Three decades ago, rawhide from traditionally grown Bangladeshi cattle had good demand among international leather product brands, but the quality of hides has deteriorated in recent times
For Bangladesh, the ability to export a raw material for the leather industry, rawhide, has gradually declined.
The consequences of this have begun unfolding as the country has so far achieved only one-tenth of its 2021 export target for leather and leather products, although this sector is believed to be one of the very few successors to the readymade garments (RMG) industry.
In the last three fiscal years, annual export of finished leather and semi-finished crust leather – the lowest-hanging target – declined to one-fifth, from $490 million to $98 million, according to the Export Promotion Bureau (EPB).
Decline of the leather industry
Three decades ago, rawhide from traditionally grown Bangladeshi cattle had good international demand. Some international leather product brands used to procure quality leather from Bangladesh.
Crust leather and rawhide were also being exported at that time.
But the gradual dominance of raising high yielding cattle deteriorated the quality of the hide. Additionally, the tendency of amateur butchers to extract meat until the extreme end of the skin damages around one-fifth of the hide.
"Nowadays, at best 40 percent of the local hide are high-grade ones," said Syed Nasim Manzur, managing director of Apex Footwear and director of Apex Tannery Ltd – the pioneers of footwear and leather export in the country.
He, along with a leather industry leader, was speaking at a webinar jointly arranged by the Chittagong Chamber of Commerce and Industry (CCCI) and the Bangladesh Center for Excellence (BCE), where The Business Standard was the media partner.
The participants said Bangladesh is struggling to export high-graded leather too, while the world gets flooded with low-graded ones, which are often dumped in landfills since the cost of processing surpass the ultimate value.
Meanwhile, over the last two decades, the world has been observing a decline in demand for leather-made footwear and some other products amid the rising popularity of synthetic ones.
None of the top global footwear brands like Nike, Adidas or Puma make products from leather anymore.
Last year, leather shoe shipment of China slid to a 20-year low and a number of their tanneries have already been shut down. In recent years, the biggest single outlet for Bangladeshi crust leather exporters shut down, affecting over 80 percent tanneries who are incapable of processing leather up to the final stage.
The around 20 tanneries capable of processing leather up to the ultimate stage are also not getting enough international buyers, mainly because of the demand for environmental and other compliances from brands in developed nations.
In 2017, Bangladesh also imposed a poorly managed shifting of the tannery hub to Savar from the Hazaribag in Dhaka. All but a handful of tanners managed to operate there that year. The tannery industry lost many foreign buyers then and have yet to gain the ground back.
Then there is the yet to serve central effluent treatment plant (CETP) at the Savar tannery village and the lack of a scientific solid waste management, which are still hindering tanneries from getting global compliance certifications like those from the Leather Working Group (LWG) – a must in recent years for exports to the compliant world.
So, along with the decline of leather exports, some leather product exporters are also being forced to source a large portion of their leather from abroad due to local suppliers lacking certification, and in some cases, issues with standard of the leather.
"Covid-19 has come with a bigger bite at a time when the world already faces a serious decline – demand for leather products have nearly halved, be it footwear, bags or car seat covers," said Nasim Manzur.
Eid-ul-Adha: An unmanageable mess
Around 40-50 percent of the nation's annual rawhide supply comes during the three days of animal sacrifice during Eid-ul-Adha, and the country lacks the capacity to prepare, process and store the hides scientifically.
The sudden rise of the once-in-a-year slaughtering spree involves unskilled butchers who separate meat up to the extreme end and destroy 10-20 percent of the rawhide.
Meanwhile, the government has fixed a floor for the procurement price which pushed the tanners in a position of disadvantage in the global market. Since the global market of the commodity is in a downward trend, Bangladesh cannot set a price; it has to follow the trend.
"Tanneries are stuck with stockpile of leather from last year – worth Tk3,200 crore – and hide worth a few thousand crores of taka is coming to flood the warehouses," said Md Shaheen Ahmed, chairman of the Bangladesh Tanners Association.
His association anticipates that of the 12.5 million animals across the country ready to be sacrificed this year, only 60-70 lakh will be slaughtered because of the economic hardships of people amid the pandemic and floods.
Leather sector looks for serious attention
Bangladesh must stop open-air slaughtering as soon as possible and adopt scientific slaughtering houses, where modern methods can save rawhide from damage and reduce environmental pollution, industry experts suggested.
A $100 million public project is on the table to build such facilities across the country, but the industry drew government attention for need-based geographic allocation of those.
Over 60 percent of the slaughtering takes place in Dhaka and Chattogram cities and they need a concentration of modern slaughtering houses, said Shaheen Ahmed.
"The services of the facilities must be affordable. Otherwise people will keep continuing the existing unwanted slaughtering practices," he said.
Leather industry insiders also demanded a rapid government response to help the tannery village in Savar transform to a globally compliant hub.
Alongside the ineffective and mismanaged CETP idea, the government must allow tanneries' own ETPs and help them with concessional green loans, discussants at the event said.
Prime Minister Shiekh Hasina also supported the idea for tanneries' own ETP for the sake of compliance, but it is yet to be a reality for an unknown reason, they added.
For international compliance, tanneries also need quicker steps for solid waste management at the Savar hub.
Potential still there
Alongside taking realistic steps for transforming the tanneries, the government also needs to incentivise local footwear and leather product manufacturers.
"Bangladesh would be capable of adding 80-90 percent local value in the sector if export was facilitated," said Nasim Manzur.
Leather and leather products together can achieve the previous vision for annually earning $5 billion from exports within 2024 if handled properly, Shaheen Ahmed expressed his confidence during the webinar moderated by BCE CEO Wasfi Tamim and addressed by CCCI President Mahbubul Alam.