Danish study claims Bangladesh shipbuilding workers are cheapest

A study carried out by the Danish embassy in Bangladesh claims the cost of building an ocean-going ship in Bangladesh is around 15% less than in any other competing country thanks to the cheap labour there.

However, low labour costs alone cannot lower overall manufacturing costs and the study said the country might not be able to compete with the likes of China, South Korea, India and Vietnam which already dominate the secondary chain-supply industry.

According to the study, the existing average labour wage per hour in Bangladesh is around $1.5, compared to $3.0 in a Chinese shipyard, $8 in South Korea, $16 in Italy and $18 in the US.

Bangladesh can supply only 10% of the components required for building a ship for export, but its support to the domestic inland and coastal vessel manufacturing is around 40%, most of which is believed to be coming from small and medium enterprises. Though the cost of labour in shipbuilding is typically around 20-30% of the total ship manufacturing costs, the study says the value of the local items could easily be raised to 70%.

The productivity rate of Bangladesh is 1.0 with the estimated relative labour rate at 0.5 while the ratio stands at 1: 1.2 in India, 1:1.5 in China, and 6:4 in South Korea.

The Danish Embassy prepared the study on Bangladesh Shipbuilding Sector prior to the visit of a high profile Danish business delegation, mostly from their shipbuilding industry, to find out about joint venture business opportunities in Bangladesh. The delegation, which arrived on Sunday, met Bangladeshi business people at a meeting entitled “Denmark-Bangladesh Match-making event” on Monday.

The study praised the contribution of the private sector to the sale of international oceangoing ships, which fetched half a million US dollars. It said four shipyard companies have already earned the full capacity of building ships of international standard.

Out of the 200 shipyards, the study put Ananda Shipyard, Western Marine, Khulna Shipyard, and Karnaphuly Shipyard in the A category. Besides, Highspeed Shipbuilding and Engineering, Dhaka Dockyard, Narayanganj Engineering, Dockyard and Engineering, Chittagong Dry Dock and Fishers Shipyard have all been placed in the B category, which means these will be capable of constructing oceangoing ships in a year or two.

The study put other shipyard companies in C and D categories said the country has the potential to develop 18 upstream linkage industries which include ship out-fittings, safety accessories, marine lighting, maritime signs, symbols and posters, piston rings, switch gear, furniture, marine cables, anchor and chain, electrical and electronic items, and shipbuilding steel plate.

Commerce Minister Faruk Khan made a clarion call to the investors to take into account the country’s labour class and environment to make the investment fruitful.

He also called upon them to find more and more investment avenues including dredging and said the government has already taken necessary steps to create an investment environment for creating job opportunities for the poor segment of the population.

Danish Ambassdor Einar H Jensen, who led the country’s ship building sector revival by making international standard sea vessels, said Bangladesh’s ocean going ships are now doing well. He said under the Business2Bussiness programme, 70 Danish companies have joint ventures with Bangladesh, mostly in information and technology.