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Export earnings from leather industry continue to fall

  • Published at 09:51 pm July 6th, 2019
Export earnings from leather industry continue to fall
Export earnings from leather industry continue to fall Syed Zakir Hossain/Dhaka Tribune

Delayed implementation of CETP, lack of infrastructure blamed

Export earnings from the country's leather sector, the second largest earner of foreign currencies after RMG sector, witnessed a 6.06% fall to $1.01 billion in the just concluded fiscal year, as non-compliance in environmental issues holds back foreign buyers.

However, the negative growth in the year less if compared with 12% in the fiscal year 2017-18. 

According to the Export Promotion Bureau (EPB) data, Bangladesh earned $1.01 billion exporting leather, leather goods and leather footwear, the only billion dollar export earner after the apparel goods, in the fiscal year 2018-19.

In the FY18, the export earnings from the leather sector was $1.08 billion and the sector saw 12% decline in export earnings. 

Of the total earnings from leather sector in FY19, leather products earned $247.28 million, down by 26.58%. The earning was $336.8 million in the previous year. 

Processed leather exports also declined by 10% to $164.62 million against $183.1 million in the same period a year ago.

However, exports earning from the leather footwear posted a 7.48% growth to $607.88 million, which was $565.6 million in the FY18. 

Why export earnings continue to fall 

Talking to Dhaka Tribune, industry people and trade analyst have blamed non-compliance in the sector through delayed establishment of central effluent treatment plant (CETP) at Savar Leather Industrial Park. 

In a move to make the sector compliant and environment-friendly, the government has forcibly moved the tanneries from Hazaribagh to Savar but construction of the new site is yet to be completed, especially the CETP.    

“We are not environmentally compliant. This is because of the absence of full-fledged operation of CETP. Moreover, the Leather Working Group (LWG) certification, which makes it easier to sell goods to the global buyers, is hard to come by for us due to the absence of a fully operational CETP,” Md Saiful Islam, managing director of PICARD Bangladesh Limited, has told Dhaka Tribune.

For lack of proper compliance, especially in environmental issues, Bangladeshi manufacturers are not getting the certificate from the LWG, which assesses environmental compliance and performance capabilities of leather manufacturers. "AS a result, export earnings from the sector saw downtrend," he explains. 

On top of that, consumers were shifting to non-leather shoes — another reason for the negative growth in earnings of overall export from leather sector, he mentions.  

Meanwhile, tanners, the suppliers of the raw materials to the footwear industry, have observed that earnings from the processed leather and leather goods fells as the production fell due to relocation to Savar.

“Manufacturers perform better when there is enough supply of raw materials. But the tanneries are suffering as the relocation hit the production of leather processing,” Md Shakawat Ullah, general secretary of Bangladesh Tanners Association (BTA), tells Dhaka Tribune. 

“Besides, some tanneries are not yet in operation as they have not yet completed construction of building in the Savar park and it affected production capacity,” he says.

The export earnings from the leather industry were in good shape before the inception tannery relocation, he says, adding that buyers are not making orders over compliance issues, which is largely dependent on the completion of CETP, points out Shakawat, also owner of Salma Tannery Ltd. 

"However, we are hoping for a better comeback as the authorities are expecting to complete the CETP by August this year," he says. 

How to return to positive growth

“Leather is the only sector, which earns over a billion dollar and is the second largest earners of foreign currencies after the apparel sector. It contributes 2.51% to the national exports. And the downtrend is a great concern for the economy,” former adviser to a caretaker government AB Mirza Azizul Islam tells Dhaka Tribune. 

In restoring the global buyers' confidence and ensuring compliance, he suggests, the government has to complete the CETP as well as the whole process of the relocation. 

Beyond this, he adds, the government has to start branding of the sector to rebuild the image already tarnished by non-compliances. 

Meanwhile, manufacturers urged the government to comply with the recommendations of the LWG in completing the CETP and total waste management. 

In making the industry a compliant one as per the international standard, the government has to implement the recommendations immediately, says Saiful.

"In addition, we have to concentrate on reducing water use and making Chrome Recovery Plant to ensure hazards-free discharge of water," he says.

He also suggests establishing cold storage instead of using salt to preserve rawhides.     

The relocation 

As per a High Court order, the government cut power and gas connections to the tanneries to compel the owners to relocate to the purpose-built Savar Leather Industrial Park to the north of the capital in April 2017.

The Industries Ministry allocated plots to 155 tannery owners through the Bangladesh Small and Cottage Industries Corporation (BSCIC) in the Leather Industrial Park established on 200 acres of land in Savar. 

As per the agreement, the government was supposed to establish a CETP at the industrial park to ensure that the liquid wastes discharged by the tanners are treated before flowing into the nearby river. 

The government decided to transfer the tanneries from Hazaribagh amid pressure from local and international rights groups, environmental activists and buyers because of their hazardous effects on public health and environment, especially the Buriganga River.