For the last couple of years, Bangladesh’s leather industry has been going through a crisis over environmental and social compliance issues, which have pushed export earnings down
In order to tide over compliance related crises and attain global certification, the country’s leather industry needs a realistic and modern policy framework in the post pandemic era, experts and people related to the industry said on Tuesday.
They also called for rebranding the country’s image as a compliant and genuine leather goods supplier through ensuring social and environmental compliance in the sector.
They made the observations at a virtual dialogue on the theme, “Future of Bangladesh Leather Sector in the Aftermath of Covid 19,” organized by the Economic Reporters’ Forum(ERF) in association with Asia Foundation and Research and Policy Integration for Development (RAPID).
For the last couple of years, Bangladesh’s leather industry has been going through a crisis over environmental and social compliance issues, which have pushed export earnings down. In the last FY20, exports from the sector fell by 22% to $798 million.
The crisis deepened with the slow relocation process of tanneries from Hazaribagh to the Savar Leather Industrial Park.
The sector is yet to become compliant and environment–friendly due to the lack of a functional Central Effluent Treatment Plant (CETP).
In the given situation, it is crucial to restore buyers’ confidence through ensuring compliance and certification from the Leather Working Group (LGW).
“The CETP was at the core of the relocation project of the tanning industry, but it is not running at its fullest efficiency as some of the facilities are yet to be installed,” said M Abu Eusuf, a professor of Development Studies at Dhaka University, in his presentation.
“Technical evaluation and compliance of environmental issues of CETP in accordance with the LWG protocol must be ensured to make it fully functional and internationally accredited,” he said.
The CETP lacks a full-fledged laboratory to measure all relevant parameters for smooth operation and monitoring, said Eusuf, suggesting appointing a professional management organization to manage the CETP.
He recommended a five-year plan to revive the leather sector, attain LWG certification and build a brand image to attract global buyers.
Speaking as the chief guest, Salman Fazlur Rahman, Private Sector Industry and Investment Adviser to the Prime Minister, said the CETP had been completed and was functional.
Water discharged during March-July met global standards. But in August-September it failed to maintain the standards due to excessive use of water by tanners, he added.
Attaining certification from LWG would be a big leap forward for local tanners and open up the international market to leather products made of locally processed rawhides, said an economist.
In order to attain the target and address the crisis, experts called for an effective and long- term policy.
“The leather sector needs a sector-specific, realistic and modern policy framework to address its longstanding challenges,” said Mohammad Abdur Razzaque, Chairman of RAPID.
Efficient operation of the tannery estate should be of utmost priority in building an export supply response, said Razzaque.
When domestic demand is very strong, export can be replaced by internal consumption. Trade policy and differences between domestic and foreign standards can stimulate this trend, said the economist.
Meanwhile, tanners put emphasis on establishment of grounds for solid waste management.
“The sector produces about 70,000 tons of solid waste but there is no dumping station or management plant,” said Shaheen Ahmed, chairman of the Bangladesh Tanners Association (BTA).
Relocation has caused a drastic fall in exports due to an environmental deficit, which remains a big challenge for the sector, said Shaheen.
Meanwhile, experts as well as people involved with the sector stressed a free trade area (FTA) agreement for the post-LDC graduation regime.
“Understanding the likely implications of LDC graduation is important and the scope of post-LDC export incentives should be carefully considered,” said Razzaque.
“China and India are big markets for Bangladesh, as we enjoy duty–free market access in those markets, which will not exist after the LDC graduation,” said Syed Nasim Manzur, Managing Director, Apex Footwear.
Vietnam, our close competitor, had gained as it had signed an FTA agreement. “We should be clear about the graduation, when it would be or should be,” said Nasim.
Experts also called for a targeted policy to attract FDI in the tannery sector as it would help attract renowned global brands and share their experiences.
They also called for equal treatment in terms of incentives and policy support like the RMG sector.