Prospects brighten for leather sector

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Shahiduzzaman Khan
With a plentiful collection of rawhides, the tanners are expecting a brisk business this year as the global economy is on the recovery trail. Besides, the prices of hides and skin are relatively lower in domestic market this year. Export orders for leather goods are also picking up following a turnaround in the world economy. This is a positive news for the country's economy.
According to reports, tanners fixed the price of cow hides at Tk 30 per square feet this year and the goat skin from Tk 18 to 20. It was Tk 35 for cow hides and Tk 25 for goat skins, both per square feet, last year. Such lowly fixed prices frustrated a section of skin traders in northern districts. Many of them have been incurring losses as they had purchased hides and skins at higher prices and are being compelled to sell these to the wholesale traders in the region at lower prices. They claimed that they were not aware about the prices arbitrarily fixed by the tanners in Dhaka.
Allegations have it that a section of unscrupulous merchants, after forming a unholy nexus, reportedly fixed the prices at abnormally lower level in spite of the fact that the global market was recovering and the prices of hides and skin were increasing in international markets. There are chances that the 'organised syndicates of smugglers' might take advantage of the situation to smuggle out the commodity through the porous north-western borders.
This year's Eid-ul Azha gave the leather industry an estimated business of Tk 10 billion. The average quality of raw hides procured this year from animals sacrificed was finer as a good number of locally reared cows and buffaloes were slaughtered while a chilling weather also became helpful in keeping hides fresh. The smuggling of raw hides to India has also reduced considerably this year.
Leather industry, country's third foreign exchange earner after the readymade garments and the frozen foods, is largely dependent on the holy Eid-ul Azha as 40 per cent of annual rawhides and goat skin are collected during the occasion. Last fiscal, the industry contributed more than $400 million as export receipts.
Indeed, global economic recession had hit the local leather industry very hard. According to Export Promotion Bureau (EPB), leather export accounted for $125 million only in the July-February period of the current fiscal, which is a 33 per cent decline from the same period a year ago. Currently, the overall market size of the local leather industry is around Tk 35 billion a year. Leather exporters have lost almost half of their running capital amid the global recession but those who export value-added products including shoes and bags have not experienced any loss.
The local leather industry is also reeling under a shadow of uncertainty and there is confusion over the government's stimulus package announced recently as the authorities have generalised 'leather and leather goods' for the cash incentive. Instead of particularly mentioning incentives for the leather export, the package announced 2.5 percentage points increase in cash assistance for export of 'leather and leather goods' for the April-June period of the current fiscal. As the two different sectors -- leather export and value-added leather goods -- were generalised in the stimulus package, the issue of giving incentive to leather sheet export was left out. Stimulus package should have clearly mentioned cash incentives that would be provided for leather goods and leather exports and ensuring safeguard of leather processing as well.
Manufacturers and exporters are now increasing by opting for producing value added products, including footwear and leather bags and purses, amid a demand decline in finished leather on global market. Major exporters are concentrating on developing their own expertise to manufacture high quality footwear that caters to the needs of the globally renowned brands. These brands outsource from Bangladesh. This is an encouraging phenomenon as it will help overcome the global crisis fallout to some extent.
Bangladesh has already earned some reputation for producing high quality finished and crushed leather, which is used in producing footwear, bags and purses. The country is also offering competitive prices. This has increased demand for its products in the global market. The cost of production of quality leather shoes is lower in Bangladesh than in China and India, and this is the main reason for getting more orders from European countries. Another big reason behind this growth is the technology the country had adopted now is from Italy, which creates trust about the quality of its products among buyers. China, India and Vietnam were the largest leather shoe exporters in the world, but in recent years these countries are failing to make and sell quality low-cost leather shoes due to WTO anti-dumping rules and also partly because of rising labour costs.
In order to maintain the quality of the rawhides, the government should set up some abattoirs on area basis at least in Dhaka and other metropolitan cities. The leather industry is now faced with a dearth of skilled people and quality designs. Initiatives may also be taken to develop expertise and train people in the sector that would help the survival of the age-old industry.
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szkhan@thefinancialexpress-bd.com