Shipbuilders want the duty scheme on raw material imports to be restructured in the upcoming budget for fiscal 2013-14 to bolster the troubled sector after a sharp fall in global orders.
At present, shipbuilders pay 20-23 percent duty on raw materials that should come down to 3-5 percent in the next budget, they said.
The government should also discourage imports of new or used ships by increasing duty, said Md Sakhawat Hossain, managing director of Western Marine Shipyard.
Importers of new or used ships pay 3-13 percent duty, while shipbuilders pay 22 percent to import raw materials to build new ships, Hossain said.
Importers pay 3 percent duty to import fishing tankers, according to shipbuilders. “But we are making fishing tankers of international standards for the European market.”
The import of used ships also creates environmental hazards, Hossain added.
The government should increase duties on the import of new or used ships to 25 percent, which will compel businessmen to look to domestic shipbuilders; it will boost competition and lower prices in the sector, he said.
“We can save a lot of foreign currency if the country reduces its dependence on imported ships. It will also create more employment opportunities and help flourish the local industry.”
Giving examples, he said the Chinese government discouraged the business community from importing ships by raising the duty to 50-100 percent, while Canada gave financial support to its builders.
Bangladesh could extend a stimulus package to boost shipbuilding, like China and Canada did, said Hossain. “The government can offer financial help as most shipbuilders face pressures in paying bank interest.”
Shipbuilding is a modern, comprehensive industry that provides technical equipment for transportation, maritime development and national defence, said Afruja Bari, managing director of Ananda Shipyard.
A strong shipbuilding industry will also help other sectors, including steel, chemicals, textiles, light industry, equipment manufacturing and information technology, she said.
“A tax waiver and interest waiver on bank loans are our main expectations from the government in the next budget.”
Being a new industry in the export basket, the related policies and regulations are still insufficient, which impedes the sector’s growth, she added.
The government allowed the duty-free import of ships with a capacity in excess of 3,000 DWT (dead weight tonnage), she said.DWT includes the weight of the ship, materials inside the ship, fuel tank, food and all other stuffs.
“On the contrary, ships of this size manufactured in Bangladesh require duties to be paid on the import of raw materials, machinery and equipment. This imbalance and inclination towards imported ships without duties discourage local shipbuilding.”
“We propose that ships, equal to or bigger than 3,000 DWT, manufactured in Bangladesh should be allowed for duty free import of raw materials, machineries and equipment,” the managing director of Ananda Shipyard said.
Local shipyards face uneven competition from foreign shipyards participating in the international biddings, Bari said.
Foreign shipyards are not required to pay any customs duty and VAT to enter Bangladesh, whereas local shipyards that intend to manufacture marine vessel against international tenders require to pay duty and VAT to import raw materials, she said.
“This asymmetric poise towards foreign shipyards hinders growth of the sector. Local shipyards should at least receive equal opportunities, if not more.”