Eurozone crisis likely to hit leather exports

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Jasim Uddin Haroon Local tanners are worried about the ongoing financial crisis in Eurozone, the major market of Bangladeshi leather products, saying it might hit their business badly, industry insiders told the FE. Tanners claimed that at least one dozen of their shipments have been cancelled over the last few months, following debt crisis in the European Union (EU). They said demand for finished leather and leather products are also waning in the 27-member EU block. Following the poor buy-order from abroad, the leather industry is now turn -ing its eyes towards the domestic market, which has been growing tremendously, the industry insiders added. Belal Hossain, president of Bangladesh Finished Leather, Leather Goods and Footwear Exporters Association, said the number of queries from the foreign buyers on leather and leather goods has drastically declined in the recent months. "We're really worried and don't know what will happen in the days ahead. There is a financial problem in Europe. The European economies are very weak at the moment, and so, their buying power is going down," added Mr Belal, the chief of over 150 tanning firms' association. Shamsul Huda, president of Bangladesh Tanners Association, a group of over 200 tanning plants, said the EU has already terminated its four-year-long anti-dumping duties on Chinese leather shoes from April 1. This is also hitting the export of local leather products in that region. Shamsul Huda said the growth of the country's leather export might come to a standstill this year following the volatile economic situation in the European markets. The export target for leather sector might not be achieved this year. The export statement of the first quarter of this fiscal year (2011-12) well reflects the bad scenario, he added. Local leather and leather products earned US$ 353 million in the last fiscal (2010-11). Footwear (where the quantity of leather is low) earned $298 million alone in the fiscal. Saiful Islam, managing director of Picard, a leading exporter of purses and ladies bags, said the present falling tendency of leather goods' prices has been felt over the last few months. "We're scared of our future export performance. Export of our goods is satisfactory in Germany only, but it is rather slow in other nations of the EU zone. Even the Christmas orders are not satisfactory as well," Mr Saiful added. Nasir Khan, a footwear exporter, said his company is witnessing a slow growth in Eurozone orders. "This is giving us signal that exports may go down in the upcoming months," Mr Nasir added. Meanwhile, a UNB report says: The liquidity crisis in the banking sector might hit the rawhide procurement process this time as banks are reportedly in predicament whether they will be able to meet the credit demand of their clients. Though the tanners have sought nearly Tk 6.0 billion (600 crore) in loan, the banks will ultimately come up with Tk 2.50 to Tk 3.00 billion before the Eid-ul-Azha, industry insiders said. "We've apprehension. We're scared whether we'll get the required loan. But we'll be able to give you a clear picture on Sunday," Belal Hossain, president of Bangladesh Finished Leather, Leather Goods and Footwear Exporters Association (BFLLGFEA), told the news agencies over phone on Friday. Last year the tanners got approximately Tk 3.75 billion loan for the procurement of rawhides. The tanners are seeking additional money this time to counter-balance the price fall in the global market and have better treatment of rawhide locally. "Banks are in dilemma. An apparent liquidity crisis is there. We're yet to get any concrete figure," President of Bangladesh Tanners' Association (BTA) Shahin Ahmed said. He, however, said the credit disbursement depends on client-bank relationship and hoped that the banks would respond positively at the end. He said they have set an initial target of collecting four to five million pieces of skinrawhide this time. Replying to a question, Shahin said they are yet to fix the price of per square feet rawhide. "We'll finalise the price three or four days ahead of the Eid-ul-Azha." The Eid-ul-Azha season alone accounts for more than 40 per cent of the yearly rawhide procurement. Tanners are hopeful that they will receive quality rawhide of cattle during this season mainly due to favourable weather condition. They think the quality of rawhide this year will be fine since winter is close to set in and there is no possibility of rainfall as predicted by weathermen. The tanners sought steps for simplification of regulations of bank loans, including reducing the period of CC loans to 45 days from 90, to let the export-oriented sector grow. Last year, the state-owned banks - Sonali, Janata, Agrani and Rupali - provided Tk 3.75 billion in loans at low interest rate to the tanners for purchasing rawhide and skin during the Eid-ul- Azha.