Shipbuilding sector in Bangladesh has lost its shine a little bit, but it is rebounding now with the efforts of some new generation entrepreneurs. Due to global recession, no orders for new vessels came from foreign buyers this year. But the entrepreneurs are now eying local market to seize the opportunity of building oil tankers for the government to carry petroleum.

Reports in the media last week say the Western Marine has so far received contracts to make a total of 18 vessels for both public and private sectors in the country. Local buyers are now eager to buy locally manufactured vessels at a lower cost. So long the country was dependent on foreign trawlers for fishing in the deep sea. Shipbuilders say they are now capable of making fishing trawlers as well.

However, this is the second time that the shipbuilders of Bangladesh, relatively new to the smaller vessels segment of world shipbuilding market, face shrinking orders from abroad. During the global recession in 2008-09, the flow of orders to Bangladesh fell considerably. Many buyers are now unable to get delivery of the ships as local banks are not interested to finance shipbuilding. However, shipping analysts say the current situation is temporary. They expressed the hope that orders to make vessels will start coming towards the third quarter of the current fiscal.

In view of the prevailing situation, shipbuilders have demanded 10 per cent cash incentives against ex-port performance, up from 5.0 per cent now, to help the sector grow further. Experts suggest that the Bangladesh Bank should introduce refinancing scheme at a lower interest rate and provide industrial loans and working capitals for setting up new shipyards as well as expansion of the existing units.

The global market size of ships and ocean-going vessels was over $300 billion in 2011 and Bangladesh, as a new entrant to ship business, exported ships worth $45.95 million in 2011-12, an increase of 13 per cent compared to the previous fiscal year. Major markets for Bangladesh-made ships and vessels are Denmark, Germany, Finland, England, Japan, Mozambique and Pakistan.

The shipyards in Bangladesh now have the capacity to build export-oriented ships and vessels worth $600 million. The builders need policy support from the government to exploit the opportunity. The country can earn $2.0 billion by exporting ships and vessels in the next five years if both government and private sector efforts are put in place.

Nearly 70 per cent orders were cancelled in China, the leading ship exporting country, for the US financial meltdown and the ongoing debt crisis in the Eurozone. The orders in Bangladesh were not cancelled, but it is taking time for maturing up for new orders. The country is losing its competitive edge for higher cost of fund.

It augurs well that the contribution of the sector is expected to comprise 3.0 to 4.0 per cent of GDP (gross domestic product) of the country by 2015. It will be no mean feat considering the tough competition coming from major shipbuilders of Europe and Asia. Right now, the continued faith of foreign buyers in its ability to deliver only reinforces the confidence that the country no more lags behind in heavy industrial production and that its quality matches that of any reputable international manufacturer. There is no denying that the shipbuilding sector has the potential to expand the country's export basket fetching much-needed foreign currency as well as generating employment.

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, is pledge-bound to extend full support to the sector through reforming or enacting new policies so that shipbuilding can lift the country's image besides earning precious foreign currency.

To what extent Bangladesh is able to utilise the opportunity of shipbuilding as a foreign exchange earning source depends on its ability to manufacture the machineries, equipment and other accessories used on a ship. Although it is not possible to set up heavy industries overnight to make marine diesel engines, pumps, compressors, etc., there are many items like steel plates, pipes, valves, furniture, electrical cables, switchboards, transformers, motors, etc. that can be made right now in the country.

When the cost of building a medium sized ship is about $20 million, apart from the cost of labour and the shipyard's profit, all money goes abroad for buying steel plates, machineries and equipment. The only government steel mill in Chittagong had been closed some years ago. Otherwise, it would have been a source of earning foreign currency now. Presently, there are many ships in the order book, that require tonnes of steel plates. Steel is being brought from abroad at a price of about $1000 per tonne. That is, steel plates worth $2.0 million are being imported for each ship.

Although shipbuilding industry is mainly export-oriented, the domestic market is no less important. Imported materials and accessories such as steel piping, sanitary equipment, furniture, doors, windows, engines, electrical generators, switchboards, transformers, upholstery and many more things can be easily made in manufacturing facilities available in the country. However, to guarantee the quality of product an 'approval of manufacturing' from an International Ship's Classification Society is required. Approval of welding shop and design approval of some equipment can be done in consultation with local representatives of International Classification Societies.

The main strengths of Bangladeshi shipbuilding are its long history of maritime activity, the presence of favourable geographical advantages, the presence of a low-cost shipbuilding workforce and industry-related educational and training institutes.

Meantime, the government is expected to finalise the policy for shipbuilding and ship-breaking sector in two months' time in a bid to accelerate the growth of the promising sector. It is working to put the policy in place to ensure an environment-friendly and sustainable growth of the sector. In fact, the country needs a comprehensive shipbuilding policy with a clear implementation plan along with improved infrastructure, dedicated space, easy access to finance and bank guarantee facilities to unleash the potential of the emerging industry.

Shipping experts term the absence of an effective government policy as the main hindrance to the US$ 40-million industry. They said the government should immediately look into it to make Bangladesh one of the world's best places for shipbuilding. They said the industry could indeed become the country's third largest foreign currency earner in less than 10 years if the government provides necessary support relating to bank guarantee, access through green channels and declaring export-oriented shipyards as export processing zones.

Source: The Financial Express

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