Govt needs to rally behind the leather goods manufacturers, too | The Daily Star
12:00 AM, June 16, 2020 / LAST MODIFIED: 12:31 AM, June 16, 2020

Govt needs to rally behind the leather goods manufacturers, too

Sector seeking another stimulus package

Leather goods manufacturers and tanners called for another emergency stimulus package for export-oriented sectors and demanded reduction in source tax to survive the economic fallout of the pandemic.

The manufacturers and exporters in different sectors were able to pay their workers' wages of April, May and June from the government-announced Tk 5,000-crore stimulus package.

But another Tk 10,000 crore is needed for July, August and September as the export-oriented industries are going through turbulence due to a slump in work orders from international retailers, said exporters of leather and leather goods and footwear products.

Work orders for leather goods and footwear products nosedived 62 per cent in June from a year earlier, and there are no signs the situation is going to improve in the months to come as the buyers are not contacting local manufacturers, they said.

In April alone, the shipment of leather goods and footwear, the second biggest export earning sector after apparel, plunged 70 per cent year-on-year, according to data from the Export Promotion Bureau.

Export of leather goods and footwear products was worth $98 million in the March-May period of the current fiscal year, a drop from $207 million in the same period last year.

"We are now in talks with buyers about some cancelled work orders. We do not see any fresh or big work orders from them," said Saiful Islam, president of the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh.

Moreover, the buyers have been delaying payment unusually as they could not reopen their outlets because of coronavirus and more than 50 per cent of the payment might not come on time, he said.

Usually, contracts signed with buyers stipulate payments within 90 days. But this time, they are demanding an unusual 180 days or 220 days, Islam said.

"We have already invested more than $1 billion in the leather goods and leather footwear industries employing nearly one lakh workers," he told The Daily Star over the phone.

Currently, the number of leather and leather goods factories in Bangladesh is nearly 1,200 and most of them are small and not export-oriented.

Over the years, Bangladesh has become a lucrative destination for buyers from Europe, America, Japan, Australia, New Zealand and China because of quality goods and competitive prices.

"So, almost all renowned brands like Timberland and Nike have been purchasing their goods from Bangladesh."

The government should reduce the source tax to 0.25 per cent from the proposed 0.50 per cent such that exporters can become more competitive during this crisis, Islam added.

The government should reduce duties on the import of chemicals needed for treating rawhides, said Md Shaheen Ahmed, president of the Bangladesh Tanners' Association.

Tanners use 40 different kinds of chemicals in their factories and the average import tariff for those is 27 per cent, he said, adding that they have long been demanding that the government bring down the duties to less than 20 per cent.

He said most of the tanners could not avail themselves of the funds from the Tk 5,000-crore stimulus package because of stringent conditions.

The tanners are facing challenges in receiving loans from another two stimulus packages of Tk 20,000 crore and Tk 30,000 crore as well for the same reasons, he added.

Only 30 per cent out of 155 tanneries at the newly-established Savar Tannery Industrial Estate are in operations now because of poor work orders from buyers.

Work orders for finished and crafted leather from four major markets -- Spain, Italy, Hong Kong and South Korea -- dropped 40 per cent amid the pandemic, according to Ahmed.

Exports to the four markets account for nearly 60 per cent of Bangladesh's total shipment of finished and crafted leather, he added.

Work orders from China, which takes 30 per cent of Bangladesh's total finished and crafted leather, are still coming but at a slower pace, industry people said.

 

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