The government has decided to give tax exemption on foreign currency income by Bangladeshi flagged oceangoing ships from the upcoming fiscal year in a bid to earn $3 billion to $4 billion a year, according to finance ministry officials.
Currently, these local ships have to pay 10% tax on their incomes.
Ministry officials said the facility will continue till 2030 if the vessels' foreign exchange income is brought into the country through banking channels.
Experts and industry insiders lauded the government decision, saying it will be a milestone towards establishing the shipping industry as a service exporting sector with huge foreign currency earnings for the country.
"This will be a timely move to encourage investment in the oceangoing shipping industry, which is a very potential sector," Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), told The Business Standard.
The government has taken initiatives to incentivize industries with earning potential in recent years, he added.
He also said this is the right time to invest in the shipping industry, as the Covid-19 pandemic has led to a massive surge in freight charges.
Meanwhile, industry insiders said the initiative has been a long time coming.
"We are absolutely delighted. It has been a long-standing demand and a most necessary step for this industry", said Shahriar Jahan Rahat, deputy managing director of KSRM Group, the largest oceangoing fleet owner in the country.
"We expect the move to boost the [shipping] industry and increase the inflow of foreign remittance through this sector", he added.
According to the Mercantile Marine Department, Bangladesh currently has a fleet of 81 ocean-going vessels, with KSRM Group alone owning 23 oceangoing bulk carriers.
Besides, Meghna Group of Industries owns 16 vessels, Akij Group has 10, the state-run Bangladesh Shipping Corporations owns 8, Karnaphuli Group owns 6, and Bashundhara Group and BSA Group each own 5 vessels.
The sector has an investment of $2 billion, according to sources.
Bangladeshi businesses have to spend over $9 billion as freight charges for export and import, but local oceangoing vessels can tap into only 10-15% of it, which is less than $1 billion.
Industry leaders have urged local entrepreneurs to invest in new vessels, noting that hiked freight costs have created a lucrative opportunity for the shipping sector's growth.
They said with new investment, it will be possible to earn about $3-4 billion in foreign currency every year.
In the last 10 years, export and import increased around two-and-a-half times but the number of Bangladeshi flag carrier vessels did not increase.
However, 2019 had been a different year from when things started to change.
According to the Department of Shipping, there are 4,565 Bangladeshi registered seamen and 1,887 of them are working at Bangladeshi and foreign vessels.