Tofail Ahmed – who was serving as Bangladesh’s commerce minister back in 2016 – had announced that the country’s leather sector market size will be $5 billion in 2021, while the government had declared 2017 as the year of the leather.
On December 7 last year, the then commerce minister Tipu Munshi had claimed that the government is planning to increase leather and leather goods exports from $1 billion to $10 billion by 2030.
But in reality, the once highly ambitious and full of potential leather sector is turning into a sick industry day by day, while industrialists barely survive the ongoing economic crisis.
Seven years have elapsed, but the relocation process of tanneries from Hazaribagh to Savar is yet to see any development, and solid waste is still being dumped into the open. Toxic chemicals are being dumped in the Dhaleshwari River due to Central Effluent Treatment Plant’s (CETP) inefficiency.
Although the government has taken a lot of initiatives to boost the leather sector, businesses said little have been achieved despite investing crores of Taka, and no one is taking responsibility for the sector’s steady decline.
An analysis of Export Promotion Bureau (EPB) data shows that earnings from this sector are declining steadily.
Export earnings from leather and leather goods have dropped year-on-year by 14.33 per cent to $628 million in the July-January period of FY24. The earnings have dropped year-on-year by 1.74 per cent to $1.22 billion in FY23.
On the other hand, despite the relocation of tanneries, the sector earned $1.08 billion in FY18, though it was 12 per cent lower than $1.23 billion posted in FY17.
Despite such circumstances, the government lifted the cash incentive facility for crust leather exports in the new policy, though more than 90 per cent earnings came from the segment.
Speaking to The Business Post, Tajin Leather Corporation Managing Director Ashikur Rahman said, “Our investments have been spoiled, and there is little hope for the future.
“Our market is limited to China due to the Leather Working Group (LWG) certificate issue. But there has not been any progress in securing this certification. As a result, the country is losing a big potential market.”
Ashikur added, “While we are exporting above 90 per cent crust leather, and our export performance is dwindling, the government cut us from the new cash incentive policy. Only finished leather is eligible for incentive, though this occupies only 2 per cent of our exports.
“It will severely impact our exports in the coming days.”
The Business Post attempted to contact State Minister of commerce Ahasanul Islam Titu for comments on the matter, but he could not be reached till the filing of this report.
What’s behind the decline?
Back in January 1954, the then government of Pakistan approved the establishment of a leather processing zone on the bank of Buriganga in Dhaka, which is presently Hazaribagh, with a layout plan for tannery industries over a parcel of 43 acres.
Initially, 19 factories went into production, after that the number reached around 600 factories, with several parts of the leather. In the beginning, each factory was established on parcels of land from 0.30 acres to 1.23 acres.
However, some owners sold or rented their space over the years.
In 2003, the Bangladesh government took an initiative to shift the tannery factories out of the capital city following protests from environmentalists expressing concerns over the dumping of high levels of toxic chemicals by these tanneries into the river and soil of the area, which is surrounded by residential areas.
The government allocated 199 acres of land in Savar, around 16 km from Hazaribagh, to establish a modern leather industry under the Bangladesh Small and Cottage Industries Corporation (BSCIC).
In 2003, the government allocated Tk 175.75 crore for the replacement process, excluding setting up the Central Effluent Treatment Plant (CETP). However, the BSCIC failed to relocate the industry for almost 15 years.
On April 8, 2017, the BSCIC cut-off all facilities of Hazaribagh tannery to force them to move to Savar following a high court rule demanding the relocation at any cost. The move came amid allegations by tannery owners that Savar was not ready for production at that time.
A total of 154 tanneries out of 222 have so far been allocated plots at the Savar Leather Industrial Park.
Industry insiders said due to the failure of the BSCIC, the sector could not be developed to its full potential and compliance issues have also remained a thorn in the flesh.
This is the reason why Bangladesh, after relaxation of Covid-19 infection control measures, had failed to make the best use of its huge export opportunity with the global demand for leather rising.
Now the sector’s major export destinations are China, Vietnam, Thailand and Italy. But due to compliance issues, the industry is stuck with exporting finished leather goods below fair price.
On condition of anonymity, a tannery owner said, “Chinese buyers created a syndicate to force us to sell leather goods below fair price as we do not have any alternative markets. But the Chinese businesses are selling finished leather to our footwear and leather goods manufacturers for higher prices.
“As we do not have LWG certification, our goods exporters cannot collect finished leather from us. A significant number of raw hides illegally cross the border.”
Another tannery owner said, “The government used a Chinese contractor for CETP construction, but they did not complete the work properly. Although the CETP capacity is 25,000 cubic feet in the paper, the actual capacity is less than 15,000 cubic feet.
“That is why thousands of cubic feet of toxic waste are being dumped into the Dhaleshwari River every day, and the BSCIC is responsible. How will we get the LWG certification and why western buyers will come to us?”
But BISIC is charging us Tk 30 for per cubic feet solid waste dumping, he added.
