Rise in export of leather and leather goods to the tune of more than 1.0 billion in ten months of the current fiscal is a clear reflection of the potential the country's leather sector holds for the economy. The forecast often made about the prospects of Bangladesh's leather industry as only next to that of readymade garments (RMG) has so far remained largely shrouded in unfulfilled expectations. Still, experts and researchers tend to see Bangladesh's emergence as a major leather producer as almost inevitable - a matter of time -- given the realities determining the future of the $230 billion global leather market.
Export Promotion Bureau (EPB) data show export of leather and leather goods during the July-April period of the current financial year reached $ 1.06 billion, a record rise in the performance of this sector. Export in the preceding year (July-June 2012-13) amounted to $981 million. With two months still left out of calculation for the current year, it is expected that the total export could increase by another $300-400 million. One heartening feature of the growth is that in all key segments - leather, leather goods and footwear-- exports registered increase in the 10 months of the current year, that too over exports of the entire fiscal in the previous years. This indeed is commendable. EPB data show that footwear, as usual the lead performer, has earned $443.54 million followed by finished leather ($424.05) and leather goods ($197.36).
Factory insiders attribute this growth to, among other factors, buoyant orders, competitive pricing, quality assurance and on-time shipment. Production of higher value added products, particularly footwear, has helped local manufacturers in targeting the up-end segments of the market, earning more in unit prices. Besides, newer markets are also believed to have played an important role. It is also believed that the new markets while boosting this year's exports will continue to hold out promising prospects for market expansion in future. Traditional buyers of Bangladesh leather and leather products include the European Union (EU) countries accounting for around 60 per cent of exports, while the remaining markets - Japan, the USA, India and Australia coupled with a number of new markets-- consume the rest 40 per cent. The new markets that have been lately added to the list of export destinations are Vietnam, New Zealand, Austria, Bulgaria, Bahrain, Costa Rica, Indonesia, Ireland, Lebanon, Sri Lanka, Lithuania, Morocco, Mauritius and Turkey, according to the EPB data.
So far as a substantial expansion of Bangladesh's leather sector is concerned, the most commonly held view is that large-scale foreign investment can make it happen. As a low-cost source, Bangladesh has plenty of reasons to become a happy destination for such investments. This has not happened as yet, and the obvious reasons one can identify are the infrastructural inadequacies, ranging from power and gas to ETPs (effluent treatment plants). However, the soaring wages in the traditional leather and leather goods manufacturing countries like China - world's biggest footwear manufacturer- has of late pushed many investors to look for low-wage countries to install or relocate footwear plants. China reportedly produces around $90 billion of footwear and $39 billion of leather goods, which account for 65 per cent and 35 per cent of the global demand respectively. Reports say that the hike in Chinese wages has shot up to as high as 30-50 per cent in recent times. Industry insiders hold that grabbing a share of 5.0 to 6.0 per cent of Chinese production is potentially capable of bringing a sea change in Bangladesh's leather sector. Beside cheap labour, another crucial factor that the investors cannot lose sight of is the duty-free status that Bangladesh as a least developed country (LDC) enjoys in exporting leather products to, among others, the EU countries.
Industry experts are reportedly confident that although the growth has not yet taken off at the desired level, the scenario will change for the better as the economies in Europe begin to show signs of recovery. Rising queries from buyers indicate that the prevailing situation would soon improve. The country's manufacturers and exporters are, however, more concerned about up-gradation of their factories with ETP (effluent treatment plants) plants in operation. Improvement of health, sanitary and phytosanitary aspects would demand urgent attention to prepare for a take-off in the desired direction. This is more so in view of the EU decision not to allow imports from sources without ETP beyond 2014.
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