Govt eyes $4bn export earning from shipbuilding

With a $4bn annual export earnings target in five years, the government has drafted a policy for the shipbuilding industry to provide a range of facilities for entrepreneurs, including bank loans at a 4% interest rate.      

The loan, which has to be repaid in 20 years, comes with a five-year moratorium.   

At present, bank loans for the industry come with a two-digit interest rate but the Ministry of Industries feels it needs to come down to 4%.

The government in the past took various initiatives to lower the interest rate to single digit, but those did not succeed.  Banks had earlier pledged to bring it down to 9% but have not implemented that as yet.

The draft policy said Bangladesh has exported 40 ships to different countries in Europe, Africa and Asia in the recent years, and local shipbuilders have earned $180 million from exports. 

It emphasised sustainable development of the shipbuilding industry, employment generation, achieving efficiency and raising standards to the international level. 

If this flourishing sector receives support, it will create one lakh jobs in the next five years, the draft said. 

The draft was sent to different government and non-government organisations last week seeking their opinion.  

The formation of a Tk5,000 crore special fund for the shipbuilding industry was also proposed in the draft of the Shipbuilding Industry Development Policy 2019. 

Sohail Hasan, managing director of Western Marine Shipyard Ltd, said Bangladesh is building many high-tech ships at present, and achieving the $4bn export target is not a distant dream. 

"It is not impossible if the shipbuilding companies can build the capacity to make LSD (also known as dock landing ship) ships, LNG (Liquefied Natural Gas) carriers and chemical tankers," he told The Business Standard. 

"The countries achieving success in shipbuilding received - and are still receiving - a range of facilities from their governments. If the industry in Bangladesh gets government support, it can grow into to something big.

"The export incentive now stands at 10%, which should be increased. Tax holiday should be introduced again. If the proposal to form the Tk5,000 crore fund materialises, entrepreneurs will get loans easily. This will help the industry grow to a great extent," explained Sohail. 

Improving standard, providing incentives   

Among other facilities, a proposal was made to set customs duty at a maximum 2% to allow easy import of raw materials for the development of the industry. 

In the draft, the industries ministry opined in favour of increasing government cash incentives for exporting ships and other materials. At present, ship exports enjoy a 10% cash incentive.

Recommendations were also made to provide cash incentives for local shipyards which participate in international tenders for building dredgers, fishing trawlers, tugboats, ferries and ships that sail in oceans.

The industries ministry is in favour of giving tax holiday facilities to shipyards for the next 10 years. Entrepreneurs said they had earlier enjoyed tax holiday, but that does not exist now.

Shipbuilding is a labour-intensive industry. It requires heavy investment and cutting-edge technology. Entrepreneurs have to wait a long time to get returns on their investment.

The existing investment structure in Bangladesh and other facilities are not at par with competitors such as China, South Korea, Japan and India. 

The draft policy recommended taking programmes to also develop the ship repair industry. The industries ministry wants to build a special economic zone for building and repairing ships. 

It said steps will be taken to encourage the export of container ships, bulkers, offshore dredger patrol vessels, survey vessels, passenger ferries and landing craft tanks.

Also, local shipbuilding material will be prioritised so that the vessels can be built at low cost. 

Bangladesh has a rich history in building ships since ancient times. It was in the limelight for building ocean-sailing ships from the fifteenth to seventeenth century. In the first half of the 19th century, Bangladesh was building ships with a capacity of 1,000 metric tonnes.

At present, some 7,000 big and small naval vessels have been transporting goods and passengers in the waterways. There are 20 international standard and 100 local standard shipyards for building river vessels in the country. 

The international standard shipyards are capable of building 100 ships annually, on average. At present, 100 tonne deadweight tonnage (deadweight tonnage is a measure of how much weight a ship can carry) ships are being built in the country. 

The draft policy said the country's shipbuilding industry has to be elevated to international standards by linking it with domestic, regional and international water transport, as it has demand both at home and abroad.

The industries ministry said the main aim of the policy is to improve the efficiency of the country's shipbuilding industry and to upgrade it to international standard.