Revival of shipbuilding industry in sight

As powerful economies like Germany, The Netherlands, Norway, etc. are gradually coming out of recession, local shipbuilders are eyeing good prospect for the revival of the industry in the near future. Local shipbuilding industry was, indeed, passing through a difficult time for the last few years as those countries were unable to take delivery of the ships they had ordered from Bangladesh.

Besides, many African countries like Tanzania, Mozambique and Kenya are in contact with the local shipbuilders to buy a good number of ships. In fact, Bangladesh received many orders from the European countries before the recession had started in 2008. Many buyers were unable to get delivery of the ships as their banks were not interested to finance shipbuilding.

A number of orders, worth $2.0 billion, to buy ships from Bangladesh were cancelled by the European buyers last year following financial crisis that swept across Europe until early this year. It may be mentioned here that the local industry did not get any single order from the foreign buyers for the last two years.

The local shipbuilding industry is expected to get orders, $4.0 to $5.0 billion, from the European countries next year given the level of contacts being made now between the stakeholders of both sides. About 10 shipyards of Bangladesh are building export-oriented ships. Besides, passenger ships, Ro Ro ferries, oil tankers, fishing trawlers, etc. are also being built in those shipyards.

The entrepreneurs are also eying for local market and want to seize the opportunity of building oil tankers for the government to carry petroleum. They are 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.

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

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, remains 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.

The main strengths of Bangladeshi shipbuilding are its long history of maritime activity, the presence of favourable geographical advantages, a low-cost shipbuilding workforce and industry-related educational and training institutes, according to a study. Significant government focus is placed on aiding the shipbuilding industry -- green channels for duty-free market access and easy importation facilities have been created and a tax holiday is in the making, the study finds.

Terming the absence of an effective government policy as the main hindrance to the US$-50-million industry, the study said the government should immediately look into it to make Bangladesh one of the world's best places for shipbuilding. 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.

In order to give a big shot in its arm, the government plans to set up separate zones for the shipbuilding sector and formulate a policy to support the promising sector. The zones will be created on the south bank of river Karnaphuli in Chittagong and in Barisal. A coordination cell will be formed comprising experts in the shipbuilding sector to ensure safety and operational efficiency of Bangladesh-built ships. The emerging industry will also give Bangladesh a new name as a shipbuilding nation through securing bilateral trade with friendly European partners and other nations.

It is assumed that while it took around 25 years for the country's garment industry to flourish and play a key role in foreign exchange earnings, shipbuilding could do the same but in less time (say 10 years) with higher local value addition, assuming proper facilities and policies are provided towards the development of its backward linkage industries. The 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 global shipbuilding business.

Bangladesh can really emerge as a quality shipbuilder, provided the nation cashes in on the growing demand in the post-recession time worldwide. The government has to play the key role by creating a proper framework of policies to address the shipbuilders' problems that include financial constraints. It should stand by the local entrepreneurs willing to make investments in the shipbuilding industry by easing the bank finance for them. High lending rate and the cost of getting bank guarantee are the two major problems these entrepreneurs are facing. If this is solved, it will help strengthen the confidence and interests of foreign buyers and local investors.
Source: Financial Express