Key highlights:
- Global market of leather goods worth $46,800cr last year
- Leather and leather goods export only $122cr in FY23
- Bangladesh’s share in global leather market only 0.26%
- Tk1,079cr project fails to build functional CETP in 21 years
- Tanners fail to woo buyers due to lack of LWG certificate
- Out of 142 tanners in Savar, only one has a globally-required LWG certificate
The leather and leather goods sector in Bangladesh is an export-oriented industry based on domestic rawhide. It is a sector with immense potential in terms of employment, national income growth, and foreign exchange earnings through exports.
One of the oldest industries in Bangladesh, the leather industry is the country’s second-largest contributor to Bangladesh’s export earnings after the RMG sector. Bangladesh accounts for a 3% share in the global leather and leather goods market. By 2020, the country has become the 8th largest global footwear producer in the world, contributing 2.1% to the global shoe production. The industry has employed around 0.85 million people of which 60% of the workforce is women.
You can also read: Bangladesh’s Leather Industry: From Local to Global Powerhouse
However, the sector is failing to capitalize on its immense export potential due to several obstacles. Among those, environmental pollution is a major obstacle to the sector’s growth. The Central Effluent Treatment Plant (CETP) at the Tannery Industrial Estate at Hemayetpur in Savar is not fully functional which is leading to the pollution of nearby rivers through the wastage produced at the estate. Also, a permanent dumping yard has not been constructed yet for the disposal of solid waste from the industrial estate. As a result, pollution of the environment remains a major problem for tanneries in Savar to obtain international certification, although the government wants to increase the export of leather and leather products.
In the first cabinet meeting of the newly formed government last week, Prime Minister Sheikh Hasina has directed to diversify exports and explore new markets, providing special assistance to three particular sectors. These are: leather and leather products; jute and jute products and agricultural products.
Industry Minister Nurul Majid Mahmud Humayun said, “The government is working seriously to increase the export of the leather sector. All possible supports, including increased incentives, will be provided for the growth of the sector. The government is also working to improve the performance of CETP at the tannery industrial estate in Savar.”
Lack of LWG certificate hinders growth of the leather sector
According to a study by the Bangladesh Investment Development Authority (BIDA), manufacturers of leather and leather goods in Bangladesh do not buy raw materials from local companies due to the lack of fully functional CETP at Savar Tannery Industrial Estate. Because the global brands would not purchase the finished products unless the raw materials are sourced from companies having globally acknowledged Leather Working Group (LWG) certificates, which the tanners of the industrial estate do not have due to the lack of a fully functional CETP.
As a result, Bangladesh is unable to fully harness the export potential of the leather sector and expending a significant amount of foreign currency to procure raw materials from overseas sources, the BIDA report said.
Savar Tannery Industrial Estate not ready in 21 years
The Industries Ministry initiated a project at a cost of Tk1,079 crore in 2003 to establish a pollution-free planned tannery industrial estate, transferring the leather industry from the capital’s Hazaribagh area. A total of 199 acres of land were acquired at Hemayetpur in Savar for the project, and 154 tanneries were allotted plots. The project was supposed to develop a compliant leather industrial city with modern facilities to attract foreign investment and increase exports.
But even after 21 years, Bangladesh Small and Cottage Industries Corporation (BSCIC), implementing authority of the project, failed to develop an environment-friendly industrial estate. As a result, wastages from the Savar industrial estate is severely polluting the nearby Dhaleswari River as the CETP is yet to be fully operational.
Even though Bangladesh produces huge amount of rawhide, the country’s exporters of leather goods spend about Tk1,000 crore (around $100 million) every year to import finished leather certified by the LWG, creating enormous pressure on the country’s foreign exchange reserves, which went down from $48 billion in August 2021 to about $20 billion now.
In this situation, the leather sector is not able to expand its share in the country’s export basket despite having sufficient rawhide in the country. Because, in order to sell leather and leather goods at lucrative prices to the leading global brands, the exporters have to obtain the globally acknowledged LWG certificate. However, the tanners from the Savar industrial estate are not able to apply for this certificate due to the pollution of the environment, although over Tk 1,000 crore has already been spent on the implementation of the project.
CETP must increase leather export
According to media reports, traders and exporters of the leather sector think that there is a good potential to increase the export of leather and leather goods. But the CETP has to be modernized as soon as possible to capitalize the potential. Also, a dumping yard will be required for solid waste management in a planned manner. Only then, the factories of the tannery industrial estate can apply for an LWG certificate.
There are currently 142 tanneries in Savar’s industrial estate. But only one of them, Simona Tanning, has received LWG recognition in last November. The company manufactures leather from the crust to the finishing stage. They have their own Effluent Treatment Plant (ETP). However, all other tanneries in the estate use CETP. As a result, none of them have yet applied for an LWG certificate.
Besides Simona Tanning, five companies have got the LWG certification. These are Apex Footwear, Reef Leather, ABC Leather, Superex Leather, and SAF Industries. Businessmen related to the sector said that the LWG-certified companies are doing good business. All five companies are from outside the tannery industrial estate in Savar.
Huge global market, tiny share
Despite the lack of raw materials, Bangladesh ranks second in the world in exports of ready-made garments, earning $4,699 crore in the last financial year. But despite having sufficient raw materials in the country, the export of leather and leather goods was only $122 crore in the last fiscal, according to the Export Promotion Bureau.
According to Fortune Business Insights, a global market research firm, the global market for leather products last year was about $46,800 crore. Of this, the European market is worth $16,600 crore. In 2030, this market will grow to reach $73,800 crore. Currently, Bangladesh’s share in the global market is only 0.26%.
According to the tannery owners, many countries, including European ones, demand LWG certificate in the export of various leather products including shoes to those countries. Tanneries without that certificate are exporting per square foot of processed leather at an average of 85-90 cents. These hides could have been sold to European buyers at twice the price if they were certified. Due to this reason, China is now the biggest buyer of Bangladeshi leather.
Present scenario of Savar tannery estate
At present, solid waste from the Tannery Industrial Estate in Savar is being dumped in the temporary dumping yard. The bad smell emanating from the dumping yard spread around a vast area as it is an open facility. On the other hand, black polluted water from CETP is released into the adjacent Dhaleswari River after treatment of liquid waste.
According to the Industries Ministry, the daily liquid waste treatment capacity of CETP is 25,000 cubic meters. An average of 17,000 cubic meters of liquid waste is produced in the tanneries of the estate during normal times and 40,000 cubic meters during the sacrificial season.
According to a BSCIC report, the overall efficiency of CETP was below 50% in September 2023.
Ray of hope in near future
Recently a meeting was held at the Prime Minister’s Office with entrepreneurs of the leather sector. In the meeting, the tannery traders demanded an extension of the bond license and inspection period, loan facility on easy terms, and help for some factories to build their own ETP. The PMO assured the traders of providing adequate support to meet their demands.
Golam Shahnewaz, managing director of Dhaka Tannery Industrial Estate Waste Treatment Company (DTIEWTPC), who is in charge of managing the CETP, said, “Several equipment of CETP have been activated in the last three months. At present, the efficiency of CETP is above 50%. Efforts are underway to take it to 80% within the next four months.”
Conclusion
In order to increase the export of leather and leather goods, international standard CETP and solid waste management at the tannery industrial estate have to be ensured first. It is expected that several tanneries in the Savar industrial estate will get an LWG certificate once the CETP and waste management are in place. This will increase the market for leather and leather goods produced in the country, and subsequently, exports will then increase steadily.
