Bangladesh’s Shipbuilding Industry: An Export Powerhouse

Key Highlights:

• Over 50,000 people are employed directly and indirectly in the shipbuilding industry.

• Currently, over 100 shipbuilders and 120 registered shipyards operate along riverbanks, varying in size.

• The industry’s potential is underlined by its current annual contribution of BDT 150 billion to the country’s economy.

Bangladesh’s riverine geography historically emphasized ship usage in trade and shipbuilding thrived during the Mughal era, with Chittagong and Sandwip shipyards constructing warships for the Sultan of Turkey by the 17th century.

At present, Ananda Shipyard and Shipways Limited (ASSL), founded in 1983 on the Meghna River banks, marked Bangladesh’s ocean-going ship export debut with the “Stella Maris” to Denmark. Western Marine Shipyard in Chittagong also landed significant export deals. Khan Brothers Shipbuilding Limited operates Bangladesh’s third-largest shipyard on the Meghna.

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Bangladesh’s shipbuilding potential draws comparisons to giants like China, Japan, and South Korea. This sector is crucial for Bangladesh’s economic growth, boasting the second-largest share of the country’s export-oriented industries.

With an average growth rate of 8% from 2009 to 2019, as per World Bank reports, it consistently generates new employment opportunities. Over 50,000 people are employed directly and indirectly, highlighting its role in job creation. Furthermore, Bangladesh’s global market share in shipbuilding stands at 0.84%, showcasing its competitiveness. It exports to nations like Norway, Finland, Germany, and New Zealand, meeting both foreign and domestic demand.

Currently, over 100 shipbuilders and 120 registered shipyards operate along riverbanks, varying in size. In Bangladesh, waterways transport most fuels (90%), cargo (70%), and passengers (35%), driving demand for vessels domestically.

Locally, vessel registrations have consistently grown at 5.39% annually, fueled by economic progress and infrastructure projects. The local shipbuilding industry’s market value is approximately USD 1 billion, with demand expected to match economic growth. The annual export capacity is about 20 vessels, while domestically built vessels range from 1,000 to 20,000 dwt and include MPVs, containers, bulkers, tankers, dredgers, tugs, and passenger ferries.

Bangladesh Shipbuilding Industry’s Growth Trajectory

The industry’s potential is underlined by its current annual contribution of BDT 150 billion to the country’s economy, a figure projected to reach BDT 1000 billion by 2041, as stated by Abdullahel Bari, President of the Association of Export-Oriented Shipbuilding Industry of Bangladesh. The government of Bangladesh aims for sectoral growth of USD 4 billion by 2026 within this industry.

Since 2009, Bangladeshi shipbuilders have earned USD 170 million from exporting small- and medium-sized ships to 14 countries. In the fiscal year 2017-18, the industrial sector saw a growth rate of 11.99%, while the shipbuilding industry maintained an average growth rate of 8%. During this period, efforts were made to bridge the skills gap in manufacturing export-oriented classed ships through knowledge transfer from Bangladeshis with experience in Singapore and Dubai.

Technical support in shipbuilding processes primarily came from ship owners, including training programs, hands-on instruction, and guidance from foreign experts. However, the industry faced challenges in 2020-2021 due to payment failures and issues related to opening Letters of Credit (LCs) amidst a dollar crisis. This setback led to a decline in exports during these years, halting the progress the country had achieved in previous years.

Bangladesh Shipbuilding Industry: A Growing Economic Force

• • Current annual contribution to economy: BDT 150 billion

• • Projected contribution by 2041: BDT 1000 billion

• • Government target for sectoral growth by 2026: USD 4 billion

• • Fiscal Year 2017-18 Growth Rate: 11.99%

• • Shipbuilding Industry Growth Rate: 8%

• • Total earnings since 2009: USD 170 million

• • Countries exported to: 14

Shipbuilding Aims for Expansion with Innovative Policies

The introduction of the Ship Building Industry Development Policy 2021 presents several initiatives with defined timelines for execution. These initiatives include offering cash incentives for ship exports, reducing import duties on shipbuilding raw materials, and granting tax holidays of up to 10 years to shipbuilders.

Additionally, it proposes banning ships under 100,000 meters and requiring fishing licenses for imported vessels to deter imports. Strategies focus on partnership, capacity building, market expansion, and banking assistance, aiming at employment generation, green technology, and the blue economy.

Bangladesh Bank and Midland Bank collaborated to strengthen the shipbuilding sector through a refinance scheme, providing accessible financing for shipbuilding, enhancing capabilities, and boosting exports.

Ship Building Industry Development in Bangladesh

Policy Initiatives:

1. 1. Cash incentives for ship exports

1. 1. Reduced import duties on shipbuilding raw materials

1. 1. Tax holidays up to 10 years for shipbuilders

1. 1. Ban on ships under 100,000 meters

In addition to the aforementioned provisions, there are specific tax regulations in place:

1. 1. Reduced tax rates on export income: 5% for publicly listed companies and 10% for non-listed companies.

1. 1. A 5% import duty is levied on raw materials utilized for shipbuilding within the local market.

1. 1. Export subsidies of 10% are granted on the export of ships.

Also, several countries partnered with the government to harness the shipbuilding industry’s potential. Norway, with the International Maritime Organization (IMO), conducted a $1.4 million safety training project benefiting 30 workers in 2016-2017. In 2020, Norway contributed $1.5 million to the Safe and Environmentally Sound Ship Recycling in Bangladesh (SENSREC) project to improve ship recycling. An American organization collaborated with the Bangladesh Marine Academy on a $1 million training project for 800 workers.

Tax Regulations:

1. 1. Reduced tax rates on export income:
      • • 5% for publicly listed companies
      • • 10% for non-listed companies

1. 1. 5% import duty on raw materials for shipbuilding within the local market

1. 1. Export subsidies of 10% on the export of ships

Financial Contributions:

1. 1. Norway’s $1.4 million safety training project (2016-2017)

1. 1. Norway’s $1.5 million contribution to the SENSREC project (2020)

1. 1. American organization’s $1 million training project at the Bangladesh Marine Academy

Other Investment Frontiers Await

Bangladesh offers potential for small vessel construction below 25,000 dwt, or 12,000, with FDI or joint ventures expected to boost industry capacity and capability to meet international standards. This includes developing new shipyards or upgrading existing ones with modern facilities such as computer-based machining and heavy lifting for larger vessels. Technical assistance would also improve productivity.

Investment in backward linkages, such as steel pipes and components, could reduce reliance on imports and increase local value for domestic and export markets. This could involve FDI or joint ventures with overseas suppliers.

Additionally, vocational training in shipbuilding and marine engineering needs enrichment, potentially through FDI or joint ventures with existing educational institutes, to address the shortage of skilled engineers and welders for higher-quality vessels.

From its deep historical origins to its current prominent status, the shipbuilding sector epitomizes resilience, flexibility, and ingenuity. As it plans its progression into the future, propelled by forward-thinking policies and collaborative alliances, it strives not only for growth but also serves as a symbol of optimism for job creation, sustainable methodologies, and economic well-being.