Bangladesh's Maritime Potential

Image: Aerial View of Chittagong Port and Karnaphuli River at Twilight.

As the delta nation's shipbuilding and ship recycling industries expand, so too do the legal and insurance frameworks needed to bolster its growth as a modern maritime power.

Bangladesh has long existed in the shadow of its South Asian neighbours, India and Pakistan, but recent developments suggest it is emerging as a major manufacturing and maritime power. One of the fastest-growing economies in Asia, Bangladesh's GDP per capita has surpassed that of India, Pakistan and Sri Lanka, with World Bank officials describing the country's economic performance as "shocking". Whether this growth can be sustained remains an open question.

The July Revolution in 2024, coupled with geopolitical tensions and a slow recovery from COVID-19, has left Bangladesh's long-term economic prospects open to debate. Yet one sector continues to gather momentum - and it is happening on the water.

This article discusses Bangladesh's shipbuilding and ship recycling potential, and what this means for maritime law and insurance.

Shipbuilding Heritage

Chittagong, Bangladesh's second-largest city, boasts a shipbuilding tradition dating back to the seventh century. The Moroccan traveller Ibn Battuta recorded seeing numerous boats and vast fleets of warships when he visited Bengal in the fourteenth century. By the seventeenth century, Chittagong's shipyards had earned international prestige, producing vessels for the Sultan of Turkey and contributing to Bengal's emergence as a major maritime centre. Contemporary accounts suggest that the Bengal flotilla comprised between 4,000 and 5,000 ships, many ranging from 400 to 600 tonnes in capacity - a scale comparable to the renowned Chinese and Arabian fleets of the period.

Shipbuilding reached its height under the Mughal Empire, whose rulers relied on Dhaka-based engineering and craftsmanship to build a formidable naval force. Ships constructed in Bengal later served the British Navy, including during the Battle of Trafalgar in 1805. During the first half of the nineteenth century, Chittagong's shipyards were capable of building vessels of up to 1,000 DWT. When Bangladesh emerged as an independent nation in 1971, it inherited not only the challenge of post-war reconstruction but also the opportunity to revive a maritime tradition centuries in the making.

Market Gap

Bangladesh is best known for its garment industry, being the world's second-largest exporter of textiles after China. More recently, however, the country has begun cultivating a niche in exporting cost-effective, mid-sized vessels. While the global shipbuilding market is dominated by large, capital-intensive projects, Bangladesh has instead specialised in a segment often overlooked by larger shipbuilding nations.

The Ananda Shipyard in Sonargaon exports vessels to Turkey, the United Kingdom and Germany. In 2025, it delivered the 5,500-deadweight-tonne Wes Wire. Chattogram-based Western Marine Shipyard has also completed cargo landing craft for the United Arab Emirates under an eight-vessel contract, bringing its total exports to 36 ships worth approximately US$138 million across 11 countries. Compared with global standards, these are modest contracts, but collectively they demonstrate genuine expertise in constructing practical, cost-effective vessels.

Supply chains underpinning this growth are reinforced by Bangladesh's status as one of world's largest ship recyclers, accounting for roughly 34% to 43% of total volume and tonnage dismantled. Within Bangladesh, recycled ship materials supply more than 60% of the raw materials used for local steel re-rolling mills and domestic shipbuilding. Recycling reduces production costs and limits exposure to volatile global steel prices, giving Bangladesh a significant competitive advantage.

Yet commercial growth alone is not good enough. If Bangladesh wishes to compete with established maritime nations, its legal and regulatory frameworks must inspire the same confidence as its shipyards.

The Hong Kong Convention

In June 2025, the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships entered into force in Bangladesh. The Convention seeks to ensure that ships are dismantled safely without posing unnecessary risks to workers or the environment. It encourages the certification of environmentally compliant "green" recycling yards that meet internationally recognised environmental and welfare standards. While initially perceived as an obstacle, Bangladesh has accelerated its transition towards green yards, aiming for a complete transition by 2030.

Certified yards command higher prices per ship and attract international clients from regulated markets. For a country whose ship recycling industry at Sitakunda once drew widespread criticism from environmental organisations, this represents a transformation of considerable commercial and reputational significance.

Bangladesh joined the green ship recycling sector later than competitors such as Turkey and India, which has more than 100 certified yards at Alang. Nevertheless, Bangladesh retains structural advantages that are difficult to replicate, including an established recycling-to-steel supply chain and an unmatched volume of ships processed annually.

Adopting green practices inevitably increases costs. Upgrading a single yard can exceed Tk 30–40 crore, while financing, technology transfer and skilled labour remain enduring challenges. That being said, the long-term commercial benefits justify the investment - and, crucially, the legal framework is beginning to catch up with commercial reality. Bangladesh’s authorised yards have rapidly increased from 4 in 2025 to 17 this May following the Hong Kong Convention.

Maritime Insurance and Law

In March 2026, the International Labour Organization (ILO) and BIMCO launched the voluntary Employment Injury Scheme (EIS), the first industry-wide employment injury insurance mechanism for Bangladesh's ship recycling sector. Under the scheme, sellers of end-of-life ships contribute US$0.50 per Light Displacement Tonne (LDT) towards a shared insurance fund, providing compensation for workers or their families in cases of permanent injury or death.

The EIS is intended as a temporary measure before Bangladesh introduces a mandatory national employment injury insurance system in July 2027, replacing the current employer-liability model in which compensation depends on individual shipyard operators. This transition will strengthen confidence in Bangladesh's ship recycling industry and could serve as a model for extending similar protections across ports, shipbuilding and the wider maritime sector.

As Bangladesh's maritime sector expands, its insurance market must evolve alongside it. Hull and cargo insurance will need to adapt to the country's growing export trajectory, as vessels sold to clients in Europe and the Middle East require insurance products that satisfy international buyer standards. This, in turn, demands that domestic insurers develop the technical underwriting expertise needed to assess the risks associated with internationally traded vessels. At the same time, certified ship recycling yards face increasingly stringent environmental liability exposure, with hazardous materials such as asbestos and heavy metals requiring specialist liability cover that the current market does not adequately provide.

Yet these developments continue to be constrained by a regulatory gap. Bangladesh has no dedicated or well-defined legislation governing maritime insurance, with practitioners instead relying on general contract law and the British Marine Insurance Act 1906.

Dependence on outdated foreign legislation creates legal uncertainty, complicates the resolution of disputes, and limits Bangladesh's ability to develop a modern maritime insurance framework tailored to its own shipping and trade needs.