Leather sector likely to see its heyday

Five years have already elapsed but the relocation of the tannery from Hazaribagh to Savar is yet to see any development with solid waste still being dumped into the open nearby spaces.

The Bangladesh Small and Cottage Industries Corporation (BSCIC) has failed to allocate plots to 68 factories at the Savar tannery estate and again a good number of factories are yet to start their production.

Yet after two fiscal years, the leather and leather goods sector earned over $1 billion from exports in the first 10 months of FY22 giving a glimmer of hope to the tannery owners.

Industry insiders said due to the failure of the BSCIC the sector couldn’t be developed to its full potential and compliance issue has also remained a thorn in the flesh.

This is the reason why Bangladesh, after relaxation of Covid-19 infection control measure, has 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 issue they are bound to export finished leather goods bellow the fair price.

Exporters say they are now exporting per square-foot finished leather for $1 to $1.1 but in case of compliance factory the price ranges from $1.3 to $1.4 depending on buyers.

The BSCIC has installed a Common Effluent Treatment plant (CETP) but it is not enough. “We are dumping solid waste into open fields and this is the key issue,” Md Shaheen Ahamed, Chairman of Bangladesh Tanners Association (BTA), told the Business Post.

He said, “Our existing capacity is enough to export minimum $3 billion but we fail to meet it because most of us don’t have compliance factories. That is why we cannot export to brand companies.”

The Export Promotion Bureau (EPB) data shows that leather and leather goods sector earnings rose by 32.97 percent to $1.01 billion between July and April of this fiscal year while the target was $852 million.

In the FY2018-19, this sector earned $1.2 billion before it came down to $797 million in FY20, according to the EPB.

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 level of toxic chemicals by these tanneries into the river and soil of the areas 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 BSCIC.

In 2003, the government allocated Tk175.75 crore for replacement process, excluding setting up the Central Effluent Treatment Plant (CETP). However, the BSCIC had 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 wasn’t 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. According to the BSCIC, the government will acquire another 200 acres of land for relocating the rest of them.

The EPB data shows that leather and leather goods sector earned $1.23 billion in the FY17 with a 6.29 percent growth but after relocation its export came down by 12 percent to $1.86 billion in FY18.

This trend continued till FY20 and plummeted to $797 million. But in the FY2020-21 it turned around and the sector earned $942 billion.

Due to low demand, negative export growth and some other crises the local rawhide market was unusually dull and many traders either sold rawhide at throwaway prices or dumped them into water bodies or other open spaces.

Consequently, rawhide price has fallen drastically over the last three years.

Against such a backdrop, the government has decided to allow export of rawhide and wet-blue leather on a ‘case-to-case’ basis after 32 years last year.

As a result, raw hide market has slightly gone up since last July. Now 134 factories are in operation in Savar tannery estate and some of them have installed ETP with their own cost.

BTA General Secretary Md Shakawat Ullah told The Business Post after completion of the CETP many brands had started purchasing from Bangladesh helping its export jump.

Due to high price of chemical manufacturing cost has increased. It is also the reason as to why export value has jumped up, he said.

But before completion of solid waste management ‘we cannot achieve our goal and we don’t know exactly when it will be completed’, he added.

However, the recent export growth will positively impact the next Eid-ul-Azha raw hide market, Shakawat hoped.