Govt has come up with a solution to the hurdle to higher leather exports
The government will allow construction of effluent treatment plants (ETPs) by individual tanneries inside the Savar Tannery Industrial Estate (STIE) in a bid to expedite the process of obtaining much-needed certification from the Leather Working Group (LWG) to boost export of leather goods.
Exporters now face delays in getting LWG certificates as Bangladesh Small and Cottage Industries Corporation (BSCIC), the authority of the estate, could not complete construction of a central ETP at the site despite taking a project in 2012.
The groundwork for the CETP started in 2014 and it was supposed to be completed by 2017.
The UK-based LWG is made up of member brands, retailers, product and leather manufacturers, chemical and machinery suppliers, technical experts and other service providers that work together to maintain environmental stewardship protocols specifically for the leather manufacturing industry.
Obtaining certification from the group is a prerequisite for any country to sell leather and leather goods at international rates.
As European and American buyers do not buy goods from non-compliant factories in Bangladesh that are yet to be certified by the LWG, exporters sell tanned leather to some Chinese companies at rates 40 per cent lower than those prevailing in the international markets.
The Chinese importers reprocess those goods as per international standards.
The construction of the CETP has been delayed for several reasons, like the change of project directors for several times over the years, fund crisis, legal dilemmas, bureaucratic tangles and delays caused by Chinese engineers.
So far, Tk 879 crore has been spent on the CETP, said Jitendra Nath Paul, project director of the STIE.
"I hope this time we will be able to build the CETP as the construction of the main part is complete."
Work for two waste dumping stores is going on, which is expected to be complete over the next two months.
"We are ready to take over the CETP from the construction company by December."
Once the CETP is ready, the authorities will apply for LWG certification so that Bangladeshi companies can export more and get better prices for their leather and leather goods, Paul told The Daily Star over the phone.
"We are planning to let individual tanneries build their own ETPs in the estate," said Md Jafar Uddin, commerce secretary.
The LWG certificate will help Bangladesh grab a bigger share of the international market and ensure better prices for locally produced goods, he said.
The government has taken some programmes to increase export, add more value and create jobs in the leather and leather goods industries, which is the second-highest export earning sector after apparel, he said.
The leather and leather goods industries generate fully value-added products and the majority of the raw materials are supplied by local people, he said.
"We are working to achieve the target of exporting $5 billion worth of leather and leather goods by 2024," Uddin said.
Last month, the government took a project titled Export Competitiveness for Creating Jobs with the view to producing skilled manpower, he said.
The local manufacturers will also be able to hire skilled people to be trained through this project, he said, adding that the project will help diversify markets and products.
"I believe that the export target of $5 billion is achievable as the major markets like the EU and the US would be opened up once we obtain the LWG certification," Uddin said.
Currently, the local leather and leather goods exporters are given 15 per cent cash incentive on their export receipts.
Since, Bangladesh is a major producer of rawhide, the manufacturers and exporters of leather and leather goods will be able to get the raw materials easily, which will help in reducing the lead time, he said. "This is a big advantage for Bangladesh."
Many internationally reputed brands do not show interest in sourcing leather and leather goods from Bangladesh only because of the absence of the LWG certification, said Saiful Islam, president of the Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh.
"So, obtaining LWG certification is very important for the country. It will help create more demand for locally made leather and leather goods, which, in turn, will increase the demand for rawhides in the country."
The demand for leather and leather goods is low now compared with the pre-pandemic times as people consider these goods as luxury items, Islam said.
If Bangladesh obtains the LWG certification and the government formulates proper policies, the sector can reach the $5 billion export target in the stipulated time.
Currently, three local leather and leather goods manufacturing companies have the LWG certification and they are doing good business with their international trading partners.
More companies need to obtain the certification, Islam added.
Monitoring would be very difficult if the government allows the construction of the ETPs by individual companies as there are 155 tanneries inside the STIE, said Md Shaheen Ahmed, president of the Bangladesh Tanners Association.
So far, two companies applied to BSCIC for obtaining permission to construct the individual ETPs, he said.
About 155 tanneries have invested Tk 7,000 crore inside the estate, employing nearly 50,000 people.
Across the country, the leather, leather goods and leather footwear industries have invested $1 billion in upwards of 1,200 factories, where more than one lakh people work.
Of the total industrial units, 200 are engaged in export.
The leather, leather goods and leather footwear is the only sector after apparel that has been fetching over $1 billion from export every year since fiscal 2011-12 save for last fiscal year.
In fiscal 2019-20, export earnings from leather and leather goods fell 21.79 per cent year-on-year to $797.6 million, according to data from the Export Promotion Bureau.