Welcome FDI proposal in shipbuilding

Despite being an industry with great potential for local and foreign markets, foreign direct investment (FDI) in the country’s shipbuilding sector is still scarce. Having an enviable past of shipbuilding industry, Bangladesh can become a global hub for the sector, and revive the shipbuilding legacy of erstwhile Bengal. The proposal of investing $1.58 billion by Singapore and Australia-based Gentium Solutions and Netherlands-based Damen Shipyards Group appears to be soothing news as far as recent years slowing overseas investment in the county is concerned.

As appeared in different dailies including The Business Post on Tuesday, the proposed foreign direct investment in Bangladesh is the highest so far. Adviser to Gentium Solutions Md Kaikobad Hossain, Senior Director Naval Projects under Damen Shipyards Group Eef van den Broek, and its Regional Sales Director Asia Pacific Rabien Bahadoer expressed the interest when they met Industries Minister Nurul Majid Mahmud Humayun at his office in Dhaka on Monday. In a handout, the Ministry of Industries said the two companies had signed a memorandum of understanding with Bangladesh Steel and Engineering Corporation for the feasibility study in 2020. During the meeting, the minister said Bangladesh was working to become a nation of shipbuilders from that of ship buyers. Prime Minister Sheikh Hasina announced the establishment of a shipbuilding and ship repair industry in the Payra Port area in 2014.

Currently, Bangladesh has around 200 shipyards and a hundred shipbuilders. Around 70 per cent of the shipyards are located in and around Dhaka, 20 per cent are in Chittagong and 10 per cent are in Khulna and Barishal.  Shipbuilding is a growing industry in the country with great potential. Bangladesh has a long history of shipbuilding dating back to the early modern era. However, shipbuilding has become a major promising industry in the recent years when locally made ships began to be exported. During the Mughal Empire, the province of Bengal Subah had a large shipbuilding industry. Economic historian Indrajit Ray estimates that shipbuilding output of Bengal during the sixteenth and seventeenth centuries was 223,250 tons annually, compared with 23,061 tons produced in nineteen colonies in North America from 1769 to 1771. He also assessed ship repairing as very advanced in Bengal.

Last year, the cabinet approved the Shipbuilding Industry Development Policy 2020 to facilitate the growth of the labour-intensive sector and generate export earnings. Bangladesh started exporting modern ships to other countries in 2008, and since then, it has earned around $180 million by exporting 40 ships to several countries in Europe, Africa, and Asia. Ananda Shipyard and Shipways Limited (ASSL), founded in 1983 on the bank of the Meghna river, became the first Bangladeshi shipbuilding company to export an ocean-going ship.

The potential of shipbuilding in Bangladesh has made the country being favourably compared with countries like China, Japan, and South Korea. Referring to the growing number of export deals secured by the shipbuilding companies as well as the low-cost labour available in the country, experts suggest that Bangladesh could emerge as a major competitor in the global market of small to medium ocean-going vessels.

Annually, Bangladesh has a $1 billion local market for shipbuilding, said the feasibility report of Gentium Solutions and Damen Shipwards submitted to the industries ministry on Monday. The report also said that the global shipbuilding market stood at $192 billion in 2019 with South Korea, China, and Japan holding most of the market share.

At present about 10,000 inland and coastal ships are plying all over the country. More than 150,000 skilled and semi-skilled workers are employed in this labour-intensive sector. To tap the FDI in shipbuilding and further develop the promising sector, skilled supervisors, foremen, specialized welders, cutters, fitters, machine operators, and other technical skilled manpower needs to be created. More than 80 per cent of raw materials and ship’s components are import-based for the export-oriented Bangladeshi shipbuilding sector. Ultimately the unit price of export ships and foreign dependency increases. Both the government and the private sector have to focus on skilled manpower and local raw materials for becoming a real shipbuilding hub.