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SHIPBUILDING SECTOR

Ship export sinks
Several ships are being constructed on the yard of Western Marine Shipyard Ltd on the bank of the Karnaphuli river in Kolagaon, Patiya of Chattogram. Although ship exports from Bangladesh have failed to meet expectations, rising local demand has kept the sector alive. The photo was taken recently.
SUKANTA HALDER and MD ASADUZ ZAMAN
Bangladesh emerged as a shipbuilding nation in 2008 when it exported its first ocean-going vessel to a Danish company and suddenly there were talks about the sector’s immense potential and the country capturing a major share of the global shipbuilding market.
Ananda Shipyard & Slipways Ltd became the first shipbuilder to achieve the feat of exporting sea-going ships from Bangladesh, in a display of the country’s growing manufacturing prowess.
Soon, existing companies pumped hundreds of crores of taka into expanding their footprint. New shipbuilders also sprang up.
But, within a few years, the momentum was lost as demand from western buyers, hit by the dragging impacts of the global financial crisis, evaporated. On the domestic front, local entrepreneurs failed to build on the initial success, maintain international standards and deliver vessels on time, denting the confidence of buyers.
A liquidity crunch and higher interest rates on industrial loans also contributed to the decline.
Subsequently, ship exports from the country started to fall. Exporters fetched only $0.2 million in the last fiscal year, the lowest in a decade, according to data from the Export Promotion Bureau.
Export proceeds stood at $0.18 million in the July-April period of the current fiscal year, slightly up from $0.16 million during the same period a year ago.
Since 2008, Bangladesh earned around $180 million by exporting 40 ships to several countries in Europe, Africa, and Asia. However, no sea-going ships were exported in the last two years.
The last ships were exported in January of 2020 when Western Marine delivered two ships to Jindal Steel Works of India.
Bangladesh has more than 100 shipbuilding yards, with most serving the local market.
RIDDLED WITH CHALLENGES
Shipbuilders have to import around 50-60 per cent of raw materials since there is no backward linkage industry. As a result, it takes additional time to build a ship in Bangladesh compared to global competitors.
Vietnam takes one and a half years to build a ship, whereas Bangladesh takes two years to two and a half years. “So, buyers are shying away,” said Sohail Hasan, managing director of Western Marine Shipyard Ltd.
In Bangladesh, there is no facility for designing international standard ships. The design work has to be done in Singapore, China, Europe, or India.
Until recently, a model ship could not be tested in Bangladesh as well.
A shipbuilder says they are facing a fund crisis as banks usually don’t want to extend loans to them. Five to six companies that jumped into the bandwagon of building ships relying on bank loans are now unable to repay because of a lack of a steady revenue stream.
“It has created a negative impression among lenders,” he said.
M Abdur Rashid, managing director of Karnaphuli Ship Builders Ltd, which makes both ocean-going and inland vessels, says negative perception about Bangladesh among foreign buyers is hampering the industry.
According to Abdullahel Bari, president of the Association of Export-Oriented Shipbuilding Industry of Bangladesh (AEOSIB), exporters lost capital. Later, the coronavirus pandemic exacerbated the situation.
“We repeatedly demanded from the government a guaranteed reserve fund of $500 million to provide capital to the shipbuilding industry. We did not receive it. Nobody is paying attention to our demands.”
Ananda Shipyard and Slipways Ltd, where Bari is the chairman, is set to send a ship to Germany with an export value of $7-8 million.
Uttam Ghosh, a deputy general manager of FMC Group of Companies, says the cost of building ships in Bangladesh is 15-20 per cent higher than in other countries such as China, Korea, Japan, and India.
Taxes on the imported spare parts have further increased the cost of manufacturing ships.
Prof NM Golam Zakaria, head of the naval architecture and marine engineering department at the Bangladesh University of Engineering and Technology, says the backward linkage industry has not been developed in Bangladesh despite its huge potential.
SADDLING WITH DEBTS
Because of the high-interest rate of bank loans, the sector has been in a severe financial crisis since 2010.
Shipbuilders borrowed Tk 1,500 crore at high interest rates. As a result, they are now saddled with interests and debts.
Shipbuilders were particularly hard hit by the global recession a decade ago. Some European buyers cancelled several export orders handing a huge loss to the entrepreneurs. As a result, some completed ships could not be exported.
Investment rises despite gloom
SUKANTA HALDER and MD ASADUZ ZAMAN
Entrepreneurs in Bangladesh have pumped billions of dollars into the shipbuilding sector in recent years to meet their own demand for vessels as well as regain the international market.
Their entry came despite sinking ship exports from Bangladesh, driven by the global financial crisis of 2007-2008, collapse in demand, and failure to maintain international standards and deliver vessels on time.
Ship exporters fetched only $0.2 million in the last fiscal year, the lowest in a decade, according to data from the Export Promotion Bureau.
Export proceeds stood at $0.18 million in the July-April period of the current fiscal year, slightly up from $0.16 million during the same period a year ago.
Although the ship export is in a tight spot, a big market has been created, thanks to Bangladesh’s fast-expanding international trade through sea routes.
More than 90 per cent of the country’s $110 billion international trade takes place through seas. Hundreds of ships are needed every year to provide the service.
Today, Bangladesh has more than 100 shipbuilding yards, with most serving the local market, worth more than Tk 3,000 crore.
According to the latest report of the United Nations Conference on Trade and Development, Bangladesh has moved 13 places up to 14th in the shipbuilding industry in a span of five years, ahead of the US, India, Singapore, and Spain.
The success has been achieved by major industrial groups, including Meghna Group, City Group, and Delta Shipyard, a joint investment of TK Group and Seacom Group.
Meghna Group has so far manufactured the highest number of ships of international standards.
The group started investing in the sector in 2008 and has built 110 ships so far at the Meghna Shipbuilders & Dockyard, a subsidiary of the group, at Meghnaghat in Sonargaon of Narayanganj.
In the last three years, the company has produced 45 ships operating in coastal areas.
“In order to bring raw materials from the Chattogram port to factories or warehouses by inland waterways, a larger ship is needed instead of a lighter ship,” said Mostafa Kamal, chairman and managing director of Meghna Group, recently.
“As the movement of goods is increasing, it is not possible to handle them in small ships. So, I’ve invested a lot in building relatively large ships.”
The group has invested Tk 700-800 crore so far and employs more than 1,200 people.
“After meeting our own needs, we are now ready to export ships,” Kamal said.
City Group, one of the largest commodity processors in Bangladesh, made its foray into the sector in 1996 to carry goods and raw materials from Chattogram to Dhaka.
It had a shipbuilding yard in Rupganj of Narayanganj that has now been shifted to Meghnaghat.
So far, it has built 60-65 ships. Another 20-25 ships are being built currently, said Biswajit Saha, director for corporate and regulatory affairs of the group, recently.