Although import and export of goods through sea routes have substantially increased in Bangladesh recently, the country is largely missing out on opportunities to tap the potentials of its oceangoing vessels industry due to a lack of enough ships.
In the past 10 years, the import and export rose by two and a half folds but the number of Bangladeshi flag vessels decreased by two-thirds.
At present, Bangladesh has only 35 ships compared to 93 in 2012, as per government data.
During the same period, the number of vessels under the Bangladesh Shipping Corporation came down to only three from 38, while those under the private sector decreased to 32 from 52.
As a result, 85 percent share of the freight-carrying business has gone to the control of big foreign cargo industries, including those from Denmark, Switzerland, China, France, Germany, Korea and Taiwan.
According to a government estimate, Bangladesh paid about Tk58,000 crore to foreign ships in freight charges in fiscal year 2017-18.
Although the country's total spending in freight charges was around Tk69,000 crore, national flag vessels got a share of only 15 percent of it.
Between 2012 and 2018, Bangladesh saw over 44.43 percent and over 68.72 percent growth in import and export respectively through the Bay of Bengal.
In 2012, Bangladeshi cargo ships used to control 40 percent of the business.
The industry did not see a significant growth against increased export-import activities owing to a lack of policy support from the government, said Azam J Chowdhury, president of Bangladesh Oceangoing Ship-owners' Association.
Credit facility, coupled with policy support, will enormously expand the potentials of the industry, he added.
Azam, also the chairman of MJL Bangladesh, further said given the present size of the economy, local entrepreneurs can create lots of employments if they operate 200 oceangoing ships.
Legal protection to bolster the industry
However, the government has taken some initiatives to increase the number of oceangoing vessels to strengthen the position of national flag vessels in sea.
To this effect, it placed the Bangladesh Flag Vessels (Protection) Bill, 2019 in parliament on September 11 to give the industry legal protection.
The proposed law incorporates a provision that at least 50 percent foreign trade of local goods must be carried by Bangladeshi oceangoing vessels. Currently, national flag vessels carry 40 percent export goods.
Other provisions include elimination of 15 percent Value Added Tax (VAT) and three percent advance trade VAT in importing ships. But the 5 percent advance income tax will remain as it is.
National Board of Revenue Chairman Mosharraf Hossain Bhuiyan said ship import by Bangladeshi companies has declined over the past few years due to a lack of policy support.
As a result, Bangladeshi vessels are losing the competition to foreign ones and are being deprived of the opportunity to earn a big amount of foreign currency.
The government, nevertheless, expressed hope that the country's current shipping trade may increase from Tk10,000 crore to Tk35,000-40,000 crore once the law is implemented.
MM Tariqul Islam, additional secretary to the shipping ministry, said the proposed law prioritises the growth of the local industry.
"We hope the present crisis will go away soon," he said.
Director General of the shipping department Commodore Syed Ariful Islam said the government has taken an initiative to bestow the freight business on local traders by reducing dependence on foreign ships.
Accordingly, income tax and VAT on import of merchant ships were waived by amending the VAT Act in 2018, he said.
The proposed law has opened up new doors for trade by encouraging local private entrepreneurs to invest more in the Bangladesh flag-carrying vessels industry.
Shipping ministry sources said there were no VAT and advance trade VAT before 2011 on import of oceangoing flag vessels.
Local importers welcomed the government initiative but argued against the condition of transporting 50 percent of the goods by local vessels.
They said it is not practical considering the number of existing ships and those in the pipeline for import.
Mahbubur Rahman, convener of the Chittagong Port Users Forum, said there are 35 Bangladeshi flag vessels, and 15 more are being imported.
To carry the amount of goods as stipulated by the law, more than 100 vessels will be required, he added.