The shipbuilding industry in Bangladesh is expanding rapidly as vessel makers in the country are increasingly looking beyond their home market for global business opportunities.
The country, seen as having the potential to become South Asia's largest economy after India, saw its ship exports in 2010 increase four times over the previous fiscal year.
The price competitiveness of the nascent industry has been boosted by partial recycling of materials supplied by local ship dismantling firms, as well as the government's tax breaks for shipbuilders. The nation is keen to develop the shipbuilding sector as its second-largest source of export revenue, after the textile industry.
Growing brand
In the riverside shipyard in Chittagong, a port city located in southeastern Bangladesh, the final stages of ship construction took place on April 12. Throughout the night, the 49 metre passenger vessel, which is slated for delivery to a Danish company, remained lit up and the clang of metal on metal constantly echoed through the dockyard.
That shipyard is operated by Western Marine Shipyard Ltd., or WMS, which was established in 2000 by its Bangladesh-based parent company specialising in ship-repair.
In 2011, a year after its first overseas delivery of a new ship, WMS exported 10 of the 12 vessels it finished building. They were sent to Germany and other destinations.
The number of ships made by the builder hit an all-time high on an annual basis that year. The firm plans to go public in the near future.
There are 300 small and large shipyards in Bangladesh. Currently, only two companies – WMS and Ananda Shipyard and Slipways Ltd. – export ships to the rest of the world. Slipwas first began sending ships in 2008.
From heap to reap
Bangladesh's ship exports roughly quadrupled to US$40 million in the year through June 2011 from the previous year. Its ship exports in the first in the first nine months of the current fiscal year were already US$184.12 million. With two other domestic shipbuilders also considering exporting vessels, the government projects that the nation's ship exports will expand to US$2 billion in 2015.
The price competitiveness of Bangladesh's shipbuilding sector stems primarily from labour costs in the nation being about an estimated one-third of those in China. As a result, a WMS official said, "The average price of Bangladesh-made ships stays at 15% below that from China."
As a way to promote the shipbuilding industry, the government has allowed vessel makers to import shipbuilding equipment and materials without duty. Investments in fixed assets have also been exempt from taxation.
As Bangladesh is home to 140 ship-dismantling companies, domestic shipbuilders also take advantage of recycled materials.
The nation ranks third after China and India in terms of the total amount of scrap steel and other materials generated from the breaking up of old ships. This puts the country in a position to exert influence over international prices of recycled materials.
In Bangladesh, scrap steel recovered from dismantled ships is used as a material for constructing infrastructure and building ships for domestic customers. However, cables obtained from demolished vessels are used to make ships destined for export. "Recycling of such material is shoring up growth of the domestic shipbuilding industry," said an official at a ship-dismantling firm.
The main category of ships exported from Bangladesh includes vessels with load-carrying capacity of several thousands of tonnes as well as ferries. The capacity of the largest ship ever delivered overseas by a Bangladesh shipbuilder is limited to less than 25,000 metric tons.
The nation's main competitor is India, which supplies boats of similar sizes and categories. India has seen an increase in ship exports since 2007 and achieved vessel shipments worth US$4.2 billion in 2010.
Source: Nikkei Weekly
Image Source: Joisey Showa
