DIVING FOR PEARLS
Bangladesh was once known as one of the largest ship graveyards of the world. Every year, dozens of aging container vessels would head towards the country's southern coast to breathe their last before being broken into pieces. National and international news media, documentaries, photographs and numerous campaigns addressed the socio-environment and human rights issues related to the ship breaking industry of the country. With time, Bangladesh's economy began to be largely associated with this industry. In recent times, however, Bangladesh has been able to break out of this gloomy identity that defined its economy. In the last six years, we have emerged as a successful ship building nation which exports small and medium-sized ships to the highly competitive European market.
In Bangladesh, ship-building has been a century-old practice and of course, one of the earliest industries developed in Bengal that expanded over the oceans from the Indian sea to the Persian Gulf. Just like old times, since 2008, Bangladeshi yards have been manufacturing and exporting ferries, cargo vessels, and multi-purpose ocean liners, worth more than $500 million. The vessels were built for countries like Denmark, Germany and Finland.
Currently, Chittagong is playing a crucial role in shipbuilding. The shore of the River Karnaphuli has become home to new ships that will soon ply the sea. According to the European traveller Caesar Frederick, during the middle of the 15th century, Chittagong was the centre of building ocean-going vessels. At that time many countries of Asia and Europe would regularly buy ships built in Chittagong. It has been said that Ibn-e-Batuta went back in a wooden ship built in a dock located at Sonargaon, Dhaka. In the 17th century AD, a fleet of ships of the Sultan of Turkey was built in Chittagong. During the first half of the 19th Century, the shipyards in Chittagong built ships that could carry up to 1000 DWT (deadweit tonnage).
However, this glory faded with time but fortunately, has once again been revived with the initiative of a few businessmen in the country. Yet it is a small beginning when compared to giant shipbuilding economies such as China, Japan and South Korea. But industry leaders say that Bangladesh will continue to grow because it has several advantages over its rivals. Bangladesh has over 100 shipbuilding yards, with most of them serving the domestic market.
“We have plenty of skilled manpower and our labour cost is cheaper than many other countries. On average, ship owners can save at least 15 percent of their production cost if they choose to build their ships in Bangladesh,” says Sakhawat Hossain, managing director of Western Marine Shipyard in Chittagong.
But despite the industry's strengths and promise for the future, it is also facing some external headwinds. The economic crisis in the Eurozone has had an impact on the shipbuilding industry of Bangladesh. “We have 17 shipbuilding purchases, worth more than 200 million Euros, listed in our order book. But as our European buyers were not being able to borrow money from banks, our business was also being affected. However, times have changed, and fortunately, we are receiving more and more orders from Europe,” says Sakhawat Hossain.
With the Bangladeshi economy growing at about 6 percent a year, new, smaller ships and cargo carriers are needed to transport goods and other raw materials from the Chittagong port to different parts of the country. Thus, the domestic market has helped the shipbuilding industry to overcome the global recession. However, with powerful economies like Germany, the Netherlands, Norway, and others gradually coming out of recession, local shipbuilders are finally being able to eye good prospects for the revival of the industry in the near future.
The ship building sector has the potential to expand the country's export, enabling entrepreneurs to expect a notable slice of the $400-billion global shipbuilding business. The most significant consequence of this is that the shipbuilding industry is fetching much needed foreign currency while also generating employment opportunities within the country.
Sakhawat Hossain says, “Shipbuilding is a labour intensive industry. Bangladeshi labourers are still cheaper than Chinese, Korean and Japanese labourers.” According to the World Shipbuilding Statistics, at present nearly 90 percent of the ships are made by China, Korea and Japan. He believes that since Bangladesh is not capable of making very large ships, it will have to target small and medium size shipbuilding, which has a yearly market of around $200 billion.
The pundits of this industry are hopeful that since the global economy is on its way to recovery, the shipbuilding industry too can sense tremendous potential. Experts contend that as more than 50 percent of the world's ships are over 20 years old and need to be replaced, Bangladesh can have a significant role to play in ensuring their replacement. Moreover, since the shipbuilding giants, Japan, South Korea and China are busy building big, specialised and hi-tech ships, the shipbuilding industry of Bangladesh can be expected to construct smaller vessels.
"Globally, this small and medium-sized ship market is worth around $200 billion. If Bangladesh can get even 1 percent of this market, then it would amount to $2 billion in revenues," says Dr M Rafiqul Islam of the Department of Naval Architecture and Marine Engineering at the Bangladesh University of Engineering and Technology (BUET).
Ananda Shipyard and Slipways, another shipbuilding company, is currently handling work orders worth Tk 800 Crores received in the past one year from the domestic market, says Tariqul Islam, its executive director. Orders for eight vessels worth about Tk 700 crore were cancelled because of recession in the last three years, according to Ananda.
"Most foreign buyers are once again displaying interest to resume their orders," says Islam, adding that Ananda is not taking fresh orders from foreign companies as its shipyard has no free space.
As the shipbuilding industry requires huge capital, Bangladeshi shipbuilders need such financing and that is a major disadvantage for Bangladeshi shipbuilders. Bangladeshi shipbuilders can get loans at an interest rate of 15 to 16 percent whereas their Chinese counterparts can acquire loans at an average of 6 percent interest rate.
“The interest rate should be less than 10 percent for this sector to grow. Also, the government should implement an Export Development Fund (EDF) to help this sector with low cost funds as they have done for the garment sector,” says Rafiqul Islam. He further believes that the shipbuilding industry is a growing market as can be witnessed by the growth of the export of ships by 7.35 percent to Tk 481 crore in the fiscal year of 2013-14. The industry, thus, needs helps from the government to contribute more in the country's economy.
The main strengths of the Bangladeshi shipbuilding industry is its long history of maritime activity, the presence of geographical advantages, a low-cost shipbuilding workforce and industry-related educational and training institutes. Significant government focus for granting loans can increase the private initiatives to set up new industries that will contribute to the country's economic growth.
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