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Leather and leather goods exports nosedive by 22% in FY20

Exports earnings from the country’s leather and leather goods sector have declined sharply by 21.79% in the fiscal year 2019-20 as COVID-19 pandemic along with environmental non-compliance has taken a heavy toll.

leather-goods-exports
Figure 1: For the last couple of years, the leather sector was going through a downtrend in exports. Courtesy: fossil.com

According to the Export Promotion Bureau (EPB) data released on July 7, by exporting leather and leather goods Bangladesh earned $797.6 million, down by 21.79%, which was $1.01 in the FY19.

Bangladesh-Leather-export-scenario-FY20

Of the total earnings from the leather sector in FY19, leather products earned $220.55 million, down by 10.81%. The earning was $247.28 million in the previous year.

Processed leather exports also declined by 40.28% to $98.31 million against $164.62 million in the same period a year ago.

However, exports earning from the leather footwear posted a 21.24% negative growth to $478.75 million, which was $608 million in the FY19.

Reasons for sharp fall

“For last couple of years, the sector was going through a down trend in exports. This was because of challenges such as non-compliance in environmental issues,” Abdul Momen Bhuiyan, Deputy Managing Director of Apex Footwear Ltd told Textile Today.

In addition, the COVID-19 pandemic has expedited the crisis as the buyers canceled and held ongoing work orders, said Momen.

As a result, the exports earnings from the sector decline sharply, he added.

On top of that, the sector was in trouble due to compliance issues especially environmental caused by the delayed establishment of a central effluent treatment plant (CETP) at Savar Leather Industrial Park.

Bangladesh-Leather-exports-down-22%-FY20
Figure 2: This downtrend is not a good sign for the export-led economy.

“After the relocation to Savar from Hazaribagh we were not environmentally compliant due to lack of functional CETP. As a result, buyers were not coming and placing orders, said,” Md Shakawat Ullah, general secretary of Bangladesh Tanners Association (BTA).

On the other hand, the supply of raw materials was disrupted due to lower production caused by the relocation. This is another reason for the declining exports, he claimed.

On the other hand, supply chain disruption especially with China is a big reason for the decline as it imports good quantities of processed leather from here, said Shakawat.

Experts’ observation

Leather and leather goods were only a billion-dollar sector after the apparel sector, which came down sharply even below the jute sector. It is not a good sign for the export-led economy, Policy Research Institute (PRI) Executive Director Ahsan H Mansur told Textile Today.

leather-goods-export-market
Figure 3: Bangladesh has immense opportunities in the leather goods export market as it is forecasted to record a CAGR of 6.2% during the forecast period (2020-2025).

As of FY19, the leather and leather goods sector was the second largest foreign currency earner after RMG with $1.01 billion earnings, which came down to $798 billion.

But it is now the third-largest export earner as jute and jute goods took the place with export earnings of $882.25 million in FY20.

This is not only for the COVID-19 pandemic but also for non-compliance. So, the government should immediately complete the construction of CETP and provide other facilities to the sector to be compliant, said the economist.

He also urged the sector people to take steps from themselves to be ready for the post-pandemic world as the virus has already changed the business model.

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