Shipbuilding holds out high promises

Shahiduzzaman Khan
A ‘pragmatic’ policy for the shipbuilding industry is reportedly under consideration for attracting new investments and orders from abroad. The country has earlier witnessed some notable success in export of small ocean-going vessels.

In this backdrop, the government is also examining the possibility of setting up a separate export processing zone (EPZ) exclusively for the shipbuilding sector.

A visiting 21-member Danish business team is, according to reports in the media, looking for local partners and investment potentials of the country’s budding shipbuilding industry. At a function styled Denmark-Bangladesh Matchmaking Event at a local hotel, Danish business leaders expressed their willingness to invest their funds in this sector in Bangladesh. Earlier, a German business mission, while visiting Bangladesh, expressed its interest in forming a sustainable, long-term partnership in shipbuilding sector in Bangladesh.
Commerce Minister Faruk Khan announced at the Danish embassy function that the government would consider tax holiday facility for this potential sector. If the Danish companies invest in the backyard linkages of shipbuilding, the sector, as the minister did rightly note, will be able to save a sizeable amount of foreign currency by reducing dependence on import of machinery and equipment.

Like the case in garment industries, Bangladesh is largely dependent on import of equipment and accessories for the shipbuilding industry. If these can be manufactured locally, the domestic value addition content, out of export proceeds from ocean-going vessels, will be substantial. In fact, accessories for the shipbuilding can be made cheaply from places like Dholai Khal if some of its units are offered soft-terms loans at low rate of interest. Local entrepreneurs should, thus, be facilitated and encouraged to manufacture such linkage facilities for the shipbuilding industry.

Investing in Bangladesh has otherwise different advantages including that of cheap labour. In the past several years, two local shipbuilders bagged orders for making more than 50 vessels worth $600 million mainly from European buyers. Some of the ships have already been handed over to the buyers in Denmark and Mozambique. Nearly 200 shipyards and workshops, employing about 100,000 skilled and semi-skilled workers, are in operation to meet demand of this riverine country. Man-hour cost in Bangladesh is lower than any other shipbuilding nations. Ships built in Bangladesh, according to industry operators, are 15-20 per cent cost-competitive compared with countries such as China, Korea, India and Singapore.

Bangladesh has become a new home for making small ocean-going vessels; traditional shipbuilding nations such as South Korea and China are now focusing on constructing large ships. This has offered an opportunity to Bangladesh to tap its full potential in shipbuilding country. More local companies have already come on the scene. Reports say six Bangladesh business houses will invest Tk 5.0 billion within a year to establish shipbuilding facilities across the country. Such business groups, having expertise in real estate, steel and engineering works, have reportedly formed already separate firms and acquired land for their shipbuilding projects. The initiatives have been taken by some of such businesses to set up projects mainly in Narayanganj, Munshiganj and Chittagong.

Danish Ambassador Einar Hebogard, speaking at the matchmaking event in question, appeared optimistic about future of Bangladesh shipbuilding industry. For the last three to four years, he has been watching the shipbuilding industry with interest and was finally convinced that Bangladesh would fare well in this burgeoning business.

According to the baseline study done by the Danish embassy, 10 Bangladeshi shipyards are expected to become capable of building high quality international standard ships of up to 10,000 DWT within a year or two. Two shipyards have already made it on the international scene and have at present around 50 vessels in their order books from the Danish, German, Dutch and Finish buyers. The size of the contracts is valued at around of $500 million and a memorandum of understanding has been signed for an additional $200 million.
If the Danish know-how is combined with Bangladesh’s low labour costs and hard work in joint ventures or other forms of strategic partnerships, local companies will be able to acquire necessary skills and experience for shipbuilding industry. However, the main strengths of shipbuilding in Bangladesh are its long history of maritime activity, presence of favourable geographical advantages, availability of a low-cost shipbuilding workforce and industry-related educational and training institutes, according to the study. The Danish embassy study found that significant government focus was placed on aiding the shipbuilding industry — green channels for duty-free market access and easy importation facilities have been created, besides a tax holiday in the making.

Bangladesh is believed to be 15 per cent cheaper in building small ocean-going vessels than its main competitors like Vietnam, primarily due to low labour costs. At present, Bangladeshi companies can manufacture around 40 per cent of the components for vessels built for local demand. With a vigorous marketing plan, the new breed of entrepreneurs will be able to obtain a large slice of the $400 billion global shipbuilding business. If that were done, this sector would play an important role in helping the country attain the status of a mid-income country within the stipulated time.

Shipbuilding is predominantly a technology-driven sector where constant improvement of engineering skill keeps one ahead of the others in competition. The government, on its part, will need to extend all-out support to the sector by framing a new policy so that it can brighten the country’s image, besides earning valuable foreign currency.

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