Bangladesh: Committee formed to examine incentives for shipbuilders

The government has formed a committee to examine an incentive package for the country's emerging shipbuilding industry. According to a government notification, one of the incentives relates to extending counter guarantee by the central bank. Central bank deputy governor Nazrul Huda will head the 14-member committee. "The central bank, if the proposal is accepted, will give counter guarantee against the local banks' guarantee to the export orders of the local shipbuilders at 0.35 per cent commission," said Ananda Shipyard chairman Abdullah Hel Bari.
"Our demands about incentives will be looked into by the committee," added Bari whose company is the country's leading shipbuilder. Annanda fetched export orders worth more than US $500 million during the last couple of years.
Apart from the issue of providing counter guarantee, the committee will also examine the feasibility of allowing the import of raw materials by the shipbuilders at 1.0 per cent letter of credit (LC) margin.
The other members of the committee include joint-secretary level officials from ministries like finance, shipping, industry, commerce and the board of investment and representatives of the local shipbuilders and the president of the bankers association.
The committee is expected to hold its first meeting today (Monday) and submit its recommendations to the government within next one month.
Local shipbuilders such as Ananda Shipyard, Khan Brothers Shipbuilding Limited, Karnaphuly Shipyard Limited have been demanding for counter guarantee from the central bank against the ship export orders.
They said such a guarantee is required to maximise the retention of foreign currencies out of export orders as a significant amount of foreign currencies is lost to foreign banks as commission in the absence of the counter guarantee.
Mr. Bari, however, finds the one-month time to make recommendations by the committee.
"One month time should not be taken for a decision on counter guarantee," he said, adding that the local shipbuilders are paying 8.0 per cent of their export value to the foreign banks as commission.
The committee will also give recommendations relating to the shipbuilders' demand for fixing 7.0 rate of interest on their bank loans.
Besides two others demands-- opening of advance foreign currency account to deposit foreign currencies and relaxation of the condition for off-loading shares of shipbuilding companies within three years-- will also be scrutinised.