The government had expected 15.64 per cent year-on-year growth in leather and leather product exports in FY2022-23, but during the period, overall exports from Bangladesh declined by 1.74 per cent, mostly due to the global economic crisis caused by the Russia-Ukraine war.
The country’s export earnings from the leather sector were $1,223.62 million in FY23, which is 15 per cent lower than the target of $1,440 million, show the latest Export Promotion Bureau (EPB) data.
Bangladesh exports leather, leather products and leather footwear. Data shows that the export growth is positive in leather product exports, but it declined in leather and leather footwear exports in the recently concluded fiscal year.
After the Covid-19 pandemic situation eased, earnings from leather sector exports had increased to $1,245.18 million in FY22, which was 32.23 per cent higher than the previous fiscal year.
Export earnings from the sector decreased by $21.56 million in FY23 compared to FY22.
EPB data shows that leather footwear exports from the country declined 6.93 per cent year-on-year in FY23 due to lower orders from Europe – the biggest market for the leather and footwear sector of Bangladesh.
Bangladesh shipped leather footwear, worth $703.81 million in FY23, a decline from $756.18 million in FY22. Leather exports declined by 18.45 per cent to $123.44 million in FY23, compared to $151.37 million recorded during FY22.
The shipment of leather products however rose by 17.40 per cent to $396.37 million. It was $337.62 million in FY22.
Abdul Momen Bhuiyan, president of Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh, said, “After the impact of the Covid-19 pandemic, when the sector was recovering, the war in Ukraine-Russia further disrupted the rebound of the leather sector in Bangladesh, which triggered the decline in leather footwear exports.
“The leather and footwear exports have decreased by 10 per cent – 15 per cent in Europe. As the European economy received a huge blow from the global energy crisis stemming from the war, orders continued to decline.”
Abdul Momen Bhuiyan, also CEO of Apex Footwear Ltd, added that Bangladesh is unable to expand its leather market to the USA due to a lack of international standard leather in the country.
Bangladesh Tanners Association Chairman Shaheen Ahmed believes that the industry’s export income will not go up until the compliance of Savar Tannery State is ensured.
He added, “If there is no compliance, exports will decrease further. The working environment in factories and waste management is not improving. Another investment of Tk 600 crore to Tk 700 crore is required to complete the CETP in Savar.”
Meanwhile, tannery owners said the negative earnings will not impact the country’s rawhide market because almost all footwear exporters are not using local leather due to the lack of Leather Working Group (LWG) certification, and the rawhide exporters are still receiving a good number of orders from China.
Besides, due to the USD shortage, shoe manufacturers in local markets are increasingly using local leather, which is helping the tanneries, they pointed out.
Tajin Leather Corporation Managing Director Md Ashikur Rahman told The Business Post, “As the country’s tanneries do not have LWG certificates, we are exporting most of the processed leather to China.
“Chinese companies are providing almost half the price than the Western buyers and we are bound to accept that offer now. Once we get LWG certification, processed leather exports will jump. But I think it will still take another two-three years to get the certificate.”
Ashikur said they are selling processed leather in the domestic market as it has become tougher to import due to the ongoing economic crisis and this is helping them to survive.
Bangladesh considers leather and leather products as emerging export items.
On April 8, 2017, the government cut off all facilities to all tanneries at Dhaka’s Hazaribagh to force them to move to the tannery industrial estate at Savar, following a High Court order demanding the relocation at any cost.
The move came amid allegations from tannery owners that Savar was not ready for production at that time. Bangladesh Small and Cottage Industry Corporation (BSCIC) has so far allocated plots to 154 out of 222 tanneries at the BSCIC Leather Industrial Park at Savar.
Six years have passed, but the relocation of the tanneries from Hazaribagh to Savar is yet to see any development with solid waste still being dumped into the nearby open spaces, industry insiders say.
Other compliance issues are also yet to be ensured, while LWG certification is mandatory for exporting leather and leather products to the Western market.
This is why the leather sector is still struggling and the country is now forced to export major finished leather to China, Vietnam and Thailand at below-fair prices.
Sources say that most of the footwear and leather product factories are bound to import finished leather from LWG-certified factories under bond license despite the availability of finished leather in the domestic market and export finished goods, which increases their lead time and production costs.
A number of exporters mention that they are now focusing on diversification, and hoping it will help them recover. They are trying to increase exports to the USA and the Asian market as their economies are better than the EU.
According to the EPB, exports of leather and leather products have been steadily increasing since 2010. The exports from this sector rose to over $1.12 billion in FY13, and the figure soared to over $1.23 billion in FY17.
Since then, the export of leather and leather goods declined for three consecutive years. Amid the pandemic, export earnings from the sector fell to $797.6 million in FY20.
However, the volume increased by 18 per cent to $941.6 million in FY21, and it further rose by 32 per cent to $1245 million in FY22.
The global leather goods market size is anticipated to reach $624.08 billion by 2028, registering a CAGR of 5.9 per cent over the forecast period, according to a recent report by Grand View Research.
