Professional Documents
Culture Documents
Leather Industry of BD
Leather Industry of BD
Leather Industry of BD
INTRODUCTION
In Bangladesh the leather industry is well established and ranked fourth in terms of
earning foreign exchange. In consideration of being a value added sector the
(Government of Bangladesh (GoB), Ministry of Industry (MoI) has declared it as a
priority sector. The leather products sector have huge opportunities in generating
employment , entrepreneurship and investment by increasing export of higher value
added products rather than finished leather and by utilizing locally made raw material
(finished leather) to convert into more value added leather products (including
footwear and other leather goods).
Statistics prepared by Export Promotion Bureau of Bangladesh for the Financial Year
2011-12, the leather sector grew by 17.5 percent and earned $765 million in revenue.
Of this $434.8 million was attributed from leather products, accounting for
approximately 57 percent of the total revenue. The leather sector includes 220
tanneries, 3,500 MSMEs and 110 large firms2 of leather products controlling more
than 90% of the export market. Most of the enterprises are located in Dhaka, followed
by two big clusters at Bhairab and Chittagong.
The sector generates direct and indirect employment for about 850,000. People,
including a significant number of women, particularly in the leather products
industries Leather is the basis of one of the oldest industries in Bangladesh and plays
a significant role in the national economy with a good reputation worldwide.
This is an agro-based by-product industry with locally available indigenous raw
materials having a potential for export development and sustained growth over the
coming years. Bangladesh leather is widely known around the world for its high
qualities of fine grain, uniform fiber structure, smooth feel and natural texture.
negligible, although this Sub sector is dominant in the domestic market especially in
leather footwear, as almost the entire demand in this regard is satisfied through local
production.
Another Important item of output of the leather sector is vegetable tanned leather,
made of buffalo hides. The entire output is locally used for shoe soles and indus trial
lead.
i. Low product quality and productivity: Product quality and overall productivity is
always a concern for this sector. The product quality means the reliability and
aesthetics of the finished products. It stems from the quality of basic raw materials
including flayed hide/skin and chemicals, the overall workmanship and the
machines/process used in the industry, so the sector still today target mostly the low
end product market. The main reasons of poor quality are
Lack of formal education of stakeholders / owners particularly of tannery.
Lack of awareness of stakeholders involved in skin/hide flaying and
preservation business.
Limited awareness and knowledge of proper butchery and hide preservation
among amateurs flaying during the (sacrificial) festival.
Poor quality of finished leather.
Higher prices of imported processing chemicals for hides/skins.
Poor quality of raw materials.
j. Outdated Machineries - Traditional status quo mind set of the owners; they lack
information on appropriate machineries, sources, prices etc. They also lack awareness
on incentives for product / productivity improvements, are using traditional tanning
and manufacturing methods and process.
k. Limited access to finance: Lack of awareness of FIs on potentiality and risks of this
business. Collateral and complicated formalities to have finance.
l. Lack of support and promotion for SMEs.
m. Absence of integrated policy; no long term policy regarding Common Facility
Center (CFC).
n. Lack of Accessories Manufacturers as backward linkage.
o. Lack of skill development institutes.
p. Poor infrastructure (power), interrupted power supply.
q. Waste management is in shambles.
2.2 Opportunities:
Huge untapped international market, <1% as well as domestic market
Increasing global demand for value added, diversified products
Scope of developing backward linkage business
High value addition potential
High tax on competitors by major leather products importers
Labor intensive; employment opportunities
Low wage workers convertible to skilled ones
No duty on shoes, leather products made and exported from Bangladesh.
Establishing by-product industry with solid and liquid waste through proper R& D
Local and Foreign Direct Investment opportunity in value added leather products
sector
China is losing competitiveness
Future Leather estate to raise brand image
backward linkage development
Investment in the value added leather goods and footwear sector
Government policies toward leather exporters; GSP, Cash Incentive; etc.
Already big players like Young-one, Blue Ocean, Venturini, Tata invested in BD
signaling many more to follow.
Increasing International and Local demands for value added leather products.
International Fashion and sourcing houses in BD for RMGs showing interest in
leather products.
2.3 Challenges:
Selective and limited Access to Finance
Lack of Skilled Workforces
Lack of access to latest technology and machinery facilities
Insufficient services and supports from BIOs.
Lack of education, training
Absence of entrepreneurial skill, rent seeking mentality.
Poor linkage and coordination between/among SMEs and lead firms
Years. Bangladesh leather is widely known around the world for its high qualities of
fine grain, uniform fiber structure, smooth feel and natural texture. Real progress in
terms of product development with respect to crust and finished leather commenced
in the 1990s following the ban on export of wet-blue hides from Bangladesh.
of the total supply of hides and skins are processed in a highly congested area of only
29 hectares of land.
Currently there are about 30 mechanized footwear companies in the country, most
produce leather footwear for global export. A large number of semimechanized and
non-mechanized footwear units are also operating for the domestic market. Some 5 or
6 companies produce quality leather goods which are regularly exported in
appreciable volume. Export performance can be anticipated to increase in the next
five years with at least 12-15% growth in turnover perannum.In the next two years
the existing footwear factories are likely to export more shoes. The new capacity
[expanded and new factories] that will come on stream from late 2012 will give
increased growth. The Export Processing Zones (throughout Bangladesh) at present
have 18 shoe and leather goods factories and there are at least seven large factories
under construction. Factories under construction include the Korean company Young
ones footwear complex which will be the largest in Asia. The leather products subsector is ideal for youth, women and micro entrepreneurial start-up businesses, based
on the low costs and capital investment. It can also provide the opportunity to gain
experience to transfer to footwear or other creative sub sector
engages in export trade. The Institute of Leather Engineering and Technology (ILET)
is the only educational institution in Bangladesh covering human resources
development in the field and new technology Annually about 85 000 tonnes of raw
material are processed in Bangladesh. The estimated quantity of tanned and untanned
waste from the processing of one tonne of salted hides/skins according to various
authors and Bangladeshi leather industries.
YEAR
2003
2004
2005
2006
leather goods made of Ostrich bird leather, is an unique collection amongst many
other exciting products made of goatskins, cow calf, Buff-Calf etc.. Articles made of
ostrich bird leather are exported to Australia (ostrich bird leather is imported from
South Africa and Australia). Bangladesh has also entered the field of Leather fashion
garments with items of distinction. The leather goods manufacturing firms use
basicallyfinished leather and lining leather as raw materials and all are collected from
local sources.
In the last ten years (2002-2012) among the major exporting sectors leather and
leather products account for a significant growth (300%) particularly the leather
products sub-sector (900%). Export of leather products jumped from $ 50 million to $
435 million which is only 0.5% of the global market share so there is a huge room to
explore the opportunity for the leather products sector of Bangladesh to increase the
world market share1.
Export Performances of leather and leather Products (leather footwear and leather
goods) last 5 yrs in USD Millions. Source EPB statistics, 2013.
The leather products industry includes 3,500 SMEs and 100 lead firms controlling
more than 90% of the export market. Most of the enterprises are located in Dhaka,
followed by two big clusters at
Bhairab & Chittagong. The
sector generates direct and
indirect employment for about
850,000 people, including a
significant number of women,
particularly in the footwear and
leather goods industries.2
MSMEs are the heart of this
sector; the large/organized enterprises are increasingly depending on SMEs as
outsourcing business is on a rise. Apart from that, MSMEs themselves are exposing
as important market players. Despite this fact there is room for the development of
MSMEs in this sector.
With the expansion of export market and increase of per capita income with
consequent higher living standard the demand for local market is also increasing
particularly for the footwear and leather goods which are mostly dominated by
MSMEs (70%) 4. Organized factories like Bata, Apex, Jennys, etc are controlling the
rest 30% market5. Domestic market of footwear and goods in Bangladesh is ~146
millions of pairs worth ~ USD 350 million6. The ratio of sourcing from local
enterprises and import is 80:20 in terms of products quantity. Out of this USD 350
million the imported leather products comprise 40%7 meaning that high ended
products are imported. Unfortunately most of these imported products are smuggled
(80%) 8 in. The country is loosing value to the tune of USD 140 million due to the
following reasons
Most SMEs failed to graduate to the value chain since its inception due to above
mentioned reasons as well so that efforts form all corners is required to make them
commendable stakeholders. The value chain of manufacturing part consists of 1)
Tannery, 2) Leather Footwear and 3) Leather Goods. Other than these 3 sub-sectors in
leather sector no new sub-sector is found emerging very soon, although a few big
companies from Taiwan and China already invested in this sector, and a few factories
started producing outsoles which is a very important and welcoming start of new
integration in the footwear sub-sector. The backward linkage industries are almost
empty, and open for investment.
Production
World
(Avg)
Export
Share of
Banglades
h
Bangladesh
World
(Avg)
(Avg)
Banglade
sh
Banglades
(Avg)
(Avg)
2000-
126.6
2001
2001-
148.8
2002
2002-
150.5
2003
2003-
155.6
2004
2004-
Share of
h
(%)
45.26
35.74
16.83
15.55
92.39
51.37
34.52
16.47
14.11
85.67
56.85
29.27
26.03
25.19
96.77
53.30
34.25
19.17
19.05
99.37
49.86
17.04
63.26
24.47
2005
20052006
MT
Internal
ion
Consump
Price Per MT
tion
in TK.
Year
Export
Volu
Avg. Export
Value
me
2000-
4.83
0.87
4.26
2001
2001-
5.36
0.85
4.41
5.16
0.95
4.37
5.17
0.94
4.72
2006
1485.37
39000
1448.10
30680
(245.60)
5.24
1.07
4.20
2005
2005-
31000
(256.34)
2004
2004-
1341.37
(236.07)
2003
2003-
29000
(224.50)
2002
2002-
1204.01
1543.08
35000
( 255.52)
5.69
0.79
4.40
1610.48
(238.73)
39000
Center (CFC).
Bring Accessories Manufacturers as backward linkage.
Improve skill development institutes.
Build more infrastructures (power), interrupted power supply.
Make environment friendly Waste management
Improve hide collection systems
Increase R&D, laboratory facilities
Develop the training facilities and centers
Vulnerable SMEs; poor enterprise level cooperation develop
international brand image should me make
countries import low and medium end market leather footwear and leather goods
from developing countries keeping their manufacturing limited to high fashioned
costly products.
Bangladesh has not yet been able to make a significant breakthrough in its leather
sector through diversification and improvement of the quality
of leather products. Bangladesh needs to improve the quality of leather products for
better market acces
s and economic benefits from the international export market including the developed
countries.
References:
r0.unctad.org/trade_env/test1/meetings/bangkok5/b5Draft case
study Bangladesh.pdf
http://iosrjournals.org/iosr-jbm/papers/Vol16-issue12/Version2/G0161224451.pdf
http://www.bkmea.com/images/media/history_of_development/pro
duct_catagory.jpg
http://lightcastlebd.com/blog/wp-content/uploads/2014/11/graph21.png
http://www.dhakatribune.com/commerce/2013/oct/02/bta-seesnew-opportunity-leather-goods-export
http://www.dhakachamber.com/economic_policy/Leather_Goods_
Final.pdf
http://r0.unctad.org/trade_env/test1/meetings/bangkok5/b5Draft
%20case%20study%20Bangladesh.pdf
http://www.fao.org/docrep/006/y4343e/y4343e03.htm
http://www.slideshare.net/samrat23/bangladesh-leather-and?
related=1
Technical Report Leather Sector Includes a Value Chain Analysis
and Proposed Action Plans Intended to be used as Source Material
in the Development of Concept Notes Bangladesh INSPIRED.Pdf