Good days ahead for oceangoing vessels

New law coming to boost earnings

On the back of necessary initiatives, undertaken by the government, the national flag carrier oceangoing vessels look forward to tapping big returns in the form of freight charge. The move to increase the number of ships, VAT waiver, withdrawal of income tax and advance trade VAT and making use of at least 50 percent of local ships mandatory have rekindled the hopes of the people related to the oceangoing ship industry to bounce back from bad patch.

To this effect, the government placed the Bangladesh Flag Vessels (Protection) Bill, 2019 in the parliament on September 11 to give the industry legal protection. Commodore Syed Ariful Islam, director general of Shipping Department, said, to revive the promising industry, the government has taken measures to provide opportunities to local businesspeople to help them capitalise on ballooning export and imports by minimising dependence on foreign oceangoing ships.

Local entrepreneurs will be keen to invest in the oceangoing ship industry side by side the government, Ariful expected. Additional Secretary to Shipping Ministry Yafesh Ahmed said the new law is going to be enacted in an effort to tap opportunities in the oceangoing ship industry. The law focuses on increasing the stake of Bangladeshi ships.

Thus, it will be possible to fetch huge foreign currency, and many employment opportunities will also be created, he informed. It is going to be mandatory to carry at least 50 percent of the cargos through Bangladeshi ships with the enactment of the ‘FlagVessels(Protection) Act-2019’, the ministry sources said. In this way, the earnings from freight charge might jump up to Tk40 thousand crore from the existing figure Tk10 thousand crore, the sources added.

In the last one decade, the number of oceangoing ships has shrunk to two-thirds. In the absence of adequate oceangoing vessels, 85 percent of freight charge from ballooning exports and imports goes to foreign ship operators. Credit facility with policy support from the government will expand the industry significantly, said Azam J Chowdhury, president of Bangladesh Oceangoing Shipowners’ Association.

Azam, also the chairman of MJL Bangladesh, also said local entrepreneurscan generate many employments if they operate 200 oceangoing ships. According to government estimate, the country paid Tk58,000 crore in freight charge to foreign ship operators infiscal year 2017-18. Shipping Ministry sources said, a total of Tk69,000 crore had been spent in freight charge in the last fiscal year. But, of the total, Bangladesh ships could tap only 15 percent.

Ships of different foreign organisations in Denmark, Switzerland, China, France, Korea and Taiwan have taken the advantage in the absence of adequate Bangladeshi flag carrier oceangoing ships, the sources added. Mentionable, according to Flagship Vessel Ordinace-1982, foreign ships can carry cargos using No objection Certificate (NoC) received from the Director General (Shipping) only if Bangladeshi ships fail to reach port to carry consignment of any route at a particular time.

Meanwhile, in a bid to boost the oceangoing ship industry, the National Board of Revenue has exempted VAT and TAX from the import of ship, having capacity of 5000 deadweight tonnage (DWT), by bringing an amendment to Value Added Tax Law in 2018. There were no Vat and ATV before 2011 in importing oceangoing ships, the ministry sources informed.

According to relevant sources, Bangladesh Shipping Corporation with incentives from the government has recently taken an initiative to procure six big ships having capacities of 80 thousand to 1 lakh DWT in carrying international products. Moreover, the NBR has given permission to various business groups to import nine ships during the last one year. Some more companies are also in the pipeline for the import, the sources added.

NBR sources said, one year after giving incentives, Omera, Karnaphuli, Akij, Crown Cement, AbulKhair, Kabir Steel and other companies have decided to import ship side by side Bangladesh Shipping Corporation. NBR Chairman Md Mosharraf Hossain Bhuiyan said, “In the absence of policy support, the import for Bangladeshi flag carrier ships has decreased in spite of a rise in exports and imports in recent times. As a result, Bangladesh is being deprived of huge foreign currencies. That is why, the government has taken new policy support to enhance national flag carrier ships.”