Dhaka, Jul 29 (bangladeshinside.com) — Much hyped shipbuilding industry in Bangladesh seems to be in serious trouble which does not come as surprise to analysts. Cancellation of export orders worth $89.40 million or about BDT 700 crore of Ananda Shipyard and Slipways has left its financier, Islami Bank Bangladesh Ltd (IBBL), in a sticky situation, reports the Daily Star.
Earlier in 2007, Ananda received orders from German and Singaporean buyers for eight ships, to be delivered between September 2009 and December 2010. The local shipbuilder, however, failed to stick to the lead time, which made the buyers withdraw the orders.
Consequently, IBBL had to honour its performance bonds and refund guarantees worth $58.71 million, according to Bangladesh Bank. It is also facing charges from the central bank—from violations of guidelines for foreign currency transactions to inadequate collateral.
As is practice in shipbuilding contracts, the purchaser is required to pay instalments to the yard in advance of delivery of the vessel, and to secure those instalments, the shipyard is required to provide a ‘refund guarantee’ from a bank.
The bank undertakes the responsibility that if the purchaser ends the contract for good reason or if the builder for any reason fails to refund the advance instalments, it will reimburse the amount on the builder’s behalf.
Performance bond, essentially, is a surety bond issued by a bank to guarantee satisfactory completion of a project by a contractor.
But IBBL disputed the figures quoted by BB. It said it has issued performance bond worth $2.39 million and refund guarantee $31.69 million. On the other hand, it has received advance payments of $31.69 million from the buyers.
Ananda’s total liabilities with IBBL now stand at Tk 456.34 crore, and BB in June instructed the bank to make provisions against the sum.
The central bank also instructed IBBL to take administrative actions against the responsible officials of the bank, including the then managing director, Karwan Bazar branch manager and credit committee members, and let it know of the progress by July 31.
“Export orders were cancelled due to Ananda’s failure to deliver the ships on time. We found no bad intention on the part of the borrowers,” Mohammad Abdul Mannan, managing director of IBBL, told The Daily Star.
He said the loans were extended to Ananda after assessing the shipbuilder’s ability to execute the orders.
Abdullahel Bari, the owner of Ananda, however said the buyers cancelled the order in May 2009, saying they were impacted by the recession.
“I did nothing wrong. I’ll pay back the bank in 10 years,” he said, adding that the recession has wiped off a good deal of value from his ships. As per banking rules, Ananda now stands to become a defaulter.
In December 2012, the High Court ordered the central bank and the IBBL not to list Ananda as a defaulter and on January 13 this year, it extended the validity of the order for four months and by another four months in a ruling on May 7.
Failing to compete the global competition now the local ship-makers have sought tax exemption on some major items, used for building ships, as the proposed national budget has not removed their higher import taxes. The industry leaders are lobbying hard to personalise the exempted tax amount at the cost of the state.
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