Tradewinds – Bangladesh scrappers and banks agree on standards

(Written by Adam Corbett)

4 September 2013 - Breakthrough as industry agrees to work with European lenders on improving scrapyard safety to encourage foreign banks to relax controls on investing

Bangladeshi banks and shipbreakers have reached an agreement on improving standards in the hope that it will result in a fresh injection of foreign liquidity to the business.

The Association of Bankers Bangladesh Ltd (ABB) and the Bangladesh Ship Breaking Association (BSBA) have expressed a commitment to improve environmental and safety standards.

The agreement was reached with the support of three European development banks that are currently providing credit to local banks, but not allowing the cash to be used to fund the shipbreaking industry for environmental and safety reasons.

The three European banks are Dutch Development Bank (FMO), Germany’s DEG Invest and France’s Proparco.

A joint ABB/BSBA statement said: “As leaders in the Bangladesh financial and shiprecycling sectors, we believe the success of our industries, and indeed Bangladesh, will be supported by economic growth that also takes into consideration environmental and social responsibilities.

“We understand that such an approach will enhance our ability to grow, innovate and compete successfully in the international market.”

The statement says breakers will work to ensure that scrapping is conducted “responsibly, consistent with international best practices”.

However, local sources suggest that an absence of funding from foreign banks has been a problem for local breakers, which now recognise that improvements will have to be made win back financial support.

FMO Bank senior investment officer Roger Hennekens, who was involved in the discussions, says he senses a “strong commitment” to improve standards on the part of breakers and the banks.

He says the joint statement represents a breakthrough as it is the first time they have come together to hammer out such an agreement.

Hennekens adds that the three European banks that supported the talks will look at opportunities to invest in environmental and social measures to improve the industry.

But he says funding will still not be used for commercial shipbreaking activities, and that other restrictions will remain in place until there are “significant and visible” changes in standards.

Only when that happens will conditions perhaps be “relaxed” rather than removed, Hennekens says.