Bangladesh: Rebranding country's image as ship-building nation:

The industries minister announced recently that the government would soon constitute a coordination cell, comprising experts in shipbuilding sector to ensure Bangladesh-built ships perform at the highest level of safety and operational efficiency. He said if the shipbuilding industry could maintain the current level of quality and production then this sector could be Bangladesh's surest path to attainment of Middle Income Country status while re-branding country's image as a 'ship building nation' through securing bilateral trade with friendly European partners.

While delivering two ships built by Bangladesh's leading ship building company Western Marine to its German buyer, the minister said that he felt proud as the company has handed over two more ships to Germany, just after delivery of two ships four months back. It is indeed encouraging to note that shipbuilding to cater to overseas buyers is becoming a fast growing sector for Bangladesh. Already quite a number of ocean-going cargo vessels were exported and orders for more are in the pipeline. It augurs well that contribution by the sector would comprise 3.0 to 4.0 per cent of GDP by 2015, and that export earning can go up to $2.0 billion in near future.

The country's shipbuilding industry could become the third largest foreign exchange earner in less than ten years if the government provides support services of issues relating to bank guarantees, access through green channels and declaring export-oriented shipyards as export processing zones (EPZs). This was revealed in a study on shipbuilding industry in Bangladesh: current position and prospects for future growth conducted by the Bangladesh Foreign Trade Institute (BFTI), a non-profit research institution.

Technology plays a major role in the industry and the industry is required to purchase basic drawings at an estimated cost of US$ 200,000, according to the study. Considering the importance of this technology, the government may consider subsidising the acquisition of technology, for instance, by undertaking to pay a certain percentage of the cost of acquiring such technology. Currently ship builders have to import virtually all materials required, which constitutes nearly 65 per cent.

The developments are presumably encouraging in the country's new and promising shipbuilding sector. Indeed, the government should not take so much time in making it a thrust sector as India and Indonesia are increasing their own ocean-faring vessel capacities. It noted that the ship building industry in India had grown from Rs 10.17 billion in 2002 to Rs 36.57 billion in 2007 as a result of government support over those five years, with sales increasing to Rs 52.83 billion in 2008. This would otherwise indicate what an important role the government can play in setting up an, what the study pointed out, enabling environment for the Bangladeshi shipbuilding industry.

The government has already granted the industry a partial green channel status. In terms of the current provisions, no customs duties are payable on imports of raw materials and components for use in shipbuilding. However, granting full green channel status to export-oriented shipbuilders will not place any additional burden on the government. It will save the industry 0.9 per cent of the contract value. If the shipbuilding yards are declared export processing zones, it would imply that all sales made to such shipyards would be considered exports.

Following the global economic recession, traditional shipbuilding countries are gradually becoming reluctant to build small ships (weighing less than 2,500 dead-weight tonne). This has had consequently opened a new window of export opportunity for Bangladesh. Given this encouraging signals, the Bangladeshi entrepreneurs were incentivised to enter the lucrative shipbuilding industry.

The shipbuilding sector is endowed with a certain level of technical edge that allows it to participate in higher value addition in terms of production. Taking this cue, it could be assumed that while it took around 25 years for the country's garment industry to flourish and play a key role in foreign earnings, shipbuilding could do the same but in less time (in about 10 years) with higher local value addition, assuming proper facilities and policies are provided towards the development of its backward linkage industries.

Entrepreneurs see Bangladesh's good prospects of flourishing shipbuilding industry. The country's economy could witness a big progress if it catches the global shipbuilding market and finds its modest room in the international shipbuilding country club. Establishment of deep-draft ports, duty exemption for import of capital machinery, bonded warehouse facilities, special financial subsidy and providing green channel for importing raw materials to ensure healthy growth of the sector are, thus, advocated by the concerned circles. Their forecast is that 'the sector has promising chances of contributing to the economy after garments sector'.

Bangladesh has advantages like cheap labour, a presence of nearly 0.1 million skilled and semiskilled workers and industry-related educational and training institutes. A long history of maritime activity and a favourable geographical location also placed the country at a favourable position, with about 200 shipyards and workshops to cater to the domestic needs for water vessels. The country has the skilled manpower required to vitalise the ship building industry. Some of this workforce is now displaced in some parts of the world but time has come to bring them back to utilise their capability in flourishing the sector. The government needs to patronise the much prospective sector by providing them with all logistic supports. India is providing 30 per cent financial subsidy on ship building industry while Vietnam is providing 40 per cent. Bangladesh can easily turn itself into a ship exporting country from present ship breaking one by giving due attention to the industry.

The Bangladesh economy is at present dependent on a few export items. It badly needs export diversification for its sustainable growth. The shipbuilding sector has the potential to expand the country's export basket, fetching much-needed foreign currency as well as generating employment opportunities. With an aggressive marketing plan, the new breed of entrepreneurs is expected to obtain a notable slice of the 400 billion dollar global shipbuilding business. In order to meet buyers' requirements in conformity with international standards, skill development is one of the pertinent issues that both entrepreneurs and the government do need to look into, concertedly.

Finance Minister AMA Muhith said recently that the government would announce a new policy for the shipbuilding industry. The emerging shipbuilding industry will also be declared a thrust sector in the new industrial policy, as it has huge export- and job-creation potential. Shipbuilding is predominantly a technology-driven sector. In this sector, constant improvement of engineering skill keeps one ahead of the others in competition. On its part, the government is pledge-bound to extend full support to the sector through reforming or enacting new policies. This pledge has to be translated into action in order to enable the shipbuilding sector to help lift the country's image, besides earning precious foreign exchange.

skhan@dhaka.net

Source: The Financial Express. By Shahiduzzaman Khan. Dhaka, Sunday April 3 2011

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