Bangladesh witnessed a 17.55% drop in exports of leather and leather goods in the first four months of 2023. The primary cause is mainly credited to decreased demand for luxury items in the global market amidst high inflation.
Based on the Export Promotion Bureau’s statistics, the country’s leather and leather goods export reached $369.2 million from $447.81 million recorded in the same period in 2022.
On Saturday, in an effort to enhance the leather goods export, the Prime Minister’s office (PMO) instructed the relevant authorities to work towards achieving a target of $5 billion in the next 3-4 years, surpassing the current status.
This decision was made in a meeting to enhance the environmental practices in Savar tanneries, along with the central effluent plant (CETP) and solid waste management to meet the Leather Working Group (LWG) standards.
Exports of leather goods and footwear experienced an upswing on the global market in 2021-2022, once the instant impact of covid-19 died down. However, the situation took a negative turn due to the escalating economic instability caused by the Russia-Ukraine war.
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The inflation surge resulting from the Russia-Ukraine conflict has significantly reduced consumer purchasing power. Also, the influx of leather goods and footwear imports has burdened global buyers with an inventory surplus.
Government officials such as the Industries Secretary and the Chairman of Bangladesh Small Cottage and Industries (BSCIC) and other representatives from tannery owners and leather goods manufacturers, including the President of Bangladesh Tanners’ Association and the President of Leather goods and Footwear Manufacturers and Exporters Association of Bangladesh also participated in the meeting led by the Principal Secretary of the PM-M Tofazzel Hossain Miah, at the PMO in Dhaka.
The failure to achieve the Leather Working Group certification by the tanneries in Bangladesh was attributed to the non-functional central effluent treatment plant in Savar Tannery Village.
During the event, the Principal Secretary tried to shed light on the importance of rectifying and upgrading the CETP in Savar. He also added, that reaching US $5 billion in the next 3-4 years is very much possible, provided a conductive environment is created.
The ministry is working on the “Outline of Exports for Leather Sector” under the export competitiveness for Jobs (EC4J) initiative, which receives funding from the World Bank. At the same time, BUILD is focusing on revising the ongoing perspective plan to modernize development.
Hong Kong, Spain and Italy are the major export destinations of leather and leather products from Bangladesh. Industry insiders have suggested that the export goal is achievable for the leather industry through the implementation of policies that support diversity.
Overview of the leather industry in Bangladesh
The leather industry has played a pivotal role in the development of war-torn Bangladesh, as it started to grow in 1970s. Pakistan Tanners Association was established in 1964 and was later renamed Bangladesh Tanners Association (BTA).
The August 2019 report by EBL Securities LTD highlighted that Bangladesh exports a mass portion of its annual leather production (approximately 350 million square feet), with only 20-25% of this output being utilized by the country.
Bangladesh became the 8th largest footwear producer worldwide in 2020 with a 2.1% share of Global shoe production. Renowned fashion brands like H&M, Kate-Spade, Michael Kors, Adidas, and Nike actively source products from Bangladesh. Additionally, the manufacturing of leather accessories remains a thriving sector in Bangladesh.
The FY 2020-2021 data from the Export Promotion Bureau revealed that the leather and leather products sector in Bangladesh emerged as the second largest export sector after RMG, attaining exports worth $941.67 million. This amount accounted to around 2.43% of the country’s total exports of $38.758 billion.
However, the export earnings have seen a decline over the past few years.
Bangladesh’s exports of leather and leather products achieved $1.23 billion, $1.09 billion, and $1.02 billion in the fiscal years 2016-2017,2017-2018-2018-2019, respectively.
Challenges abound in the leather industry
Meeting the diverse needs and export goals of the value chain requires a workforce that is both proficient and abundant. Nevertheless, the scarcity of skilled labor in Bangladesh presents a major hurdle for the sector.
Leather production evokes environmental concerns. In 2003, BSCIC Tannery Industrial State was built in Hemayetpur to reduce industrial waste sailing down to the Buriganga River. This facility can handle around 25 thousand cubic meters of liquid per day while about 40 thousand cubic meters of waste are being released daily.
Ineffective tannery waste management adheres to Basic Health Compliance Guidelines and is a great concern for the well-being of its workers. The unsanitary conditions followed by poor disposal of waste pose a severe health risk and tannery workers suffer from various illnesses over time.
Another major problem is the lack of funding in the leather industry. The country’s leather sector has seen investments of over BDT40 billion, yet BDT 32.5 billion remains in default and most of it constituting long-term debts.
As Bangladesh navigates its way through these challenges and opportunities, ensuring robust marketing and distribution channels becomes paramount for market access and sustained profitability. The endeavor to propel leather exports to the $5 billion mark by 2027 is not merely a numeric target; it signifies a resolute determination to bolster economic growth, sustainability, and global recognition in the realm of leather and leather goods.
