Let's build as well as break
Shipbuilding could be a bonanza business for the country, suggests Rafiq Hasan
The rich history of the shipbuilding industry in this part of the world goes back to the first half of the last millennium. Large wooden ships used to be built on the banks of the rivers Meghna and Shitalaykha. It is even said that the famous Arab traveller Ibn Batuta came to this area on a big ship built in a dock located at Sonargaon near Dhaka. Many such historic ships are being preserved in European museums.
With the changes in global politics and emergence of steel-made ships, the Europeans dominate the modern ship construction industry. They innovated various modern methods and developed sophisticated technologies for building large ships. They used those ships for commercial purposes and also supplied them to other parts of the world.
On the other hand, Bangladesh has become an important place for breaking large ships instead of building them. Bangladesh alone breaks 50 percent of the ships which are scrapped in the world every year. As a result, it is now known worldwide as one of the major ship breaking countries.
The ship breaking industry flourished mainly by exploiting thousands of poor people as workers. The booming ship breaking industries also caused environmental pollution in the area. Considering the negative impact on the environment, the ship owners choose under- developed countries like Bangladesh and India for breaking their old and rundown vessels.
The industry has become one of the main sources of iron and steel in the country.
But now Bangladesh is gradually entering a new phase in the shipping sector. The country has started building large ships for export purposes. The shipbuilding plants in the country have already received around $150 million worth of orders for constructing and supplying ocean-going ships to Europe and South-East Asian countries.
The local shipbuilding plants have been constructing large motor vessels and meeting domestic demands for a long time. Since independence,
hundreds of big passenger launches were built in local shipyards. Besides, hundreds of small cargo vessels are also being built here every year.
Earlier, the shipbuilding industry was dominated by public sector enterprises. A number of shipyards and dockyards in the public sector used to build and repair ships. But most of them have been sick because of mismanagement and financial constraints over the years.
But now the private sector has emerged as the major player. There are dozens of shipyards in Dhaka, Narayanganj, Barisal, and Khulna districts, where small size ships are built. In Dhaka, the main shipbuilding factories are located on the southern bank of river Buriganga. Over twenty large, and half a dozen small, shipyards are located there.
A vessel named Keari Sindabad that plies between Teknaf and coral island Saint Martin's, carrying tourists, and another vessel, Sarina Cruise, used for river cruise of foreign guests at Hotel Sarina, show the standard of locally built ships.
Some local shipbuilding plants also build international standard ships. But this is for the first time that two shipbuilding plants have received orders from abroad for large, ocean-going ships.
The plants are Western Marine Shipyards Limited in Chittagong and Ananda Shipyards and Shipways Ltd (ASSL) at Meghnaghat. The Western Marine Shipyard got the first export order, worth $11 million, from a company in Denmark for building a 26,000 ton capacity cargo-carrying ship. Ananda Shipyard got orders from two German companies to build eight ships worth over $10 million each. The ships will have the capacity of carrying 325 TEUS (twenty equivalent unit) of containers, each. The order is the biggest single order so far that any private company in the country has received.
The ships will be supplied by June 2010. A formal agreement was signed between buyers and sellers recently, after inspection of the facilities at the Ananda shipyard. "They are convinced that we can build the ships and deliver them on time. We have enough skilled workforce," said Abdullahel Bari, chairman of Ananda Shipyards, after signing the deal.
This is a new phenomenon in Bangladesh in the context of investment and employment generation, which was largely dependent on the textile sector. But the shipbuilding industry can emerge as a promising sector for employment generation for both skilled and semi-skilled labour.
Shipbuilding is a very attractive industry for a developing nation. It can bring a huge amount of foreign currency as the market is dollar based. Japan used shipbuilding in the 1950s and 1960s to rebuild its industrial structure. South Korea made shipbuilding a strategic industry in the 1970s, and China is now in the process of repeating these models with large state-supported investment in this industry.
The world's shipbuilders are looking for new places as the major shipbuilding countries like, Japan, South Korea, China, Vietnam, and Singapore have been inundated with orders. Those countries are no longer interested in taking orders for small or medium range ships. All the shipyards in Vietnam, China, and Singapore are booked until the year 2010. The buyers have become desperate and are looking for new locations for placing orders.
The most interesting thing is that it is the foreign buyers who first came to Bangladesh and encouraged local shipyards to improve facilities for constructing large ships. European buyers visited Chittagong several times in the last couple of years and drew the attention of the shipbuilders for improving existing facilities.
According to shipbuilding industry sources, orders worth around $70 billion are currently floating in the air in the world market. If a small portion of that arrives in Bangladesh, it would bring massive changes in the over-all socio-economic condition of the country.
"We have world class expertise and skilled labour force for shipbuilding. The only requirement now is government's policy support. If given, this sector can earn billions of dollars in foreign currency every year," according to one expert.
"These days European buyers are frequently coming to visit shipbuilding plants in Chittagong, and placing orders for ocean-going ships," says Sakhawat Hossain, managing director of Western Marine Shipyard Ltd. "European buyers are showing keen interest in the development of shipbuilding industry here, and this would help harness our cheap labour force," he adds.
Shipbuilding is a basic industry, and industrialisation in many countries began with shipbuilding plants. Highly developed countries like Japan, South Korea, Taiwan, and Singapore had first adopted shipbuilding plants for major industrialisation.
They brought huge investment, providing job opportunities for thousands of the semi-skilled and skilled labour force, and contributing to establishment of the base of the economy. Later, those countries adopted other sophisticated industries for development.
Bangladesh has a number of advantages for developing shipbuilding industries. The main advantage is that it is a riverine country having vast rivers, which is one of the major pre-requisites for developing shipyards.
Availability of plenty of workforce is another advantage. The cheap labour force can be used for shipbuilding work after brief training. From these points of view, Bangladesh is now an ideal place for setting up shipbuilding industries.
The main disadvantage in developing the sector is non-availability of steel -- the main raw material for constructing ships -- which Bangladesh does not produce. In addition, if the shipyards are set up without proper planning it may cause massive pollution of the environment. Regular monitoring by the government can prevent environmental disaster in this regard.
The government has hardly any policy for developing shipbuilding industries in the country, and the shipbuilders are following the prevailing export-import policy. But the survival of the sector, with the existing policy, would be very tough. The government should frame a proper policy to make quality steel available in the country, and develop the shipbuilding industry.
With policy support from the government the shipbuilding industry can flourish rapidly, like the garments industries. The back-to-back Letter of Credit (L/C) system can be introduced in the sector for greater interest of the country, and for employment generation. Sakhawat Hossain suggests that expansion and development of this industry in Bangladesh were being impeded due to high cost of importing raw materials: "The sector can flourish rapidly and generate huge employment if the government allows back-to-back Letter of Credit (L/C) system for importing steel."
Value addition in the sector is also much higher, not less than 35 percent according to experts, while it is only 20-25 percent in the textile sector. One order in the shipbuilding sector can bring more foreign currency than over ten orders in the garments sector.
Other than engineers and designers, welders are the main workers required in the shipyards. Thousands of Bangladeshi welders are working abroad, particularly in Singapore plants. This sector developed in Singapore with labour force from Bangladesh, as around 80 percent of the workers in the Singapore shipbuilding industry are from Bangladesh.
If shipbuilding plants flourish here a large number of them might come back home.
Rafiq Hasan is Senior Reporter, The Daily Star.