The largely state-owned Bangladesh Shipping Corporation (BSC) has, reportedly, signed a commercial deal with a Chinese firm to procure three bulk carriers and three oil tankers.
Each of the bulk carriers, having a capacity of 36000 DWT (deadweight tonnage), would cost the BSC US$27 million dollar. The Chinese government, according to a report published in this paper Tuesday last, would make available a loan to finance the procurement of the vessels.
There is nothing unusual about the procurement, being funded under a foreign loan; none has any reason to raise question about it. Yet questions are being asked by officials within the Ministry of Shipping about the BSC's latest procurement move.
The question that is hard to ignore is: Why would the BSC buy a ship at a price almost 100 per cent more than what is being paid by a shipping company of Sri Lanka?
According to the FE report, the Ceylon Shipping Corporation (CSC) in December last signed a deal to procure two bulk carriers, each having a capacity of 63,600 DWT, at the total cost of US$70 million from a Chinese shipyard. That means that each of the bulk carriers would cost the CSC US$ 35 million.
The arithmetic is as simple is that the BSC will be paying nearly 100 per cent more to the Chinese firm, namely, CMC ( China National Machinery Import and Export Corporation) for each of the bulk carriers with 36000 DWT capacity.
Globally, shipbuilders are having a very tough time because of the slump in demand for ships. One is not required to go a long way to know the truth about the shipping business. The Bangladeshi shipbuilders would tell their sorry tales about the current shipping business. A couple of local shipbuilders which had dreamt of sunny days, in terms of inflow of international order for ships, are having nightmares these days. Some banks which have financed them are also in difficulty.
So, under the prevailing conditions in shipbuilding industry across the globe, it is buyers, not sellers, who dictate the terms. Then why should the BSC buy ships at a very high price?
Is it then the BSC has struck the deal just because of the Chinese loan? The loan in question is not a grant and the borrower, in this case the BSC, will have to repay the loan. And in the event of BSC's failure to repay, the government would have to pay back the same with interest.
There is every chance that, finally, the government would have to shoulder the loan burden since the financial performance of the BSC in recent years has been very poor. The corporation that had earned handsome profits in the mid-2000s, incurred, according to the latest Economic Review of the ministry of finance (MoF), a loss of Tk.170 million in the fiscal year (FY) 2012-13. In the two preceding years it had earned a paltry profit of Tk. 10 million each.
Why should the BSC with such a frail financial health go for procuring ships at abnormally high prices? Is it that someone powerful was interested in such an expensive deal?
Procurement of goods and services by the public entities, be it from a domestic or a foreign source, has been the most abused means to make unearned money in Bangladesh. Officials, politicians in power and commission agents, of hybrid sorts, tend to exploit the opportunity in the best possible way. However, the scope for indulging in financial irregularities is more in the case of hard-term loans or suppliers' credits.
The government, particularly at the insistence of the multilateral donors, has been trying to ensure so-called transparency in public procurement. It has adopted procurement law and rules to make it happen. But for a few hard-term or tied loans, the application of the procurement law and rules is kept in abeyance to 'facilitate' implementation of large projects and procurements that fail to draw response from the providers of soft loans.
However, the expensive loans turn out to be a burden on the government because of their high rate of interest and shorter repayment periods. What is worse is that some firms involved in contractual arrangements under such loan deals tend to extend irregular financial benefits to the concerned government officials of the borrowing countries to fulfil their unholy missions. It is hard to say the people involved in the BSC deal on bulk carrier procurement could ignore the lure of extra income, if there was any.
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