Shipbuilding: A Lucrative Opportunity For Bangladesh

Kazi Aiman Udoy

Shipbuilding is a potential industry for Bangladesh which is growing rapidly. Dating back to the early modern era, Bangladesh has a long history of shipbuilding. Moreover, when the locally made ships started exporting, it became a healthy, promising industry in our country. There are more than 200 shipbuilding companies in Bangladesh, mostly concentrated in Dhaka, Chittagong, Barisal, Khulna and Narayanganj.  

Ships have been playing a crucial role in the trade affairs of the people of this country since the old times, because of the riverine geography of Bangladesh. As evident in the documents of 14th century Moroccan traveler Ibn Batuta, there used to be large fleets of warships docked in various ports of the country. The port city of Chittagong and Sandwip were manufacturing hubs of large ships during the mid-15th century, documented by a medieval European traveler, Caesar Frederick. During the Mughal period, the amount of shipbuilding swelled extensively.

The first Bangladeshi shipbuilding company to export an ocean-going ship was founded in 1983 on the bank of Meghna River named Ananda Shipyard and Shipways Limited (ASSL) when it exported the locally manufactured "Stella Maris" to a Danish firm. Since then ASSL has secured many other contracts, mostly from the European countries. In Chittagong another shipbuilding company “Western Marine Shipyard” has secured many export contracts. Khan Brothers Shipbuilding Limited situated in Meghna is the third largest shipyard in Bangladesh. One of the reputed names in Bangladeshi shipbuilding industry is FMC Dockyard and it is the only Dockyard of Bangladesh that has its own forward and backward linkage facilities.

In 2000s, Bangladesh was introduced to the market of shipbuilding. At the very beginning, Bangladesh exported a few small boats to Mozambique and Maldives, but orders from Europe became the major turning point for Bangladeshi shipyards.

German and Danish buyers ordered vessels called “multi-purpose cargo ships”. Through this process, Bangladesh has started to export ships to Europe and has come to be recognized as a shipbuilding nation.

Another reason for our position in the international market is our expertise in domestic shipbuilding. We already achieved technical knowledge on how to manufacture coastal and in-land vessels for commodity transports in the domestic market.

Some shipyards improved their abilities to turn themselves into a fully-fledged world class shipyard and some shipyards had to start from scratch. Shipbuilding has become a potential industry in Bangladesh like South Korea, Japan and China. Experts opine that Bangladesh could stand as a major challenger in the international market of small to medium ocean-going vessels witnessing the cheap labor availability in Bangladesh as well as increasing volume of export deals secured by different shipbuilding companies.

Experts say that since the leading industries like South Korea and China are after larger containers, ships and tankers, an immensely lucrative market has emerged for Bangladesh to manufacture small and medium sea-going vessels. Hence it makes the way for Bangladesh easier to stand as a surprising competitor in the small to medium ocean-going vessels market segment. The focus of foreign buyers has been on Bangladesh for quite some time, testing the strength of the Bangladesh is not so organized shipyards with stray orders. The test over, it is indeed gratifying that our manufacturers are now planning to go in big way in this hitherto uncharted territory. This sector has all the potential to flourish, the observers believe. So far, the local shipyards have exported 40 ships to distinct countries in Europe, Asia and Africa and earned $180 million.

Experts forecast that Bangladesh would be able to earn around $4.0 billion in a span of next five years provided the present trend continues. Government policy should be a major facilitator in making this happens.

Shipbuilding and Western Marine Future prospects: 
 
United Nations Conference on Trade and Development (UNCTAD), published ‘Review of Maritime Transport 2019’ in which Bangladesh secured the top position in ship breaking by dismantling 47.2% vessels of the world in 2018. A Belgium based advocacy organization, The NGO Ship breaking Platform, has published data on ships dismantled worldwide in 2019. Bangladesh has taken the lead by dismantling some 234 ships in 2019, according to the list published on February 4.  India, Bangladesh, Pakistan, and China were the top four ship breaking countries in 2017.

Manufacturing medium-sized cargo vessels within 12,000 DWT capacity and many other utility vessels in the main focus of Bangladeshi shipyards. As a result, Bangladesh do not need to battle with main shipbuilding nation like South Korea, Singapore or Japan, who focus on manufacturing gigantic vessels above 50,000 DWT. Bangladesh concentrates on very specific segments of the market which is easier for them to build.

Statistical data shows that lately in the European market there will be a huge demand for medium-sized cargo ships running on green energy. Western Marine has already secured order from an LNG driven cargo vessel from Norway newly.  ​​

​Also, throughout the world there is an increase in demand ​for utility vessels

such as fishing trawlers or offshore vessels, tugs etc. Different foreign buyers are knocking on the door since Bangladesh has proved itself to be a new and appreciated place for manufacturing these vessels.
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Right now, Bangladesh is manufacturing 38 ships for Netherlands, Norway and India. There have also been some orders from the government and local owners inside the country. Lately, Bangladesh has delivered an offshore patrol vessel to the Ministry of Fisheries of Kenya, a landing craft to the UAE and two cargo vessels to India.

In 2017 Work Boat World awarded Western Marine as the “Best Large Patrol Boat” for exporting hi-tech offshore patrol vessel “Doria” to the Ministry of Fishers in Kenya.
 
Government support to tap this growing industry:
 
Shipbuilding is actually a highly technology-based and sophisticated industry with the huge prospect of social and economic benefits. It provides a steady flow of foreign revenues, massive job opportunities, industrial development and many other opportunities for this country. Given its prospects, the government should come up with policies to support and promote this growing industry.
 
Most importantly, shipbuilding has been recognized as a heavy-tech based industry throughout the world which brings a positive image for Bangladesh. But Bangladeshi yards are still fighting to sustain in the industry where shipyards in other nations enjoy the lowest interest rates for developing their yards and executing their shipbuilding projects. Government must work out a policy for the provision of long-term loans at lowest rates of interest to ensure sustainability in this massive and competitive international market since huge investments are needed in the capital-intensive shipbuilding industry. Moreover, a host of materials such as steel pipes, sanitary equipment, furniture, doors, windows, power generators, switchboards, transformers, upholstery etc. could be made locally instead of importing them at high cost. Ultimately, it will have a multiplier effect on the economy in terms of subcontract servicing and employment generation. This lucrative industry will be able to sustain the growth momentum if it is ensured that the proposed shipbuilding policy addresses these and other pertinent issues.

 
Why is Bangladesh a lucrative place for shipbuilding? What are the advantages?
 
The presence of Quality Management System (QMS) in Bangladeshi shipyards is the main advantage in building ships. In the long run a full-fledged shipbuilding facility without QMS cannot be competitive. It is our pride that Western Marine is an ISO 9001: 2015 certified yards which ensured the highest quality in our workmanship.

After that, skilled and cost-effective workforce with expertise in shipbuilding is our advantage. We have the advantage of building yards on river banks as ours is a riverine country - a prerequisite for any shipyards because they need to create access through waterways to deliver a ship to its destination. Last, but not the least, compared to shipyards in Europe and other parts of the world our favorable weather conditions allow us to be more productive.
 
What will be the effect of ship-breaking, how are we going to save our environment?

Prior to answering this question, we must at first differentiate between shipbuilding and Ship breaking. Ship-breaking and Shipbuilding are two different industries. One breaks the ships to scraps, which could be harmful to the environment if certain compliances are not met whereas the other builds new ships.

Many protected mangrove trees have been cut to make way for ships discarded for scrapping in Bangladesh. In 2009 14,000 mangrove plants were felled in Sitakunda to make space for ship breaking yards.  Statistics by YPSA shows that over the past few years at least 60,000 mangrove trees have been cut along the coast near the port city Chattagram to make for more ships. The degradation of mangrove trees has adverse effect since they are necessary for the ecosystem and work as shield against the devastating effects of typhoons and floods. 

The health issue is another concern for this growing industry. Since the workers in the industry do not use sufficient respiratory material to save them from toxic fumes and contaminated substances spread during the cutting and cleaning operations. Apart from that many hazardous substances are not even identified and ultimately, they harm workers health. Some cancers, including asbestos related mesothelioma, will only develop 15 to 20 years after exposure and cause many more casualties among former ship breaking workers. No one can disagree that ship breaking has huge negative impacts on the environment. But due to the recent government interventions, we are hopeful that breaking yards will take preventive measures to reduce adverse effects on the environment.

Shipbuilding industry is not harmful to the environment at all. It is a shore-based industry. It only comes in contact with the water when a ship has been fully built and launched in the river. No harmful chemicals are used that can cause water or air pollution. Moreover, the facilities inside shipyards are “asbestos free”.
 
Ways to get global reputation:
 
Good Quality Management System (QMS) brings fame for us. QMS helps us to deliver the best products to our clients that are now sailing across the world. Many ships which today sail in the Atlantic, the Pacific, Gulf, the Indian Ocean and Baltic Sea were delivered by Bangladesh.
Europe, S. America, New Zealand, Asian subcontinent, Middle East Asia and East & West Africa which are the major destinations in the world has thus far been covered by us. For now we have not received any major warranty claims from any of our buyers; this is our reputation in the global competitive market due to which new buyers are directing their shipbuilding queries to us.
 
 
Challenges for Bangladeshi shipbuilders:
 
The high cost of funds is our primary challenge. For its high social and Economic value addition, shipyards require long-term easy loans with single digit interests. Since heavy industries like shipbuilding require constant maintenance of proper roads and highways, bridge, port facilities, dredging works and many others to facilitate the heavy engineering and high-tech work, ultimately it presents logistical challenges for us.
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We are contributing to the economy by meeting diversified domestic demands for increased growth, increased domestic and international trade and most importantly, capacity build-up. This is the only industry with the capacity for heavy steel engineering for any huge construction work such as bridges or offshore platforms. It will be impossible for us to compete in the global competitive market if we do not receive financial support from the government, like easily accessible, low-interest loans with long-term payment terms.

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References:
 
https://en.wikipedia.org/wiki/Shipbuilding_in_Bangladesh

https://thefinancialexpress.com.bd/editorial/shipbuilding-policy-1567095604

https://www.dhakatribune.com/business/2018/05/25/bangladesh-gaining-global-recognition-as-a-shipbuilding-nation

https://www.statista.com/chart/17336/countries-scrapping-the-most-ships-and-countries-of-shipowners/

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Kazi Aiman Udoy

Kazi Aiman Udoy is a second year undergraduate student at the Department of Economics, University of Dhaka. He aims to systematically achieve his objectives given the available opportunities.