Flag-carriers in high seas boon for economy

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Flag-carriers in high seas boon for economy


Publication Date: 13 January 2019 00:00 00 AM
Media: The Independent
The Bangladesh flag carrier ocean-going cargo vessels have a huge potential of earning over $9 billion every year and there are chances of generating employment.

In 2018, the country’s premier port handled 29,03,996 TUES (twenty-foot equivalent units) of import, export and empty containers, while in 2017 it was 25,66,597 TUES, which is 3,37,399 TUES up from in the previous year. About 90 per cent of imports and exports are carried out by sea, but only a small portion of it being carried out by Bangladesh flag carriers.

To handle such quantities of goods, Bangladesh businesses have to spend over $9 billion as freight charge for export and import, but Bangladeshi ocean-going vessels can tap s only 8-10 per cent of it, which is not more than $ 1 billion from this sector.

Bangladesh flag carriers have a legal right to carry at least 40 per cent of the sea-borne cargoes relating to foreign trade of Bangladesh, according to the Flag Vessels (Protection) Ordinance, 1982. But the country is unable to carry such volumes of cargo due to lack of ocean-going vessels.

About six years ago, Bangladesh had 85 ocean-going cargo vessels, but the number has now dropped to 35 vessels due to the major shake in last few years for decaling freight charges, operating cost and withdrawal of VAT exemption benefit for import and manufacture of vessels. High rate of bank interest, image crisis, delay in registration, double taxation in various international ports and lack of flag protection are factors responsible for a dwindling number of merchant ships in Bangladesh.


Businessmen say Bangladesh has a huge potential to revive its merchant the business if the government comes forward to revitalize the sector.

By investing in this sector, the money that is being spent as freight charges paid to foreign ships could be save along with employment generation of employment for those passing out from the marine academies of the country.

Of the country’s 35 vessels, 18 are owned by the Chattogram-based Kabir Group. Kabir Group’s SR Shipping Limited is leading Bangladesh with 18 vessels. Kabir Group Deputy Managing Director Sarwar Jahan told The Independent, “Our bulk carriers transport regular goods to almost all the ports around the world. Most of our ships carry goods to Vietnam, Japan, China, Indonesia, Gulf, Europe, Africa, and many more ports.”

Sarwar Jahan said, “Bangladeshi ocean-going vessels can tap up only 8-10 per cent of the export-import cargos of the country. This is a very low percentage, though it is a sector with high potential. With the extension of this sector the country’s economy will be enriched and the money of the country will be saved.”

In 2005, Kabir Group registered the largest bulk carrier of 45,200 deadweight (DWT) capacity ocean-going vessels in Bangladesh named MV Fatema.

The vessel business then began to flourish with the fleet increasing. From 2005 to 2010 more than six vessels were added, while from 2011 to 2015 the company added 10 more vessels.

When other companies are leaving the business, complaining about a reduction in freight charges, high operating coast and government vat and taxes, in 2017-2018, seven more vessels were added to the fleet. The Kabir Group has 24 vessels; however, maintaining the international standard they had scraped six vessels and now 18 vessels of the company are now in operation. In 2019, this company is going to add a new bulk carrier.

Sarwar Jahan told The Independent their company gave job to over 700 seafarers in the ocean-going vessels alone.

“There is a possibility of further expansion. Our company has been given the opportunity to get jobs to the students who are passing out from Marine Academies on a priority basis. Earlier, state-owned Bangladesh Shipping Corporation (BSC) used absorbed fresh cadets, but the BSC fleet has declined.  So, we, the private entrepreneurs are filling the gaps of the BSC by offering jobs to the fresh cadets. With the generation of job potential, we are saving the country’s money,” said Sarwar Jahan.

His company is also expanding the sector by adding a new carrier. He said, “We have completed all the procedure to add a new bulk carrier to our fleet this year. In adding the bulk carrier in our fleet it will increase our capacity to carry export-import cargo in the international shipping business.”


However, he spoke of certain challenges in the expansion of this sector. He said, “The biggest hurdle of business expansion in this sector is the high tax rate.”

In this sector, the total tax is about 27 percent including Advance Income Tax (AIT), Vat, and other taxes that pose as barriers to expanding business for local investors. Besides, Bangladeshi sailors cannot sign off and sign on in many ports of the world.

However, he said the government was sincere about expanding this promising sector and to overcome its problems. The sector was quietly expanding due to government efforts. He also suggested identifying the important hurdles to solve the problems quickly.

He said they, too, had faced a hard time establish their business. On December 5, 2010 their vessel MV Jahan Moni and its 26 Bangladeshi crewmembers were captured at gun point on the Arabian Sea while carrying nickel from Indonesia to Greece. The ship was then taken to Garacad Village in Somalia, where the vessel and its crew were captive for 99 days. However, with the efforts of the company and diplomatic negotiations, all crew members were released, and they managed to return home. He said there was bound to upward and downward trends in business.

Bangladesh Oceangoing Shipowner’s Association (BOGSOA) and businessmen urged the government to promote the sector to remove the lengthy and costly processes in the registration system, non-protection of Bangladesh flag carrier ocean-going ships, double taxation, lack of facility to open bank accounts in foreign currency for ocean-going ships, high bank interest rate, and disturbance of pirates at sea.

Contacted, shipbuilder Md Sakhawat Hossain, managing director of Western Marine Shipyard, told The Independent “The government should exempt all VAT and taxes for importing vessels of more than 15,000 deadweight tonnage (DWT). Alternately, it should impose tax and VAT on the import of vessels bellow 10,000 DWT, as these ships were being in about 150 shipyards in the country.”

“But our NBR tends to exempt vat and taxes on all types of vessels, which is not realistic. Vessels over 10,000 DWT go to the ocean and compete internationally. So they should get the exemption,” he added.

“If they get the needed facility facility, Bangladesh would save over $9 billion, which is now being paid to foreign shipping companies. Moreover, it would create employment. Over 100 people is directly involved with a vessel. If Bangladeshi companies own 100 ships, job would be created for 10,000 people,” said Shahwakat.

“NBR apparently thinks that revenue would fall if they exempt tax on importing ocean-going vessels. But the people who would be employed would pay taxes, and a huge amount of Bangladesh money would saved, which would be be more than the revenue,” said Shahwakat.

Shamsuddin Illius
Shamsuddin Illius is a print and online media journalist. He has been working in the field (fulltime) of journalism since 2010. He is very much passionate about journalism since his early age. Currently he is the Bureau Chief-Chittagong at The Business Standard.

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