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Bangladesh ferry purchase disregards benefits of NZ made

New Zealand Marine Industry Association

Media release

13 January 2014

Government’s ferry purchase from Bangladesh disregards benefits of buying New Zealand-made

The decision by the Ministry of Foreign Affairs and Trade to commission a US$6.6 million (NZ$8 million) ferry to be built in Bangladesh rather than by a New Zealand boat builder has disappointed the 450-plus members of the New Zealand Marine Industry Association (NZ Marine).

The 43-metre vessel is a replacement ferry for the New Zealand territory of Tokelau and capable of carrying 60 passengers and 50 tonnes of freight. Twelve shipyards from Australia, Bangladesh, China, New Zealand, Poland and Singapore submitted tenders with the Bangladesh firm Western Marine Shipyard selected. Not only will it be built offshore, it was designed by Danish firm Knude E Hansen.

During 18 months of talks between NZ Marine and MFAT, the department confirmed there are no instructions to consider any economic gain to New Zealand from having this vessel built here versus by an overseas yard.

Peter Busfield, executive director of NZ Marine, says: “We believe the Government’s procurement requirements are fundamentally flawed as the process does not factor in the economic gain to the country of buying ‘New Zealand made’ versus importing.

“We are aware of the new regulation which came into effect in October 2013 that requires government officers when procuring major equipment to give New Zealand suppliers every opportunity to put forward a tender. We have confirmed with government officers, including Mr Jonathan Kings of MFAT, that this new regulation does not require the government to consider any economic gain to New Zealand for buying in New Zealand.”

Several New Zealand companies have the capabilities to build the specified ferry and most recently, Nelson’s AIMEX Ltd indicated that, based on the design criteria, they believed they could build this vessel in Nelson for NZ$14-15 million. Following further discussions with MFAT, AIMEX was advised that unless they could provide a quote in the region of NZ$9.5-10 million, they were wasting their time.

Busfield continues: “What really concerns us as New Zealand taxpayers and representing one of New Zealand’s largest manufacturing sectors, is that the New Zealand Government is not considering the total picture for the procurement of the Tokelau ferry. We have sought the advice of highly-respected economic advisors Market Economics Ltd which advised that the government procuring a vessel from New Zealand for the sum of NZ$14 million would generate an additional NZ$9 million in GDP and sustain the equivalent of 127 employees for one year. We believe the New Zealand Government procuring the vessel from a New Zealand ship builder would be a net cost to New Zealand of NZ$5 million versus the currently planned NZ$9.5-10 million that MFAT intend to spend purchasing this vessel offshore, allowing for travel and communications costs on top of the actual vessel cost.”

Countering the disappointment with the MFAT purchase, Busfield notes that NZ Marine works with New Zealand Trade and Enterprise, Auckland Tourism, Trade and Economic Development, and Tourism New Zealand to encourage and promote the New Zealand marine industry globally.

“We value our partnerships with NZTE, ATEED and Tourism New Zealand to promote New Zealand as a destination for superyachts and cruising yachts and as an excellent country in which to build new yachts, new commercial vessels and have refit and maintenance work completed.

In a letter to the Right Hon. Murray McCully, Minister of Foreign Affairs and Trade, about the Tokelau ferry purchase, Busfield writes: “In addition, it is painful for the New Zealand marine industry to have the New Zealand Government, that requires a New Zealand boat-building company to have high standards of health and safety in the workforce, human rights and other protective rights for employees, to purchase a vessel from a country that has very little in this regard and is also likely to be paying employees less than $5 per day.

“We also cannot see where MFAT has considered the lifelong servicing costs in their decision-making process. We are confident that a New Zealand-built vessel would have the lowest lifelong service cost compared with the offshore ship building company considered.

“The New Zealand marine industry has been in survival mode since 2008 and some companies are currently walking the narrow line between economic survival or not. The purchase by the New Zealand Government of the Tokelau ferry from a New Zealand ship builder would assist the chosen company and its many contractors and suppliers, helping them continue trading and employing tens, if not hundreds of staff. Furthermore, the contract would have provided an excellent example to the world of the company’s capabilities of building vessels of this nature.

“Currently and in the past, New Zealand companies have built vessels for other countries’ local and national governments such as Australia’s State of Victoria recently ordering a police boat from Whanganui’s Q-West Boat Builders. It is ironic for the New Zealand Government has now purchased a vessel from another country.”

NZ Marine has a member group dedicated to the commercial boat sector, called the Ship and Workboat Group, currently chaired by Dave Hopkins of the highly successful exporter CWF Hamilton & Co Ltd, manufacturers of the HamiltonJet. From 2011 industry analysis figures prepared by Market Economics Ltd, New Zealand’s ship and workboat sector had an output of NZ$330 million, employed a total of 2,041 full-time equivalent personnel and expected to grow to an output of NZ$574 million by 2021. NZ Marine’s Ship and Workboat Group has recently published a directory of commercial boat building, design, engineering, ship repair, maintenance, equipment supply and services companies – downloadable in a PDF format via this link – highlighting the capabilities of this valuable sector.

“We think the New Zealand Government needs to amend its procurement policy to ensure that the potential economic gains to New Zealand are considered when making major equipment purchasing decisions,” Busfield concludes.


Background information:

Western Marine secures contract to build vessel for New Zealand

The Daily Star, Bangladesh

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