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Procedia Engineering 194 (2017) 218 – 223

10th International Conference on Marine Technology, MARTEC 2016

Foreign Direct Investment and the Shipbuilding Industry: A

Bangladesh Perspective
Khandaker Rasel Hasana,∗, Md. Mashiur Rahamanb , M. Ziauddin Alamgirc , Hiromichi
Akimotod
a Department of Port and Shipping Management, Bangabandhu Sheikh MujiburRahman Maritime University, Dhaka 1216, Bangladesh
b Department of Naval Architecture and Marine Engineering, Bangladesh University of Engineering and Technology, Dhaka-1000
c Faculty of Maritime Governance and Policy, Bangabandhu Sheikh MujiburRahman Maritime University, Dhaka 1216
d Center for the Advancement of Research and Education Exchange Networks in Asia (CAREN), Osaka University, 1-1 Yamadaoka, Suita, Osaka

565-0871, Japan

Abstract
Traditionally, Bangladesh has been a shipbuilding country. Bangladesh had exported ships even in the seventeenth and eighteenth
century. The modern shipbuilding industry started since the period in Bangladesh in mid 1950s, and has made some progress since
then and also attracted foreign buyers. It took a number of years before the country could register its name as an ocean-going
shipbuilder. The Bangladesh Shipbuilding Industry got a spurt in 2008 when a 2,900 DWT ocean-going ship was exported from
Bangladesh. Bangladesh created a new history for the export sectors of the nation. Almost exclusively, the Ready Made Garment
(RMG) has been the largest export sector in Bangladesh. There is both a necessity and opportunity for expansion to other sectors
and to widen the export base. Shipbuilding is an opportunity, which can grow into a billion-dollar industry in a single decade.
Analyzing the micro economic factors, present study describes the segment of the market where Bangladesh enjoys the highest
advantage and to draw out a strategy for exploitation of the potential. The present study also identifies that attracting Foreign Direct
Investment (FDI) is a necessity for exposure to market, infusing management as well as technology and much needed finance.

©c 2017
2017TheTheAuthors.
Authors. Published
Published by Elsevier
by Elsevier Ltd.is an open access article under the CC BY-NC-ND license
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Selection and peer-review under responsibility of the organizing committee of the 10th International Conference on Marine Tech-
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Peer-review

Keywords: Shipbuilding; Labour; Bangladesh; Foreign Direct Investment

1. Introduction
Bangladesh being a maritime country owns a long tradition of shipbuilding not only for the domestic market but
also for foreign countries. With more than 200 rivers and a sea area of around 166,000 square km, the maritime
cluster of the country possesses a multi-dimensional associate. The shipbuilding industry has been considered a prime
component of the cluster. However, the industry has been mostly focused on the ships for domestic market basically
serving in the inland and coastal trade which numbers more than 10,000. More than 200 shipyards located in different
location of the country are involved in this tonnage generation of which some are of international standard having the
capacity to export ships. A baseline study conducted by the Danish Embassy, Dhaka in September 2009 [1] identified

∗ Corresponding author. Tel.: +88-02-9673605 ; fax: +88-02-8613046.

E-mail address: [email protected]

1877-7058 © 2017 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the organizing committee of the 10th International Conference on Marine Technology.
doi:10.1016/j.proeng.2017.08.138
 Khandaker Rasel Hasan et al. / Procedia Engineering 194 (2017) 218 – 223 219

that there are four shipyards in the country having a capacity to build class ship of small size of 10,000 DWT, whereas
six more yards are in expansion process of accommodating such facilities. The same study also identified there are 13
yards who have postponed the expansion due to recession.
The shipbuilding history of Bangladesh is quite long. It is found that in the fourteenth century the famous
tourist Ibne Batuta came to Bangladesh and in his way back he used a wooden ship built in Sonargaon near Dhaka,
Bangladesh. There are several instances in history where it can be found that shipbuilding in Bangladesh has been an
exporting industry for several centuries. Modern shipbuilding industry started in mid 1950s and made some progress.
It took several decades before the nation could register its name as an ocean-going shipbuilder and attract foreign
buyers. Bangladesh shipbuilding industry got a spurt in 2008 when a 2,900 DWT ocean-going ship was exported
from Bangladesh. It created a new history for the export sectors of the nation.
Bangladesh is currently dependent almost exclusively upon Ready Made Garment (RMG) for export. There is both
necessity and opportunities for expansions to other sectors and widen the export base. Shipbuilding is an opportunity,
which can expand, to few billion dollars in a single decade. There is a need to identify the segment of the market
where Bangladesh enjoys the highest advantage and to draw out a strategy for exploitation of the potential. In order
to identify such area macro economic factor analysis have been conducted in this paper. Among other measures,
attracting Foreign Direct Investment (FDI) is a necessity for exposure to market, infusing management as well as
technology and much needed finance.
2. International Shipbuilding Market and Bangladesh
According to the United Nations Conference on Trade and Development [2], after passing a declining scenario
in new shipbuilding order since the peak in 2008/09, for the first time the customer orders book have increased but
very slightly during 2013. The excessive orders received during the booming period created a disproportionate (over)
supply of tonnage and this might need some more years to adjust even as the world economy seems to recover to some
extent. However, whatever the economic scenario of the world, the shipping world needs to replace its old tonnage
with a new one. Around 53% of the total world fleet is showing an average age of more than 20 years among which
the general cargo ship is covering the largest share. 57% of general cargo ship are more than 20 years old. Moreover
the average size of this 20 years old group is 6330 Dead Weight (DWT) of which the general cargo ship is showing
even lowest average DWT, which is 2917[2]. Therefore, there is a huge upcoming demand of small size general cargo
or multipurpose ship. It is true that the containerization and port specialization is declining the demand of general
cargo ship, however, 4.6%[2] of world tonnage share still shows its significance in world trade.
On the other hand, considering the four stages of shipping market cycle that are the trough, recovery, peak and
collapse, the market is now lying somewhere in the trough stage as the freight market is still showing a very low mark
in all segment of the shipping[2]. The ship building cycle analyzed by Stopford[3] shows the average duration is 9.6
years from a peak to another peak and the standard deviation is 6.4 years. It is almost eight years now since the last
recession started in 2008 therefore, there may be cyclic recovery as well as boom in the coming years. This is a very
general assumption but the time series data show that there will be a change in the cycle sooner or later. As soon as
the recession is over, a rush of orders is expected. Actually, huge orders are expected even if there is no expansion
of the economies and goods transportation does not increase. The expansion of economies, usually experienced after
recessions, will put a further pressure. However, if Bangladesh has to utilize the opportunity, it is imperative to make
necessary preparation.
Jon[4] stated shipbuilding as an attractive development tool in newly industrialized country and mentioned three
points behind this. The first point is that shipbuilding is a medium technology industry, which helps the emerging
country to utilize the cost advantage from its cheap labour and other inputs. The second point is the international
aspects of shipbuilding. Since it is an export-oriented industry, the country could earn huge foreign currencies, which
might strengthen its economy. The last point is the multiplier impact of this industry as it has a strong linkage
with other emerging industries. Burns[5] observed nine key points that creates the competitive advantage over the
other examining the world shipbuilding history. These nine elements are innovation and modernization, investment,
production management, low cost covering labour, resource management and utilization, domestic steel industry,
cheap currency, upstream and downstream linkages, government support and subsidies and regulatory framework.
However, Burns[5] also highlighted that among other the low cost labour and government policy, cheap currency
has a significant impact in attracting ship building. The evolution of world ship building analyzed by Stopford[3],