Business Opportunity of Ship Breaking From Malaysia

Submitted to
Dr. Syed Ferhat Anwar Course Instructor International Business Environment (L301)

Submitted by
Group Eleven Ahamed Najeeb Rahman Tasnia Azim Choudhury Saifur Rahman Zahin Azad Moslem Abdullah Ar Rafee Section B BBA 20th Batch ZR74 RH76 ZR89 ZR121 ZR127

Institute of Business Administration University of Dhaka, Dhaka
December 23, 2014 i December 23, 2014

Dr. Syed Ferhat Anwar Professor Institute of Business Administration University of Dhaka Dear Sir: Subject: Submission of Business Opportunity Strategy Paper It is an honor to submit a well-structured and comprehensive paper on “Business Opportunity of Ship Breaking from Malaysia” in due time. We have tried to follow your guidelines in every aspect of preparing this paper. Concentrating on the most relevant and logical areas to make the model coherent as well as feasible, has been key priority. We hope the Business Opportunity Strategy Paper charms your kind appreciation. Sincerely,

Group 11 Ahamed Najeeb Rahman Tasnia Azim Choudhury Saifur Rahman Zahin Azad Moslem Abdullah Ar Rafee Section B, BBA 20th Batch IBA, University of Dhaka ZR74 RH76 ZR89 ZR121 ZR127

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Table of Contents
1.0 Background ..................................................................................................................................... 1 2.0 Bangladesh: Country Overview ..................................................................................................... 3
2.1 Significance of Ship breaking in Bangladesh ............................................................................................... 3

3.0 Bottom of the Pyramid ................................................................................................................... 4 4.0 Nation Branding .............................................................................................................................. 4 5.0 Global Value Chain - Green........................................................................................................... 5
5.1 Ship Brokers ................................................................................................................................................. 5 5.2 Breaking Yards ............................................................................................................................................. 6 5.3 Steps of Ship Breaking ................................................................................................................................. 6 5.4 Cost cutting in GVC: .................................................................................................................................... 7 5.5 Docking Method Used .................................................................................................................................. 7 5.6 Proposed facilities and Infrastructure for Green Recycling .......................................................................... 9 5.7 Market Features of Recycled Products ....................................................................................................... 13 5.8 End users of the scrapped steel ................................................................................................................... 13

6.0 Labor Information ........................................................................................................................ 14
6.1 Current Socio-economic profile of ship breaking activities........................................................................ 14 6.2 List of Death and Injuries ........................................................................................................................... 16

7.0 HR Structure ................................................................................................................................. 17
7.1 Types and categories of labor ..................................................................................................................... 17 7.2 Wages ......................................................................................................................................................... 18 7.3 Age of Laborers .......................................................................................................................................... 18 7.4 Medical Facilities........................................................................................................................................ 18 7.5 Other Facilities ........................................................................................................................................... 18 7.6 Ensuring worker safety in SBRI ................................................................................................................. 18 7.7 Associated costs of Green Ship Breaking ................................................................................................... 20 7.8 Availability of funds and subsidies ............................................................................................................. 20

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8.0 Market Analysis ............................................................................................................................ 22
8.1 The Supply Side of the Ship Scrapping Industry ........................................................................................ 22 8.2 The Demand Side of the Ship Scrapping Industry ...................................................................................... 22 8.3 Market Potential ......................................................................................................................................... 22 8.4 Steel Market ................................................................................................................................................ 23 8.5 Competitor Analysis ................................................................................................................................... 24

9.0 PESTEL Analysis of Malaysia ..................................................................................................... 27 10.0 Bangladesh – Malaysia Relationship ......................................................................................... 29 11.0 Entry Strategy ............................................................................................................................. 29
11.1 Exit strategy .............................................................................................................................................. 30

12.0 Financial Analysis of the Strategy ............................................................................................. 31
12.1 Income Statement ..................................................................................................................................... 31 12.2 Green Cost Break down ............................................................................................................................ 32 12.3 Break Even Analysis ................................................................................................................................. 32 12.4 Risk Management ..................................................................................................................................... 33

References ............................................................................................................................................... i Appendix ................................................................................................................................................. i
Ship Breaking Value Chain ................................................................................................................................. i International Framework and Policies ................................................................................................................ ii Financial Analysis of the Strategy ...................................................................................................................... x

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1.0 Background
Once called the epitome of human engineering and achievement, the ocean going vessels, or Ships, as we can easily call them, are now some of the most complex and large structures made by humans. An estimated 89,000 strong fleet of ships (excluding ships for military purposes) pry the vast oceans. Most ships have a life expectancy of just 25 to 30 years, at which point many ships are scrapped. Shipping experts predict that every year, four percent of the world’s 89,000-strong shipping fleet should be scrapped or recycled. It is predicted that by 2010, 24 million tons – 4,000 ships - should be scrapped annually. (Geographic, 2014) That’s how the Ship Breaking, or rather the ship recycling industry has grown for. Interestingly, 90% of the global volume of ships are broken in South Asia alone, mainly in Bangladesh, India and Pakistan. China and Turkey account for the rest. Only 5% of the ship breaking industry is outside these 5 countries. Historically seen, Bangladesh had been a global leader once in the ship breaking arena, accounting for nearly 50% of the ships broken in 2008. In 2011, they scrapped 130 light vessels to medium vessels, accounting for 3.1 million MT of steel and other salvageable materials. Ship breaking is not only vital for Bangladesh for economic and strategic reasons, studies have shown that Bangladesh will remain competitive in the Ship Breaking Industry for a foreseeable future. Very steady growth is reported in ship recycling volume from ship recycling yards in Bangladesh during the last five years. Chittagong is the major ship recycling location in Bangladesh. Sixteen kilometers stretch available at Fauzdarhat, a city 16 km southwest of Chittagong where 8 square kilometers area is available for the recycling related activities. Due to high tidal difference available these yards are suitable for dismantling of big tankers and bulk carriers. The recycling yards in Bangladesh follow minimum safety standards for recycling. The yards seldom follow recommended ship recycling practices given by leading international ship recycling agencies. Pre-beaching and beaching activities are done without proper routine checks [Det Norske Veritas 2000].

1.1 Purpose of the study
The Business Opportunity of Ship Breaking from Malaysia is undertaken as part of the International Business Environment (L301) course. It is hoped the plan will be fruitful towards Ship Breaking from Malaysia.

1.2 Objectives
1.2.1 Broad Objectives
 To develop a Business Opportunity paper for the purpose of Ship Breaking from Malaysia

1.2.2 Specific Objectives
    To execute a country analysis (PESTEL) and industry analysis To analyze pros & cons of the entry strategies To analyze the Value Chain To execute a financial analysis of the business opportunity

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1.3 Scope
The scope of the report is limited to the ship breaking industry and its stakeholders. Additionally, the geographical scope of study lies in the urban regions of Bangladesh- Dhaka, and Chittagong, where we interviewed key stakeholders.

1.4 Methodology
1.4.1 Data Sources
The primary source for the paper was interviewing key stakeholders of the Shipbreaking Industry of Bangladesh.   Mohammed Abu Taher, President, Bangladesh Ship Breakers Association (BSBA) Noor Mohammed, Executive Vice President & Manager, ONE Bank Limited

The secondary sources of the paper was scrutinizing and evaluating current & forecasted prospect of market, investment, and competitors with legitimate data from different journals, reports, newspapers and websites.

1.4.2 Data Collection Method
The data collection process was mainly semi structured interview of key stakeholders in Bangladesh. In addition, some observational research has also been taken into account.

1.5 Limitations
1. 2. 3. 4. It is difficult to gather all external information from the internet. We had limited time as a result, we could not physically travel to Chittagong and conduct the interview in person, nor could we get firsthand information of the area. Ship Breakers and the enterprises do not allow access into internal affairs, due to various propagandas and internal issues. Certain websites require money to access statistics related to our paper, this required use of international credit cards, which were not available to us.

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2.0 Bangladesh: Country Overview
2.1 Significance of Ship breaking in Bangladesh
2.1.1 Creating Jobs
The industry creates hundreds of thousands of direct and indirect jobs for some of the most marginalized segments of the population in those countries. On average, a Bangladeshi worker in the Shipyards make around $2 a day. But they have one of the poorest working conditions in the country. They are mostly illiterate, with on 46.37% with any sort of formal schooling. Almost 10% of the workers are children. Industry reforms have come in fits and starts. India now requires more protections for workers and the environment. But in Bangladesh, where 194 ships were dismantled in 2013, the industry remains extremely dirty and dangerous.

2.1.2 Generating Income for the Government
In 2011, the government earned taxes worth BDT 800 Crore from the ship breaking and related industries. Even in the best estimate, the industry is worth $1.2 billion. For a non-export oriented sector, this is a huge size. They impose 7.5% of yard tax and a further 2.5% of personal tax. This is the second largest activity in the Chittagong city after port activities.

2.1.3 Salvageable Materials
The ship breaking and recycling industry plays a significant economic role in Bangladesh, supplying a substantial quantity of re-roll able scrap steel for the iron and steel industries. SBRI provides more than half of Bangladesh’s steel supply, for example, making it a strategic industry in that country. The work force in Bangladesh varies with the volume of ship breaking but may range from 30,000–32,000 workers in the ship recycling yards to 200,000 in the supply chain, shops, and re-rolling mills—with dependents in extended families estimated to reach over 500,000 in Bangladesh. In this case, the SBRI’s contribution to the steel production of Bangladesh, can be seen below: Figure 1: SBRI’s contribution to national steel production 2008-2009 Bangladesh Steel Consumption Steel Production Scrap steel from ship breaking Ship breaking steel’s contribution to production Ship breaking steel’s contribution to consumption No. of re-rolling mills Scrap yards (total no.) Estimated no. of workers in yards 5 m tons 2.2-2.5 m tons Up to 1.5 m tons 50% 20-25% 250 to 350 40 active 30,000

(Bangladesh Shipyard Statistics, 2013) Figure 2: Bangladesh Dry weight tonnage 3

(Clarkson Research Organization, 2012)

3.0 Bottom of the Pyramid
Shipbreaking is a labor intensive industry; in Bangladesh approximately 30,000 people work in the yards and another 50,000 are involved in the trade of materials. Working at shipbreaking yards in the Indian sub-continent often pays more than working on a farm or other types of informal employment. On average, a Bangladeshi worker in the Shipyards make around $2 a day. However, violation of basic labor rights such as the right to freedom of association and sound working conditions is often reported in media by various bodies. The industry is also reported to make rampant use of child labor. In 2008, an investigation by the International Federation for Human Rights revealed that 20 per cent of the workers in Chittagong (a key shipbreaking location in Bangladesh) were younger than 15 years old. Driven by the need to support their families, young boys or girls seek unskilled work at shipbreaking yards, often cutting and carrying pieces of steel. Markets opening up from ship breaking industry of trading of reused components are talked about in the “Ship Breaking Value Chain” section.

4.0 Nation Branding
Image Branding in simple term, is marking out who you are, what you do, what you believe in and how you treat people or behave and then choosing who you want to be, what you want to be known for and qualities & characteristics you want to imbibe in your personal, professional and social life. Similar to this, for a nation, the image is one of the most important aspects or perhaps at times the most important aspect that the nation should consider and protect. The image really defines how the perception of the nation really is among its own people and those with other nationalities. The objective is to successfully promote the Bangladeshi Shipbreaking industry, and create a positive Brand out of it. Our destination being Malaysia gives us a large advantage while trying to go for Nation Branding.

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Bangladesh and Malaysia maintain friendly ties and have low cultural distance. There are approximately 500,000 workers already employed in Malaysia, and with a recently approved the importation of new guest workers from Bangladesh after a nearly six-year moratorium, the Malaysia government expects to recruit another 400,000 workers, by 2020. This is a major news that should help facilitate the opportunity to expand businesses between the two countries. Bangladesh is already one of the top 3 largest shipbreaking countries in the world. Ship owners and brokers would more likely be willing to sell ships to Bangladesh considering the competitive prices they’ll receive for their ships. To go into an alliance with the brokers, we will need incentivize them by paying more for the ships that we import. This will act as a win-win for both parties. The negative aspect of Bangladeshi Shipbreaking industry is the fact that it is portrayed as one of the worst work environments in the world. Countless articles and news reports constantly cover the health hazards of the industry. The toughest challenge will be to overcome this perception.

5.0 Global Value Chain - Green
The shipping industry is a service industry where value is created through the generation of services demanded by customers. The downstream customers are companies producing goods at one location and selling goods at another location, thus demanding transport between the locations. The shipping industry does, however, have an additional value chain, the value chain of its means of transport, the vessel. The vessel is typically ordered from a shipyard, then operated by one shipping company, sold and resold to other companies, and then, finally, sold to a scrap yard. This life cycle is typically of about 20-30 years, and when the vessel is sold to the scrap yard, its remaining value lies in the value of its steel components and other reusable items. However, typical value chain process do not work for ship breaking, since, there is only one raw material here, the ship, coming from only one supplier. The supplier i.e. ship owners and the brokers or agents in the middle, don’t show any trends for selling ships which can be used to establish country specific value chain.

5.1 Ship Brokers
Before reaching the last owner (who is responsible for towing the ship to the positioning site for dismantling) the obsolete ship may pass through different intermediate owners. Owners of decommissioned ships are not called ship owners as the ship ceases to be operational and becomes scrap [Basel 2005]. Intermediate owners of such vessels are called as ship recycling brokers. Whenever the ship owners decide to decommission their vessels, information regarding this is made available in global information platforms such as internet websites and maritime publications. Interested ship recycling brokers approach the owners and transfer the ownership by paying advance amount. Then the broker invites quotation from potential buyers. Based on the highest bid offer from the buyers, the broker fixes the buyer and Memorandum of Understanding (MOU) is signed between the ship owner and the buyer. The MOU clearly states the conditions of transfer of the ship to the dismantling site and other prerequisites. A ship surveyor as representative of the buyer will thoroughly inspect the vessel and give a report. 5

The buyer pays the price to the owner based on surveyor’s report. It is the responsibility of the broker to arrange all these activities including arranging relevant certificates for transferring the vessel from a foreign owner to the end buyer or dismantler treating the vessel as imported commodity (or import).

5.2 Breaking Yards
This is where the dismantling happens. It is the place where the ships are broken down. They are taken apart by rudimentary tools and hand. The shipbuilding business follows a closed loop supply chain, but a bit different. The difference of shipbuilding closed loop supply chain from that of normal products such as FMCG goods or automobiles is that the collection point of decommissioned ships (ships out of service) is clustered. This is an advantage as the collection effort required is lesser than for other products. Over the last decade, over 80% of the world ship breaking took place in two ship breaking yards, one at Alang (India) and another at Chittagong (Bangladesh). These shipbreaking yards are a dominant source of cheap ship steel which constitutes almost 95 per cent of the ship (ABDI, 2003). Generally ship breaking yards of Bangladesh work on all types of ships other than war and passenger ships.

5.3 Steps of Ship Breaking
The entire process of breaking a ship from buying a decommissioned ship to selling all the products to various buyers follows a large and tedious process which involves adherence to various strict regulations. The entire process is summarized in the table below. Figure 3: Steps of ship breaking [G1]
Time required in days owner 3

Step Decision to decommission vessel by the owner Appointment of a broker for selling the vessel Identification of buyer Preparation of terms and conditions of sale

Cost/Revenue $50000 1.25% of ship cost -> 1.25% * 11,000 * 470 = $64625 3000-15000 gross tonnage = $2990

Incurred by

breaker

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Inspection by buyer's surveyors Change of ownership of the vessel to buyer Acquirement of certificates as per rules of recycling nation Transfer of towage of vessel to recycling yard Positioning of vessel at the site of dismantling Dismantling of vessel by sliding Intermediate storage of dismantled products Disposasl/Reuse/Selling of dismantled products

breaker

2

$6,130,500

breaker

7

$16,670,004 $369,230 $8759865

breaker breaker breaker

150

20

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The ship breaking process starts a long way from the coast. The owners of the Bangladeshi shipbreaking yards are kept abreast of the ships to be sold for scrap by brokers operating from all around the world. All ships are sold by the ton, at a price ranging from 460-470 dollars per LDT depending on market factors. As soon as the ship is purchased, the clock starts to tick for the owner, who must have it dismantled as fast as possible to recover his investment. So, once bought in Singapore they sail posthaste on their last crossing to the demolition yards of Chittagong-generally a two week long journey. Once the ship arrives in the Bay of Bengal, the ship is anchored in international waters off Chittagong and the first administrative steps are set in motion. As per rule, the ship is inspected, checked and made gas free. Finally, once all the administrative formalities have been completed, the Chittagong Port Authority issues a permit for the ship to enter territorial waters for beaching. The ship’s captain puts the ship in position off the coast and waits for the ideal time to perform the beaching maneuver. Vessels are beached by own propulsion power at high tide and during low tide vessels are lying stable on their flat bottom. The ship must be placed in this exact position and above all, come to ground as high up on the beach as possible to facilitate dismantling operations. Beaching has a crucial impact on the final cost; the time needed for dismantling can be doubled, if the beaching operation is not successful.

5.4 Cost cutting in GVC:
The current global value chain can be made more efficient in two simple ways. Firstly, the breaker could buy a warehouse rather than renting or leasing one. This would prove to be more cost efficient especially in the long run. During the times that they do not need to use the entire warehouse, they could rent out the remaining space. Secondly, immediately after the ship has been purchased, they could decide on potential buyers for the salvaged metals and go into contracts with them. This would mean that the breaker would have a guaranteed customer and at the same time the potential buyer could directly take the scrap metal into his custody. This would save the cost of warehousing further.

5.5 Docking Method Used
Ship breakers currently use beaching method to dismantle vessels. Beaching remains the most commonly used method, employed by 95 per cent of shipbreaking yards. This method consists of deliberately crashing a vessel onto a beach so that it can be dismantled during low tide. Beaching is considered the most controversial method of shipbreaking due to the overall lack of containment. For green recycling we are going to use new safer methods available. The slipway method is somewhat similar to beaching because it also takes place on beaches. Slipway is characterized by it being conducted at sites that have little or no tide, making the size and distribution of the intertidal zone easy to predict and providing better control and opportunity for measures to contain accidental spillages. With the top-down approach (also called the quayside or buoy approach), the vessel is secured along a quayside and pieces are removed by crane, starting with the upper section. Because dismantling of all pieces is done from above, the risk that pieces will come in contact with sea water and pollute the environment is limited.

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It follows the same approach as natural slipway and two vessels can be berthed at each side of the pier. Length of the pier determines the maximum length of the vessel to be dismantled, and can be extended to accommodate longer vessels. Its design is particularly favored in partial-dismantling operations due to ease of access to vessel. Finally, in the dry dock approach, which is considered the cleanest and safest method, the ship is docked and dismantled. Once the ship is completely dismantled, the dock is cleaned and flooded again for the next vessel. The dock prevents accidental spillages into the sea. He main advantages of dry dock to wet basin are the total containment of operations with substantially reduced damage and risk to marine environment. Due to prepared surface of the dock, i.e. concrete base and side walls, this variant has the superiority of containment control over other layout variants. During the second phase, cutters and their helpers start cutting the vessel into parts. Once the ship is mired in the mud, its liquids are siphoned out, including any remaining diesel fuel, engine oil, and firefighting chemicals, which are resold. Then the machinery and fittings are stripped. Everything is removed and sold to salvage dealers—from enormous engines, batteries, generators, and miles of copper wiring to the crew bunks, portholes, lifeboats, and electronic dials on the bridge. For safe green recycling, before asbestos can be disposed of, it must be wetted and sealed in leak-tight, properly labeled containers (i.e. sealed in drums or "double-bagged" by placing the asbestos in a plastic bag (6 mil) which is then placed in another plastic bag (6 mil)). Contaminated clothing and equipment must also be handled this way. Each bag or container must be individually labeled with all information required by regulation. (Answers to Common Asbestos Questions, 2013)         Waste must be stored on the premises in an environmentally safe manner. Bonded asbestos material must be securely packaged at all times. Friable asbestos material must be kept in a sealed container. Asbestos-contaminated soils must be wetted down. All asbestos waste must be transported in a covered, leak-proof vehicle. Asbestos waste must be disposed of at a landfill site that can lawfully receive this waste. It is illegal to dispose of asbestos waste in domestic garbage bins. It is also illegal to re-use, recycle or illegally dump asbestos products.

(Safely disposing of asbestos waste , 2014) After the ship has been reduced to a steel hulk, swarms of laborers from the poorest parts of Bangladesh use acetylene torches to slice the carcass into pieces. These are hauled off the beach by teams of loaders, then melted down and rolled into rebar for use in construction. The breaking operation is undertaken based on the structural design of the vessel. The larger parts are dragged to the dry part of the shore with the help of motorized pulley. A large number of workers are also engaged in this operation. Though the motor does the main job, workers need to help the pulley driver in dragging the part to the dry area of the shore. Another group of cutters, helpers and workers start cutting the dragged parts of the ship into truck able parts as per order of the purchasers. Heavy equipment like boilers, motors, capstan stocking etc. are carried to stack yards by moving crane.

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The unskilled workers carry metal plates, metal bars or pipes on their heads or shoulders, start walking in synchronized steps with the rhythm of the singers call up to a definite destination and then pile up metal plates in stack yards or load them on trucks. The supervisors control the group of workers; the on-looker guides them and helps them in pilling up the heavy metal plates in stacks.

Use Landfill In Chittagong:
Two landfill sites are present today. Both are within the Chittagong City. (Arefin Nagar and Halishahar). The Chittagong City Council (CCC) does not have any plans to introduce anymore. Therefore, we will purchase land suitable for dumping toxins and use standardize procedures to ensure that they are contained. For this, licenses from the CCC will be required. The land will be segmented into three parts. One segment will contain land used exclusively to dump as asbestos. Another segment will contain an industrial-grade incinerator. The last segment will be allocated for ash and sludge from the incinerator. Square Feet Dock Landfill Square Feet Cost/Feet 1273 1273 Total Cost

86,400 18,720 105,120

109,987,200 23,830,560 133,817,760

5.6 Proposed facilities and Infrastructure for Green Recycling
Existing dry dock facilities constitute a possible capacity for green recycling of ships since they employ modern health, safety and environment standards such as those promoted by the guidelines of IMO, ILO and Basel Convention. However, the availability of a dry dock facility depends on many things like the cost of labor, availability of steel processing facilities (steel smelters or rerolling facilities), downstream waste treatment facilities, and etc. The present status of the facility is also an important factor in the evaluation of the possibility of the facility taking up ship recycling. Existing green recycling capacity for larger tankers is limited and may optimistically reach around 780,000 LDT/year. Most of this capacity is found in China.

Country Italy Belgium Holland China USA Total
Ship Scrapping Industry.] Green Recycling requires extra costs like:

Existing Green Recycling Capacity LDT/Year 80,000 120,000 30,000 550,000 780,000

[Source: European Commission Directorate – General Energy and Transport Oil Tanker Phase Out and the

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Manpower costs: the new and more time consuming work routines increase the number of man hours used for the dismantling process and thereby the operating costs of the recycling facility. The time used for pre-cleaning a ship of 10,000 – 25,000 LDT before scrapping is initiated, has been estimated to be around 4 – 7 weeks, depending on the size of the vessel. The extra load and cost stems almost entirely from the requirements related to green measures.

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Construction costs: the capital costs for a green recycling facility are dependent on the capacity and the starting point of the facility – a green field development is much more expensive than extension or upgrading of an existing facility. Further, local factors such as the wage level, additional infrastructure needed, etc. will influence the size of the costs. The cost of establishing a green field European green recycling facility, by DNV 2000, estimated to be around $96 million. 70% of the cost was for establishing the dry dock and dockside areas. According to Eport AS, the estimated investment cost for a fully operational floating hazardous waste cleaning station is $10-15 million (Nilsen, 2004). This facility must operate in conjunction with a scrapping yard. The estimated annual cleaning capacity of the waste cleaning station is 250,000 – 350,000 LTD/year. Cost of Incinerator: $50,000 - 2,000,000 / Unit that disposes 5000 kg per hour and uses 380V/h Electricity.

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Hazardous waste disposal costs: the following table presents indicative examples of disposal costs for hazardous waste.

[Source: European Commission Directorate – General Energy and Transport Oil Tanker Phase Out and the Ship Scrapping Industry.] • Depreciation costs are regarded as an additional cost related to the operation of a green recycling facility and could best be covered by the facility earnings. The depreciation period for a ship recycling facility will typically be around 20-30 years.

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In order to overcome these extra costs, and make the green recycling a feasible option, a number of actions should be undertaken. Basically there are three types of instruments available: o Regulation: Implementation of a universal regulatory system able to guarantee health, safety and environment protection. Hong Kong International Convention for the safe and environmentally sound recycling of ships. o Economic Instruments: A number of instruments allowing ship owners to choose acceptable scrapping have been brought forward. Not considering the question of who shall carry the costs, using subsidies is the simplest way of making green recycling economically attractive. o Information: means raising awareness among ship owners, authorities in breaker countries, workers and other stakeholders.

Support from the government is important to promote us further for green recycling. It can be started with compliance with the Hong Kong Convention Currently in summary, compliance gaps with the Hong Kong Convention are: • • • • • No recognition of the industry No authorizations for yard facilities No standards or guidelines applied to ship recycling Low level of application of health and safety practices Few inspections

The following plan will allow us to comply with the Hong Kong Convention gradually. It mentions actions to carry out for the organization, and for the industry as a whole as well.

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The table above presents priority actions for the government to promote green recycling.

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Investment required by our firm is mentioned in the table above. It is found that the above compliance procedures will result in some extra costs for the ship breakers. The assessment shows that an additional $50 million in cost of compliance will translate into additional costs of $9– 11/LDT if all these compliance costs are paid by the ship breakers. As these costs are not negligible, they may be applied incrementally over time. The risk that such additional cost would result in relocation is small, as ship breaking is still profitable in Bangladesh under this compliance scenario. This is especially the case if environmental regulations are tightened simultaneously in other South Asian countries.

5.7 Market Features of Recycled Products
Numerous products and byproducts of ship recycling can be generally classified, according to their re-usability as, readily reusable, (without additional dismantling, spare parts) recyclable, scrap and hazardous elements and parts. Information regarding the route through which these dismantled marine components and parts are moving out to reach the pre-owned market elsewhere is not properly studied and documented so far. It is unofficially known to all that these dismantled items somehow manage to enter the new building sites. The prevailing rules and regulations in ship recycling and maritime activities do not cover this aspect of reentry of used items to fresh and new building. The very presence of active “used marine industrial goods market” determines the degree to which ship recycling extends. If one region or a country is having very live market for used goods trade, dismantled goods will reach the nook and corner of that country and those items will come back into the product market. In this situation there will be high chance of manipulation in the condition of the products. Possibilities for unauthorized pre-owned trading where the traders will somehow manage the deployment of used products, labeling it as brand new exist. The market will flood with these items and that will generate a new threat in new building and repair sector of the maritime industry.

5.8 End users of the scrapped steel
The scrapped steel can end up with two parties. One being traders who work as middlemen between breakers and re-rolling mills and another being the re-rolling mills themselves. The traders in the middle handle most of the market as they compile steel from the local environment, imported steel and from the ship breakers. 13

In cases it has been seen that re-rolling mills create backward linkages and have their own ship breaking yards from where they feed their mills. From here the steel is mostly used for making rods for construction purposes. Currently the product has high demand in the market, rigorous marketing is not required by the breakers. The end users approach the breakers directly and collect the scrap by their own measures. [G3]

Figure 5: Materials/Machineries Collected from 5000 LDT Multipurpose ships and their uses [G4]

6.0 Labor Information
6.1 Current Socio-economic profile of ship breaking activities
Most of the ship breaking workers come from the poverty stricken northern region of Bangladesh where there are limited employment opportunities. Usually, the workers are not given an appointment letter and there is no formal contract between the employer and the employee.

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Workers have been unable to enforce their right to permanent and secure employment as they are unable to demonstrate an employment relationship exist between the yard owners and themselves. There is no contract paper of their job. The labor force complained that due to lack of evidence in job-they are deprived from their rights and also facing problems in the permanency of job. They well understand the importance of the contract paper and also want to change this situation but they can’t dare it as they are afraid of losing the job. Their wages depend on the number of hours worked as well as the type of work and skill level. They have no entitlement to overtime, sick or annual leave. Their wages range from 85-200 taka. It was found that majority of the labor (40.75%) are between the ages of 18-22 years old. Only 1.13% of labor is between 46-60 years old. 46.42% of yard workers are illiterate while 43.02% attained primary school education. There are no arrangements for pure drinking water, healthy food, hygienic toilets and living conditions for the workers. It was observed that 86.44% of the labor force stated that they received no medical facilities from the ship yard owners, 5.93% said they received medical facilities, 4.15% said they got medical facilities but in a nominal way or by way of first aid treatment and 1.69% stated sometimes they got medical facilities and sometimes not. As the government has not recognized it as an industry, the industry based labor laws (for example the Factory Act 1965) do not apply. Though the workers have been working in the scrap yards for years they are not allowed to form or join a trade union to bargain and enforce their rights. The workers are deprived of proper compensation due to the lack of a valid contract. In order to maximize profits little is done to minimalize the risk of accidents (Source: Young Power in Social Action (YPSA)’s baseline survey).

6.1.1 Duration of Work and Salary
On average, workers, spend 12 hours a day at the yards, typically from 7 or 8 am. Most of them have roughly a one-hour break for lunch and two short tea breaks in the morning and afternoon. They do not have any days off, but half a day of rest (which is not paid) on Friday afternoon. None of the children work every day because they are too tired, injured or sick. Some children work only 15 days a month, others more than 25. The children can make around 3,000 takas a month. A laborer earns around 1-3 dollars per day depending on the type of work. Some 300-500 people are typically employed on a temporary basis for dismantling a ship, and many more are employed in downstream activities for recycling of all kind of materials from the ships. Payment of a salary is a problem for the workers. Usually it is dispensed twice a month, but in many cases workers are paid less often. The foreman also keeps five days of pay to make sure that the worker will not leave the yard without notice. In fact, the foreman can easily force a worker to continue to work much longer than wanted. And for children lacking experience and afraid of bosses, it is very difficult to negotiate. A few workers, employed as loaders, are not paid by the hour but according to the volume of steel they move.

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6.1.2 Child Labor Reboots
Bangladesh has again come under attack for the use of child labor in its shipbreaking yards. The industry was shut down for almost a year in 2010, and during this time the government instituted new regulations including the prohibition of children under the age of 18 working in the industry. NGO Shipbreaking Platform, is a coalition of environmental, human rights and labor organizations. The organization’s local partner YPSA conducted a short follow up study in 2014 on one they did prior to the government’s changes in 2009. They used a simple method to estimate the number of child laborers at three yards. During lunch break, the workers leave the yards. They counted all workers leaving the yards through the main gate, which is usually the only access point as the yards are fenced in and also counted the number of children (workers that looked clearly younger than 18). Unfortunately, the number has not really changed since 2009 when it was estimated that 2025 percent of the work force are children. Poverty is the reason behind child labor in shipbreaking yards .Children are not formally employed by the yards, They are brought in by so called contractors who get paid by the yard owners for providing day laborers. The children are not registered as workers and are often used as “free floaters” between different yards wherever their work force is needed.

6.2 List of Death and Injuries
In Bangladesh, there is no governmental body keeping records of the shipbreaking accidents or the diseases related to shipbreaking. The sources of information were the press clippings that reported accidents and mentioned the names of people who died. The local non-governmental organization YPSA gathers about the victims. Figure 4: Number of deaths on the job Death 8 10 8 14 25 12 15 Not available Not available

2005 2006 2007 2008 2009 2010 2011 2012 2013

There is no complete registration of workers by the yard owners nor existing reliable statistics by the authorities.

16

7.0 HR Structure
7.1 Types and categories of labor
Since no machinery is used, the Bangladeshi yards use a very large number of laborers. Two major categories of labors are found in the ship breaking activities-regular and casual. Regular employees and workers are permanent categories and they have monthly wages and some other facilities. On the contrary casual workers are supplied by labor supply contractors on the basis of demands Regular:     Administrative Manager (Academically qualified, the administrative manager will oversee the entire business) Accounts Officer (Accounts officer will oversee the financial area of the business. Will also aid the administrative manager in decision making) Yard Manager (Yard manager will be the front runner of the operations, overseeing the frontline workers and aiding the administrative manager by providing feedback) Foremen (Foremen are the leaders of the labor group; supply labor to the yard from different places and also supervise different problems of labor. Some of them work in the yard and some don’t. Thus the foremen are separated from the mainstream labor.) Fitters (they are engaged to dismantle important parts, pipes, hardware, metal etc. of the vessel). Gas cutters (the gas cutters work with gas torches. This group is divided in two sub-groups, the first working on the ship, the other on shore. These are the most skilled workers, and the best paid, but they are also (those working on board the ship) the most exposed to the risk of explosions, which are frequent. Crane operators (operate cranes to load and unload) Truck drivers (transport the materials) Rhythmic callers/singers. (He goes on singing to synchronize steps of the group of casual workers while carrying heavy steel plates and pipes etc. from one place to another; their role is highly important).

 

  

The organogram is such that at least 120 regular employees are employed, including the roles mentioned above. The workers will maintain relation with the labor contractors for casual workers. The casual type workers are mostly engaged through Labor Supply Contractors, and paid on a daily basis and work under the contractor’s supervision. Sometimes workers are selected from those who hang around in the area looking for work. Casual workers: Truck helpers, Semi-skilled gas cutters, Semi-skilled Fitters, Lifters, Loaders, Wire pullers, Cutter, loading and wire pulling helpers are included in casual type categories of labor.      The group of fitters who operate on board to remove everything that can be removed before cutting commences. The group in charge of chains and cables moves parts of the ship, especially with winches, from the point where the ship was beached to the worksite. The group in charge of oil empties the ship of remaining fuels and hydrocarbon residues (in the case of tankers) and stores them The group of “sweepers” removes mud from all slices or segments of the ship after they have been dragged tens of meters inland. The group of loaders is in charge of the last stage of the dismantling operation: carrying steel plates and other pieces of the ship and loading them on the trucks that deliver them to buyers.

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7.2 Wages
Pay Structure Average Salary(taka/10hour working day) 120/day 90/day 100/day 180/day 200/day

Cutter group Plate Group Wire Group Hammer Group Foreman Figure 5: Pay Structure

Overtime will be paid in accordance with the law, at a double rate basis.

7.3 Age of Laborers
We will allow laborers to work only after they have verified their identity and age (must be an adult, 18 years or more) with their National Identity cards. In this way we can prevent child labor and also we will have a supervisor to ensure that the contractor is working accordingly.

7.4 Medical Facilities
There will be first aid treatments, treatment for common injuries available on the premises. The yard will be equipped with a three-bed mini hospital having a full time doctor with adequate arrangement of primary treatment. A physician will also visit the yard in every 15 days and check the health condition of the workers. Besides, an ambulance to hospitalize the injured workers will also be available. Enough initiatives will be taken to minimize the dreadful issues that can be threat for the environment.

7.5 Other Facilities
The workers will be paid Eid bonus of 1000 taka in both the Eids. They will also get healthcare insurance. There will be arrangement for pure drinking water, healthy food, hygienic toilet and living place for laborers. In case of death on the job, the family will receive 100,000 taka as compensation. For Temporary and Permanent disability families will be paid in accordance with labor law, 2006. Break in work Labors will enjoy a total of one and half an hour break per day- one hour for lunch and fifteen minutes each for tea break in the morning and afternoon. Vacation in job One week vacation every six months (unpaid) will be provided.

7.6 Ensuring worker safety in SBRI
Some of the major improvements we will impose (compared to the current scenario):  The management will provide personal protection equipment and monitor the use of safety equipment (Hand tools, Safety helmets, Eye Shields, Hard Hats, Globes, Apron, Overall protective equipment) through their contractors All regular workers will be under group-insurance 18



     

Monitoring of occupational health and safety standards Adequate training Easy access to treatment, emergency services The yard management will take initiatives to builds safety consciousness among workers by arranging training workshops. All recycling facilities will provide accommodation sanitation, washing and canteen facilities for their workers as far as practicable. To ensure safety more mechanized methods (Magnetic grabs/ Cranes, Crawl cranes, Tow motor etc.) of handling will be in use.

We will follow OHSAS 18001 stands for Occupational Health and Safety Assessment Series which is an internationally accepted management system on occupational health and safety. It is based on the ISO management systems methodology and provides a system to improve the health and safety situation in companies. This is done by identifying health and safety risks and hazards, eliminate or control them and demonstrate improvement. OHSAS is mainly applied in technical sectors.

Human rights and labor payments:
 According to the Bangladesh Labor Law amended into Bangladesh Labor Act 2013, group insurance of the workers mandatory for companies with minimum 100 workers. We will have a group insurance policy, under which each of the workers and his or her nominee will be entitled to receive Taka 0.1 million for death and Taka 0.125 million for any permanent disability while at work.  Minimum Wages will be ensured. A worker, who will join the job as an apprentice, will be entitled for a pay-package of 5300BDT with 3000BDT as basic pay. Senior operators will get 6850BDT, which includes 4075BDT basic pay.  Working hours will be in accordance with the Labor Law,2006(even over-time)

Environmental compliances:
For obtaining environmental standards, the ship breaking yards needed to build up different facilities for hazardous inventory, and monitor these inventories through our system. ISO 30000:2009 (Ships and marine technology, Ship recycling management systems, Specifications for management systems for safe and environmentally sound ship recycling facilities) ISO 30000:2009 specifies requirements for a management system to enable a ship recycling facility to develop and implement procedures, policies and objectives in order to be able to undertake safe and environmentally sound ship recycling operations in accordance with national and international standards. The management system requirements take into account the relevant legal requirements, safety standards and environmental elements that the ship recycling facility needs to identify and comply with in order to carry out safe and environmentally sound ship recycling. ISO 30000:2009 applies to the entire process: accepting a ship for recycling by the facility; assessing the hazards on-board the ship; identifying and complying with any applicable notification and import requirements 19

for ships to be recycled; carrying out the recycling process in a safe and environmentally sound manner; conducting required training; ensuring the availability of social amenities (e.g. first aid, health checks, food and beverages); storage and processing of materials and wastes from the ship; waste stream and recycling stream management, including contractual agreements; and documentation controls for the process, including any applicable notification of the final disposal of the vessel.

Proper Waste Management:
There must be proper waste management to prevent contamination of the environment. The enforcement of the use of protective clothing and working appliances should be present in the national level. The appropriate and relevant government body has to perform checks to the recycling yard whether the implementation of safe work procedure is present and use of protective appliance is in practice. We will construct temporary storage facility for storing hazardous waste. Incinerators cost $50,000 - 2,000,000 / Unit that disposes 5000 kg per hour. Also there be associated costs like maintenance and electricity consumption (it uses 380V/h).

7.7 Associated costs of Green Ship Breaking
Pre-cleaning costs:
It is difficult to generalize the costs of pre-cleaning as it depends on a number of factors specific for each vessel, such as ship size, type, cargo type, maintenance level and repairs and refitting. Therefore estimates are highly uncertain. In general the costs of performing pre-cleaning comprise: • • • Manpower costs for safe removing of the hazardous waste Hazardous waste disposal costs Construction costs for new equipment, machinery and infrastructure necessary for safe separation and containment of hazardous materials from the ship.

In the study "Oil Tanker Phase Out and the Ship Scrapping Industry" that COWI performed for DG TREN, the cost of performing pre-cleaning of a ship and disposal of hazardous waste was estimated by industry sources to be around $25 - 50 /LDT in Asia.

Training cost:
Initially introduction and implementation of safety equipment will cost $15 per worker. Basic equipment can cost from Taka 500 to 1500.Gas Masks cost Taka 20,000/piece and Gas detectors cost Taka 200,000(minimum two for a yard).

7.8 Availability of funds and subsidies
As part of funding measures to establish green infrastructure, a ship recycling fund has been established by the EU. There are similar mechanisms and propositions all over the world to promote Green Ship Breaking. In Bangladesh:  There will be a reduction of tax from 18% to 6% on import of a “Green Ship”. 20



NGO Ship Breaking platform, pushes to local or influential NGOs to provide funds for Green Ship breaking practices to companies after reviewing them.

Overall, Green Ship recycling will be a long-term process that will be costly initially, but the funding and support obtained for Green Ship-breaking ultimately pays off. II is feasible for large companies to go green, but for smaller ones it is burdensome.

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8.0 Market Analysis
8.1 The Supply Side of the Ship Scrapping Industry
Historically the owner of a vessel has had positive cash inflow from two sources. The main source of income is cash generated in the freight market. In addition, selling a vessel in the second hand market or the demolition market will generate a positive cash inflow. Keeping other factors constant a ship owner’s decision to sell a vessel to the demolition market will be a matter of weighing the advantages of keeping the vessel, in terms of future expected income, against the advantages of selling the vessel as scrap, the achievable scrap price. It is optimal to scrap a given vessel if the expected value of continued trading is less than its scrap value. The age of the vessel will affect the ship owner’s scrapping decision given that older vessels have a lower future earning potential due to higher maintenance costs. An important cost element for aging vessels is the regular surveys the vessels has to undergo to obtain classification and then insurance. The fifth survey, at the age of 25 years tends to be expensive and high freight rates are thus necessary to compensate for the increased costs if the vessel is to be held in operation. Finally where the ship is sold off is mainly decided by 3 factors: 1) Distance of breaking yard from last voyage position 2) Price offered by buyer 3) Policy alignment

8.2 The Demand Side of the Ship Scrapping Industry
Demand of ship recycling volume for a specific period of time depends on various financial and non-financial factors. The financial factors which has got direct influence in the demand forecasting are: a) b) c) d) e) Price/ton of shipbuilding quality steel in the international market Price/ton of scrap steel in the regional market Prevailing freight rate/ ton of commodity shipped Price/barrel of fuel oil and New shipbuilding cost/ ton of steel

The non-financial factors influencing volume of demand of recycling are identified and listed below: i. ii. iii. Recycler friendliness (situation yielding maximum profit) of the prevailing dismantling and recycling rules and regulations enforced on or prevailing for the recycler. Rules and regulations regarding ship operations and maintenance which decide on the availability of the ship for recycling. Prevailing ship conversion options.

The first five parameters are quantitative whereas the last three are qualitative. These are suggested in the present study to serve as the input for demand forecasting of ship recycling volume using some commercial software.

8.3 Market Potential
As mentioned already, the life cycle of a ship is generally between 25-30 years age. From Equasis statistics it has been found that in 2013 there were 25,963 ships in the world fleet that were over 25 years of age. This included the small, medium, large and very large ships. The data is shown in the table below.

22

Figure 7

Figure 8

Figure 9

According to the table above, we can see that there is a large number of ships that can be scrapped in Bangladesh. This provides a massive scope for Bangladeshi ship breakers, where if they continue to scrap at the current rate, a big portion of the market can be obtained.

8.4 Steel Market
The market faces overfull demand. Whatever scrap steel is produced is fully consumed into the market, and if the companies could produce more, even that would be consumed. More than 60% of the national steel demand is met by ship breaking industry, the rest is imported with higher prices or taken from local steel market. Steel 23

from ship breaking is currently the most selected option because of the price. The scrapping of ships provides the country’s main source of steel and in doing so saves substantial amount of money in foreign exchange by reducing the need to import steel materials. At present Bangladesh has a demand for 500,000 tons of metal / steels, but Bangladesh has no iron ore sources or mines, which make ship scrapping the inevitable and important source of raw materials. More than 350 re-rolling mills have been using ship scraps as their raw materials. The industry is currently supplying more than 60 per cent of the raw materials for local steel industry. [G1] Besides, local shipbuilding industry also largely depends on this as raw materials mostly are being used from scrap steel. A good number of local industries including heavy and light engineering already been developed depending on ship breaking industry. Refer to figure 1.

8.5 Competitor Analysis
Competition has been broken down into two segments: 1. 2. 3. Ship breakers around the world Local suppliers of scrap metal Countries exporting steel to Bangladesh

Ship breakers around the world:
The major players in the ship breaking industry are India, China, Pakistan and Turkey other than Bangladesh of course. Our potential competitors, when it comes to purchasing ships from Malaysia are Pakistan and India because of the geographical nearness and similar rates.

Figure 10 Bangladesh World Ranking Carrying capacity of ships (Millions of tons) Environmental Protection Policies Literacy rate Education and training provision 1 84.8 India 2 78.7 Pakistan 4 38

Very low 46% Low

Low 59.5% Moderate

Low 58% Low

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Safety control measures Infrastructure facility Average working hours Wage rate/day Workers per plot Compensation upon death or injury

Absent Poor 12-15 $1-3 379 Limited

Provided but not used Poor 8 $1.58-3.16 325 Lower than the government rate.

Provided but not used Poor 8 $3.5-8 220 Provided in accordance with govt. regulations.

Figure 11: Comparison between 3 major ship breaking countries India: As per SRIA India, the following measures are implemented in terms of safety:           Use of PPE is made mandatory for workers by ship-recyclers. Workers are regularly sent to the training center for safety education. Emergency treatment is provided by Red Cross Hospital. Regular medical checkup camps are arranged by Ship-recyclers in co-ordination with GMB. The accident rate has decreased considerably. Health awareness camps are organized on regular basis. Safety audit is conducted jointly by GMB and ship recycling industries association. GMB and GPCB monitor the safety standards on regular basis. Life buoys are kept on board the vessel during its recycling for emergency exit to the sea in case of fire. Safety belts are provided to workers working on board the vessel.

However, the National Human Rights Commission (NHRC) had commissioned a study in 2013 by the Tata Institute of Social Sciences (TISS) on Alang and according to preliminary findings, conditions have hardly improved despite official claims to the contrary. The final report is due for submission by July 30. This study for NHRC is based on intensive field work at Alang Sosiya from April 21, 2013 to May 30, 2014.

Pakistan: The conditions is Gadani, Pakistan, display comparative advantages through a relatively high level of mechanization and a dry working environment compared to Bangladesh. However, there is a complete lack of hazardous waste material management in the yards as well as of occupational health and safety standards, training and awareness. Workers’ rights are not adequately protected, notably health and safety rights, the freedom of association, workers welfare and benefits, and contractual rights. Pakistan has ratified the Basel Convention; however, a compliance instrument is yet to be established. Moreover, there is no sector-specific regulation exclusively for the industry in compliance with BC and the future HKC.

25

Local suppliers of scrap metal:
A large proportion of the metal also comes from local scrap metal. According to the Institute of Scrap Recycling Industries, the four largest sources of local scrap supplies are cars, appliances, steel cans and structural steel from construction sites. Globally 580 million tons of ferrous metal was consumed globally in 2013. Scrap traders are the major market players in the scrap metal industry. The have hold over imported scrap metal, domestically produced scrap metal as well as the ones we get from ship breaking. At the end of the day, they maintain a balance between the import and domestic levels for their better interest.

Countries exporting steel to Bangladesh:
Even though most of Bangladesh’s domestic need for steel is fulfilled by the ship breaking industry, competition does persist. This is because the reroll able steel that is recycled from the ships is not of the best quality. Which leads to arising need to import better quality steel. The steel importing scenario is as such:

Figure 12

2014 Import (Million USD) As a % of total imports paid to the countries

Japan 103.1 31%

South Korea 40.7 14.3%

Taiwan 60.8 22.3%

Figure 13: Import from different countries. Source: Bangladesh Bureau of Statistics

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9.0 PESTEL Analysis of Malaysia
9.1 Political
The politics of Malaysia takes place in the framework of a federal constitutional monarchy, in which the Yang di-Pertuan Agong is head of state and the Prime Minister of Malaysia is the head of government. Executive power is exercised by the federal government and the 13 state governments. Federal legislative power is vested in the federal parliament and the 13 state assemblies. The judiciary is independent of the executive and the legislature, though the executive maintains a certain level of influence in the appointment of judges to the courts. The Constitution of Malaysia is codified and the system of government is based on the Westminster system. Malaysia has a multi-party system since the first direct election of the Federal Legislative Council of Malaya in 1955 on a first-past-the-post basis. The ruling party since then has always been the Alliance Party (Malay: Parti Perikatan) coalition and subsequently from 1973 onwards, its successor the Barisan Nasional (National Front) coalition. The Barisan Nasional coalition currently consists of the United Malays National Organization (UMNO), Malaysian Chinese Association (MCA), Malaysian Indian Congress (MIC) and 11 other political parties. Although Malaysian politics has been relatively stable, critics allege that "the government, ruling party, and administration...are intertwined with few countervailing forces." However, since 8 March 2008 General Election, media's coverage on country's politics has been noticeably increased, making the politics more transparent to the citizens. Their political environment is quite stable. Corruption does exist in Malaysia which, to some extent, hinders foreign business as it adds to the costs and risks. Malaysia currently ranks 50th is the Corruption Perception Index, with a score of 52. At the same time it ranks 15th out of 28 countries in the Bribe Payers Index. This goes to show the level of corruption that persists in Malaysia.

9.2 Economic
Malaysia’s main attraction as a foreign business hub is its vibrant economy. Over the past 10 years, their average GDP has been around 7% per year. However, as observed, in the third quarter of 2014 their GDP now stands at 5.6%. Malaysia is a nation located in Southeast Asia, bordered by Indonesia, Thailand and Brunei, and shares borders with Singapore, Vietnam and Philippines, making it an ideal location for business purposes. Their export sector takes up a large portion of the GDP (37%).

9.3 Social
Malaysia’s demographics are as such that 60% of the population are Malays, 30% Chinese and 10% Indians. This mix of population gives birth to Malaysia’s vibrant and rich culture. The country is seen as an example of racial harmony as the different populations have resided peacefully for many years. In terms of poverty, Malaysia is doing quite well.

27

Their Poverty head count ratio at national poverty lines as a percentage of the population is currently 1.7%, predominantly one of the best compared to most LDC’s. Just like Bangladesh, Malaysia is predominantly an Islamic country. But it’s only the Muslim Malaysians who are bound by the Islamic laws.

9.4 Technological
Malaysia is slightly lagging behind in terms of its technological advancements to be compared to international markets. In 1996, the government initiated the “multimedia super corridor” (MCS), which is a strip of land stretching from the central district of Kuala Lumpur to the international airport in the outskirts. This hosts more than 360 multinationals, including foreign owned and home-growth Malaysian companies, all focused on multimedia and communication products. Given its potential it continues to attract world leading ICT companies. Malaysia invests heavily in education and training. It is the level of technological support that makes Malaysia and attractive place for foreign firms to conduct business. It has been tagged as “Cyberjaya” and is considered to be one of the top three destinations for business support services and outsourcing in the world.

9.5 Environmental
Malaysia is the leading producer of rubber, tin, palm oil and tropical timber. Over the past decade or so, they have faced rapid economic development. As good as that is, it does came with high environmental costs i.e. negative externalities. According to a report from the UN, Malaysia’s deforestation rate is increasing at a faster pace than that of other countries. Once home to the world’s 5th largest Mangrove forest, Malaysia has lost an average of 140,200 hectares- 0.65% of its forest area- per year. Much of the country’s land that was once rainforest is now given over to the production of palm oil, which is used for processing the food we eat and as a source of biofuel. According to the Environmental Performance Index (EPI), Malaysia ranks 51 st out of 178 countries, with a score of 59.31 out of 100.

9.6 Legal
The law of Malaysia is mainly based on the common law legal system. This was a direct result of the colonization of Malaya, Sarawak, and North Borneo by Britain from the early 19th century to 1960s. The supreme law of the land—the Constitution of Malaysia—sets out the legal framework and rights of Malaysian citizens. Federal laws enacted by the Parliament of Malaysia applies throughout the country. There are also state laws enacted by the State Legislative Assemblies which applies in the particular state. The constitution of Malaysia also provides for a unique dual justice system—the secular laws (criminal and civil) and sharia laws.

9.7 Why Malaysia?
Malaysia is one of the biggest international ports. Which is why a lot of ships pass through it or are docked last in its port. Malaysia proximity to Bangladesh, makes it easier and more cost effective to bring ships to Bangladesh. This reduces the overall cost transporting the ship here. Our political ties with Malaysia are favorable. Considering all this we have picked Malaysia as our destination.

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10.0 Bangladesh – Malaysia Relationship
Bangladesh and Malaysia enjoy strong fraternal relations. Malaysia has a high commission in Dhaka and Bangladesh has a high commission in Kuala Lumpur. [1][2] Both nations are members of the Commonwealth of Nations, the Organization of Islamic Cooperation, the Developing 8 Countries and the Non-Aligned Movement. Malaysia was one of the first countries to recognize the independence of Bangladesh in 1972. [3] Two-way trade between the two countries stood at US$1.19 billion in 2012. [4] Malaysia is also one of the largest foreign investors in Bangladesh. [5] The bilateral relations between the two countries also enhance in the sector of economic. In 2012, a memorandum of understanding (MOU) has been signed by both countries for collaboration in the construction of the Padma Bridge which has been consider as the largest bridge in Bangladesh once it finished.[17] Much more, a free trade agreement also has been proposed for both countries to boost the pharmaceutical, garment and tourism sector of Bangladesh, while Malaysia would benefit immensely from future infrastructure projects dished out by the Bangladeshi government.[18] Malaysia also consider as the third largest investment partner in Bangladesh after India and Pakistan with the Malaysian companies invests in the sectors of telecommunications, power generation, textile and financial sectors which worth around MYR558.86 million.[5] Since 2010, all the Bangladesh workers in Malaysia had sent home a total of MYR3 billion, which is the highest compared with other workers from Indonesia (MYR2.9 billion), Nepal (MYR1.9 billion), India (MYR625 million) and the Philippines (MYR561 million).[15] The top 5 exports of Malaysia's products to Bangladesh are such as refined petroleum products, palm oil, chemicals products, iron and steel and electrical and electronics products while the major import of Bangladeshi's are textiles and apparel, refined petroleum products, vegetables, processed food, seafood and also electrical and electronics products.[19]

11.0 Entry Strategy
Before we enter the market for decommissioned ships, we will contact the potential buyers for the scrap metal. The buyers will range from scrap traders to steel re-rolling mills. A price lower than the average market price will be offered to lure them into negotiation. Currently prices are such that steel is sold between US$ 330 to 400 per ton. On coming to terms with a buyer, we will require him to make an advance payment with which part of the LC payment will be paid. Considering the dynamics of the ship breaking industry in Bangladesh, we believe the use of agents to acquire ships from the Malaysian port is the way to go. As we know, the purchase of a ship is often done through a middleman, who links the local buyers with the international sellers. Given the level of corruption that persists in Malaysia, transactions would be difficult without someone who knows the ins and outs of the Malaysian brokerage. This is where the need for conducting business through agents arises. An agent will know best how to approach the owners and which owners to approach to be precise. In the attempt at purchasing ships last docked in Malaysia, it is advisable that both Malaysian as well as International brokers be used.

29

This will broaden our market and increase the possibilities of getting a wider array of ships from many different companies. The advantages and disadvantages of using agents in this case are listed below.

Advantages
          The use of agents, in this case, does not involve much of an investment. Thus the stakes are low. This will give us a cost advantage because we wouldn’t have to individually contact brokers and deal with them. The agents will provide the required assistance. A lot can be learnt by collaborating with agents in terms of conducting business internationally. This will help in developing our competences. Agents will lead to instant access in to a new market or at least speedy entry. In aligning with them, we will get better contracts and thus our revenues will increase. Having agents on field would mean better control of business. Malaysian officials would be more trusting of one of their own, over a foreigner. Malay agents would speed up any legal processes. Agents would know their way around the country’s laws, rules and norms. They have local knowledge that is important in conducting the business, they speak the language, and they understand the local business.

Disadvantages
      Cultural differences between the agents and our local management might result in management differences. There is a loss in control in terms of the quality and number of ships we might get. Communication might not be as efficient. It might become difficult to keep the objectives on track over a long period of time. Business through agents leads to exercising less control over them than on regular employees. Proper incentive must be given in order to keep them with the business.

11.1 Exit strategy
Despite our attempts, failure is plausible when it comes to buying ships from the Malaysian port. Thus we have devised the following strategies in the event that things don’t work out as planned. We don’t plan to leave the market if the strategy fails, rather we change or leave the strategy and further revaluate and enter again in the near future. The plan is to collaborate with different agents if the current collaboration does not work out. This will minimize the risk of terms not working out with the existing agents. If our strategy fails, we plan to observe the market for a further few years and wait for any agreement between the two governments. If any changes in the infrastructure occur for Malaysia, we further reinvest into the market.

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12.0 Financial Analysis of the Strategy
All calculations have been done in dollars ($)

12.1 Income Statement
Not Green

Green

31

12.2 Green Cost Break down

Notes: Rest of the analysis are provided in Appendix

12.3 Break Even Analysis
Not Green

Green

Notes:   Cost of ship/LDT = $460 Each ship takes about 5 to 6 months to dismantle. About 50 decimals of land is required to dismantle each ship. We will be buying/leasing about 150 decimals of land to break 6 ships, by the end of year 4.

32

12.4 Risk Management
Price fluctuation Risk:
Price of scrap metal is highly volatile in the local market which creates pressure on the business on a regular basis and also affects the profitability. Therefore, the company is exposed to price fluctuation risk.

Changes in Government Policy:
In general, Bangladesh economy is an example of many sick industries created out of the change of government policy. The Government policy changes frequently with the change of Government. Reverse impact on investment returns could stem from a change in Government, legislative bodies, other foreign policy makers, or military control. The company may suffer from such loss in the case of tightening foreign exchange repatriation rules or from increased credit risk if the Government changes policies to make it difficult for the company to pay creditors. The Government may change the import duty on import vessels which will affect the whole sector.

Labor Supply Risk:
Ship breaking is a labor intensive industry where labor death has become a common phenomenon. Such recurring death has created a panic among the workers which may limit the supply of labor. Meanwhile, considering the hazard and complexity of operation, labors are raising their voice for increased wage rate. The Government is also in the way of declaring a separate wage structure for ship breaking industry. The above issue may have a negative impact on the business operations of the entity.

Interest Rate Risk:
The company can get lower interest cost benefits through the deferred L/C liabilities. However, failure of timely repayment of deferred liability may force the entity to avail funded facility from local bank. Floating interest rate of funded banking facilities for working capital management may vary from time to time. The fluctuating interest rate exposes the company to a cost volatility which ultimately may result in squeezed profitability.

Exchange Rate Risk:
The company faces significant foreign exchange risk as the concern will pay its foreign suppliers in US Dollar. However, recently BDT has been appreciating against USD, which might work in favor of the entity. Therefore, the entity is not much exposed to exchange rate risk for the time being.

Political Instability:
The business of the enterprise is highly dependent on movement of transport for frequent products supply. Political situation of the country has been to be unstable in the recent past which has adversely affected the business. Present political situation is moderately business friendly, however business community is suffering from lack of confidence thinking that vulnerability may come back at any time. Thus, the entity is exposed to political instability risk. 33

References
Clarkson Research Organization. (2012). Geographic, N. (2014, May 3). Natgeotv. Retrieved from http://natgeotv.com.au/tv/salvage-code-red/what-isship-breaking.aspx Maria Sarraf, F. S.-L. (December 2010). The Ship Breaking and Recycling Industry in Bangladesh and Pakistan. World Bank. Lloyd’s Register, Shipbreaking: Practice and regulation today, (June2011), http://www.shipbreakingbd.info/report/ShipRecycling_Lloyds%20Register.pdf Hossain, K. A., ‘Evaluation of potential prospect and challenges of Bangladeshi shipbuilding in the light of Global contest’, M.Sc. Engg. Thesis, submitted to Dept. of Naval Architecture and Marine Engineering, BUET, Dhaka, 2010. Hossain, K. A., Iqbal K. S. and Zakaria, N.M., ‘Ship Recycling Prospects In Bangladesh ‘,Proceedings of MARTEC 2010, The International Conference on Marine Technology, BUET, Dhaka, 2010. Chowdhury, Iftekhar Uddin, ‘the Problems and Prospect of Ship Breaking Industry in Bangladesh: An Overview’, University of Chittagong Pasha, M., Mahmood, H., Rahman, I. and Hasnat, A., “Assessment of Ship Breaking and Recycling Industries in Bangladesh - An Effective Step towards the Achievement of Environmental Sustainability “International Conference on Agricultural, Environment and Biological Sciences (ICAEBS'2012) Phuket, 2012 List of death from: http://www.shipbreakingbd.info/death_trap.html [G1] [G2] Sivaprasad K (2010) Development Of Best Practices For Ship Recycling Processes, Post Doctorate Thesis Submitted To Department Of Ship Technology Cochin University Of Science And Technology Kochi: [G3] Crisl (2014) Credit Rating Report On M/S Arefin Enterprise [G4] [G5] Kh. Akhter Hossain, K. Shahriar Iqbal And N. M. Golam Zakaria (2010) Ship Recycling Prospects In Bangladesh, Department Of Naval Architecture And Marine Engineering, Bangladesh University Of Engineering And Technology, Dhaka, Bangladesh: . [1] "Bangladesh High Commission Kuala Lumpur". High Commission of the People's Republic of Bangladesh. Retrieved 21 January 2014. [2] "Official Website of High Commission of Malaysia, Dhaka". Ministry of Foreign Affairs, Malaysia. Retrieved 21 January 2014. [3] "Najib’s visit to Bangladesh will further enhance bilateral ties – Bernama". Bernama. The Malaysian Insider. 16 November 2013. Retrieved 22 March 2013.

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[4] "Bangladesh-Malaysia Bilateral Trade Statistics" (PDF). Dhaka Chamber of Commerce & Industry. Retrieved 22 March 2014. [5] Rahimy Rahim (17 November 2013). "Ties high on Najib's agenda for first Bangladesh visit". The Star. Retrieved 21 January 2014. [6] Salahuddin Ahmed (2004). Bangladesh: Past and Present. APH Publishing. pp. 207–.ISBN 978-81-7648469-5. [7] Dr. Abdul Ruff Colachal (7 May 2008). "Bangladesh-Malaysia Ties". Asian Tribune. Retrieved 21 January 2014. [8] "Bangladeshi baby-sitter raped a 7 year old girl". Kuala Lumpur Post. 4 September 2012. Retrieved 21 January 2014. [9] "Bangladeshi jailed for raping teen--and wants to wed her". asiaone. 22 May 2013. Retrieved 21 January 2014. [10] "Bangladeshi jailed 13 years, whipping for rape of student". The Borneo Post. 24 July 2012. Retrieved 21 January 2014. [11] Punitha Kumar (24 December 2013). "Bangladeshi restaurant worker gets jail, rotan for rape". New Straits Times. Retrieved 21 January 2014. [12] Maizatul Nazlina (24 December 2013). "Bangladeshi gets 29 years’ jail, 16 strokes for raping and robbing clerk". The Star. Retrieved 21 January 2014. [13] "Man slashes would be rapist with machete to protect wife". The Star. 1 February 2014. Retrieved 1 February 2014. [14] Staff Correspondent (25 January 2014). "(Illegal Trip to Malaysia) 57 fortune seekers held in Teknaf". The Daily Star. Retrieved 25 January 2014. [15] "Najib on maiden visit to Bangladesh". The Malay Mail Online. 17 November 2013. Retrieved 21 January 2014. [16] "Malaysia is opening all sectors to Bangladeshi workers". Bdnews24.com. 18 August 2014. Retrieved 21 August 2014. [17] "Bridge to boost Malaysia-Bangladesh ties: PM". New Straits Times. 10 April 2012. Retrieved 21 January 2014. [18] "Malaysia-Bangladesh FTA to enhance investment relationship further". The Borneo Post. 5 June 2012. Retrieved 21 January 2014.

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[19] Zakaria Kamarudin (7 March 2013). "Welcoming Remarks by YBhg. Dato’ Zakaria Kamarudin, Business Opportunities in Bangladesh (7 March 2013)". Malaysia External Trade Development Corporation. Retrieved 21 January 2014. [G1] http://www.shipbreakingbd.info/Benefits.html Bangladesh Shipyard Statistics. (2013). A Report on Ship Building Industry of Bangladesh. Japan: Japan Bangla Business Center. Retrieved from http://jbbc.co.jp/wp-content/uploads/2014/08/A-Report-on-ShipbuildingIndustry-of-Bangladesh.pdf Equasis. (2013). The World Merchant Fleet in 2013. Hossain, D. M., & Islam, M. M. (2006). Ship Breaking Activities and its Impact on the Coastal Zone of Chittagong, Bangladesh: Towards Sustainable Management. Chittagong: Advocacy & Publication Unit, Young Power in Social Action (YPSA). John, J., Kumar, D. S., Singh, D. K., & Srivastava, D. R. (2013). Sustainable Operations in Reverse Supply Chain of Shipbuilding Business: Benefits of Green Practices. Independent Journal of Management & Production. Joseph, J. M. (2012, June). Pros & Cons of Malaysian Flagging of Ships. Khalid, N., & Kaur, C. R. (n.d.). Status of ratification of IMO Conventions by Malaysia. Lloyd's List. (2012). Ship Recycling. Lloyd's List Intelligence. (2012). Last Voyage Origin of Recycled Ships. Lloyd's Register. (2011). Ship Recycling: Practice and Regulation Today. London. Shipping, I. C., & Federation, I. S. (2013). Shipping Industry Flag State Performance Table. Vedeler, K. V. (2006). From Cradle To Grave – Value Chain Responsibility In The Ship Scrapping Industry. Norwegian School Of Economics and Business Administration.

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Appendix
Ship Breaking Value Chain
Attainable Products
Table: Attainable products [2] Machinery and Outfit Components
Compressors, Chilling units, Lathe machines,

STEEL (95%)
Household Equipment
Ladders, Kitchen appliances and machineries Office and home furniture, Handrails, Fittings, Mirrors, Cupboards and sideboards, Crockery and cutlery, Flower pots and holders, Steel pipes, Nuts and bolts, Screws, Electric motors, Bulbs and light fittings Wood,

Drilling machines, Welding generators, Oil purifiers, Oil pumps, Water pumps, Heat exchangers, Condensers, Diesel generators, Alternators,

i

End users of the scrapped steel

Table: Amount of materials/substances collected, recycled, and disposed from the sample ship [5]

International Framework and Policies
The Basel Convention (BC)
In the realm of ship breaking industries the most important legal frame work is the Basel Convention. The ‘Basel Convention on the Control of Trans boundary Movements of Hazardous Wastes and their Disposal’ was completed in the late 1980s and came into force in 1992. It is an international treaty that was designed to reduce the movements of hazardous waste between nations, and specifically to prevent transfer of hazardous waste from developed to less developed countries (LDCs). It does not, however, address the movement of radioactive waste. The Convention is also intended to minimize the amount and toxicity of wastes generated, to ensure their environmentally sound management as closely as

ii

possible to the source of generation, and to assist LDCs in environmentally sound management of the hazardous and other wastes they generate. A piece of follow-up legislation called the ‘ban amendment’ was proposed. This states that it is illegal to transport waste from an OECD (The Organization for Economic Co-operation and Development) country to a non-OECD country. While this amendment has not come into force, several countries have ratified it, including the whole of the EU, which means it is law for all EU countries. It is also law for China and Turkey, but not India. Coupled with this amendment is a decision by the Basel Convention that a ship ‘may’ be defined as waste because of the hazardous materials it contains. The Convention places a general prohibition on the exportation or importation of wastes between parties and non-parties. The exception to this rule is where the waste is subject to another treaty that does not take away from the Basel Convention. The United States is a notable non-Party to the Convention and has a number of such agreements for allowing the shipping of hazardous wastes to Basel Party countries. It is generally acknowledged that the Basel Convention is difficult to put into practice for ships.

The Hong Kong Convention
The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009 (the Hong Kong Convention), was adopted at a diplomatic conference held in Hong Kong, China, from 11 to 15 May 2009, which was attended by delegates from 63 countries. The Convention is aimed at ensuring that ships, when being recycled after reaching the end of their operational lives, do not pose any unnecessary risks to human health, safety and to the environment. The Hong Kong Convention intends to address all the issues around ship recycling, including the fact that ships sold for scrapping may contain environmentally hazardous substances such as asbestos, heavy metals, hydrocarbons, ozone-depleting substances and others. It also addresses concerns raised about the working and environmental conditions at many of the world's ship recycling locations. The text of the Hong Kong Convention was developed with input from IMO Member States and relevant nongovernmental organizations, and in co-operation with the International Labour Organization and the Parties to the Basel Convention. Regulations in the new Convention cover a number of aspects, to facilitate safe and environmentally sound recycling of ships. Upon entry into force of the Hong Kong Convention, ships to be sent for recycling will be required to carry an inventory of hazardous materials, which will be specific to each ship. Ships must have an initial survey to verify the inventory of hazardous materials, additional surveys during the life of the ship, and a final survey prior to recycling. Ship recycling yards will be required to provide a "Ship Recycling Plan’. Parties will be required to take effective measures to ensure that ship recycling facilities under their jurisdiction comply with the Convention.

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The International Convention for the Prevention of Marine Pollution from Ships (MARPOL) MARPOL is the main international convention covering prevention of pollution of the marine environment by ships from operational or accidental causes. The MARPOL Convention was adopted on 2 November 1973 at IMO. The Protocol of 1978 was adopted in response to a spate of tanker accidents in 1976-1977. It is a combination of the two treaties and updated by amendments through the years. The Convention includes regulations aimed at preventing and minimizing pollution from ships - both accidental pollution and that from routine operations - and currently includes six technical Annexes. Special Areas with strict controls on operational discharges are included in most Annexes. Annex I Regulations for the Prevention of Pollution by Oil (entered into force 2 October 1983) Annex II Regulations for the Control of Pollution by Noxious Liquid Substances in Bulk (entered into force 2 October 1983) Annex III Prevention of Pollution by Harmful Substances Carried by Sea in Packaged Form (entered into force 1 July 1992) Annex IV Prevention of Pollution by Sewage from Ships (entered into force 27 September 2003) Annex V Prevention of Pollution by Garbage from Ships (entered into force 31 December 1988) Annex VI Prevention of Air Pollution from Ships (entered into force 19 May 2005) Basel Action Network One of the most important international organizations is Basel Action Network which works mainly with transboundary transportation of wastage instituted under the direction of Basel Convention. It has adopted Technical Guidelines for the Environmentally Sound Management (ESM) of the Full and Partial Dismantling of Ships, a document directed at countries which already have or are establishing facilities involved in ship dismantling. EU ‘A Strategy for better ship dismantling’ was adopted by the EU in 2009, following the 2007 Green Paper on better ship dismantling, after they noted that a very large proportion of ships going for recycling are EU member state flagged. The strategy points out that end-of-life ships should be regarded as hazardous waste, as a result of the many hazardous substances contained in such ships, and should therefore fall within the scope of the Basel Convention. It calls for an explicit prohibition on 'beaching' of end-of-life ships and that the Ship Recycling Convention should be evaluated with regard to a level of control equivalent to the Basel Convention

Green Peace Greenpeace is an independent global campaigning organization that acts to change attitudes and behavior, to protect and conserve the environment. Green Peace is also working in this field. It has surveyed all over the world regarding ship breaking industries. It also provides guide line to improve the environmentally sound recycling system. International Ship Recycling Association (I.S.R.A) I.S.R.A is an international membership organization for recycling facilities which places emphasis on responsible practices. It has possibly the broadest knowledge and capability in ship recycling today. Other organizations may encompass more facilities and countries, but with a significant proportion of the higher end of the market, I.S.R.A has a strong position in the industry. International Organization for Standardization (ISO) The ISO published the ISO 30000 series of standards on management systems for ship recycling in 2009. ISO 30000 specifies requirements for a management system to enable a ship recycling facility to develop and implement procedures, policies and objectives in order to be able to undertake safe and environmentally sound ship recycling (ISO, 2011).

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The Industry Working Group on Ship Recycling The Industry Working Group is led by the International Chamber of Shipping (ICS) and comprises the following industry bodies: BIMCO (Baltic and International Maritime Company); IACS (International Association of Classification Societies); IPTA (International Parcel Tankers Association); ITOPF (International Tanker Owners Pollution Federation Limited); Intertanko; Intercargo; and OCIMF (Oil Companies International Marine Forum).The Working Group has been instrumental in developing the Hong Kong Ship Recycling Convention.

National Organizations working with Shipbreaking Industries
YPSA Young Power in Social Action (YPSA), a NGO, is working to improve the conditions in the Chittagong shipbreaking yards. YPSA has membership to an NGO platform on ship breaking based in Brussels. It is the first non-governmental organization to address the basic rights and needs of ship breaking workers. They undertake in depth research about workers' problems and their rights, as well as bring national awareness to the issue. There is no official policy up to date, so YPSA must meet face obstacles such as getting legal aid for workers and their families, and acquiring a draft policy. YPSA is expanding their good relations with international organizations like Green Peace, an international report was published jointly. BELA Bangladesh Environmental Lawyers Association (BELA) is working to ensure the safety of environment and working condition through legal battle. It got some success by forcing Government to take step to control the ugly activities of the ship breakers. Achievement of Goldman Environment Award by Syedaa Rizwan Hasan, CEO of BELA is a clear indication of this success in their protest. NGO Platform on Shipbreaking This is the principal environmental pressure group involved in ship recycling, and was formed in September 2005. It is a conglomeration of several of the familiar pressure groups, such as Greenpeace and the Basel Action network, as well as bodies unique to ship recycling such as the Prevention of Hazardous Shipbreaking Initiative.

International organizations working with Shipbreaking Industries
The International Labour Organization (ILO) The International Labour Organization is the oldest organization of the United Nations, and its Conventions cover a vast field of law from health and safety to workers’ rights and child labor. International Labour Organization mainly works with the working facilities provided in these industries. It suggests a national framework defining the general responsibilities and rights for employers, workers and regulatory authorities in shipbreaking. . In addition, the Guidelines provide recommendations on safe shipbreaking operations including the management of hazardous substances, protection and preventative measures for workers against hazards and suggestions for a competency based training program. .Some of the major ILO conventions are still not ratified by the principal ship breaking nations.

Figure 6: Comparison International Maritime Organization (IMO) International Maritime Organization works on the pollution of sea environment. It also gives guideline in the recycling process, including administrators of shipbuilding and maritime equipment, supplying countries, flag,

v

Basic labor rights ILO Conventions Basel Convention Hong Kong Convention

Hazardous Waste Child Labor and Material

Health and safety

Water contamination

and port and recycling states, as well as inter-governmental organizations and commercial bodies such as shipowners, repairers and recycling yards. It is a specialized agency of the United Nations, with one hundred and sixty nine member states and three associate members. The IMO’s main task is “to develop and maintain a comprehensive regulatory framework for shipping and its remit today includes safety, environmental concerns, legal matters, technical co-operation, maritime security and the efficiency of shipping” (IMO, 2011). The IMO’s main regulatory instrument is the Convention. While many UN Conventions only operate within the boundaries of a signatory state (meaning that they cannot be enforced in countries which have not ratified them) IMO Conventions work differently. Under the ‘no more favorable treatment’ clause, once a convention has entered into force, any ship trading internationally is bound to comply fully with it anywhere in the world. Any nation which is a signatory to the convention can refuse entry to its waters or harbors for ships which are not compliant, or can even arrest ships in certain conditions. These extra ‘teeth’ in IMO conventions are very powerful and far reaching. They also mean that the IMO is well placed to deliver regulatory requirements for ship recycling.

Available Legal Framework in Bangladesh
There are no laws that is Act of Parliament, Ordinance or Order directly in the regulation of environmental pollution of the shipbreaking industry. But there are some case laws of the High Court Division of the Bangladesh Supreme Court. The Government has introduced a policy for ship breaking industries in 12th February, 2011. But all these laws are not strict in sense as they have failed its effectiveness. Order of High Court Division The High Court on 16th February, 2011 issued rule directing the government to stop scrapping of ships in the country until further order. An HC division bench ordered the authorities concerned to relocate the exploded ship to a secured place and also issued a contempt of court rule against the owner of the shipyard.

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It also directed to keep the ships, which were already imported for breaking, at such places so that those can be relocated in a short notice, and the officials concerned of customs and port authority can easily visit those ships. The court prohibited unloading materials from those ships until further order. The bench of Justice AHM Shamsuddin Chowdhury Manik and Justice Sheikh Md Zakir Hossain issued the contempt of court rule against Master Abul Kashem, owner of the shipyard and also Vice-President of the Ship Breakers Owners Association. It also noticed, this court is not against the import and breaking ships, but those ships have to be free from any risk for health and security. In another order, the same bench also issued a rule upon the government to explain within two weeks why it should not be directed to allow four imported ships, now in outer anchor in Chittagong, to enter into the inner anchor. In January 2008, the Supreme Court called upon government agencies, including shipping, commerce, environment, industry and labor, to show reason why appropriate safety and labor welfare measures as required under the Factories Act shall not be enforced. The court also issued a further ruling directing government agencies to take steps to protect ship breaking workers and to ensure adequate compensate for them against injury or death. In March 2009, the Supreme Court imposed tight regulations on the industry. It directed the closure of all 36 ship breaking yards operating without environmental clearance. It also enacted restrictions on the import of Greenpeace listed contaminated ships and directed pre-cleaning, at origin or before entering Bangladesh, of all ships to be imported for breaking. The court also ruled that a committee will monitor the implementation of this order. These kinds of rules are also given by High court in 2005 & 2007. These rules say that for the import of any ship for the purpose of breaking, the importers must have to take an Environmentally Clean Certificate from Department of Environment. No ship can enter in the boundary of Bangladesh without the ECC. The violation will be considered as contempt of court.

Rule relating ship breaking Ship-breaking and Hazardous Waste Management Rules, 2010 Following the Order of High Court Division, The ministry of environment is directed to frame rules and regulations for the proper handling and management of hazardous materials and wastes, keeping in view the Environment Conservation Act 1995, rules framed hereunder, the Basel Convention 1989, Factories Act 1965 and Labor Act 2006.But this Rule provides punishment of imprisonment for two years or fine of TK 2 lakh for any breach of the rules, though the Environment Conservation Act 1995 stipulates three years of imprisonment or fine of TK 3 lakh for the offence. The rules propose banning the import of ships listed as ‘hazardous‟ by Green Peace, while the High Court order says, ‘the import of any vessel, containing hazardous waste or materials, which has not been decontaminated at source, must be prohibited.‟ The rules contain a mandatory provision that would require the breakers, the importers and the industrialists to obtain certificates from the environment ministry that the vessels do not contain the dangerous chemicals or hazardous wastes. The commerce ministry incorporated a condition in its Import Policy Order 2009-2012, which said an exporter of a vessel had to submit a pre-cleaning certificate from the country of origin stating the ship was cleaned before exportation. However, the rules ease the rule relating to ship export. This proposition is firmly opposed by the environmental groups as it will create more opportunity of importing unclean ship from the abroad. vii

Policy relating to ship breaking industry Ship Breaking Industries Policy, 2011 On 11 February, 2011 the Government has introduced a new policy relating to “Shipbreaking Industries Policy, 2011.” It was drafted with the advice of BELA, YAPSA and one another NGO working in this side. But it kept some provision of importing unclean ship which is opposed to the Basel Convention. The three NGOs said that the Department of Environment neither followed the advice of them nor followed the order given by the High Court Division of Bangladesh Supreme Court.

Law Enforcement Mechanism
Though there are no effective laws to prevent the effects of environment pollution arising out of shipbreaking industries. But it can be addressed in the alternative way within the existing legal framework. As the impacts are related to environment, it can be redressed by the mechanism of Environment Court Act, 2000 which has established Environment Court. But there should be made especial provision regarding it. As there are many problems with regard to labor, it can be redressed through the Labor Court constituted under the Bangladesh Labor Act, 2006. As the pollution is a matter of public interest, it can be remedied through the High Court Division of Bangladesh Supreme Court by applying its writ jurisdiction stated in Article 102 of the Constitution of the People’s Republic of Bangladesh. It is to be mentioned that most of the success of environmental movement has come out of the Writ petition. The High Court Division has ruled out in the writ petition filed therein. Department of Environment has some role in framing the problem of environmental pollution. It has some duty to prevent the pollution directed by the Rules and Policy of Shipbreaking It can also impose fine. Bangladesh
IMO Convention 48 SOLAS Convention 74 SOLAS Protocol 78 SOLAS Protocol 88 SOLAS Agreement 96 LOAD LINES Convention 66 LOAD LINES Protocol 88 TONNAGE Convention 69 COLREG Convention 72 CSC Convention 72 CSC amendments 93 SFV Protocol 93 Cape Town Agreement 2012 STCW Convention 78

Malaysia

x x x x x x x

x x x x x x x x

x

x viii STCW-F Convention 95 SAR Convention 79 STP Agreement 71 Space STP Protocol 73 IMSO Convention 76 INMARSAT OA 76 IMSO amendments 2006 IMSO amendments 2008 FACILITATION Convention 65 MARPOL 73/78 (Annex I/II) MARPOL 73/78 (Annex III) MARPOL 73/78 (Annex IV) MARPOL 73/78 (Annex V) MARPOL Protocol 97 (Annex VI) London Convention 72 London Convention Protocol 96 INTERVENTION Convention 69 INTERVENTION Protocol 73 CLC Convention 69 CLC Protocol 76 CLC Protocol 92 FUND Convention 71 FUND Protocol 76 FUND Protocol 92 FUND Protocol 2003 NUCLEAR Convention 71 PAL Convention 74 PAL Protocol 76 PAL Protocol 90 PAL Protocol 02 LLMC Convention 76 LLMC Protocol 96 SUA Convention 88 SUA Protocol 88 SUA Convention 2005 SUA Protocol 2005 SALVAGE Convention 89 OPRC Convention 90 HNS Convention 96 HNS PROT 2010 OPRC/HNS 2000 BUNKERS CONVENTION 01 ANTI FOULING 01 BALLASTWATER 2004 NAIROBI WRC 2007 HONG KONG CONVENTION

x x x x x

x x

x x x x x x

x x x x x

x d x x x

x x x

x

x

x x x x x

ix

Financial Analysis of the Strategy
Salaries and Wages
Not Green

Green

Costs of Ship

x

Labor Living and Maintenance

Revenue Breakdown

xi

Balance Sheet
Not Green

Green

xii

Ratio Analysis
Not Green

Green

xiii