A high amount of bank guarantee requirement for the import of raw materials under bonded warehouse and the cost for obtaining such a guarantee make the country's booming shipbuilding industry less competitive, according to industry insiders. They pointed to the fact that the competitive shipbuilding nations like India, Vietnam, South Korea and Singapore do not pay any such charges for the import of such industrial raw materials.
The National Board of Revenue (NBR) last year imposed an additional 25 percent bank guarantee requirement on this sort of imports.
However the NBR clarified that the bank guarantee is required for those builders only who want to import raw materials through green channel to avert any lengthy customs procedure.
Ananda Shipyard Chairman Dr Abdullah Hel Bari thinks this 25 per cent bank guarantee is too high. On importing through green channel, he said it is natural that every body prefers this channel to avert the lengthy customs procedure.
"It is a completely irrational that the government holds a huge amount of money from shipbuilders in the name of bank guarantee. How shipbuilders will continue business if a portion of their funds gets stuck up with the government for a long time," Bari lamented.
The industry people also expressed their dismay over the hassles they are to face in obtaining the bank guarantee from a foreign bank the raw material exporters seek to get advance payment of their buying orders.
The foreign bank guarantee is needed because the suppliers say that they are not satisfied with a guarantee from a local bank in paying advance.
The 6-7 per cent charges payable for such bank guarantee are also a hurdle, the shipbuilders said.
"Entrepreneurs need to pay commission for a local bank guarantee and at the same time they have to take yet another burden of paying fees to foreign banks for the guarantee the foreign supplier asks for," said Mahmudur Rahman, chairman of Highspeed Shipbuilding & Engineering Co. Ltd, pointing to the high bank guarantee charges.
Shipbuilders have long been demanding that foreign banks should take a reasonable fee, but for the lack of a set policy most of the cases the banks impose irrational fees, Rahman added.
Meanwhile, the Export Promotion Bureau (EPB) has decided to ask for Bangladesh Bank's intervention in reducing such bank guarantee fees taken by foreign banks.
EPB Director General Khalilur Rahman said a high-powered committee has been formed to find out the hurdles the potential shipbuilding industry is now facing.
Currently, local shipbuilders, including Ananda Shipyard and Western Marine Shipyard, are working on about US$ 400 million worth of orders for over 40 vessels for buyers from Germany, Denmark, Netherlands and Mozambique.
The success of these two companies have encouraged other local companies such as Meghna Group of Industries, Rangs Group, Khan Brothers and Narayanganj Engineering & Shipbuilding to jump on the bandwagon of global shipbuilding market.
Behind the current boom of the industry is the global rise in the demand for new ships, especially smaller ones with a capacity below 15,000 dead weight tonnes (DWT). This has helped Bangladesh attract the attention of international shipping companies as traditional shipbuilding countries such as Japan, China, South Korea and Vietnam are not interested in building ships with under 20,000 DWT.
Reluctance of major global shipbuilders to take orders for small vessels, coupled with rising demand for new ships in recent years, has made Bangladesh an alternative destination for global buyers of low-cost ships in recent times.
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