Export earnings from shipbuilding soar

Govt should adopt a refinance scheme

Saif Uddin | December 16, 2017 00:00:00

Export earnings from the country's shipbuilding sector has surged in recent months due to
handing over of several high-value ships to foreign companies after a sluggish growth
witnessed during the last couple of years, insiders have said.

They are becoming hopeful of the sector to contribute more to the country's export
earnings in the days ahead, if there is enabling policy support specially low cost finance.

According to Export Promotion Bureau (EPB), the country earned $30.45 million in the
first five months (July-November) of the current fiscal year (FY) 2017-18, a robust
growth of 460.77 per cent comparing to the corresponding period in previous FY.

In July-November period of FY 2016-17, the country exported ships and other floating
structures worth $5.43 million. The total export figure for whole FY 2016-17 was $65.61
million, a growth of 230 per cent from $19.89 million in FY 2015-16.

Export earnings from the sector were $0.44 million and $5.73 million in FY 2013-14 and
FY 2012-13 respectively. However, in 2011-12 FY, it was $45.95 million, the official
data revealed.

According to estimation by Businesswire, a global economic data analysis agency,

around $650.83 billion will be spent for the procurement of new ships in the year 2026
across the globe.

Sources said the country may tap the multi-billion dollar opportunity riding on its
expertise and long tradition in ship building. The global market is led by China, Korea
and Japan.

When contacted, President of Association of Export Oriented Shipbuilding Industries of

Bangladesh (AEOSIB) Dr Abdullahel Bari said the country has huge prospect to earn
from the global shipbuilding market.

"The global shipbuilding industry is growing at a significant rate in recent times," he said
adding : "The sector will see a robust growth from next years as shipyards are receiving
increased orders."
Mr Bari, chairman of Ananda Group, a pioneer in vessel export also said domestic market
has become important for the shipbuilders.

"It will be our first job to build our ships by ourselves, not by foreign shipyards at higher
cost," he said.

Admiring the capability of Bangladeshi ship builders, the veteran engineer said: "Our
entrepreneurs are very courageous to invest money in the sector who are giving the
country an identity of a ship exporting nation."

However, higher cost of investment is the main challenge for the sector, he said.

The shipbuilding industry is very important one considering its direct link with total
export-import and merchandise handling to and from the country.

Bangladeshi Shipyards have to pay a double digit (12%) interest rate for funding from the
banks.

"India and Vietnam governments are providing interest-free loan for a period of up to 20
years," he said.

Sources said around 300 shipyards are operating in the country with employment of more
than 0.3 million people.

They added that unlike other industries including apparels, shipyards require extended
period from investment to profit ensuring. This is why many banks are reluctant to invest
in the sector. Moreover, construction of a ship usually requires more than two years.

In addition to this, shipyard owners have to pay import duty on raw materials aimed at
ship construction in the country, which is contrary to the industrial policy. The authorities
concerned failed address the issue, despite persuasion from shipbuilders.

Amid such challenges, the ship builders are doing well, said the AEOSIB president.

"In next five years we shall be highly successful in shipbuilding," he said adding that:
"Bangladeshi manufacturers can build ship with capacity up to 15,000-20,000 Dead
Weight Tonne (DWT)."

Ananda Shipyard and Slipways is now more focused on local market in recent years, he
added.

According to the sources, for the last couple of years, only Western Marine Shipyard
(WMS) Limited has been exporting vessels.

While contacted, the WMS Company Secretary, Shahadat Hosen said the WMS has
already exported 15 vessels including ship, barge and ferries in calendar year 2017.
Of those, only three ships brought $30 million approximately. The company earned $2.6
million from export in the year 2016.

"Recently we have sold an Offshore Patrol Vessel (OPV) to the government of Kenya
through a Danish buyer at a cost of $18 million," said Mr Shahadat.

He also said two other ships have also been sold at nearly $10 million each in recent
months. These earnings have been reflected in nearly five times growth trajectory
compared to first half of last years.

The WMS is making numerous ships for both international and local buyers.

Sources said the country exports vessels to countries including the UAE, Denmark,
Germany, Norway and India. Buyers choose Bangladesh for low cost and availability of
cheap labour.

The sector's great achievement is in reducing the import dependency, said Tariqul Islam,
executive director of Ananda Group and a naval architect.

"We are meeting almost whole of the local demands in recent years", he said adding that
local ship buildings annual market value is about $1 billion.

His company has been making vessels for government and non-government organisations
like Bangladesh Inland Water Transport Authority (BIWTA), Bangladesh Inland Water
Transport Corporation (BIWTC) Bangladesh Navy, Chittagong port, Mongla port and
others through international tender.

With the country's growing economy in recent years, shipbuilding sector will also thrive
to meet the increased demand for commodities and other goods, he said.

"The government should adopt a refinance scheme for supporting the sector," he said.

Besides, Banks should extend the term for loan against trust receipt (LTR) to more than
one year for the shipyards as it takes time to make profit from building a ship, he added.

saif.febd@gmail.com
Govt plans single-digit interest loan
for
shipbuilders
FE Report | Saturday, 9 December 2017
The government has taken a move to provide the shipbuilders with single-digit
loan facility aiming to help promote the shipbuilding sector and boost export
earnings, officials said.
As part of the move, the commerce ministry has requested the finance ministry to
take necessary steps in this regard, they added. "The finance ministry is now
working on the issue," an official concerned told the FE on Wednesday.

The country could earn over Tk 20 billion annually from ship export if the sector
gets bank loan at single-digit interest rate, long-term financing and necessary
policy support from the government, according to sector insiders.

"Currently, we earn Tk 10 billion annually. If we get bank loan at single-digit

interest rate with long-term financing facilities, it will help increase the volume of
our exports to over Tk20 billion from Tk 10 billion annually," one of them said.
At present, the bank interest rate for the shipbuilding industry is above 10 per
cent. They demanded that the government should make the 'cost of finance' for
shipbuilding similar to other competing countries in Asia.
They also demanded consolidated bank guarantee issuing cost at 1.5 percent a
year and long-term funding at 6/7 percent interest and working capital with
single-digit rate.

Available loan facility for the industry is very limited. The sector is mostly
deprived of the export loan during pre-shipment and post-shipment as it takes
12-24 months to build a ship, Export Promotion Bureau sources said.

Earlier, the Export Promotion Bureau (EPB) had sought to facilitate the Export
Development Fund (EDF) for the shipbuilding industry, the data mentioned.
The shipbuilding industry received orders from different countries like New
Zealand and East Africa and other countries in Europe, showing an interest of
global buyers to Bangladesh-made ships.

At present, the industry employs more than 100,000 people and its value addition
exceeds 40 percent. Besides, quite a few backward linkages such as
manufacturing of marine cable, furniture, paint and so on have developed from
the sector.

Bangladesh has a strong background in building ships since ancient times. Many
countries in Asia and Europe buy ships built in Chittagong. If the country can
grab 1.0 percent of the global orders for small ships, the amount will stand at
about US$ 4.0 billion. The global market for small ships is now about US$ 400
billion, according to industry insiders.

Md Shakhawat Hossain, General Secretary of Association of Export Oriented

Shipbuilding Industries of Bangladesh, could not be contacted over phone for his
comments in this regard.rezamumu@gmail.com