Prospect of Bangladeshi Shipbuilding Industry

by • On Dec 8, 10 15:47pm, Updated: Dec 12, 11 5:14am • 3045 Views

The country’s shipbuilding industry could become the third largest foreign exchange earner in less than ten years if the government provides support services of issues related to bank guarantees, access through green channels and declaring export-oriented shipyards as export processing zones (EPZs).

This was revealed in a study on Shipbuilding industry in Bangladesh: current position and prospects for future growth conducted by the Bangladesh Foreign Trade Institute (BFTI), a non-profit research institution.

“The government should not dwell over these decisions too long as India and Indonesia are increasing their own ocean-faring vessel capacities,” the study, which is likely to be presented at the country’s first-ever BFTI national shipbuilding conference to be held on September 29.

The study said the ship building industry in India had grown from Rs 10.17 billion in 2002 to Rs 36.57 billion in 2007 as a result of government support over five years, with sales increasing to Rs 52.83 billion in 2008. The report also said, “This confirms that government can play a crucial role in setting up an enabling environment for the Bangladeshi shipbuilding industry.”

However, the study said bank guarantee constitutes a very significant portion of the total project cost, saying the local shipbuilders are paying approximately 7.6 per cent of the total contract value for obtaining bank guarantees. “If the government could provide bank guarantee through the Bank Bangladesh, this cost could be reduced significantly,” the report added.

The government has already granted the industry a partial green channel status. In terms of the current provisions no customs duties are payable on imports of raw materials and components for use in shipbuilding.”Granting full green channel status to export-oriented shipbuilders will not place any additional burden to the government, but will save the industry 0.9 per cent of the contract value” – study revealed.

The report advocated that the shipbuilding yards be declared export processing zones saying, “This would imply that all sales made to such shipyards will be deemed to be export sales”. Technology plays a major role in the industry and the industry is required to purchase basic drawings at an estimated cost of US$ 200,000, according to the study.

“Considering the importance of this technology, the government may consider subsidizing the acquisition of technology, for instance, by undertaking to pay a certain percentage of the cost of acquiring such technology,” the study added.

Currently ship builders have to import virtually all materials required, which constitutes nearly 65%. If a contract for shipbuilding is worth $28 million, material imports constitute around $ 18.2 million. Regardless the current economic down-turn, it seems like Bangladesh has enormous amount of opportunity to play a big role but yet again it would be nearly impossible without the direct support from the Government itself.

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