Kampala — SOMALI pirates roaming and high-jacking ships in the Indian Ocean off the Somalia shores are a threat to shipping in the region, which has engendered fears that the economy could get hurt unless the pirates are curbed.

The International Maritime Bureau has described the situation off the coast of Somalia as "out of control", with at least 18 ships and 330 mariners being held hostage now.

Insurance giants AIG anticipate an increase in insurance premiums for ships passing through the pirate Infested waters off the coast of Somalia.

"We can expect premiums to increase if nothing is done to resolve this issue soon. We already have clients choosing to go around Madagascar and come up via Tanzania rather than risk their cargos. What that means since insurance is pegged to the cost of freight premiums will go higher, AIG chief Alex Wanjohi said.

But it makes sense for insurers to cover the longer trip with the lower risk of attack than the shorter trip which is a higher risk." Far-reaching effects for Ugandans are anticipated. "For Ugandans, expect price increases of imported goods and a lowering of living standards".

According to Issa Sekitto the Kampala City Traders' Association (Kacita)

spokesperson, Ugandan prices could go sky high as high jacking spawned hoarding and speculation in oil and fuel products as traders tried to take advantage of a possible oil scarcity.

"All the oil used in this country is from external countries and therefore any perception alone that there could be shortage of oil would lead to hoarding for those holding stocks knowing well that when there is a shortage there would be no supplies and prices will go through the roof."

Officials in Mombasa port have said they were worried the piracy would push up the cost of goods and might deter some importers from bringing cargo to the region.

On Thursday Maersk, the world's largest shipping company, announced that it would no longer put its tankers at the mercy of pirates of Somalia.

Its decision to stop plying the route through the perilous waters came after pirates on board the super-tanker Sirius Star demanded a $25m ransom with a warning of "disastrous" consequences if the money was not paid.

The Saudi Arabian super tanker is capable of carrying two million barrels of crude oil.