As the 2nd largest export contributor, the leather industry of Bangladesh is moving ahead day by day though slow but with an identical steady growth. In recent times the leather products of Bangladesh is being well recognized throughout the world. The availability of raw materials is the biggest strength the sector has. Recent policy changes of the leather industry in China, the world’s largest manufacturer is creating a new era of possibilities for this industry of Bangladesh.
When it comes to export diversification, looking for strong alternatives to RMG then the leather and leather products sector comes as the biggest contender. When RMG has brought up many leading brands in Bangladesh with their direct presence they will be very happy to put their own orders of leather products in the same country Bangladesh from where they are sourcing garments. So the growth of textile and RMG sector is actively helping the growth of leather and allied industries like footwear and other leather goods industry.
Delay in industry relocation is hindering the growth
For over half a century the Hazaribagh tannery industry has been operating without any treatment plant. This has polluted the river Buriganga and posed as a health hazard to the local people. The long back government took the initiatives to relocate Hazaribag factories but still the process has not been completed.
There can be no more delay in shifting all of these factories to a new leather industrial zone in Savar. However, further development of this industry to go in a new model of business in Savar and other outskirts zones of Dhaka. When the initial days of relocation bring a tough time now, soon it would open a new era and new opportunities. Adopting the leather processing industries with international compliance requirements is the key to attract more international clients.
New place in Savar will help the industries to comply with them. At this point in time if the government provides the right policy support the industry would be able to cross ahead many other sectors in Bangladesh because of high-value addition of this industry.
The history of leather industry in Bangladesh
The first tannery in Bangladesh territory was set up at Narayanganj by Ranada Prashad Saha who is the renowned entrepreneur of 1940’s. It was later shifted to Hazaribagh area of Dhaka in the 1960’s, which turned into a location that now accommodates a large number of tannery units. Leather Industry developed in Bangladesh on a large-scale mainly in the 1970’s.
About 95% of leather and leather products of Bangladesh are marketed abroad, mostly in the form of crushed leather, blue wet leather, finished leather, leather garments, and footwear. Most leather and leather goods export to Germany, Italy, France, Netherlands, Spain, Russia, Brazil, Japan, China, Singapore, and Taiwan etc.
Leather industry overview & market updates
Exports of leather and leather goods crossed $1 billion for the third year in a row. In fiscal 2015-16, according to data from the Export Promotion Bureau export of leather, leather goods, and footwear were $1.16 billion. In 2014-15, Bangladesh exported leather and leather goods worth $1.13 billion, compared with $1.12 billion in the previous fiscal year. It shows that the sector is having a steady and remarkable growth.
Bangladesh aims to export $1.22 billion of leather and leather goods in 2016-17. And she is moving well in its target. In the first quarter (July-September 2016) of the financial year, export was more than 319 million USD, which is more than 24 percent higher from same period export of last fiscal year. It shows that the total export of this fiscal year will be potentially high for leather, leather goods, and footwear.
Italy, the UK, Belgium, Spain, France, Germany, Poland, the US, and Canada are the big markets for the sector. In recent years, the exporters have been doing well in Japan, India, Nepal and Australian markets. Of the new destinations, Japan is very promising for Bangladesh, as the export is increasing significantly in the market because of a duty-free advantage.
In a survey data shows that a total of 18059 employees are directly employed by the leather sector firms/units having above 15 working force. Of them, about 60% are skilled (having experiences of more than 3 years), about 21% are semiskilled (having experiences of 1-3 years), around 15% are unskilled (having experience of less than 1 year) and less than 4% are professionals.
Most of the leather sector manpower/employees (about 80%) are full-time employees, and most of them belong to the skilled employees’ category. A notable number of about 18% of all the manpower are seasonal employees. Of the total employees, about 59% are employed in the leather processing units, 37% in the footwear manufacturing units and the remaining 4% are in leather goods manufacturing firms. Among the employees about 73% are male.
Present scenario of leather industry
The relocation of tanneries from Hazaribagh to the leather industrial park in Savar on the outskirts of the capital is likely to be completed by this year. 155 tanneries got plot in the new industrial park in Savar. The relocation work is going on and about 30 factories have completed primary construction of their new premises. The progress is slow due to a shortage of fund. The Ministry of Industries decided to relocate the tannery factories from their current location in the capital’s Hazaribagh area amid pressure from the rights group, environmental activists and buyers concerned with its hazardous effects on the public health and environment.
The unending tale of tannery relocation continues. The government is giving a fresh deadline at regular intervals to shift the tanneries from Hazaribagh, but the tannery owners showing different excuses. On the survey, the reporters found that the tannery owners are willing to shift their tannery to Savar, but the owners stated that, they only got the allocation of plot but yet they don’t get the new trade license and registry papers of these plots.
That’s why they are not getting the loan from banks and also they are not providing their compensation for shifting tanneries which were promised by Bangladesh Small and Cottage Industries Corporation (BSCIC). The amount of compensation is about BDT 250 crores but on average 40% is given. The owners claimed those causes as the main issue for being late to shift their tanneries from Hazaribagh to Savar.
In the latest move, the govt. has again extended the timeline up to December 31. Industries Minister Amir Hossain Amu said to a daily newspaper that tanneries would be moved from the capital’s Hazaribagh area by the end of the year. “Gas and electricity supply will be suspended from Jan 1 to those factories which fail to meet the deadline.”, he warned.
According to the latest estimates of BSCIC, the status of factory relocation is as figure 3.
The tannery owners have always put forward that absence of a central effluent treatment plant (CETP) at the Savar site—where the owners are given plots—as the main reason for which they are being unable to shift tanneries.
But the Bangladesh Small and Cottage Industries Corporation has already established two units of a CETP partially and in between December full construction will be completed. But the dumping yard is yet in the primary stage. Moreover, the government is also saying that different utility lines such as sewage and water are also complete.
The new addition to this project is Sludge Power Generation System (SPGS). This plant will produce electricity by processing 60% solid wastage from dumping yard and 40% coke which will supply to this industrial park.
Opportunities of the sector to highlight
- Huge untapped international market, <1% as well as the domestic market
- Increasing global demand for value-added, diversified products
- The scope of developing backward linkage business
- High-value addition potential
- Labor intensive; employment opportunities
- Low wage workers convertible to skilled ones
- Local and Foreign Direct Investment opportunity in value-added leather products sector
- China is losing competitiveness
- Government policies toward leather exporters; GSP, Cash Incentive; etc.
- Increasing International and Local demands for value-added leather products.
- International fashion and sourcing houses in BD for RMG’s showing interest in leather products
Threats to be considered
- The absence of integrated policy; no long-term policy regarding Common Facility Center (CFC), SME cluster development, Branding/promoting Bangladeshi leather products
- Political instability, corruption
- Lack of backward linkage industry for chemicals/accessories and substandard quality of the products.
- Illegal export of raw hides/skins
- Potential buyers stringent stands for compliances, and delay in building Common Effluent Treatment Plant (CETP) at the leather village, Savar, Dhaka
Recommendations to move forward
- The government should formulate appropriate rules and regulations to support Leather and leather-based products and footwear sectors.
- To ensure sufficient and continuous power supply.
- They can start a joint venture business with other major leather exporting country like India and Japan.
- By collaboration with EU and other developed leather importing countries, they can import advanced technology.
- The government should take initiatives to formulate appropriate leather policies to support the sector which is aligned with the industrial, export, and investment policy and especially strengthen e-diplomacy.
- The government needed to arrange some soft loans for the industry to fight against the current financial crisis.
- The government should plan and build facilities to increase the value addition through increases production of finished goods.
Current demand of the leather, leather product and footwear in the world are nearly $215 billion. Bangladesh exports only $ 1.16 billion. About 1.50 crore square foot leather is produced in Bangladesh. Many of them are being exported as raw hide. As a result, we have a huge possibility to grab the market with our highest level of efficiency and proper strategic planning.
For this, it has been a crying need to shift the tanneries to Savar Tannery Estate. According to the related professionals, more profit can be gained by proper strategic planning, market monitoring, and quick preservation of raw leather, transportation and proper processing of leather.
