Diversification a must to make footwear competitive

FE Report
The footwear sub-sector in leather sector requires special attention, given the rising demand of footwear in global market and the value chain advantages, a think tank says.  
In its 11th issue, Keystone Quarterly Review said leather industry is the largest in earning foreign exchange after RMG but with export share of only 4.29 per cent of the country's total exports. In the world leather market, it accounts for a mere 0.56 per cent of export share.
"Footwear export value is projected to rise to US$820 million by FY2019-20, while export of leather and other leather goods alone is likely to cross US$1 billion in export value in FY2017-18," the review says.
Exporters, however, target US$5 billion by the next four years, which will require high growth.
Keystone recommends some measures, if undertaken, can enhance the performance of the leather and footwear sector and help achieve the target of US$5 billion.
The first and foremost recommendation it made is a swift shift of the tanneries from Hazaribagh to Savar.
It says introducing financial incentives for SMEs in the sector and providing other necessary supporting policies to raise productivity, improve quality, and make this sector globally competitive.
"Rationalised tariffs and access to the local market should be ensured for exporters so that the sector does not suffer from stock lots and cancellations," it says.
It suggested sound environmental, occupational safety, and labour compliance measures should be kept up with international standards along with establishing world-class training and research facilities such as a Leather Research Institute, Footwear Development and Design Institute and manning these with highly experienced and trained instructors and consultants to ensure development of this sector.
Establishing design, product development, and product testing capabilities for this sector were also recommended.  
Government's initiatives were urged making Bangladesh a member of international conferences to let the country have a voice in the global market.
Keystone suggests supporting efforts from government for both product and market diversification will expand market in the countries other than EU and Japan.
Currently, 60 per cent leather products go to the European Union (EU), 30 per cent to Japan and 10 per cent to the rest of the world. EU-centric export market led to a 20 per cent erosion of leather export values due to Euro devaluation crisis.
This has made leather products in Bangladesh relatively more expensive in the European market, discouraging European importers. As a result there has been a substantial loss in market share. Market diversification, therefore, becomes essential for the economy at the present.
Apex-Adelchi Footwear Limited is the market leader accounting for 45 per cent of the total footwear export earnings.
Among other major exporters are Jennys Shoes, Landmark Footwear, Leatherex Footwear, Bay Footwear, etc. Leather footwear is the major exported item of these companies besides other leather goods.
Keystone said Bangladesh is increasingly becoming a preferred destination for leather and footwear sourcing.
"A number of Chinese firms have already relocated in Bangladesh because of its competitive advantages within the value chain which includes: low labour cost, high supply of rawhide, duty free and GSP facilities etc," it said.
Despite the ongoing political unrest in the country, previous fiscal years have exhibited remarkable surge in exports of leather and leather goods, particularly of footwear, among the Bangladesh export basket.
Combined export of leather, leather goods, and footwear (leather and non-leather) went up by 42 per cent in FY2010-2011, 17.5 per cent in FY2011-2012, 28 per cent in FY2012-2013, and 8.6 per cent in FY2013-2014.
Total leather industry export has marked a record with over USD 1 billion in FY2013-2014; footwear alone accounted for around 71 per cent of this.
The major exporting companies all mainly export leather footwear. Besides leather, footwear sourcing is also bringing in increased foreign earnings for the country.
Several orders which earlier used to go to China and India are now coming to Bangladesh. World famous brands such as Gucci, Nike, Timberland, Reebok, and ABC Mart have been sourcing footwear from Bangladesh.
"Some of them are now even considering setting up their own factories in Bangladesh," Keystone added.
    bdsmile@gmail.com