Western Marine fails to build ship, now sued by Dubai co

[The Ronin]

Western Marine Shipyard's deal with the Dubai-based company Al Rashid Shipping Ltd could have been a testament to Bangladesh's craftsmanship – with three made-in-Bangladesh vessels carrying the UAE flag traversing the seas and delivering goods across the globe.

But, instead, the deal signed in 2018 ended up in a very expensive lawsuit.

Al Rashid Shipping filed an admiralty suit against Western Marine, demanding a refund of around $5 million and accusing the Bangladeshi shipyard of missing its delivery deadline.

In a petition submitted to the High Court in June last year, Al Rashid Shipping stated that the demanded sum included payments made so far, expenses incurred, loss of profit, interest, and legal expenses. It had already cancelled the contract with Western Marine on 18 May 2020.

Al Rashid Shipping had signed two agreements worth more than $5.9 million with the Bangladeshi shipyard for the fabrication, construction, installation of machinery, launch and delivery of a 67-metre AHTS vessel and two 6,500 tonne deadweight (DWT) tankers, maintaining all international standards.

Though Western Marine Shipyard was contractually obligated to deliver all three vessels to the Dubai-based company within 18 months of the first stage payment, the shipyard did not even begin to construct the ships. It took payments of more than $1 million, though.

The deal was signed on 4 October 2018, but Western Marine has only managed to fabricate a plate since then. After signing the deal, Al Rashid paid $500,000 as the first stage payment for the AHTS vessel on 17 October 2018, and $340,000 for the two tankers on 7 February 2019.

Instead, the company paid their workers arrears, their employees Eid bonuses and other bills with the money sent by Al Rashid Shipping, sources told The Business Standard.

As per the contract, Western Marine could only receive the second stage payment after 25% of the steel was erected in panel or block form. But the shipbuilder kept asking for more funds from its client on multiple occasions without commencing the construction in breach of the agreement, the petition says.

Commenting on the matter, Al Rashid Shipping Ltd's lawyer Shah Muhammad Ezaz Rahman said, "We already sent a large sum of money to Western Marine Shipyard, but they have not begun building the ships as per the agreement.

"This is a matter of preserving the image of our country. The debacle has put us into a lot of difficulty."

He said, "During a hearing held last month, the High Court set 7 February for the next hearing, providing an opportunity to fix the matter amicably. However, we have yet to receive a proposal from the shipyard."

When contacted, Western Marine Shipyard's Managing Director Sohail Hasan said, "We worked according to their payment. We bought rods, imported steel, made the design, and got it approved."

The official said, "We had to pay salaries and Eid bonuses to 400-500 workers, and the electricity bills and transportation bills for the yard. To pay these expenses, we took the money as an advance, which will be adjusted with the next stage payment."

Al Rashid Shipping's petition

Despite receiving the fist stage payments for all three vessels, Western Marine did not start constructing the ships, and kept asking for more money from Al Rashid Shipping on multiple occasions – citing a lack of funds.

In the petition, Al Rashid Shipping says the shipyard had also assured it that the money would be adjusted with the next stage payments.

Al Rashid Shipping has sent $1,013,587 to Western Marine in several installments since 2018.

The Dubai-based company sent the engines and propulsion systems for the vessels from Japan, which arrived at the Chittagong port on 29 April 2019. But the ship-builder did not take the deliveries. The machinery remains at the port till this day.

On 21 May 2019, Western Marine requested Al Rashid Shipping to release the second milestone payment for the tanker project, without making any progress on the ship construction.

Three months after the engines and propulsion systems arrived, Western Marine told Al Rashid Shipping that to release the goods from the port, they needed money to pay the port's demurrage charge, CNF charges, transportation charges, and other miscellaneous expenses.

The shipyard also provided a cost estimation to the client, which then clarified that if Western Marine could show good progress, it could release the payments to help them. But the shipyard failed to show any.

Meanwhile, the validity of the warranty for the engines, gearbox and Rexpeller propellers expired in February 2020, which means Al Rashid Shipping will have to bear all risks regarding the systems because of Western Marine's negligence.

Cancellation of the agreement

On 18 May 2020, Al Rashid Shipping confirmed its decision to cancel the agreement and requested Western Marine for a refund. The ship-maker has yet to reply to this notice.

Addressing the matter, Western Marine MD Sohail Hasan said, "Al Rashid Shipping sent two engines, but we did not make any payment against the engines and did not open any LCs [letters of credit].

"For these reasons we failed to release those systems from the port. Al Rashid Shipping then sent us the required documents, but it took some time. Moreover, the process of releasing goods is a slow process in our country as the port authority and bond are related to it."

Sohail said, "We had to spend some money for the necessary documentation and needed more to release the machinery from the port. We told them [Al Rashid Shipping] that the money will be adjusted with the next stage payment. But at that stage they went to the court."

He added, "The High Court has given us the opportunity to solve the matter amicably. If we sit and try together, we will find a solution. Moreover, we will be able to reduce port charges, customs and minimise the damage."
Western Marine still wants to build their ships "as we have done before", said the official.

Commenting on the issue, president of the Association of Export Oriented Shipbuilding Industries of Bangladesh Abdullahel Bari said, "This matter is regrettable because it is not only related to the image of Western Marine Shipyard but also for the country as well.

"The image of our shipbuilding industry could be impacted. Ignominy spreads rapidly from one place to another."

Bari said, "We have to address this incident properly so that we can secure a large portion of the Middle Eastern market in the coming days. If we can create a market in the Middle East – if we create goodwill – nobody will be able to push us back."

Western Marine fails to build ship, now sued by Dubai co

Al Rashid Shipping files an admiralty suit demanding refund of nearly $5m

tbsnews.net

 

[bluesky]

দুধ খেয়ে বঙ্গ সন্তানদের পেট ভরেনা। গাই খেয়ে ফেলাকেই আমরা ব্যবসা মনে করি। Although, our people are greedy, this shipbuilding deal is an international treaty between two companies, there remains a little scope to steal money from the orderer.

This cheating by the Western Marine has exposed our shipbuilding industry in a bad light throughout the marine community of the world. Bangladesh people will suffer from this.

The GoB must play a role in the confrontation to smooth it out.

 

[Bilal9]

President of the Association of Export Oriented Shipbuilding Industries of Bangladesh Abdullahel Bari is a crook himself. He has his own record of breaking contracts and can't call the kettle black. He is the number one river encroacher in the N'ganj area, he has videos on him fighting with BIWTA guys on demolishment of his illegally encroached govt. property, we have seen this.

He maybe trumping up the issue to get the contract for himself. It is a non-issue. His yard has not had orders for a while now.

Interestingly, Western Marine's order book is more than full. They have many successful export builds to their credit and the number one ship exporter from Bangladesh.

 

[Michael Corleone]

President of the Association of Export Oriented Shipbuilding Industries of Bangladesh Abdullahel Bari is a crook himself. He has his own record of breaking contracts and can't call the kettle black. He is the number one river encroacher in the N'ganj area, he has videos on him fighting with BIWTA guys on demolishment of his illegally encroached govt. property, we have seen this.

He maybe trumping up the issue to get the contract for himself. It is a non-issue. His yard has not had orders for a while now.

Interestingly, Western Marine's order book is more than full. They have many successful export builds to their credit and the number one ship exporter from Bangladesh.

Where do you think issue arises? Overcapacity or financial mismanagement

 

[Bilal9]

Where do you think issue arises? Overcapacity or financial mismanagement

(Sorry for the long post)...

Well too many orders came in too fast, and these people did not know how to say "No". Hence the issues.

And Dubai companies suing local yards is not going to help except them being blacklisted as customers. Bangladesh has the lowest cost of shipbuilding, period. Not matched anywhere else. They can simply go somewhere else and spend more money, or come here.

Problem with our local yards is under-capacity, not over capacity. And lack of coordination among yards owned by different people as well.

Govt. has antiquated customs laws, customs procedures and above all corrupt customs people - and our burbak ministers are slowly realizing that those are hindrances to growth and reasons for not shipping build orders on time.

Bangladesh is no longer limited to the sleepy local shipbuilding scenario, only building ships for local consumption. At least half the two dozen larger yards are trying to transition to the export market and adopting shipbuilding classification and build standards/NORMS like RINA, Bureau Veritas, DNV, Japanese Class NK, China Classification Society etc. which has been less than smooth.

Small yards, not expanding build areas fast enough, not pooling resources. There are yards which are sitting idle with no orders, and yards with two years' full of order-books. Abdullahel Bari is the king of mismanagement. Not enough focus on results.

Just growing pains. Hopefully the issues are temporary, until they are re-dressed.

The yards have to actually plan for projects far, far into the future and plan for orders and expansion - which they do not, right now. Even the successful ones. Just playing safe.

What they do not realize is that Bangladesh does not have the same risk scenario as countries/companies which have ten times our labor cost. They have to benchmark yards in countries like Vietnam and to some extent China/India (for builds above 10,000 DWT size). They can partner/coordinate on builds and make matches with companies like Hyundai for low cost builds, either complete or partial.

They have to trumpet their capability in South Korea and Japan to shipbuilding companies there (via industry experts and even local academics if necessary) - and arrange for visits to local yards by these experts and academics.

Our local yards may be not mismanaged financially but they certainly are organizationally (not knowing how to use resources properly for planning and management, and simply not hiring good shipbuilding project managers) - due to their lack of experience in the industry.

The shipbuilding industry is VERY different than the apparel industry, and Project Management expertise is I'd say magnitudes more crucial. Apparel production may have two dozen components, many made locally, reducing need for Just-in-time (JIT) supply principles. But shipbuilding uses many times more of components, and almost all have to be imported.

Remember what Western Marine said about customs holding up shipments of components arriving from overseas (probably for bribes)? This is a huge reason for builds getting late.

These corrupt customs haramis in Chittagong Customs House should be shot in the head (or at least booted out of their customs jobs). Burbak govt. servants and higher ups are sitting on their hands, doing nothing about it, while we lose export orders and people go hungry. All the while our yards are getting sued and earning a bad name for themselves.

Our yards also do not spend enough money to hire competent management consultants with ship-building company expertise. The project managers and consultants are all sitting in Europe, where shipbuilding was once thriving, like UK, Germany, Holland etc. Or busy in European yards like those in Turkey/Poland where more complex and expensive builds take place.

If needed, we can hire project managers from other shipbuilding countries like China and maybe also South Korea, who are in a position to help our industry as optional low cost build destinations. I suggest leaving out hiring project managers from India, for a number of reasons. First is the issue of their rampant practices of padding resumes and portfolios with fake expertise (due to the poor track record of Indian shipbuilding).

Second, although larger Indian yards usually build larger ships than ours, their smaller yards are largely a competitor to ours, or going to be in short order. Hence the progress of Bangladesh shipbuilding industry is not in the best interest of any yards in India, other than their shipping companies being customers, for one reason or another.

Saying "no" to countries and companies who do not intend placing repeat profitable orders for us (profitable enough for the time spent, as well as future order prospects) is perfectly reasonable. Bangladeshi yards have to learn to say "no". Better choice than to say "yes" and then not ship orders on time and get sued.

Lastly, Damen is definitely going to build a yard in Payra, and they will retain competent shipbuilding consultants and project managers. Those same consultants may also be retained by local yards, infusing expertise/processes on large builds. I hear Fincantieri is also interested - but too soon to tell.

 

[The Ronin]

WMS is doing the same with deliveries of two LCT for Bangladesh Army.

https://www.facebook.com/DefsecaBD/posts/174660707426774

 

[Bilal9]

WMS is doing the same with deliveries of two LCT for Bangladesh Army.

https://www.facebook.com/DefsecaBD/posts/174660707426774

Yeah I know. Too many orders. They have a separate yard for building fishing vessels. Time to start expansion.

But Army won't sue WMS.

Covid may also be a factor, partly.

Some critical components such as engines, driveline components are all imported, and we all know how customs blocks imports and demands ransom. "Thek dia paisha khai" - just like your petty street goons. Another mini mafia. CTG AL leaders back these customs goons up, because they get paid by them. Real culprit is not WMS, it is the Chittagong Mayor AL leader and his goons. Thank your leaders for the problems as always. Buck stops there.

This CTG Mayor guy A. B. M. Mohiuddin Chowdhury did it for the past thirty some years, and his successor (4th term) is doing the same thing. Don't want to speak ill of people who have passed but they (Chittagong AL Mayor Mafia) are single handedly responsible for Bangladesh staying at India GDP per capita level (using Customs ransom taking), in spite of our vibrant apparel industry and other exports. These scumbags could not stand up to proper law and order - if we had it.

A. B. M. Mohiuddin Chowdhury - former CTG mayor for three consecutive terms. Met the guy before he passed, was nice enough. But Allah sees beyond fake beards and topi - he had amassed millions using ill gotten customs mafia proceeds. His son went to LSE, came back and became another petty AL goon. Proof that education does not solve blood issues.

Incumbent CTG mayor (4th Term) Rezaul Karim Chowdhury (he looks innocent but is part of the same CTG customs mafia)

 

[AgNoStiC MuSliM]

Would have all been done on time if Al Rashid Shipping had given a 20% cut to the Bangladeshi COAS and his brothers.

 

[The Ronin]

Western Marine in stormy voyage

The Western Marine Shipyard still stands out at Kolagaon on the southern bank of the River Karnaphuli but what is missing now is the whirring sound of shipbuilding and hustle and bustle of its around 3,000 workers.

Now, those who did come here even a year ago will at first think that they have come to the wrong place.

The shipbuilder's three shipbuilding yards covering 40 acres of land – equivalent to 30 football grounds – have been lying abandoned for the past one and a half years.

Recently, the shipbuilder has faced some obstacles – internal conflicts of directors, mismanagement, high-interest loans on short terms and investment in long-term projects.

Despite having enormous prospects, Western Marine is now on the verge of closure owing to a lack of working capital.

The country's leading shipbuilder based in Chattogram has reportedly not paid its workers in the last 13 months. The outstanding salaries amount to Tk8-10 crore. It has also failed to pay rents of a portion of the land it took on a lease for the yards.

The main gate of Western Marine Shipyard Limited, a shipbuilding company. The company has produced 150 ships in last 20 years. Patiya Ship Builders, land owner of the shipyard locked it due to an internal conflicts over rental dues for the last one and a half year. Photo: Mohammad Minhaj Uddin/TBS

While visiting the shipyard on 11 February, it was seen that Patiya Marine Shipbuilders has closed the Western Marine's main entrance and hung a signboard on it under the name of Saber Ahmed. It has also erected walls on more than half of the land used as Western Marine's yards.

No worker was found working at the factory, which used to be abuzz with several thousand workers at one time. Only 15-20 officials and workers were seen in the whole factory and its office. They are mainly engaged in clerical and security work.

Seeking anonymity, a director of the Western Marine said 28 of its 40 acres of land were bought in the company's name. The remaining 12 acres were taken on a 30-year lease. But one of the lessors, Saber Ahmed, has put up a sign on his land as the company could not pay him monthly rent in the last 18 months.

Another lessor has also issued a notice to the Western Marine, asking it to vacate his premises, he added.

Haji Saber Ahmed, land owner of Western Marine Shipyard Limited, built a concrete wall in between of the shipyard owing to long term rental dues. Photo: Mohammad Minhaj Uddin/TBS

In 2000, the Western Marine Shipyard joined the shipbuilding industry, one of the country's potential sectors. The company has since built 150 ships of various types, such as deep-sea fishing trawlers, port utility vessels, tugs, container ships, tankers, bulk carriers, and passenger ships, over 20 years of its journey.

Since 2008, the shipbuilder has also exported 33 ships to 12 countries, including the Netherlands, Denmark, Kenya, Finland, Germany, the United Arab Emirates and India. The company had a turnover of around Tk2,000 crore, including Tk1,400 crore in foreign currencies.

Conflict of directors

The company's current director Md Shakhawat Hossain had been its managing director for about 19 years.

At a board meeting, one of the directors complained that Shakhawat failed to increase orders and reduce bank loans. In June 2019, Shakhawat resigned as the managing director due to disputes over company management and Captain (retd) Sohail Hasan then took over.

The shipbuilding activities of Western Marine Shipyard Limited has been suspended for the last one and half years. The picture was taken recently from Karnaphuli River bank in Patiya area. Photo: Mohammad Minhaj Uddin/TBS

Sohail lives in Singapore with his family. He was there when employees protested outside the dockyard during the pandemic demanding wages.

The company has not been able to export any ship since the new managing director took over in 2019.

Director Shakhawat Hossain said the company had achieved global prominence by exporting ships until he stepped down as the managing director in June 2019.

"After I resigned, the company could not export even a single ship in the last 1.5 years. A foreign company has even filed a lawsuit against them for failing to deliver on time. This has tarnished our long-standing reputation," he added.

Shipbuilders say it takes a long time to reach profits after investing in the shipbuilding industry, and Western Marine invested in long-term projects, including shipyard construction, by taking out short-term loans at a high-interest rate.

Due to incompetent manpower and various obstacles, it sometimes takes 1.5-2 years to build a ship, which is supposed to be built in just six months. Failure to deliver ships to buyers according to the contract leads to penalty or the ships have to be sold in losses.

More than 3,000 workers and officials used to work in Western Marine Shipyard Limited. Bank Asia opened its ATM Booth here to provide easy transaction access to the employees of the company. Photo: Mohammad Minhaj Uddin/TBS

Western Marine built ships but bank loans taken for the projects started turning into bad loans before the sale of the ships. It borrowed from one bank to repay the loan of another. Thus, the number of loans began to rise.

The company's Independent Director Captain Anam Chowdhury said unlike other countries, the government did not provide support to take the organisation to a sustainable level.

Lending banks at risk

Banks and financial institutions that invested in Western Marine are now at risk of debt recovery as shipbuilding stalled over the past 1.5 years.

According to creditors, the company owes about Tk2,000 crore to 19 banks and financial institutions so far. Most of these loans have been restructured and rescheduled by the banks for long terms according to BRPD circular-4 of the Banking Regulation and Policy Department of the Bangladesh Bank.

But a portion of the loans has again become classified (overdue and bad/loss).

The shipbuilder is in debt of Tk721 crore with National Bank, Tk448 crore with Bank Asia, Tk117 crore with Sonali Bank, Tk111 crore with Mutual Trust Bank, Tk100 crore with NCC Bank, Tk72 crore with IFIC Bank, Tk63 crore with Dhaka Bank, and Tk53 crore with One Bank.

Western Marine owes Tk45 crore to Midas Finance, Tk36 crore to Union Capital, Tk32 crore to Premier Leasing and Finance, Tk22 crore to Reliance Finance, Tk17 crore to Fareast Finance and Investment, Tk13 crore to National Finance, Tk11 crore to Uttara Finance and Investment, Tk5 crore to Pubali Bank, Tk5 crore to BRAC Bank, Tk3 crore to First Security Islami Bank and Tk2 crore to National Housing Finance and Investment.

Apart from the bank loans, the shipbuilder also owes at least Tk50 crore to the industry people including Tk80 lakh to Atlantic Marine owner Nasir Uddin, and Tk2.5 crore to Desh Ship Building owner Mohammad Sarwar. Some of the industry people have already filed multiple cheque dishonour cases against Western Marine.

AKM Saiful Islam Chowdhury, executive vice president and zonal head of Bank Asia, said the Western Marine made a profit by shipbuilding with bank loans, but it did not repay the bank on time. Therefore, the company is now burdened with numerous debts.

Monir Hossain, deputy general manager of Sonali Bank, said they granted loan approvals to the shipbuilder since the company had good business prospects in the beginning.


Monir said the company has recently undergone a series of internal disputes among its directors. Besides, Western Marine marred by mismanagements could not build any new vessel in recent years. These failures ultimately contributed to the non-payment of its mounting loans.

Delivery of eight vessels uncertain

Uncertainty grips Western Marine's delivery of eight vessels to both domestic and foreign clients since the company is in the doldrums for the last one and a half years. There is also no new order for the shipbuilder.

In June 2020, Dubai-based Al Rashid Shipping Ltd filed a lawsuit against the company with the High Court for failing to deliver vessels on time.

Meanwhile, deliveries of S Alam Group's cargo vessel Evergreen, a passenger vessel of Bangladesh Inland Water Transport Corporation, two tugboats of Chattogram port and Payra port and a landing craft of the army also see uncertainties.

When contacted, Western Marine Shipyard Ltd Managing Director Captain (Retd) Sohail Hasan said delivery of two ships was delayed as their foreign workers could not return to the construction site due to the pandemic.

"As we had to pay the workers and factory utility bills even during the pandemic-led shutdown, we are facing a financial crisis now. But we are optimistic about overcoming the crisis soon," he added.

The managing director said the government is formulating a development policy for the shipbuilding industry, allowing long-term loans at low interest.

Western Marine in stormy voyage

Since 2008, the shipbuilder has also exported 33 ships to 12 countries, including the Netherlands, Denmark, Kenya, Finland, Germany, the United Arab Emirates and India. The company had a turnover of around Tk2,000 crore, including Tk1,400 crore in foreign currencies

tbsnews.net

 

[Bilal9]

The whole shipping sector globally has been hit by the pandemic, as investment in new ships is at a standstill.

But hopefully things will get better in the next few months.

Don't know why they let Sakhawat Hussain go, he was an excellent manager and made them hundreds of millions of dollars.

Shipbuilding is dependent on global business prospects, more than any other sector.

 

[Michael Corleone]

Maybe poor management and shitty govt policies, seems more fault of poor management

 

[Tom-tom]

Maybe poor management and shitty govt policies, seems more fault of poor management

this WM was Bangladeshis leading ship builder. May be the army can take it over as a private enterprise?

 

[Michael Corleone]

this WM was Bangladeshis leading ship builder. May be the army can take it over as a private enterprise?

It’s public owned. Anything that was acquired by the govt on force always failed. Army will make it a cash cow before them. They’ll not expand, innovate for business purpose.