Leather sector holds immense potential

The leather sector in Bangladesh has the potential to raise its earnings of exports of both finished leather and leather goods to US$16 billion from the present level of $1.0 billion. This is not an impossible task to accomplish, provided the country does adopt short, medium- and long-term plans of action to grab a significant share of global market. This is what the relevant the experts say.
In this connection, it is to be noted that a roadmap was presented at a day-long national seminar on 'Environmentally-friendly Leather Industries in Bangladesh: A Roadmap to Competitiveness and Sustainability' in the city last week. It outlined short-, medium- and long-term plans of action for the sustainable development of the leather industry.
Short-term plans, as the participants in the seminar highlighted, should include quick implementation of the central effluent treatment plant (CETP) at Savar Tannery Estate to expedite the shifting of Hazaribagh tanneries, abolition of 4.0 per cent tax that is collected by banks from leather that is processed in the local tanneries that are otherwise exportable ones, and is supplied to the local shoe factories and other leather goods' factories, having the capacity to export.
Among the mid-term proposals, the roadmap has proposed for approval and easing of import facilities for wet blue and pickle to help the local shoe makers, upgradation of the leather research institute to an international standard testing certification one, conversion of the Dhaka Leather Complex into an environment-friendly leather processing zone.
A National Leather Development Board, according to a number of participants in the afore-mentioned seminar, may be constituted by the government for sustainable development of the leather industry and meeting international demand under a long-term planning process.
Yet it is disturbing to note that Bangladesh lacks environment-friendly tanneries to process leather. This poses to be the main bottleneck to increasing its exports. As such, the task is most urgent for relocating hazardous tanneries from Hazaribagh to Savar.
Everybody knows what has happened to the country's readymade garments (RMG) industry after deadly Rana Plaza incident. Overseas apparel buyers are now too fussy about the Bangladesh's garment sector and are not playing a fair game here. Many work orders have by this time been cancelled. The leather industry can also become a 'target' of some extraneous circles. Hence, it should proceed in such a way that no foul game could be played by them. Now all are eyeing on quick implementation of the central effluent treatment plant (CETP) at Savar in order to help combat the problem of pollution in the leather sector.
The construction of the CETP was reportedly delayed due to dilly-dallying by the contractors. The contractors claimed that piling is needed for building the plant. But the Bangladesh University of Engineering and Technology (BUET), consultant of the project, said no piling was needed there. The contractors were obviously demanding it for increasing the cost of the project to seize a large part of it. However, the matter has now been settled and the work of the CETP is reportedly going on in full swing.
Bangladesh's leather exports might be substantially high if the government endeavours hard to help promote diversification of its leather products and export markets. Many new markets are opening up for the country like Brazil and Chile. More markets need to be explored in South American countries. Japan might become the biggest market for Bangladesh's leather goods and the issue is expected to come up for discussions during the Prime Minister's upcoming visit to Japan.
However, it is otherwise a piece of worth-mentioning news that many buyers are now diverting orders from China, where the production cost has increased significantly. China alone produces 13.7 billon pairs of shoes. This is 65 per cent of the total world production. Out of $110 billion global shoe market, Chine earns $39 billion which is 35 per cent of the global aggregate value of exports. Of late, labour cost in China has risen abnormally high --  by 30 to 50 per cent. Furthermore, the European Union (EU) has imposed anti-dumping tax on China and the value of its currency has risen by 20 per cent against US dollar. As such, China is now relocating its leather industries to its neighbouring countries. This has opened an opportunity for Bangladesh to attract more investments from China in leather sector. If it could attract a minimum - let us say, 10 per cent -- of Chinese units for relocation, the country's export earnings from this sector may rise to $16 billion a year.
Bangladesh's improved quality of leather has also helped it in winning the confidence of buyers. Many leather goods and footwear makers here are producing high quality products targeting the middle- and higher-end segments of the market, which ultimately helps in earning more, in terms of unit price. The country will be able to earn a handsome amount of foreign exchange from leather, leather goods and footwear export in the next decade if it can properly address health-, environment- and compliance-related issues in the sector.
There is no denying that the additional exports of leather goods will benefit the country immensely. It will be able to increase domestic manufacturing output by 9.2 per cent and agricultural output by 6.7 per cent, if an additional $5.0 billion can be earned by it through exports of leather goods. The leather sector is expected to create 4.4 million additional jobs, according to a study.
On its part, Bangladesh faces a deadline to cut toxic pollution from tanneries by the end of the year, in order to be able to continue exports of its leather or leather goods to the European countries. Leather goods' makers are already facing difficulties in exports due to the absence of CETP. Geox, a large European company, recently withdrew orders for 2.5-3.0 million square feet of finished leather from Bengal Leather Complex Ltd mainly due to the absence of CETP.
However, with the CETP being in place by next year, the deadline, set by the European Union (EU), could be met. The relocation process of the Hazaribagh tanneries to the Savar leather complex is expected to be completed by then. As such, achieving the projected export target will then not be too difficult to achieve, if the government adopts necessary supportive measures and also a state of stability is ensured on a long term basis.
    szkhan@dhaka.net