Leather sector eyes $5b from exports
Bangladesh will be able to earn at least $5 billion in exports from leather, leather goods and footwear in the next decade if it can properly address health, environment and compliance issues in the sector, analysts said yesterday.
“We have all the elements, such as cheap labour and raw materials to grab more orders,” Bazlul Haque Khondker, an economics professor at Dhaka University, said at a roundtable..
But the country lacks environment friendly tanneries to process leather, posing as the main bottleneck to increasing exports, he said.
“So, it is an urgent requirement to start relocation of hazardous tanneries from Hazaribagh to Savar.”
Bangladesh now exports leather, leather goods and footwear worth around $1 billion a year, which accounts for only 0.005 percent of the global market worth $230 billion, said Shaheen Ahmed, chairman of Bangladesh Tanners Association (BTA).
The leather industry stakeholders were speaking at the roundtable -- Relocation of Tannery: Progress and Prospect, co-organised by BTA, Bangladesh Finished Leather, Leathergoods and Footwear Exporters' Association, in partnership with the Asia Foundation and South Asian Network on Economic Modelling (SANEM) at The Daily Star Centre.
Khondker said additional exports of leather goods will benefit the country immensely.
The country will be able to increase domestic manufacturing output by 9.2 percent and agricultural output by 6.7 percent if it can export an additional $5 billion in leather items, according to a 'simulation exercise' conducted by Khondker and M Abu Eusuf, a professor at the development studies department at DU.
Agricultural output will increase mainly due to high demand for livestock, he said. The leather sector would also create 4.4 million additional jobs, according to the study.
Tannery owners also urged the government to provide long-term loans at single digit interest rates to expedite relocation.
Tanners will have to invest around Tk 6,000 crore to relocate the factories, establish new plants and begin commercial production, Shaheen Ahmed of the BTA said.
“We need soft loans to relocate the tanneries as leather is a capital-intensive industry,” said M Abu Taher, chairman of Bangladesh Finished Leather, Leathergoods and Footwear Exporters' Association.
He called upon the government to take necessary steps to arrange soft loans.
Amir Hossain Amu, industries minister, also urged the tannery owners to start relocation as soon as possible, considering the environment issues and global business opportunities.
Bangladesh faces a deadline to cut toxic pollution from tanneries by the end of the year, to be able to continue leather or leather goods exports to European countries, according to Amu. Leather goods makers are already facing difficulties in exports due to the absence of a modern central effluent treatment plant (CETP).
Geox, a large European company, recently withdrew orders for 2.5-3 million square feet of finished leather from Bengal Leather Complex Ltd mainly due to the absence of CETP, said Tipu Sultan, managing director of the local company.
A total of 127 tannery owners out of a total of 155 so far have submitted factory layout plans to Bangladesh Small and Cottage Industries Corporation (BSCIC), the implementing agency.
BSCIC has approved 85 plans so far, said Sirajul Haider, project director of the Savar tannery industrial estate.
Chinese joint venture JLEPCL-DCL already resumed construction of the CETP, said Md Asiqur Rahman, a representative of the Chinese company.
JLEPCL-DCL is expected to install the plant by June 2015 at a cost of Tk 477.46 crore at the Savar Leather Industrial Park that is under construction, he said.
The industries ministry has already allocated more than 205 plots on 200 acres to 155 tannery owners through BSCIC, a wing of the ministry.
The project, which took off in 2003 at an approximate cost of Tk 175.75 crore, came to a standstill over a decision on who would bear the lion's share of the cost and receive the contract for the CETP.
The government would provide 80 percent of the project cost at Tk 829 crore and the 155 tanneries the rest.
Since 2003, the total project cost shot up to Tk 1,079 crore, including the Tk 250 crore in compensation to be paid by the government to the tanneries. The government now intends to complete relocation by 2016.
The Asia Foundation is working as a facilitator between the government and private sector to complete the relocation process as soon as possible, said Syed A Al-Muti, associate director of economic development of the foundation.
He stressed the need for proper coordination between the stakeholders to expedite the relocation process.
At the event, a website was launched to promote the Bangladesh leather sector in the global market.
The industry earned $980.67 million last fiscal year in exports, up 28.2 percent year-on-year, according to Export Promotion Bureau.
In the first eight months of the current fiscal year, exports rose 39.46 percent to $847.68 million.