Saturday, May 04, 2024
The leather and leather products sector is one of the most promising export-oriented industries in the country, but is it struggling after the government removed incentives from crust leather and reduced incentives from finished leather in the leather industry.
To remedy this situation, the Bangladesh Tanners Association (BTA) wrote to the finance ministry to reinstate the incentive system for continued development of this industry, BTA sources told The Business Post.
The government used to provide 10 per cent incentive on crust leather. It has been withdrawn through a circular of the Bangladesh Bank. Meanwhile, finished leather is now getting 7 per cent incentive, a drop from the previous 10 per cent.
However, among the 43 products that are incentivised, other sectors continue to receive incentives.
According to industry insiders, these incentives should continue till Bangladesh graduates from the LDC status in 2026. The country’s leather export capacity should be increased by obtaining compliance and Leather Working Group (LWG) certification before this deadline.
Speaking to The Business Post, BTA Chairman Shaheen Ahmed said, “It is important to continue the incentives for the leather industry to flourish. Otherwise this promising sector will not survive.
“All 154 tanneries in Dhaka and leather factories running with their own ETPs outside Dhaka are likely to stop producing and exporting leather if incentives are not provided. In that case, a di[ in crust leather exports would reduce the annual export income by around $200m. This will also make it harder for the industry to get LWG certification.”
He added, “Compliance is the key challenge faced by the tannery industry. Now-a-days, it is important for the export-oriented leather industry to follow compliance. As the leather industry is not yet compliant, it is not possible to attract foreign brands.
“As a result, the desired export target is not being achieved. A LWG certification is required for sending exports to European Union countries, which are major markets.”
Shaheen Ahmed further said, “The leather which is now being sold for 75 cents, can be sold for $1.5 if we could obtain the LWG certification. But if the government does not provide support through incentives, it will not be possible to get this certification in any way.”
Ever since the transfer of tanneries from Hazaribagh to the leather industrial city in Hemayetpur, the tannery owners have been keen on following compliance. But achieving compliance requires new investments.
The BTA, with the support of Leather Sector Business Promotion Council (BPC), Ministry of Commerce and other organisations, is implementing workshops, training to achieve compliance and advising tanneries to follow best practices.
According to the BTA, about two lakh workers work directly and indirectly in various sectors of the industry to support their families, also there is employment of about ten lakh people in forward and backward linkages industry.
By 2030, the leather industry will create employment opportunities for 35 lakh to 40 lakh people, and has the potential to produce and export leather goods and footwear worth $12.50 billion.
Tk 1,015 crores were spent on Savar Tannery Industrial Estate to further increase export earnings, but the initiative is yet to become successful. Moreover, the parliamentary committee had recommended shutting it down in August last year due to improper waste management.
This recommendation has not yet been fully implemented. Businessmen say the tannery industry is sinking due to Bangladesh Chemical Industries Corporation’s (BCIC) planning errors.
