After apparel, leather is considered the next big thing when it comes to export earning potential and it is also one of the oldest industries in Bangladesh.
Starting the growth journey way back in the 1970s, the leather sector got a shot in the arm when the then-Pakistan Tanners Association (established in 1964) was rechristened as the Bangladesh Tanners Association (BTA) with the sole objective to promote the development of the leather industry by liaisoning with the concerned Government departments.
It also had an equally important role in issuing export certification even as it all started with the shipping of wet blue leather initially, which the Bangladesh Government put a strict curb upon in 1990 as it was found processing raw leather further to produce finished goods, adding up to 90 per cent value to the offerings.
This had the leather entrepreneurs modernising their operations to capitalise on the emerging opportunities, and adding a new dimension to the growth story.
“There is a huge demand for leather products in the global markets. With the help of new technologies, the leather industry can go a long way,” felt Commerce Minister Tipu Munshi, adding leather and leather goods export from Bangladesh was set to increase 10 times to touch the US $ 10 billion mark by 2030.
The latest export trend, if at all, makes it amply clear that the US $ 10 billion in export target by 2030 is not far-fetched by any stretch of imagination.
Figures tell it all!
Leather goods and footwear export from Bangladesh reached a 10-year-high of US $ 1.25 billion in the fiscal year ending June 2022 even as in FY 2020-21, Bangladesh shipped leather and leather products worth US $ 941.67 million, which was about 2.43 per cent of the total export earnings of the country (US $ 38.758 billion).
Coming at the back of somewhat poor export performance in the previous years — in the fiscal year 2017-18, export earnings from the leather sector witnessed 12 per cent decline in export earnings even if in FY ’19, processed leather exports went down by 10 per cent to US $ 164.62 million against US $ 183.1 million in the same period a year ago — one cannot help but credit the indomitable spirit of the industry players, who despite all the problems are holding their ground, to keep the growth momentum going.
Bangladesh’s export earnings from leather and leather goods during July-February period of FY ’23, meanwhile increased by 6.04 per cent on Y-o-Y basis to US $ 832.38 million, whereas leather footwear export earnings grew by 2.48 per cent to US $ 486.82 million, as per Export Promotion Bureau (EPB).
Shifting work orders help Bangladesh’s cause
“In recent times, the global leather industry has been shifting its focus from China and Vietnam, which is an opportunity for countries like Bangladesh,” claimed an industry player speaking to Apparel Resources (AR).
Increased labour and maintenance cost coupled with policy changes are primarily held responsible for the businesses moving out of China even as Vietnam’s popularity as a leather goods sourcing hub seems to have also taken a hit lately.
However, to optimally capitalise on the opportunities, industry players have called for urgently focusing on the inherent and persisting problems, addressing which could increase the growth potential significantly, they feel.
Manpower, raw materials high up the challenge list
“There are a number of skill gaps in workers in different occupations in the leather goods sector. It has high growth potential but to tap that, it is necessary to address the problem of skill gap,” claimed Mohammad Harunur Rashid Bhuyan, Research Fellow at the Bangladesh Institute of Development Studies (BIDS).
Agreeing with him is Mohammed Omar Faruq, Owner of Omera International – a Bangladesh-based manufacturer of leather products and accessories.
“Small and micro-enterprises dominate the sector, especially in leather footwear. It is thus necessary to conduct in-depth surveys to understand their specific requirements in terms of manpower requirement,” opined Omar speaking to AR, as he called for opening up more training institutes to churn out quality sewing operators, cutting operators, setting and assembling operators and technicians while the availability of quality raw materials continues to be another major issue for the leather goods manufacturers to deal with!
“As the procurement, preservation and processing systems are rather outdated, insufficient, and slow, they combine to result in declining leather quality while also causing permanent damages,” said a finished leather goods manufacturer to AR.
Then there’s the contentious issue pertaining to the Leather Working Group (LWG) certification, which is not only causing major hindrance towards sourcing things locally but also when it comes to shipment of finished products.
This has now reached such a stage that many leather goods exporters are forced to open back-to-back LCs to import leather from overseas so as to meet the buyers’ sustainability criteria, held Mohammed Omar Faruq, a sentiment strongly echoed by Md. Saiful Islam, the Managing Director of PICARD Bangladesh Limited as well.
PICARD Bangladesh is one of the pioneers of leather goods manufacturing in the country which apart from manufacturing for the PICARD brand, is also involved in production for other brands based in Australia, Germany, Italy, Japan and Singapore.
Faulty ETP at the root of all problems!
“For the foreign buyers, especially the bigger names from Europe and USA, LWG certification is a must,” claimed Md. Afzal Hossain, the only approved LWG Auditor from Bangladesh and an industry veteran with more than over 25 years of experience in various capacities.
It is the Central Effluent Treatment Plant at the Savar Tannery Industrial Estate, which is behind all the hassles towards attaining the much-needed LWG credentials.
“The CETP with fundamental flaws and jaw-dropping inadequacies reflects extremely negatively on how this project was planned, designed and implemented,” held in the meanwhile the Chairman of the Parliamentary Standing Committee on Environment, Forest and Climate Change Ministry, Saber Hossain Chowdhury.
Six years since the tanners were shifted from Hazaribaug to the leather estate at Savar, nothing much has been done to change the state of affairs when it comes to the CETP, which puzzles people like Saber Hossain Chowdhury and the tannery owners, who in particular are held to ransom, thanks to the faulty ETP.
“Even though prices in the global market are significantly high, but we do not have any alternative,” complained Managing Director of Anjuman Trading Corporation Ltd., Md Shaheen Ahamed, involved in the business of exporting finished leather, crust leather and split leather, for long.
High global stakes beckon
However, as the demand for leather products on the global market continues to rise, it would be in the larger interest to address the major pain points before it’s a case of too little too late, stakeholders held unanimously.
According to Grand View Research, the worldwide market size of leather in 2020 was US $ 304.12 billion, which is expected to grow at a CAGR of 5.9 per cent between 2021 to 2028 even if according to GlobeNewswire, notwithstanding the epidemic (Covid-19), the market size of global footwear was US $ 364.2 billion in 2020, expected to reach a promising US $ 440 billion by 2026.
“Bangladesh’s leather is internationally popular for its high-quality fine-grain leather, uniform fibre structure, smooth feel and natural texture,” said Sahadat Hossain Selim who recently started his own leather footwear company named Craftsman, rather optimistic that the pressing issues will be dealt with sincerity and sans any delay even as Chairman of the Fortuna Group, Abu Taher, on his part underlined if Bangladesh can capture even 10 per cent of the globally burgeoning leather market, building a business worth US $ 24 billion won’t be a tough ask, to wind up on a positive note.
Hope the stakeholders are listening!
|Footwear boost to leather and leather goods export
Footwear forms an integral part of Bangladesh leather sector and is considered a major contributor in the sector’s overall growth journey.
According to the country’s Export Promotion Bureau (EPB), Bangladesh’s leather exports totalled around US $ 919.7 million in the first nine months of the current fiscal year, up by 2.56 per cent from the same period last year even as leather footwear exports amounted to US $ 534.2 million in the first three quarters of the year, representing roughly 58 per cent of the total export of US $ 919.7 million.
Boasting of 110 footwear manufacturers and exporters out of the total 120 members under its aegis, the Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB) is a very important stakeholder in this direction.
“If you look at the transition in the leather exports of Bangladesh in the last five years or so, more than 70 per cent was export of leather (crust and finished leather) and the rest was of leather products, but today more than 60 per cent is finished products such as footwear. This is a very healthy trend,” opined Syed Nasim Manzur, President of the LFMEAB, who believes Bangladesh has rather successfully carved a niche for itself in the global context, when it comes to leather and leather products.
However, he is equally candid about highlighting the sector’s challenges, evident from one of his recent social media posts wherein he rued how the rawhide prices from Bangladesh were being undervalued and had to be discounted heavily, thanks to the failure of Bangladesh Small and Cottage Industries Corporation (BSIC) towards ensuring a functioning CETP in Savar, for the tanneries.
The tanneries aren’t getting a fair price for their finished products and they are not able to pay fair prices for the raw hides, Nasim claimed as he went on highlight how the limited production capacity of many shoemakers was also a hindrance towards achieving the actual export potential.
“Most of the factories are rather small and cater only to the smaller buyers. The rest of the industry is stuck in a catch-22 situation as big buyers will not come till factories have developed scales while manufacturers will not develop scales either till buyers assure business,” bemoaned Nasim, who is also the Managing Director of Apex Footwear, which is the biggest shoe maker in the country churning out around 22,000 pairs of leather shoes daily even as the next big to it is Fortuna Leather Craft, producing only around 8,000 pairs of shoes a day.
However, as US buyers continue to relocate their sourcing from China and Vietnam, Bangladesh’s footwear export to the United States is seeing a significant rise.
According to the US Department of Commerce, Bangladesh’s leather footwear exports to the US market last year also grew by 63.25 per cent to US $ 406.49 million from that of US $ 249 million in the previous year while according to the EPB, Bangladesh’s overall export earnings from footwear in 2022 increased by 25.63 per cent to US $ 1.28 billion from what was US $ 1.02 billion in 2021.
Leather footwear contributed US $ 795.53 million in this.
Meanwhile, the footwear exporters in Bangladesh expressed hope that the United States is slowly but surely turning into a big market than the European Union, with the future in the perspective as US buyers go for country-of-origin diversification that is only expected to open up the floodgates for countries like Bangladesh.