Blowtorches light up the night on the beaches of Chittagong, Bangladesh. Aside from the moon, the blue-orange glow is the only light by which workers in the southeastern port city of five million people labor under harsh conditions, dismantling large ships that lie like whale carcasses washed ashore.
Oil tankers, military ships, and cargo vessels, football-fields long and weighing 5,000 or more tons apiece, await an inevitable fate. In three to six months, these ships will be reduced to little more than a pile of scraps at the hard-worn hands of thousands of men.
A fortuitous incident gave rise to what is now a controversial but principal industry.
In 1960, a Greek ship crashed onto the shores of Chittagong in a severe cyclone. The ship owner was unable to free it, and soon the surrounding villagers began to strip the ship, making use of everything on board.
Today, Bangladesh’s ship dismantling yards directly benefit the country’s economy, providing jobs, steel, and other resources by offering an essential service to the international ship industry. The country, however, has come under fire for the poor labor and environmental conditions that exist across its 40 dismantling yards.
Dylan Vogt, BSBA ’12, believes revitalization is the only way Bangladesh’s industry can ultimately survive. He became interested in the country from a young age thanks to a family friend; the shipbreaking industry first captured his attention in an international business course.
“It was clear to me that there was a lot of criticism of the industry, but not many ideas about how to fix it,” Vogt said. He has spent the last two years researching the trade and building a proposal to do just that.
In his plan, Vogt proposes tactics to grow and innovate, from raising capital to installing new equipment, while meeting the requirements of national and international regulatory bodies.
He believes addressing the industry’s questionable practices could position Bangladesh as a global leader.
As of 2009, Bangladesh had scrapped 200 to 300 ships annually, accounting for 30 percent of the total market share in the global ship dismantling industry, according to the World Bank. More recently, the number has spiked to 400 ships, or eight million gross tons of salvage.
The industry provides more than 20,000 direct jobs in Bangladesh, reports the Bank, and an additional 200,000 jobs for workers in related industries.
In a country devoid of the natural resources to make steel, the ship dismantling industry contributes over 1.5 million tons each year to the Bangladesh steel industry; the steel is broken down in one of the country’s more than 350 re-rolling mills. Bars and rods that are often used in construction, also known as rebar, are the most common product.
For this reason, the dismantling industry is often referred to as “the steel mines of Bangladesh.” And the steel mines are big business: each ship equates to just under $1 million in profit. Revenues come from the sale of salvaged steel and other materials like electrical wires, toilets, sinks, and canned food.
The ships’ owners aren’t complaining. Disposing of old ships overseas is a benefit to ship companies as it often results in a net gain on a major balance sheet item with little to no value.
But there are debits to every credit.
With an average 16 percent profit margin, the only way to keep shipyards viable is to process ships quickly. “It’s chaos,” Vogt said. “They just go at it without any real organization.”
Of the major costs related to dismantling, labor is one of the cheapest. Taxes, tariffs, and duties are double the cost of labor. “Blowtorches are the most advanced technology used,” Vogt said. “Large pieces of a ship either fall by gravity or by men pulling them off with ropes.”
Those workers lack safety equipment, often even basic protection like shoes and gloves, and are exposed to toxins and chemicals such as asbestos and PCBs. Cadmium, mercury, chromium, and lead have been found on the shipyard beaches in noxious amounts, leading to lung and nervous-system problems and cancer.
Shipbreaking is now considered one of the most dangerous jobs on the planet: 600 workers have been killed in Bangladesh in the last 20 years, according to Young Power in Social Action, a nonprofit organization in Chittagong.
As the need for and attractiveness of disposing of ships abroad has increased, new regulations have been created to attempt to oversee the expanding industry.
Growth of the global ship dismantling industry has accelerated since the US passed the Double-Hull Tanker Oil Pollution Act of 1990, which required that all single-hull oil tankers of 5,000 gross tons or more cease operation in US waters, including all foreign ship companies.
This meant that countries around the world needed to dispose of old, single-hull tankers by the end of 2010 in order to continue maritime business interactions with the United States.
The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, the most comprehensive global environmental agreement of its kind, has had a manifest impact on dismantling industries in low-income countries such as Bangladesh. It requires that developed countries ban the export of hazardous materials to countries that are unable to manage the toxins in an environmentally friendly manner.
To further track the movement of hazardous waste, the Hong Kong Convention for the Safe and Environmentally Sound Recycling of Ships in 2009 established that ship owners must maintain an inventory of hazardous materials on board their vessels for use by ship dismantling facilities during the recycling process.
“In the US, before many of the ship dismantling yards closed, there were full dry-dock facilities with cranes and high-tech machinery to take apart ships,” Vogt said. “Every precaution was taken to protect workers and minimize pollution. However, ship owners in Bangladesh say that if they were to follow all the regulations that exist they’d be out of business.”
Numerous loopholes allow ship owners and dismantlers to bypass current standards.
Here’s one: many countries provide open registry for international ships—a practice known as the flag of convenience. This allows ships to fly a different country’s flag—and take down their own—to avoid conforming to regulation that they would otherwise have to follow.
The result: Liberia, not part of the Basel or Hong Kong conventions, has the highest ship registry of any country—3,700 ships, or 11 percent of the world’s oceangoing fleet.
Intermediaries that purchase ships for cash and sell them to recycling yards are not bound by regulation either.
Above all, international organizations have no criminal authority to enforce the regulations they create.
Although regulations seek to make ship dismantling safer for both workers and the environment, they have spurred a destructive race to the bottom in countries where it’s difficult just to keep the industry afloat. Bangladesh has kept labor rates low, disregarded environmental standards, and avoided expenditures on capital improvements in order to remain competitive with other nonregulated ship-breaking rivals in the region.
Until regulations are met, the industry in Bangladesh is restricted to dismantling ships from countries that don’t comply with international standards, further compounding existing problems.
Recent developments, however, may rectify this conflict between compliance and the bottom line.
A Turning Point
In February 2011, the Bangladesh Ministry of Industries officially recognized ship breaking as an industry, citing its “huge potentials and economic impact.” A 56-page document established a Ship Building and Ship Recycling Board (SBSRB), which will monitor and audit incoming ships for hazardous materials.
As Bangladesh makes incremental progress toward a more regulated industry, a new stakeholder has come on the scene: the Norwegian government.
Norway initiated a foreign direct investment program with the Bangladesh government in 2011, directing large sums toward improving the ship dismantling industry. An acute need for the safe disposal of Norwegian military ships was the impetus.
“It’s very encouraging,” Vogt said. “An investor providing capital and support can result in a lot of great outcomes.”
Pavement of service roads and footpaths, installation of lighting arrangements, and the establishment of a permanent training institute are just some of the improvements the program will bring.
Despite these positive developments, however, Vogt believes that the industry in Bangladesh remains “extremely narrow-minded and lacks a long-term vision for future growth and sustainability.”
A lengthy list of new requirements for shipyard owners will not alone produce a more efficient and productive industry, he argues. The threat of closure for noncompliance, after a long history of following the same unregulated business model, is perceived as antagonistic rather than encouraging.
A Plan for Bangladesh
To present tangible solutions to the industry’s impediments, Vogt offers three recommendations:
He outlines six solutions that cater to the needs of shipyard owners, workers, regulators, environmentalists, and ship companies:
Together, the solutions have the potential to position the country’s ship dismantling industry as a model for others, such as India and Pakistan.
“There is so much capacity out there,” Vogt said. “It’s a matter of getting the industry to a point that it can meet the capacity.”
A domestic pre-cleaning facility, offering full inspection and services in preparation for dismantling, would function as the point of initial port for ships entering the country. Removing chemicals and wastes prior to dismantling would substantially decrease health and safety risks to workers and reduce the industry’s impact on the coastal environment. Additional jobs and financial gain would also result from the provision of an advanced and much sought-after service.
“If Bangladesh were to establish the proper facilities to handle toxic wastes, it would be able to open up to a whole new market of countries that are currently restricted from sending ships there,” Vogt said.
The continental shelf off of Chittagong provides a long extension between the shore and ocean—deep enough to allow ships to almost completely reach the beach. Vogt envisions making use of this distinct geographic feature in a new way.
Using ship-lifting technology like a Roll-Royce Syncrolift or a patent slip—that is, mechanical ship elevators—ships could be transferred from beaches into controlled facilities, where toxins and chemical residue would be captured rather than washed away with the outgoing tide.
“The installation of such a system could provide the centerpiece of revitalizing the ship dismantling process,” Vogt wrote.
He also proposes the purchase of substantial equipment, including lighting, cranes, trucks, and other capital investments to create a proper facility for dismantling.
Implementing strict dismantling procedures that comply with safety measures would ensure that new facilities are run efficiently and new equipment is operated appropriately. And to convince foreign countries with high disposal needs to export ships to Bangladesh, the government will have to conduct regular audits that confirm adherence to international standards.
Lastly, Vogt suggests that shipyard owners launch their own towing and crewing operations, instead of using expensive and unreliable intermediary organizations to transport purchased vessels.
To integrate corporate social responsibility, he advocates the introduction of education, training, medical treatment, and rescue services; housing for workers and their families; increased workers’ rights and wages; and clothing and safety equipment for workers.
“It is possible to revitalize this ‘dirty’ industry to the advantage of the local Chittagong community and the Bangladesh economy as a whole,” Vogt wrote.
He has spoken with Bangladesh’s ambassador to the US, Akramul Qader, and the executive director of the US Bangladesh Advisory Council, Shamarukh Mohiuddin, about his ideas. He’s also worked closely with Bernhard Gunter, an adjunct professor at American University and president of the Bangladesh Development Research Center. Gunter helped refine the proposal for submission to the Bangladesh Development Initiative’s March 2013 international conference in Berkeley, California.
Vogt hopes he can offer some kind of assistance in the future, and is watching closely as new rules and renewed awareness offer optimism for real change.
“Something needs to happen; something will happen.”