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Economy

Heydays Ahead for Leather

Farhana Urmee

Made in Bangladesh- nothing can make us feel prouder than this trademark, especially when we see it on the label of a garment or clothing accessory in a foreign store. While the success of Bangladeshi garments abroad is well known, another industry is enjoying many years of success in producing exportable goods. The shoe industry started its journey in the 50s to 60s in the country and continues to expand everyday. It has been possible as there is no need to import the raw material. Bangladesh herself is a manufacturer of high quality leather.

L-R: Eid-ul-Azha alone accounts for 45 percent of total rawhide that feeds the export of leather goods. The shoe industry started its journey in the 50s in the country and continues to expand everyday. Photo: zahedul i khan

The annual market size of the leather industry is nearly Tk 3,500 crore. Last year, local tanners collected more than 29 lakh pieces of cowhide and 45 lakh pieces of goatskin during the Eid-ul-Azha when thousands of animals are sacrificed. According to the Export Promotion Bureau data, leather exporters earned 226 million US Dollars in the fiscal 2009-10. According to Bangladesh Bank data, leather export rose in volume and 27 percent in value last fiscal year.

According to Bangladesh Hides and Skin Merchants Association president Mohammad Aftab Hossain, an average of 500,000 cows are slaughtered every year during the religious festivals of Eid-ul-Fitr, Eid-ul-Azha and Shab-e-Barat. But the fear of Anthrax spreading among people resulted in the low consumption of beef which led to a decline in the total number of regular slaughtering this year.

Tipu Sultan, former Chairman, Bangladesh Finished Leather, Leather Goods and Footwear Exporters' Association says, “the leather industry that includes both the leather processing industry and the shoe and leather goods manufacturers is going through the preliminary level of boom. The base of the industry has already been established, now is the time to see the expansion.”

He says that considering the advantage of high quality leather and comparatively cheap manpower, the industry might see a harvesting period soon. As this is a labour-oriented industry and Bangladesh offers cheap labour, the industry is attracting the attention of foreign buyers who are moving towards Bangladesh rather than India, China or Vietnam (known as the largest shoe exporters). The buyers who were usually known as clients of China are showing their interest in our leather market. The chance must be grabbed immediately by Bangladeshi manufacturers, observes Tipu Sultan.

Local tanners produce four types of leather- rawhide, wet blue, crushed and finished leather. Bangladesh exports mainly crushed and finished leather. Again, Bangladesh is becoming a reputable exporter of footwear made by local leather.

“If the relocation of tanneries can be conducted successfully, that would increase the number of local and foreign investment in the sector. The increasing growth of the industry and boosting investment in the sector would definitely make the sector the second highest export industry in the next five to seven years,” says Sultan adding that the annual production of 5000 crore taka from tanners and a further 1600-1800 crore taka from footwear and leather goods industries will automatically increase by seven to eight thousand crore taka in the coming years with the existing infrastructure in place. But, if the relocation of tanneries is successful, the growth will be much bigger and would be worth Tk 20,000 crore, he continues.

“A fear was there about anthrax hitting the leather industry adversely as regular slaughtering of cows declined in the last three months. But during the religious festival of Eid-Ul-Azha, a huge number of cow sand goats were slaughtered and the panic vanished,” he says. Eid-ul-Azha alone accounts for 45 percent of total rawhide that feeds the export of leather goods.

Shahin Ahmed, Chairman, Bangladesh Tanners Association thinks that the leather industry has a huge potential to earn foreign exchange for the country through exports. “The potentials of the leather industry are also accompanied by a number of barriers. Of them, the relocation process would be one. The existing tanneries, being congested and clumsy cannot welcome new investments. Again the relocation of the tanneries in Savar would require a huge compensation for the tanner owners,” says Ahmed.

He also says relocation and thus expansion of tanneries would not only benefit the tanners, but also the industries depending on tanneries, which would be able to increase their production. Again, footwear and other leather goods industries can be affected badly if the tanneries get unstable in economic aspect.

“If the government does not help the tanners by providing a compensation which was fixed at Tk 250 crore back in 2006 by the task force committee formed by the previous prime minister, the pressure will all on be the shoulders of the tannery owners. The tanners demanded Tk 1089 crore as compensation from the government in 2004 to relocate the tanners in Savar,” observes Ahmed.

“The proper shifting of the tanneries taking practical measures would help tannery investment grow. Also, tanneries require skilled labour and a good technical know-how to carry on its operations. The government can take initiatives to train up the workers as skill labourers, technicians and chemists,” recommends Ahmed.

He also observes that the government can ensure a low interest bank loan for the investment and operation of tanneries. The government can also help the tanners by lifting the duty in chemicals import, which is required only in tanneries. As neighbouring India can produce some of the chemicals by their own, the production costs get minimised. A minimum production cost may lead to a good profit margin both in the domestic and international markets.

“Besides exporting leather and finished leather goods and earning foreign currency, the leather industry in the country is also contributing in the local market by providing leather and finished leather products which saves foreign currency that is worth about Tk 1,100 crore. Otherwise, the local footwear industries could not flourish or would have to import leather,” he continues.

The Government has to encourage small and medium enterprises practically not by pledging but by addressing the requirements. Ahmed hopes that the industry would be able to export leather worth Tk 3700 crore this year and anticipates that if the government shows a cooperative attitude towards tanners, and small entrepreneurs, the leather industry would see its golden days in the near future.