The Leather Industry

Cover Story

is a huge potential sector for the economy of Bangladesh

Mohammad Maruf Mozumdar

Proudly named, leather is Bangladesh’s second largest export sector. But in reality, this sector has been declining for more than a decade due to indecision and corruption! Jute was the main cash crop of East Pakistan (now Bangladesh) during the Pakistan era. Jute and jute products are the main export products of Pakistan. 65 percent of the country’s national income came from the agricultural sector. The presence and position of tea and leather in domestic consumption and export is gradually increasing. As this country is dominated by Muslims, many animals such as cows, goats, etc. are sacrificed during the holy Eid-ul-Azha. Besides, the meat of these animals is bought and sold throughout the year. As a result, the production and supply of leather in Bangladesh has been steadily increasing since ancient times. The journey of the leather sector as a business in this country began in the forties of the last century.

However, the good news is that, for the first time, the country’s export revenue of leather and leather products has exceeded one billion, or one billion dollars. In the first 11 months (July-May) of the just-concluded 2021–22 fiscal year, the sector exported 111.55 billion. However, at the beginning of the year, it was unimaginable to the Ministry of Commerce that the export revenue from the leather sector would be so high in the current financial year. In the last eleven months alone, the export revenue has exceeded the target by eight and a half crore dollars. According to the data, the highest export earnings in the sector from July to May came from footwear or footwear. a total of $63 million in export revenue which is 31.59 percent higher than the same period in the previous fiscal year.

According to the data of the Export Promotion Bureau (EPB), in the first eleven months of the last financial year 2020–21, exports of leather and leather products amounted to 846 million dollars. According to that calculation, compared to the same period of last year, there has been an increase of 31.85 percent in the export income of the leather sector this year. And those involved say that various incentives have been given to overcome the effects of Corona in various countries in Europe and America. In this context, the sale of leather products is good in those countries. Besides, since the opening of tourist spots, there has been a new demand for shoes, bags, etc. for travel purposes. In such a situation, there is a danger that the demand for such products will decrease in the future due to the increase in price inflation in the country due to the effect of the Russia-Ukraine war.

According to EPB statistics, in 2013-14, income from leather and leather products was 1258.82 million dollars. In the next three financial years, the export income of this sector was 1130, 1161 and 1234 million dollars respectively. Since 2013-14, the sector’s revenue has fluctuated between $1.08 and $1.23 billion. On the other hand, China’s income is $10.9 billion against India’s income of $3.05 billion. Pakistan is doing business of 948 million dollars. The year 2016-17 was officially declared as ‘Leather Year’ in Bangladesh. In the financial year 2018-19, the export income of this sector was 1019.78 million dollars. In that financial year, the market of Bangladesh has fallen by about 16 percent. However, due to lack of environmental compliance in the country’s leather processing and product production, the demand for Bangladeshi leather products in the international market has never been as expected and since 2017, the ongoing progress of the leather sector has been declining.

In addition, due to the increase in the prevalence and prevalence of the coronavirus worldwide, the export income decreased to 797.61 million dollars in the fiscal year 2019–20. In terms of export income, the leather sector has lost its second place and has come down to third place. Last year, there was a chaotic situation with the raw leather of Qorbani. Despite the fact that the price of raw leather has dropped by about 30% compared to the previous year, many people have buried it due to the low price and lack of buyers. The country’s leather traders are uncertain about the collection and market of leather during this Eid al-Adha.

Businessmen and experts in the leather industry sector feel that the main problem in the country’s leather sector is a lack of compliance. The products produced in Bangladesh are getting low prices in the international market and it is not possible to ensure the fair price of leather in the local market either. Leather and leather products are estimated to generate $10 billion in export revenue by 2030. For that, it is important to ensure the compliance of this sector. Moreover, the ETP set up in Savar leather town is still not functioning in a fully eco-friendly manner and solid waste management is also not in place. As a result, products manufactured in Bangladesh receive 30 to 40% less.

Leather is the main raw material of the tannery industry sector. The leather industry is identified as a potential and significant sector in our country. It is a sad fact that this industry has been reeling in failure for a long time. The government has spent 16 years building a leather industrial city on 200 acres of land for the development and stabilization of this sector. This has gradually reduced the income of leather exports, and the price of raw leather has plummeted. Needless to say, despite the year-round supply of hides for the tannery, an excess of sacrificial animal hides is observed every year. But the price of leather, the main raw material of the leather industry, is the lowest in the market. This time too, it has not been interrupted. Asia’s largest tannery industry opened in Kolkata a few years ago, and its market is booming now. But we could not!

In addition, the COVID-19 epidemic has also had a negative impact on the leather industry. Sales of leather and leather goods have declined due to the ongoing global lockdown. Because leather goods do not fall under any of the necessities, As a result of the negative impact on the industry, entrepreneurs have faced great challenges. About 5,000 workers have lost their jobs due to the closure of leather processing due to the epidemic. However, the biggest complaint about the leather industry in Bangladesh is that it is harmful to the environment and that free child labor is practiced here. Not only that, Bangladeshi leather workers have to work in a very risky environment. Where there is a leather industry, it is poisoning the soil, water and air year after year. In this context, the following steps can be taken to overcome the current state of the leather industry:

First, the government may announce a special incentive package to revive the leather industry. At the same time, tax exemptions and cash incentives can be given to the leather industry, similar to the ready-made garment industry. Second, it is developing as a modern and sustainable technology-based sector. Sustainable technology means being aware of the use of water and chemicals. to maintain an environmentally friendly system. To form the “Price Center” of the Export Guild with the owners of the tannery industry, their main task will be to determine the minimum price of leather. Third, to make LWG i.e. Certificate of International Non-Profit Organization called Leather Working Group) compliance mandatory for all export-oriented tanneries. Fourth is to establish a minimum wage, security and humanitarian arrangements for tannery workers and employees, bring transparency to bank loans.

Fifthly, leather entrepreneurs should also work with honesty and professionalism. They will use the borrowed money in the leather sector instead of spending or investing elsewhere and will try to repay the bank loan on time. A potential sector should not only be kept alive but awakened by the collective efforts of all.

Leather and leather products are an export-oriented industry based on domestic raw materials. It is a potential sector in terms of growth in national income, foreign exchange earnings through exports, employment and value addition. At present, leather’s contribution to the export sector is more than 9 percent. Therefore, various plans can be adopted to promote Bangladesh as a country with future potential in the global leather market and to take the leather industry to new heights. Analysts believe that even though the government has fixed the price of raw hides, the interests of traders have been protected in setting the prices. It is a matter of great regret that the price of leather in our country has come down despite the high prices of leather and leather products in the international market. We can go a long way in the leather industry if we can get rid of middlemen and party influence. In addition, leather will be the main export product if environmental problems can be overcome. A poor country like Bangladesh earns more than one billion dollars a year from the leather industry. The potential in this sector is increasing day by day. If the environmental problem can be overcome, the skin will be replaced by golden jute.

After all, about 45% of the annual demand for raw hides in Bangladesh comes from sacrificial animals. Entrepreneurs need to step forward not only in leather production but also in the production of versatile leather products. In order to continue the economic progress of the country, it is advisable to take comprehensive steps for the development of the potential leather sector.

Mohammad Maruf Mozumdar, Student of the Department of Political Science, University of Chittagong.