Leather sector aims for $5b in exports

Bangladesh will be able to churn $5 billion from exporting leather, leather goods and footwear in four years, riding on the back of product diversification and value addition, a leading exporter said yesterday.

The sector will create 200,000 jobs in the period, said Md Saiful Islam, managing director of Picard Bangladesh.

“Everyone is talking about export diversification. The leather sector will help Bangladesh diversify its exports,” said Islam, also the vice president of Leathergoods and Footwear Manufacturers and Exporters Association of Bangladesh.

leather meet
Participants in a conference on social responsibility, organised by Bangladesh German Chamber of Commerce and Industry, pose for photographs at Radisson Hotel in Dhaka yesterday. Photo: STAR

He spoke at the third global social responsibility conference, organised by Bangladesh German Chamber of Commerce and Industry (BGCCI) and GIZ, the German agency for international cooperation, at Radisson Hotel in Dhaka.

The sector recorded $1.3 billion of exports in fiscal 2013-14 and set a target of $1.5 billion for this fiscal year. Leather exports accounted for 4.29 percent of the country’s total exports worth $30.17 billion last fiscal year.

The high cost of doing business in China has created a business opportunity for Bangladesh due to its competitive workforce, he said. “Bangladesh saw political unrest last year, but not labour unrest. It is a positive sign for Bangladesh.”

It will be easier for exporters to add more value to the local products as the sector has some advantages in its value chain, Islam added. “We are addressing the environmental issues with the government and I am confident that those will be overcome by mid-next year.”

Salehuddin Ahmed, managing editor of The Daily Star, moderated the session.

The leather sector is the next promising sector after garments, Ahmed said. “If we put our minds together, we will succeed in the sector, like in RMG.”

The leather sector has the potential to deliver rapid growth as it has a huge supply of hide, competitive cost base, huge workforce, tariff-free access, business shifting to Bangladesh from China, and a growing middle class, said Adnan Nafis, head of trade promotion at BGCCI.

Vietnam has set its goal of $12 billion in leather-product exports in 2014. In the first nine months of the year, Vietnam received around $7.4 billion from shipping footwear abroad, up nearly 24 percent year-on-year and $1.9 billion from exporting handbags, up 37 percent year-on-year, according to data from the Southeast Asian nation’s government.

“So our target of $5 billion in exports is achievable,” Nafis said.

Bangladesh exports leather products mainly to Italy, New Zealand, Poland, the UK, Belgium, France, Germany, the US, Canada and Spain.

In addition, Japan, India, Nepal, Australia and some other countries are emerging as potential importers of Bangladeshi leather goods.

Bangladesh’s leather exports account for a mere 0.005 percent of the global leather and leather goods market worth around $230 billion, according to industry insiders.

The sector has immense potential to tap more export orders, said Nabhash Chandra Mandal, executive member of Board of Investment. The sector registered 28 percent growth last year, he added.

The duty free import of raw materials and tax rebate facility for the sector will encourage foreign companies to form joint ventures with local companies, he said.

“The tannery relocation process is slow. We should complete it soon.”

About 80 tanneries have started relocating from the toxic tannery hub of Hazaribagh to Savar, according to the tanners’ association.

The industries ministry has already allocated plots on the 200-acre leather estate in Savar to 155 tannery owners through Bangladesh Small and Cottage Industries Corporation, a wing of the industries ministry that is implementing the project.

The central bank also declared an incentive package for tanners to help them move the hazardous factories to a designated industrial park.

Bata Shoes is facing some problems, such as high value-added taxes and counterfeit shoes from Myanmar and Thailand, said Iftekhar Haider Chowdhury, industrial relations manager at the company.

“We have 300 outlets across the country but counterfeit shoes are sold on the roads or others showrooms, which affect our business.”

“The company pays VAT twice on its finished products. It pays VAT when the product comes out of the factory and again when it is sold.”

“The problem should be addressed,” Chowdhury added.

The company has the highest market share of 22 percent in Bangladesh, playing an important role in transforming the economy as it paid $ 22.5 million in tax and VAT to the government last year, he said. Bata sold 30 million pairs of shoes last year.

The collection and preservation process of rawhide should be developed to produce quality finished products, said Sabur Ahmed, chairman of the leather engineering department at Dhaka University.

“We should add value to our finished products to get more export orders.”

-the Daily Star