Leather exporters stare at grim prospects in 2023
Growth in leather footwear exports from Bangladesh was unsatisfactory in the first eight months of the current financial year as the economic fallout of the Russia-Ukraine war has been weighing down shipments since September, according to industry people.
Export earnings from leather footwear amounted to $458.59 million for the July-February period of 2022-2023, registering a year-on-year growth of just 4.12 per cent.
Shipments of leather products brought home $246.07 million in the identical period, indicating growth of 22.23 per cent, shows data from the Export Promotion Bureau (EPB).
On the other hand, leather exports slumped 8.87 per cent to $77.27 million.
The overall leather sector, the second-largest export earner after garments, suffered greatly during the Covid-19 pandemic in 2020 and 2021 as export orders took a sharp dive amid economic uncertainty.
However, it did not take much for shipments to bounce back as importers started sourcing their products from Bangladesh in a bid to reduce dependency on other producing countries, namely China.
As a result, exports of leather, leather goods and footwear reached a 10-year-high of $1.25 billion in the last fiscal year that ended in June 2022.
Now, the adverse impacts of the Russia-Ukraine war are stifling the sector once again.
Nasir Khan, managing director of Jennys Shoes Ltd, said his company's exports have been gradually slimming ever since they cleared shipments for winter and Christmas.
"Export orders for summer footwear are lower than what they were last year due to the rise in bank interest rates across the globe amid the economic crisis," he said, citing how retailers in Europe do not want to take the added burden to mobilise capital.
Khan went on to say that exporters have become cautious about injecting fresh funds into production considering the reduced volume of orders.
Bangladesh mainly exports low-priced products that are used by common people. But orders in this segment have slowed, which means that the global economy is weakening.
"We are not sure if this trend will continue for the rest of the fiscal year as the global crisis stemming from the Russia-Ukraine war is showing no signs of abating anytime soon," Khan added.
With this backdrop, he urged the government to resolve the issues related to bonded warehouse facilities and sought cooperation from the National Board of Revenue and customs authority to this effect.
Khan also said the leather industry does not get the necessary support from the government, for which exporters are unable to lift their earnings even though there is huge potential.
Mohammed Nazmul Hassan Sohail, managing director of Leatherex Footwear Industries Ltd, said their export growth has yet to reach pre-pandemic levels as it declined 40 per cent in the first half of the current fiscal.
"While export orders are slightly higher at the moment, the overall shipment volume is not growing."
Abdus Samad, assistant general manager of Akij Footwear Ltd, said their exports have been climbing this year even though overall export growth in the sector is falling.
While stating that export performance differs from company to company, he said that most exporters are registering lower shipments due to the ongoing global economic crisis.
As such, finished leather exports came down to $77.27 million in the July-January period of 2022-23 while it was $84.79 million during the same period the year before.
Mohiuddin Ahmed Mahin, president of the Bangladesh Finished Leather, Leathergoods and Footwear Exporters Association, blamed three factors for the decline in exports.
First, international prices are less compared to what they were in the preceding fiscal year.
Second, buyers do not feel interested in purchasing products from Bangladesh given the country's non-compliance with the guidelines of the Leather Working Group, a global multi-stakeholder community committed to building a sustainable future with responsible leather.
And third, the war has disrupted supply chains while also giving rise to other economic concerns.
For example, exporters shipped the same quantity of finished leather in July-January as they had last year but earnings were lower as production costs grew due to the sharp appreciation of the US dollar against the taka.
The local currency has lost its value by about 25 per cent against the American greenback in the past one year, making imports costlier.
"We have to import chemicals and other products for tanning and processing leather at higher prices due to the appreciation of the US dollar," Mahin said.
While pointing out that the prices they get have decreased by 20-25 per cent compared to last year, Mahin said he does not see how the situation can improve in 2023 until the global economy recovers fully.