NSU Research Contributions
Title : Contributions of Ship Recycling in Bangladesh: An Economic Assessment
Authors : Helal Ahammad, Mohammad Sujauddin
Abstract : This report forms part of Work Package 1 of the project ‘Safe and Environmentally Sound Ship Recycling in Bangladesh – Phase I’, jointly implemented by the International Maritime Organization (IMO) and the Government of the People’s Republic of Bangladesh. This study provides an up-to-date assessment of the overall contributions that the ship recycling industry has made to the economy of Bangladesh. It also discusses the domestic and international regulatory frameworks within which the industry is operating, together with other major factors and developments that have, and will have, shaped the industry and impacted its economic performance. It is important to note that there are important social, human health and environmental impacts of ship recycling which do not fall within the scope of this economic study and, on their own right, would warrant dedicated study. However, readers interested in the environmental impacts are referred to the companion study of Work Package 1. In this study, ship recycling is taken to encompass all economic activities involved in dismantling and converting imported end-of-life ocean-going vessels?through using labour, land, infrastructure, machinery, and various utilities and consumables?into steel and other recyclable and reusable commodities that are mostly sold in domestic markets. Bangladesh is one of the leading ship recycling countries in the world. • On average, the industry recycled over 175 ships totalling about 1.8 million light displacement tonnes (LDTs; the most relevant measurement unit in ship recycling) a year over the past decade to 2015. • Over this period, the Bangladesh ship recycling industry has accounted for over 25 percent of the total ships scrapped (in LDTs) by the five leading ship breaking nations; the four other being India, China, Pakistan and Turkey. • In 2015, Bangladesh became the top ship recycling country in the world, surpassing India once again since 2008. • Despite the structural and cyclical ups and downs in the global shipping and ship recycling markets, the ship recycling industry in Bangladesh has managed a respectable growth, estimated at about 14 percent a year on average since 1980. • With expanded capacity of breaking yards over the years, Bangladeshi breakers have imported relatively large and diverse range of ships for recycling. The internationally competitive ship recycling industry of Bangladesh is making valuable contributions to the national economy. • The industry has sustained its international competition due to a combination of factors including adequate domestic demand for steel scraps and reusable materials and products; proximity to critical infrastructure and a thriving industrial zone with many re-rolling mills and other ‘linkage’ industries; stable climate and geographical advantage; relatively affordable labour; mature entrepreneurship; and enabling and conducive regulatory environments. • The industry generated output worth, on average, about Taka 53.3 billion (approximately US$770 million; at 2009-10 constant prices) a year over the past five years to 2015. • In terms of customs duties, income and other taxes, the industry has paid around Taka 5 billion (or, approximately US$68 million) a year, providing an important source of government annual revenues. Additionally, the industry pays a substantial amount of fees and charges as required under the current regulatory and compliance frameworks. • Importantly, the industry provides jobs to many thousands of skilled and semiskilled workers coming from across the country, estimated to be between 25,000 and 40,000 full-time equivalent jobs in 2015. In addition to these direct contributions, the industry is making important indirect contributions to the national and local economies by supporting and stimulating a host of economic activities along its supply chain?upstream and downstream, including domestic steel manufacturing, ship building and repairing services. • Between 80 and 90 percent of all materials recovered from dismantled ships (measured in Metric tonnes) constituted various forms of steel scraps. Typically, between 50 and 60 percent of these recovered steel scraps are used in re-rolling mills in Bangladesh. As such, steel scraps recovered from ship breaking account for over half of the domestically sourced feedstock into total steel manufacturing in Bangladesh. • Recycled ships are effectively imported feedstock for domestic steel manufacturing. In view of this, the import dependency for feedstock of domestic steel making would not have been reduced substantially by domestic ship recycling. But the substantial value-adding and employment opportunities that the ship recycling industry has been generating since 1980 would have been foregone had there been equivalent direct imports of steel scraps for domestic steel making. • As such, for every Taka 1,000 of value-added generated by the ship recycling industry, there was an additional Taka 2,000 of value-added generated along the supply chain?upstream and downstream, implying a value-added multiplier of 3. Value-added includes wages and salaries, proprietary income, other proprietor income, and indirect business taxes. • In addition to steel scraps, ship breaking yards recovers substantial amount of non-ferrous metals (in the form scraps, sheets, nets and bar materials), estimated at 7,500 Metric tonnes in 2015 worth about Taka 1.2 billion (or about US$17 million) at the ‘yard gate’ in 2009-10 constant prices. • Ship recycling also recovers numerous machines, components and hardware such as pipes, chains, boats, anchors and propellers, the value of which was estimated at Taka 7.6 billion (about US$111 million) at the ‘yard gate’ for the year 2015. • By ensuring ongoing supply of key feedstock to domestic steel making as well as recovering other reusable or recyclable materials, ship recycling has contributed to the development and growth of many industries in Bangladesh, and thereby playing an important role in broadening and deepening the industrial base of the country. The substantial domestic demand for steel scraps and the expected ongoing global supply of recyclable ships from the pool of ageing global merchant ships suggest a promising outlook for the ship recycling industry in Bangladesh. Nonetheless, global shipping and ship recycling markets are volatile by nature. As such, not only the industry will have to deal with market uncertainties, it will also be facing domestic and international regulatory frameworks and standards which are currently being developed or implemented. One of the critical regulatory requirements relates to safe and environmentally sound ship recycling practices under the Hong Kong Convention. Also, the beaching method of recycling that is used in Bangladesh may come under some threat if the controversial EU Regulation gets up. Last but not least, for evidence-based decision making by the industry stakeholders, it is critical to develop and maintain a credible information base and analytical capacity for the industry, which the authors of this report have found lacking. This report is expected to make a contribution to this end. Nonetheless, it is important that the industry’s contributions be duly incorporated in the national accounts and employment statistics generated by the Bangladesh Bureau of Statistics in the future.
| Journal : | Volume : | Year : 2017 | Issue : |
| Pages : | City : London, UK | Edition : | Editors : |
| Publisher : IMO-NORAD SENSREC Project | ISBN : | Book : | Chapter : |
| Proceeding Title : | Institution : | Issuer : | Number : |