Problems and prospects of Bangladesh leather industry

Bangladesh Finished Leather, Leather Goods and Footwear Exporters’ Association (BFLLFEA), Bangladesh Tanners Association (BTA), and Bangladesh Hides and Skin Merchants Association (BHSMA) – these three leading hides’ trade bodies in the country’s leather sector after sitting together in Dhaka on October 02, 2015, announced this year’s raw hides’ price rates. The tanners fixed the price of salted cowhides this year 2015 at Tk. 50 to Tk.55 per square foot in the capital city of Dhaka and at Tk. 40 to Tk. 45 per square foot for the rest of the country. These are the lowest rates in five years for the skin of sacrificial animals. The prices of goat hide range from Tk 15 to Tk 22 per square foot, down from Tk 35 per square foot in 2014. Last year, the rates for cowhides stood at Tk 65 to Tk.70 per square foot in Dhaka and Tk 60 to Tk 65 per square foot in the rest of the country. The rates are also at least 30 percent lower than the previous year. Cowhides were sold at Tk 50 to Tk.60 per square foot in 2011.
Bangladeshi traders and merchants have apprehended that the fixation of raw hides at lower rate this year 2015 may encourage smuggling of the item to the neighbouring countries. Such allegations are made in almost every year about the skin of sacrificial animals and it is true that the raw hides of sacrificial animals are smuggled to the neighbouring countries every year. However, blaming low prices in the international markets, devaluation of currencies of importing countries and standing stockpiles of rawhides held by the tanneries, the leaders of the associations defended the low rates. The BFLLFEA argues that the prices of finished leather fell 30 percent in the international markets.
It is notable that China, the world’s largest footwear manufacturer, is now withdrawing from the global leather goods market. And Bangladesh is ready with huge potentials to attract foreign investments in the sector. According to a report, China’s annual leather footwear production had dropped by 5.29 per cent in 2012 and 7.45 per cent in 2013. While asked about the reasons for China’s focus shift, Bangladesh Footwear and Footwear Accessories Association (BFFAA) said labour cost in China has gone up. In consequence the Bangladeshi manufacturers are seeing brighter prospects for the leather sector after the readymade garment industry because of a policy shift in China, the world’s largest economy.
According to the Leather Goods and Footwear Manufacturers and Exporters Association (LGFMEA), presently 110 export-oriented factories manufacture footwear in Bangladesh. Of them, Apex, FB, Picard Bangladesh, Jenny’s, Akij, RMM Bengal and Bay have their own tanneries and leather processing units. There are another 207 leather processing units in the country. They expect Bangladesh to be an attractive destination for leather sector entrepreneurs as China, the world’s largest footwear manufacturer, is shifting focus from this sector. Bangladeshi manufacturers are now planning to fill the vacuum in the international footwear market being left by China.      
The BFLLFEA said international leather market is valued at US$260 billion and Bangladesh can take a substantial portion of this by ensuring world standard production facility. It adds that Bangladesh will get better prices in the international market provided environment friendly production facilities are ensured. And without maintaining environment friendly production process, no exporter can survive and sustain in the international markets. An environmentally sound leather sector in Bangladesh has the potential to take a larger share of the global leather export market and become a key driver of the nation’s development as China is now withdrawing from the global leather goods market.   
The BFLLFEA farther said that Bangladesh with a population of more than 160 million can survive economically through creation of new industrial jobs in the leather industry. The leather sector has the potential to take the position of readymade garment sector provided the government extends all sorts of cooperation to the sector. Stakeholders believe that the country’s leather industry would see greater potentials once the tanneries are shifted from Dhaka’s Hazaribagh to Savar. It also said Bangladesh Bank should provide soft loans for the leather sector to shift tanneries from the Dhaka city’s Hazaribagh area to Savar. It expressed the views that in consultation with the Asian Development Bank (ADB), the World Bank (WB) and other international financial institutions, Bangladesh Bank can arrange some Tk. 55 billion for distributing among the leather sector at 5.0 per cent interest rate.
The BHSMA said Bangladeshi leather is the best in the world after the French product. According to data from the Export Promotion Bureau (EPB) the exports of leather and leather goods crossed US$1 billion for the second year in fiscal 2014-2015. Bangladesh exported leather and leather goods worth US$1.13 billion in 2014-2015, compared with US$1.29 billion in the previous fiscal year 2013-2014, making it the second highest contributor to national exports after garment industry that earned US$19 billion in 2012. The EPB data shows jute and jute goods became the third highest export earner with US$736.4 million in the FY 2009-2010. Orion Footwear said Bangladesh’s footwear sector was poised for a big expansion. Bangladesh used to export mainly raw hide, wet blue leather, and crust leather until 1990. But now it is concentrating on exporting finished leather and leather goods. The BHSMA said the country annually produced 200 million to 300 million square feet of finished leather, most of which is exported.
At present Bangladesh exports leather shoes, travel bags, wallets, belts and finished leather. The RMM Leather Industries was the first Bangladeshi company to receive an international award for production of eco-friendly leather. According to the EPB, Bangladesh earned US$ 1.29 billion from exports of leather, leather goods and footwear in the 2013-2014 fiscal years; now a new possibility has opened up for the Bangladesh leather industry with the China’s focus shift away from the leather sector. The LGFMEA said at least 51 foreign companies have so far expressed interest in establishing joint-venture footwear units in Bangladesh.
It is expected that if appropriate measures are taken to augment the indigenous finished leather and leather goods industry, the country will be saved from the menace of the outflow of hides to neighbouring countries through black routes. Since Bangladesh is a beef and mutton eating Muslim majority country, hides and skins will always be available throughout the year to feed an expected prosperous and sustained leather industry that may immensely contribute to the country’s economic prosperity. By now Bangladesh economy has made commendable progress to be able to develop this vital sector by mobilising domestic sources of finance rather than relying on ADB, WB or other foreign sources of finance that may delay the process. The Bangladesh Bank may possibly provide at 5.0 per cent interest rate the necessary Tk. 55 billion that equals pretty less than US$1 billion out of its over US$25 billion present foreign exchange reserve for this promising sector or other domestic sources of finance may be tapped for the purpose. It is better to start or try to be self-reliant in the nation’s development expenditures than seeking external help in all cases. We have already done so in the case of Padma bridge construction.           

The writer is a retired Professor of Economics, BCS General Education Cadre