessment of its overall monetary impact on the maritime industry and wider society, including indirect costs such as extended vessel lead times and delays.  Understanding these hidden costs is crucial, as they profoundly affect commercial activity and society, MACN says.

“This study, developed by consultancy QBIS, puts a dollar value on the cost of corruption for the private sector, government, and society, taking into account some of the hidden indirect costs resulting from corrupt practices across the maritime supply chain.

“The findings demonstrate a clear economic benefit and a compelling business case for proactive anti-corruption measures by both governments and businesses. These benefits have positive ripple effects for the entire economy, domestic revenue mobilisation, the business climate, and people’s livelihoods.”

QBIS undertook a case study of the African nation of Nigeria, where it found that based on the business-as-usual scenario, the cost of maritime corruption to the industry involved in the import of food and bulk products is over US$162 million per year.

“This cost of corruption adds about 15% to the total transport and logistics costs of importing bulk and food products into Nigeria. Per shipment, the cost of corruption is US$147,000 per import shipment of grain and over US$178,000 per import shipment of petrol. This is a significant cost that is borne by the private sector and has severe knock-on effects further down in the supply chain and ultimately impacts the end consumer,” MACN/QBIS found.

Based on the business-as-usual scenario, the cost of corruption adds about 1-2% to the retail prices paid by the customer for grain and petrol. This results in less consumption and less sales and negatively impacts GDP, tariffs collected by Customs, and job creation. Maritime corruption results in an annual reduction in GDP of US$ 204 million, an annual reduction in revenue collected by Customs of US$42 million, and 235,000 fewer Full-Time Equivalent (FTE) jobs due to less sales and economic activity, the report found.

“It’s worth noting that the total economic damage of maritime corruption is likely to be much higher. Bulk imports are estimated to account for around 43% of the total value of imports, with containers accounting for the remaining 57%. If similar costs of corruption apply in container imports as in bulk imports, the economic damage of maritime corruption will more than double,” according to this study.

The study can be found at https://macn.dk/wp-content/uploads/2024/06/Cost-of-Corruption-Study.pdf