Of the total earnings from leather in FY18, the Export Promotion Bureau (EPB) calculated that leather products earned $336.8 million - a year-on-year fall of 27% - even if leather footwear bucked the downward trend, growing by over 5% to $565.6 million in the last fiscal year.
Bangladesh’s export earnings from leather suffered a huge drop of over 12% in the last fiscal year, with manufacturers blaming the forced relocation of the centre of the country’s tanning industry.
The leather sector, the second largest export earner after apparel products, contributed $1.08 billion - or just under 3% - of the total national exports of $36.66 billion in fiscal year 2017-18.
According to Export Promotion Bureau (EPB) data, however, Bangladesh earned $1.23 billion from the sector in the FY 2016-17.
That strong performance had even prompted Prime Minister Sheikh Hasina to announce leather as the Product of the Year for 2017, saying the government would “boost this industry to reach its full potential”.
Since then, however, the industry’s manufacturing base has been hollowed out with the relocation of the tanneries from Hazaribagh in Old Dhaka.
The move was forced through in April last year when, following 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.
“The majority of factories are yet to resume manufacturing since the relocation,” Md Shakawat Ullah, the general secretary of the Bangladesh Tanners Association (BTA), told the Dhaka Tribune.
“So far only 110 tanneries have restarted production (and) because of that, the production rate is low and that is why export earnings were lower.”
Shakawat said buyers have reacted by switching to other sources of leather and leather products due to the non-compliance issues at Savar Leather Industrial Park, where the Central Effluent Treatment Plants are yet to become operational.
Manufacturers are also blaming the industry’s recent slump on the rise in popularity of rexine - a strong coated cloth which imitates leather and is especially useful for upholstery and bookbinding.
“Rexine and synthetic products are grabbing the market of leather products as they cost less,” MA Majed, an adviser to Bangladesh Finished Leather, Leather Goods and Footwear Exporters Association, said.
“Demand for leather goods is falling in the global market, but I believe this impact will be short-lived.”Of the total earnings from leather in FY18, the EPB calculated that leather products earned $336.8 million - a year-on-year fall of 27% - even if leather footwear bucked the downward trend, growing by over 5% to $565.6 million in the last fiscal year.
Majed, who is also the executive director (marketing) of Apex Tannery, said the prices of leather processed in Bangladesh is also falling due to the degraded condition of raw hides of slaughtered animals.
In the last fiscal year, export earnings from processed leather dropped by 21%, from $232.6 million to $183 million.
“Quality leather is a prerequisite for quality products in order to earn more,” he said. “To improve the leather quality, the government should introduce designated slaughtering houses in the major cities to ensure proper skinning of the slaughtered animals.”
Shakawat Ullah said the industry is being further hit by the failure of entrepreneurs to secure bank loans due to an administrative delay.
“The tannery owners have to provide their land registration documents as collateral to get loans (but) those relocated to the Savar Leather Industrial Park are yet to receive their documents from the government,” he said.
A tannery owner, requesting anonymity, said the government is yet to keep its promise to give this sector a boost after the relocation.
“It has been over one and a half years, but the tannery owners have not received the land registration documents,” he said.
“The government has given no proper direction since the relocation last year. The leather sector has hardly benefited from their special attention.”
US market opportunity
Sector sources said leather export earnings would rise again when all the tanneries at Savar become fully operational.
They said that in order to realize the full potential of the industry, the government will have to ensure unhindered utility services and finish installing the Central Effluent Treatment Plants.
In addition, the industry sees the potential to expand into the US market due to the country’s looming trade war with China.
US President Donald Trump has signalled his intention to slap a 25% tariff on a number of Chinese products entering its markets, in response to alleged intellectual property theft. China also quickly announced its own plans to put tariffs on US goods.
“If the US officially imposes the 25% tariff, entry of Chinese leather products to its markets might decrease and create opportunities for Bangladeshi leather goods,” said BTA leader Shakawat.
“We can grab more market share in the US by taking the advantage of the US-China trade war, but our government will have to take steps in tapping that opportunity."