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Leather industry: Let the golden goose lay for economic development

In the last couple of years, Bangladesh economy is growing steadily with an average 7% growth riding on the country’s export sector, where apparel export is contributing over 11% to Gross Domestic Products (GDP).

BD leather industry suffering
Figure: About 99% work of CETP is completed but there are needs for fine-tuning, while automation for monitoring is very close to ending. Courtesy: www.tannersbd.com

After the ready garment sector, the leather industry is the only billion-dollar export earner, which is contributing as the second-largest earner in the country’s economic development. Unfortunately, the sector is going through its toughest time since the inception, this is because on non-compliance in terms of environmental issues.

As a leather and leather goods manufacturer, Bangladesh has the great advantage of meeting raw materials demands from domestic sources. In addition, the cheap and available workforce is another key element for the sector to fight in the global export markets.

However, the future of the country’s $1 billion leather and leather goods is bleak, which needs proper attention.

Why leather industry suffers

In the face of tremendous pressures from the local and global rights group and international buyers of leather goods, in 2003 Bangladesh government took the initiative to relocate tanneries from Hazaribag to Savar.

As a part of this move, the Industries Ministry allocated plots to 155 tannery owners through the Bangladesh Small and Cottage Industries Corporation (BSCIC) in the Leather Industrial Park established on 200 acres of land in Savar.

After several extension for relocation, as per a High Court order, the government cut power and gas connections to the tanneries to compel the owners to relocate to the purpose-built Savar Leather Industrial Park to the north of the capital in April 2017.

As of today, out of 155 tannery 124 have started tanning in the industrial park, of which a good number are doing in a limited scale as they yet to complete full-fledged construction.

The initiative was taken to make the country’s billion-dollar leather industry compliant and environment-friendly and to free Buriganga River from hazards and toxic chemicals.

But the sector still polluting air, water and river at its new destination at Savar Leather Industrial Park built on 200 acres of lands.

This is only because of the lack of functional Central Effluent Treatment Plant (CETP), dedicated dumping station for solid waste management.

“As of now the CEPT is operational, but solid waste management still remains a great concern for the sector, which puts a bar on becoming a fully compliant sector,” Md Shakawat Ullah, the general secretary of Bangladesh Tanners Association (BTA) told.

It was assumed that after the relocation, the sector will be compliant but it did not happen so. Though the CEPT is operation sludge, a byproduct of ETP and solid waste management is yet to start, said Shakawat.

As a result, the global buyers and retailers have stopped purchasing leather and leather goods from Bangladesh, which brought woes to the sector as well as the business people, said the tanner leader.

However, the government is making promises that the CETP will be fully operational by this year while dumping station to be established by 2020.

“There is no visible progress in solid waste management. But the government has selected three sites for setting up dumping station for solid waste management,” Jitendranath Pal, Project Director of Savar Leather Industrial Park told.

Bangladesh University of Engineering and Technology look into the projects and we are expecting to complete it by March 2020, he said.

However, about 99% work of CETP is completed but there are needs for fine-tuning, while automation for monitoring is very close to ending, he added.

Non-compliance a curse for exports

Export earnings from the country’s leather sector, the second-largest earner of foreign currencies after RMG sector, witnessed a 6.06% fall to $1.01 billion in the just-concluded fiscal year, as non-compliance in environmental issues discouraged foreign buyers.

“We are not environmentally compliant. This is because of the absence of the full-fledged operation of CETP. On the other hand, it is easier to sell goods to the global buyers, if the raw materials are certified by the Leather Working Group (LWG),” Md Saiful Islam, Managing Director of PICARD Bangladesh Limited, told Textile Today.

Due to lack of proper compliance especially environmental, Bangladeshi manufacturers are not getting the certificate from the LWG. AS a result, export earnings from the sector saw downtrend.

On top of that, consumers are shifting to non-leather shoes, which is another reason for the negative growth in earnings of overall export from the leather sector, he added.

Meanwhile, tanners, the suppliers of the raw materials to the footwear industry, opined that earnings from the processed leather and leather goods fall as the production fall due to relocation in Savar.

“Manufacturers only do better, when there is enough supply of raw materials. But the tanneries are suffering as the relocation hit the production of leather processing,” Md Shakawat Ullah, owner of Salma Tannery Ltd told Textile Today.

“On top of that, some of the tanneries were not in operation as they are yet to complete construction of building in the Savar Park and it reduced production capacity.”

Fund shortage hinders new investment

“In completing the construction of the factory, tanners had to spend a huge amount of money and they are now facing fund shortage to spend more,” said Md Shakawat Ullah, the General Secretary of BTA told Textile Today.

On the other hand, tanners cannot take loans from banks as they yet to get land registration from the government, said Shakawat. As, borrowing money from banks, providing documents supporting land registration is mandatory, he explained.

However, the government blamed the owners for the delay in land registration as they did not pay them money.

“Only seven to eight tanners have paid an installment of land prices, while the others are yet to pay. That is why we cannot complete land deed to provide ownership to the tanners,” he said.

In May this year, the government has reset prices of land at Tk471 per square feet by adding a 20% cost of CETP.

Earlier, the government set prices of land at Tk191 per square feet.

Meanwhile, the owners claimed that the government did not finalize the land prices, which was a reason for the delay.

Why and how to save the industry

In sustaining the economic growth, Bangladesh needs to keeps export sector vibrant. Since the sector is the second largest export earner and continuing to fall, for the sake of economy, the sector needs to turn around.

“Over the non-compliance issues buyers left the country, brands stopped sourcing from here as a result export earnings from the sector continue to decline risking employment and the sector,” Md. Mizanur Rahman Executive Director of Samata Leather told.

On the other hand, the government has set a target to earn $5 billion from the sector by 2020. In attaining the target, Bangladesh has to make the sector compliant as soon as possible, said the sector people.

Restoring the buyer’s confidence and bringing back to buy from Bangladesh is a big challenge right now for the industry to attain the government target. In doing so, the government has to make the sector compliant without any delay and brand Bangladesh as an environment-friendly manufacturing hub for leather goods.

If anyone has any feedback or input regarding the published news, please contact: info@textiletoday.com.bd

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