PROSPECT OF SHIP BUILDING INDUSTRIES IN BANGLADESH

Md. Mahfujul Amin
10364075

Managerial Communication
BUS 502
Spring 2011

BRAC UNIVERSITY

Prospect of ship building industries in Bangladesh
Abstract:
Bangladesh has a thousand year old history in shipbuilding. There are more than 200 shipyards in the country, which are mainly engaged in building and repairing low quality inland vessels. Two shipwards have succeeded in making international classed vessels- and many more will come. It is about 15% cheaper to produce a ship in Bangladesh than anywhere else and the industry is expected to grow significantly. Introduction:
Bangladesh is enjoying a boom in ship building. Driven by rising demand and a global supply shortage, existing players in the market have been able to capitalize on a global backlog in orders and sharp rises in prices. While investment in existing shipyards provides significant investment opportunities, investment in new yards may less compelling given two to three year lead times, a forecast fall in demand from 2011 and global dominance from China. However, leveraging its low cost base, adopting new technologies, coupled with government incentives and a strategic focus on areas such as small ships, Bangladesh could carve itself out a profitable niche.

Bangladesh, through the course of time, has gained a comprehensive experience of building fine vessels in answer to her communication and transportation needs. From wood to steel, and from single-deck to multi-deck vessels, the country’s Shipbuilding Industry has developed over time and so has the labor force’s mastery of the craft. Today, There are over two thousand 500 tonne–to-2000-tonne capacity cargo-ships and 220 tonne-to-1000 tonne capacity passenger vessels, all made in Bangladesh cruising its rivers.

The location of the first fully fledged shipyard in the country, the ‘Khulna Shipyard’ was selected in 1954 and the yard reached production capacity in 1957 .Since 1967, the shipyard has been run by local engineers and staff. As days progress, many ship building industries are now being established which are now building world class ships like; Stella Maris and Stella Moon.
As air transport continues to be highly expensive and since major shipbuilding countries like South Korea, China, Vietnam and Singapore are showing less interest in building Small Ocean going vessels, European buyers are now showing interest towards newer yet experienced sources and Bangladesh is definitely one of these sources which can claim preference

Background:
Shipbuilding is the construction of ships. It normally takes place in a specialized facility known as a shipyard. Shipbuilders, also called shipwrights, follow a specialized occupation that traces its roots to before recorded history.
Ship building and breaking has been going on in this country for a long time and Bangladesh has such a highly experienced labor force that even today, the majority of the workers in Singapore shipyards are from Bangladesh. Bangladesh, a riverine country with huge coastal areas that are frequently lashed by cyclones and natural disasters, can, according to sources in the shipbuilding industry, actually generate vast amounts of revenue from its extensive coastline.
Before becoming a ship building nation, there are four mandatory conditions in order to produce ocean-going vessels: international standard shipbuilding practice, quality management system, coastal and riverine country, and infrastructure with proper sheds and skilled manpower. Bangladesh scores full marks on all these counts.
With global shipbuilding orders of very large vessels increasing every day, a market is emerging in Bangladesh for shipbuilding yards that can concentrate on producing smaller sea-going vessels as the industry leaders like China, South Korea and Vietnam go for the larger container ships, bulkers and tankers
According to shipbuilding experts in this country and abroad, Bangladesh can emerge a surprise competitor in the small to medium ocean-going vessels market. This particularly applies to shipyards that until now were best known for scrapping and breaking ships, and not building them.

Why ship building in Bangladesh:
Before becoming a ship building nation, there are four mandatory conditions in order to produce ocean-going vessels. * International standard shipbuilding practice * Quality management system * Coastal and riverine country * Infrastructure with proper sheds and skilled manpower
Bangladesh scores full marks on all these counts.

Comparative advantages:
Bangladesh can enjoy few comparative advantages in ship building industry in comparison to her competitor countries. Those are; * Cheap labour:
Like other industry, Bangladesh offers the cheapest labor in the ship building industry in the whole world. * Government help:

Government has declared ship building a priority area and given 5 years of tax holiday and have also implemented a green channel programme easing import and export of components.

* Skilled labour:
Number of skilled labor in the ship building industry is increasing as days progress. This is proved when we see major ship building nations like Korea, Singapore uses labor from Bangladesh in great numbers in the ship building industry. * Standard quality:
Bangladeshi ship builders are building international standard ships now. For example, Ananda Shipyard made two ships for Denmark named Stella Maris and Stella Moon. * Technological support from importing countries:
Once world’s large ship building nations like Denmark are now becoming interested in Bangladesh for making joint-ventures. As a result, Bangladesh is benefitted by the technological support and expertise from those countries. * Backward linkage industries:
Bangladesh is now importing the basic raw-materials for ship building. But, contract have been already signed with Denmark for establishing backward linkage industry in Bangladesh.

Global Market and opportunities:
Ship building industry sources said since major ship manufacturing countries like South Korea, Vietnam, China and Singapore are becoming less interested in building small ocean going vessels, European buyers are now coming to Bangladesh And India. With global shipbuilding orders of very large vessels increasing every day, a market is emerging in Bangladesh for shipbuilding yards that can concentrate on producing smaller sea-going vessels as the industry leaders like China, South Korea and Vietnam go for the larger container ships, bulkers and tankers. According to shipbuilding experts in this country and abroad, Bangladesh can emerge a surprise competitor in the small to medium ocean-going vessels market. So, it is a great opportunity for Bangladesh to grab the market of small and medium vessels.

Within 2012, the total world ship demand will be 10000 units. Here, 55% of the total demand will be of small and medium ships.
Total Market demand- $ 1600 billion
Small and medium vessel market demand- $ 400 billion
If Bangladesh can grab only 1% of this $ 400 billion dollar market, the GDP of Bangladesh will increase by 2%.
Name of the major ship building companies in Bangladesh: 1. Ananda Shipyard and Slipways Ltd 2. Western Marine Shipyard Ltd 3. Narayanganj Shipbuilders Ltd 4. Highspeed Shipbuilding & Engineering Co. 5. Khan Brothers Shipbuilding Ltd.
Name of the exporting country: * Germany * Denmark * Holland * Singapore * Mozambique * Japan
Total export order grabbed: Year | Order Size | 2008 | $150 million | 2009 | $250 million | 2010 | $600 million |

Problems faced by ship building industries * Higher interest rate from banks * Lack of electricity and gas supply * Image crisis * Infrastructural development * Govt. financial support * Govt. regulation * Strong dependency on imported raw materials.

The Challenges:
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. Time is proper now, delay will be very costly as such opportunities do not come very often.

Two thousand locally-made 500 tonne-to-2000-tonne capacity cargo-ships and 220 tonne-to-1000 tonne capacity passenger vessels are plying in our rivers. In the emerging shipbuilding market, ship owners of international shipping companies are looking for cheaper locations. Europeans and Americans are approaching the Asian ship-builders to build new ships, replacing the old ones.

It is possible to attract sizeable foreign investment on shipbuilding by way of utilising skilled and low wage workers. Inland water transport vehicles are being built in Bangladesh for a long time. 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. There are great possibilities for shipbuilding sector in a conducive policy environment. The emerging shipbuilding industry will strengthen the export diversification strategy.

Conclusion:
In summary we can say that, the demand of small and medium ships are increasing day by day. More than 50% ships have already become old and major ship building nations are less interested in building small and medium ships. So, for Bangladesh it may become the brightest sector.

References * Bangladesh Economic Survey, 2010. * Websites of- * Western Marine Shipyard co. * Ananda Shipyard and Slipways Ltd * www.mof.gov.bd. * Financial Express * The Daily Star. * The Independent.