Perspective

Nazmus Sakib

Bangladesh is witnessing a booming industry yet not so favored by the government. It is an Industry which can add value addition to the economy twice the size of RMG within five years. It is the Shipping industry of Bangladesh which has grabbed orders from developed EU countries due to its quality products and yet cheap labor costs and some other comparative advantages. With some very promising factors there are some trivial problems which can be solved with some auspicious government policy especially a proactive tax policy and some infrastructural development.

Evolution of the Industry
The history of shipbuilding in Bangladesh has a long tradition. It began with wooden-bodied traveler boat having two decks. Back to the early days of Arab businessmen arriving in this area we can trace back the ship building and even ship export from Bengal. Today we are all set to forget that Bangladesh was the centre of building ocean-going vessels in Asia between 15th and 17th century. In the early 19th century, the shipyards of Chittagong built many commercial ships up to 1,000 tons and also British navy vessels which participated in the battle of Trafalgar in 1805. Steel-body construction of multi-deck passenger carriers started in the eighties.
With the ship-breaking industry boom in Chittagong, availability of steel plates boosted the inland ship-building in the early nineties and various shipyards started to emerge in this sector. As of today, about two thousand locally-built cargo vessels of varying sizes — from 500 DWT to 2000 DWT — are now operating.
Khulna Shipyard was made in 1954 in the then East Pakistan. Engineering equipment, pumps for irrigation, freight vessels for fertilizer and seed, oil tankers and rail crossing barges were built in this shipyard. Six thousand and fifty new ships were built in this shipyard. In the mid 80′s after an accident a decision was taken to transfer this yard to the Ministry of Defense. Management of this shipyard was given to Bangladesh Navy in October, 1999. Then it became alive again.

The Modern Export Era
However, while the inland ship building was at its emerging stage, Bangladesh got its first contact of international ship building in 1979. Japanese ship building giant, Mitsui Engineering and Ship Building Industry developed the first and the largest joint venture shipyard with High Speed Ship Building and Engineering Co. Ltd. at Fatullah.
For the first time, High-speed with their Japanese partners was able to build vessels according to international classification for meeting national requirement. To mention a few achievements, this yard constructed five deep-sea fishing trawlers and participated in an international tender floated by the FAO (Food and Agricultural Organization, UN) to build eight grain carriers. It built the first barge-mounted power plant for RPC (Rural Power Company), several oil tankers, fast moving patrol boat for Navy and troops carrier for the Bangladesh Army.
However, an international slump in shipping was observed with many international ship-owners getting forced out of business as the new rules proved too costly for them. Many vessels were sold out for scrapping and with the growing demand for steel in China; suddenly global shipping found themselves having more vessels scrapped than they would need to replace with new building under new regulations. The international shipping entered a new era and the freight market jumped four-fold since the slump ending in the year 2001. The Europeans and the Americans could not compete with their Asian counterparts. As a result, all yards in China, Korea, Taiwan, Singapore and Japan are booked for apparently next ten years buildings super-ships, and the owners could not find yards to build the smaller vessels i.e., up to 6000 DWT. Even Vietnam, which is relatively new in ship building, is no longer interested to build small ships weighing up to 25,000 dead weight tones. Most of the giants in this industry want to build bigger vessels because it is relatively cheaper and requires fewer people adding. Their reluctance has made India and Indonesia the new destinations for small shipbuilding.
Ultimately the owners were forced to focus their concentration to Bangladesh. Testing orders were placed, only a few yards could draw the attention of the prospective builders like Ananda Shipyard, Western Marine grabbing international orders for approximately 22 vessels of various types but of smaller capacity because of lack of infrastructural capability and depth of water limiting the sizes of these vessels to a maximum of 4500 DWT. Highspeed Shipyard, though late, is negotiating several offers from abroad. The 22 vessels mentioned above would be worth US 300 million and would require five years to build. Disappointed owners are going back from Bangladesh as there is no further capacity to accommodate their requirement. So it turns out that Bangladesh definitely has an undersupply of Ships at the current world cost-pricing rate. This trend or the ship-building boom is expected to continue for at least next fifteen years, may be for a longer period, in case of Bangladesh because of its cheap labor. The opportunity that is now knocking must not be lost due to lack of priority or understanding of the prospects.
Due to the shipbuilding boom worldwide for the last decade or so, Bangladesh shipyards such as ASSL and WMS benefitted in terms of new ship orders from overseas and also expanding their building capacity. The low-tech oriented ships such as bulk carrier can be built competitively with low labor costs which is a big advantage in Bangladesh. In this view, the shipbuilding is an attractive industry for developing countries that can easily enter in the world market. By building such low-tech ships one after another, the skills of workers and technologies are accumulated and improved, and then, high-tech ships can be built. Japan and Korea followed this strategy and now China is following the same strategy. Bangladesh is receiving orders for bulk carriers from some European countries including Denmark, Germany and Norway.
If the government allows couple of more shipyards along the river Karnaphuli near the Chittagong port area, many international companies might be willing to set up joint venture shipyards so that larger vessels could be built and exported. This sector, is unequivocally capital intensive, but economists predict that it could produce net value addition twice that of readymade garment (RMG) industries in five years’ time. This sector, by international standard, is still at a vulnerable stage. It will stand firm if it gets the same facilities as given to the RMG sector. The net benefit will be of much higher yield in comparison to that of RMG. It will be possible if and only if we can take prompt actions.
At this stage, some shipyards are capable of manufacturing ocean-going vessels. It is felt that if the incentives provided to garment industries are extended to shipbuilding, it will help attract a large amount of foreign investment. A number of deep draft ports are needed for ship-building in suitable locations.
Experts said the country has become a new destination for companies seeking construction of small ocean-going vessels as traditional shipbuilding nations such as South Korea and China now focus on building large ships.
Three large shipbuilding companies in Bangladesh have received ‘export offer’ of about Taka 2,000 crore within a very short span of time. The new shipbuilding efforts and the entry into the global market, it is expected, will open new avenues for earning foreign exchange through export of ships besides creating wider scope of expansion of the industry and employment. Bangladesh’s shipyards have acquired a lot of experience in the field of shipbuilding as most of the motor launches and cargo vessels plying within the country have been built at local shipyards. The cost of shipbuilding is ‘highly competitive’ compared to other foreign shipyards.
The local shipbuilders require urgently proper attention of the government so that whatever assistance they need is provided for rapid expansion of the industry for greater interest of the country. One of the shipbuilders the other day expressed the confidence of building even war ships of any category at the local shipyards with all the precision required internationally for the defense services.
Ship building industry in Bangladesh is set to emerge as new export leader after two ship builders said they have already grabbed order worth over $250 million in 2007.
Meghnaghat-based Ananda Shipyards said it signed agreements worth around $180 million while Chittagong-based Western Marine put its total orders to more than $70 million.
“It’s a huge leap forward for us. If the trend continues, ship building in Bangladesh will be the second largest exporter after garments in 2015,” chairman of Ananda Shipbuilders Abdullahel Bari said.
“If we can grab one per cent of the global order for small ships, the amount will be worth $4.0 billion. The global market for small ships is now about $400 billion,” said Shakhawat Hossain, managing director of Western Marine.

SWOT Analysis
Bangladesh has some critical problems in this sector.  Bangladeshi ship building sector is lucky to have the Department of Naval Architecture and Marine Engineering (NAME) of BUET.  However, there are no valuable experimental facilities which can be effectively used in qualitative education and good research. An agreement of Academic Exchange and Cooperation between the two institutions was made in order to encourage faculty/student exchanges and joint research activities.
The shipbuilding industry needs heavy infrastructural equipments and well trained workers for design and manufacturing. In addition, this industry needs backward and forward linkage industries, steel and electricity industries, social infrastructure and logistics, and financing support. The most important factor is the strong governmental support and dedication. Various favorable policies by government should be in action such as subsidy, R&D and educational investments.
Bangladesh has some weaknesses in several areas which are necessary to address in order to upgrade the existing level of its shipbuilding industry. Among them, design and engineering technologies, and modern technologies such as automation and welder, and backward/forward linkage industries can be introduced by engaging proper foreign joint venture partners.
The role of CEO is very important in a modern competitive company, in particular, global company such as shipbuilding sector. There are many CEO’s, CTO’s and well experienced directors, scientists and technicians who retired from developed countries  ship yards. They can be hired as advisor of Bangladesh ship yards.
The education of well qualified naval architects in Universities is one of the most important factors. In order to do so, the experimental equipment such as towing tank, cavitations tunnel, structural and fatigue test facilities, welding test facilities and CAD/CAM lab etc are essential. This kind of test facilities can be also used as high quality research activities for Professors and MSc/PhD graduate students whose innovations can be used by shipyards in their commercial production.
In addition, Bangladesh government should establish a scholarship system that supports excellent students to study in advanced countries in shipbuilding technologies.  With compared to the facilities given for the RMG in the initial stages it is nothing. Moreover a developing country like Bangladesh has nothing to loose from a bonded investment for students in this regard.
Another important one is to open a maritime related national research institute such as MOERI (Maritime and Ocean Engineering Research Institute) in Korea or NMRI (National Maritime Research Institute) in Japan. This kind of national research institute is necessary not only to develop new technologies for shipyards but also to give jobs for many higher degree holders who cannot be absorbed 100% in shipyards. If this cannot be accomplished soon, at least some urgent necessary test facilities should be constructed in BUET and many professors can be involved in doing tests and research.

Important aspects
Bangladesh has some advantages for shipbuilding industry such as low labor cost, prosperous history, English spoken people and advantageous geographical location etc. However, there are also some weaknesses and challenges. These include the shortage of gas and power supply and the traffic jam. Most of all the government incentive and attention to this sector is yet to be noticed. An auspicious tax policy from the NBR like that is now operating for the RMG sector can make this sector a viable and promising sector for Bangladesh. And within five years this sector can emerge as the largest export sector for Bangladesh. The challenges could be overcome by appropriate responses that should be initiated by Government with the focus of building small to medium size ships up to 30,000 tons. According to the estimates of some economists ship building in Bangladesh will be the second largest exporter after garments in 2015.
This sector needs immediate attention from the government because the opportunity this sector is facing is a very exclusive one. The Government tax policy has to be positive by allowing tax exemption. But the first thing to do is to allow new shipyards along Karnaphuli river. There are great possibilities for shipbuilding sector in an auspicious policy environment. The emerging shipbuilding industry will strengthen the export diversification and upgrade Bangladesh from semi-mono-export country to multi-export country. And it is unambiguous that Shipping industry is much more sustainable than that of RMG in the long run.