Leather goods exporters in tight spot
Leather goods and footwear exporters will continue to face serious hardships amid the ongoing pandemic as the declining export orders have led to a capital shortage in the sector, according to industry insiders.
Export orders may plunge by more than 50 per cent this year, which would make it difficult for companies to continue operations after facing losses for the last eight months, they said.
Besides, there is no immediate solution to the current crisis, for which many small manufacturers will have to shut down their factories, they said.
However, the exporters could not provide reliable figures on the number of orders received this season as they do not compile such records.
Rubina Akhter Munni, owner of Design by Rubina, said she lost sample orders worth around Tk 1 crore from international buyers due to the Covid-19 fallout.
"Now, I do not have any orders from abroad. I even had to terminate some staff due to a capital shortage," she said.
"I fell into trouble just when my business started to flourish ahead of the pandemic. I am not sure when I will recover from this crisis," Munni added.
Tipu Sultan, chairman of Bengal Leather Complex, said the main obstacle faced by the leather sector is a lack of compliance at a time when the Covid-19 has significantly reduced exports.
There is also a lack of planning to develop the sector's backward linkage industries, he added.
According to Sultan, exporters are paid 30 to 40 per cent less for their products due to the sector's non-compliance with international standards.
"The sector will capsize gradually as there is no proper plan for ensuring compliance or a solution," he said.
The current export volume of finished or semi-finished leather came down to $90 million while it was $350 million in 2014, the chairman added.
"We usually receive orders for next summer season during this time. The present shipment is from an earlier order," said Nasir Khan, chairman and managing director of Jennys Shoes, a manufacturer and exporter of leather footwear.
"At this moment, my orders have seen a 30 per cent year-on-year fall," he added.
Khan, also vice-president of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB), went on to say that he does not know when exports would return to normalcy as the buyers have no interest to place orders amid the global threat of a second wave of the Covid-19.
The retailers in the EU and the US that source products from Bangladesh are placing an insignificant number of orders. Besides, most entrepreneurs related to the industry were unable to avail any financial support from the government's stimulus packages, which has led to a shortage of working capital in the sector.
Khan said lenders often claim to have insufficient funds to make disbursements.
According to the LFMEAB vice-president, there is no way for the sector to revive exports immediately, and the ongoing crisis will continue up until a vaccine hits the market.
Mohammed Nazmul Hassan Sohail, managing director of Leatherex Footwear Fashion, said the sector's future in terms of export is quite unpredictable and no one knows when it will return to normal.
"The buyers have no option here since they had to shut down their stores due to a decline in sales," he said.
Meanwhile, a potential second wave has slowed down the sales of leather products, Sohail added.
According to him, consumption declined around 40 per cent while production fell 50 per cent amid the pandemic.
Leather products are formal items, and so, customers do not want to spend heavily on these items while incomes have declined as well.
"We don't know what we should do at this moment. But we are giving salary to the employees," Sohail said, adding that companies are adopting different strategies to survive.
The government and the manufacturers will have to work hand in hand to overcome this crisis, he said.
Sohail fears that certain export-oriented companies, particularly small manufacturers, would be compelled to close their factories if the situation lasts for another six months.
"Now the situation has reached a stage where it is tough to repay instalments on bank loans," he said.
Exporters lost their winter orders as a result of the Covid-19 fallout, which is evident from the data of the Export Promotion Bureau.
However, Rajan Pillai, chief executive officer at Apex Footwear, said the situation might gradually get better despite the current hard times.
But if the 165 footwear and leather factories currently operating in Bangladesh were compliant and used modern technologies, they could fetch up to $5 billion in export receipts, according to the LFMEAB.
Bangladesh's leather sector is failing to make it big internationally even though the country has an abundance of rawhide and a skilled workforce.
Of the country's total production, only 30 per cent of finished leather is consumed locally while the remaining 70 per cent is exported, mostly to China.