Why lobby for five years to invest in the most hazardous sector in Bagladesh?

From deadly industry to source of jobs and business prospects

Back in 2008, Bangladeshi shipwrecking was one of the world’s most hazardous industries. Each week, another worker would die due to the unsafe conditions. Ships were brought to the coast where employees dismantled them, right there in the mud. Working without safety nets at great heights. Without protection, as they carried huge pieces of steel to the beach. Where at high tide oil, asbestos and other toxics would leak into the local waters, and gas leaks would regularly cause explosions.

At the same time, FMO was looking to invest in the Bangladeshi financial sector. But there was a problem. In 2003, the country’s Supreme Court had ruled that all shipwrecking yards not possessing a sustainability certificate must close. Unsurprisingly, none of them had a certificate and the entire industry was shut down for almost 2 years, putting 20,000 people out of work. It also made it illegal for banks to invest or give loans to the shipwrecking industry. And as most Bangladeshi banks were connected to the industry, FMO couldn’t invest in them. Preventing much needed support to the financial sector and thus the wider Bangladeshi economy.

A bold and creative solution was clearly needed to square this vicious circle.

Investing in hope

FMO decided that to invest in Bangladeshi banks, it must first help improve working conditions within the shipwrecking industry. FMO mediated between government, industry and banks, who they finally signed a commitment to improve the industry’s environmental and social standards.

But a commitment on paper changes nothing and no one really believed the shipwrecking companies could ever get a sustainability certificate. No one except FMO and the shipwrecking yard, PHP SBRIL. So together the two worked hard for five long years to bring about the necessary changes.

FMO gave support and guidance to improve working and environmental conditions. While PHP, who had total ownership of the project, embraced the Hong Kong Convention guidelines on limiting risks to health, safety and the environment.

When PHP finally applied for a sustainability certificate, the accrediting body initially didn’t even want to check the yard. Why bother? No Bangladeshi yard would ever meet the criteria. But when they finally did visit, they were impressed. And after some further improvements, PHP was the first ever certified Bangladeshi shipyard.

Opening up opportunities

The vicious circle had been transformed into a virtuous one. PHP is now even planning to apply to join the EU’s approved list of ship recycling yards. Which in turn should inspire other yards to follow the strategy of PHP, who are now well positioned to become a preferred ship recycling yard of any client or investor considering their own social reputation.

But on a larger scale, FMO has opened up a market for local and foreign banks and investors to invest in making the Bangladeshi shipwrecking industry safer and more sustainable.

The next challenge

FMO’s next goal is to get improving the shipwrecking industry on the banks’ green lists, so yards can apply for loans to improve their practices and get certified. There also remain many practices in the shipwrecking industry that NGOs want to see changed, and another FMO goal is for Bangladesh to sign the Hong Kong Convention for sustainable ship recycling.

But the first steps have been made. Showing it’s possible to turn round even the most brutal industry. Improving working and social conditions, ensuring the right climate for investment, to create more jobs and greater prosperity.

See the improvements PHP has made: