Pressing issues like relocation of tanneries from Hazaribagh to Savar and compliance requirements put a dent on export earnings from leather and leather goods, preventing the sector from tapping into the opportunity arisen from the US-China tariff war.
Industry people involved in the leather processing and export business said the present situation held back top global buyers from sourcing leather from Bangladesh.
“The biggest problem for the Bangladesh leather industry is environmental compliance. Due to lack of the proper functioning of CETP at the Savar Leather Industrial Park, we cannot be compliant,” Md Saiful Islam, Managing Director of PICARD Bangladesh Limited,told the Dhaka Tribune.
On the other hand, some of the tanneries are not in operation as they are yet to complete setting up in the area, and that has reduced production capacity, said Saiful.
According to Export Promotion Bureau (EPB) data, in the first five months of the current fiscal year, Bangladesh’s export earnings from leather and leather products went down by 16.11% to $434.7 million, which was $518.15 million in the same period a year ago.
Export earnings from crust leather saw 5.42% decline to $76.24 million, while leather products registered a 49% fall to $94.18 million.
However, leather footwear posted a 4.54% rise in export earnings to $264.28 million, which was $252.81 million in the same period a year ago.
In the last fiscal year, Bangladesh’s export earnings from leather suffered a drop of over 12% to $1.08 billion, which was $1.23 billion in the fiscal year 2016-17.
Why sector bears the brunt of non-compliance
Talking to the Dhaka Tribune, manufacturers have blamed ongoing relocation of the tanneries from Hazaribagh in Dhaka to Savar, which is still taking toll on the sector as it will take another six months to complete the Central Effluent Treatment Plant (CETP). Buyers do not want to place work orders without a compliant supply chain.
“To make the leather sector safe and compliant, the initiative was taken to establish the Savar Leather Industrial Park, which has every facility up to global standard. But due to unusual delay in completing the CETP, the sector could not become fully compliant,” Md Shakawat Ullah, general secretary of Bangladesh Tanners Association (BTA) told the Dhaka Tribune.
“Due to lack of environmental compliance at Savar Leather Industrial Park, global buyers are not placing work orders. As a result, export earnings from leather and leather products, the second largest exports earner,have seen a downward trend,"he added.
However, the Ministry of Industries denied the allegation and opined that there might be other reasons that caused the downswing in export earnings.
“There are many reasons, which can cause downward trend in export earnings. I don't agree that the compliance issue has caused the export earnings to fall,” Md Abdul Halim, secretary in-charge, Ministry of Industries,told the Dhaka Tribune.
The government established the dedicated industrial park to make the leather industry compliant and environmental friendly. The installation of the CETPis expected to be completed by the end of June 2019, Halim added.
Trade experts also expressed their concerns over the delayed implementation of compliance issues at the Savar Leather Industrial Park.
"In a bid to make the leather sector complaint, the government relocated the tanneries to Savar from Hazaribag. But it is still a great concern for the buyers,as well as the industry people, asthe compliance is afar cry from expectation,"former caretaker government finance adviser MirzaAzizul Islam told the Dhaka Tribune.
"Since compliance is a global issue, I think the government should complete the CETP within the deadline and make it environment friendly,"he added.
Solid waste management a big concern
Though the CEPT is being implemented, solid waste management still remains a great concern for the sector.
During a recent visit to the Savar leather park, the Dhaka Tribune found solid wastes being dumped in an open space, which is spreading foul smells and polluting air quality in the surrounding areas.
There is some progress in liquid waste management, but solid waste management remains a big concern for the sector as there is no visible step, said Shakawat Ullah, the general secretary of BTA.
The Ministry of Industries, however,rejected this allegation, too.
"There is a dedicated place in the area, where solid waste is being dumped and it does not spill over to the nearby river or spread bad smell,"claimed Abdul Halim, the ministry's secretary in-charge.
He added that there is a designated official to monitor the pollution aspects of the park.
Leather sector cannot gain from the US-China trade war
The ongoing US-China trade war has created opportunities for Asian countries to grab more of the global market share, especially in apparel and leather sectors. Though the ready-made garment sector has seen a rise in export earnings,the leather sector has failed to do so.
“The US-China trade war has created a direct export opportunity for Bangladeshi leather and leather goods in the US market,” Md Mizanur Rahman, treasurer of Bangladesh Tanners Association (BTA),told the Dhaka Tribune.
But American buyers do not want to source products from any non- compliant factory. "As a result, due to lack of functional operation of CETP, we cannot utilize the opportunity,"said Rahman, who is also the executive director of Samata Leather.
After an abrupt cut of utility services to the tanneries at Hazaribagin April, 2016 for delay in relocation, workin the factories was stopped for a period of time, which hampered production resulting in many buyers to leave the country, industry people said.
To bring the buyers back to Bangladesh, the country needs quick implementation of the Savar project to make the supply chain compliant and efficient, Rahman added.
Global buyers expressed concerns over pollution
In September, Interfaith Center on Corporate Responsibility, a coalition of over 300 global institutional investors, urged the Bangladesh government to ensure occupational health and safety, protection of the environment and worker rights, and not to allow child workers in the country’s leather industry.
Given the relocation of the tanneries to Savar, it is a critical time for investors to take stock of what has been accomplished,and what remains to be achieved, to mitigate risk to workers and the environment, as well as the legal and reputation risk to companies, said the organization in a recent letter to the Bangladesh government.
In its observation, the Interfaith Center said about 60% of the planned waste management infrastructure has been completed at Savar.
However, the Central Effluent Treatment Plant (CETP) is yet to be fully functional.
In the absence of a fully functional waste management infrastructure, the tanneries are now polluting the Dhaleshwari River. Meanwhile, the tanneries continue to dump their hazardous solid wastes in a man made pond, said the statement.
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 at Savar.
As per an agreement, the government was supposed to establish a CETP in the leather park to ensure that liquid wastes discharged by the tanneries are treated before flowing into the nearby river.
The government decided to move the tanneries from Hazaribagh to Savar amid pressure from local and international rights groups, environmental activists and buyers, because of their hazardous effects on public health and the environment, particularly the Buriganga River.
