Bangladesh eyes to earn $10b in leather-product export

Bangladesh's leather sector holds all the potential to earn US$10 billion in the next five years but appears to be hamstrung by the flawed central effluent-treatment plant (CETP) in its potential hub.

The absence of properly functional CETP deprives the country of having the certification from the Leather Working Group (LWG) which is mandatory for exporting leather products to top global brands, sector entrepreneurs said.

And thus, despite having all the ingredients like high-quality raw leather, expertise and cheap labour for producing world-class finished products, the industry is virtually forced to limit its export earning to around one-billion dollars.

The government has devised a ten-year perspective plan that includes a target to increase the leather sector's export earnings to $10-$12 billion by 2030 but getting to the goal without addressing the compliance issue would be impossible, experts and the entrepreneurs forewarn.

Industry-insiders told the FE that the global leather-goods market is estimated to grow to $424 billion by 2025 and they have the expertise to take a chunk of it if the compliance issue can be solved.

The so-called CETP set up in the Dhaka Tannery Industrial Estate at Hemayetpur in Savar has been showing botched-up performance since its inception in 2021.

It does not have the capacity to treat the volume of waste discharged by the factories in the zone, in the first place, and it has been malfunctioning since day one, leaders of Bangladesh Tannery Association and the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB) told the FE.

Questions have also been raised how such a huge amount of public money was allowed to be spent on this low-quality CETP.

Many alleged that irregularities and mismanagement resulted in the messed-up project.

The CETP is capable of treating 25,000 cubic meters of waste each day against the requirement for 30-to 40-thousand cubic meters, they said.

Admitting that the CETP project was botched up, officials at the Industries Ministry that supervised the project told this correspondent that the CETP would be rectified and upgraded.

The ministry received several proposals from different companies to do the job.

"But the proposal from an Australian company seems to be more favourable than others as this company intends to finance the project," says Mostak Ahmed, Managing Director of the Dhaka Tannery Industrial Estate Effluent-Treatment Plant Project.

Other companies have expressed willingness to do the job but they are not going to fund the project, he adds.

Officials said they had sent the proposals to a technical committee for reviewing and that final decision would be taken after getting the vetting report.

The project for constructing the CETP and solid waste-management facility was taken in 2010 with an allocation of TK5.45 billion but it took 11 years to set up the flawed CETP, and the cost rose to Tk10.15 billion, stakeholders said, citing it as a textbook case of project mismanagement.

A Chinese company was given the contract in 2012 to complete the job in two years but the project ended in 2021 after seven extensions.

Asked why the ministry failed to ensure that the CETP was properly functional, a senior official, preferring anonymity, said the technical aspects of the project were monitored by experts from BUET.

But he admitted that the ministry had its failure in ensuring flawless project, especially the lack of solid waste-management facility.

After the pandemic upset, the country's lather sector has started witnessing growth in export, as it reached a 10-year-high of $1.25 billion in the past fiscal from 941 million dollars of the previous fiscal.

Previously in 2016-17 the country exported $1,234 million (over 1.23 billion) worth of leather products, Export Promotion Bureau data shows.

In the July-March period of the current fiscal the earnings reached 919 million dollars, registering a 2.56-percent year-on-year growth.

According to entrepreneurs, shifting orders from China, Vietnam and other competitors triggered the growth but they also feared that the Ukraine war-led inflation might slow down the growth in years ahead.

But many are upbeat about the future of leather sector and they feel if the compliance issue can be addressed, Bangladesh can easily be a major player in global footwear export.

Sahadat Hossain Selim who recently started his own leather-footer company named Craftsman says proper policy support from the government and functional CETP can bring about a massive leap forward for the sector.

He mentions that many entrepreneurs are now focusing on this sector sensing its export potential.

Banking on favorable environment for raising and nurturing animals, Bangladesh boasts 2.0 per cent of the total livestock population in the world.

"Bangladesh's leather is internationally popular for its high-quality fine- grain leather, uniform fibre structure, smooth feel, and natural texture, and our industry is gaining the capacity to produce processed raw leather and leather products in sustainable ways," says Mr Sahadat.

Citing his own quick success, the newcomer said he started production in his Leed-certified Green factory at Sreepur in Gazipur two years ago but within a short period of time he got huge response from buyers from European countries.

He suggests that the government should provide better access to finance for the leather exporters on easy terms to boost the leather industry.

Presently, Apex Footwear, Jennys Shoes and Bay Footwear, and FB Footwear are the top exporters from the country.

Shaheen Ahmed of Bangladesh Tanners Association says exporters are not getting fair price owing to compliance issue as they are now exporting per-square-foot finished leather for $1.0 to $1.1 which is at least 30-percent lower than the global price.

To stop pollution of the Buriganga River, the government initiated shifting the tanneries from Hajaribagh area of the capital to the 199-acre BSCIC Leather Industrial Park at Hemayetpur, 16 kms from the city, in 2003.

But it took long 14 years to start the relocation when in 2017 the High Court ordered completing the process.

Till last year, 154 out of 222 tanneries could be relocated to Hemayetpur, BSCIC officials said, adding that the rest will be shifted after expansion of the Park for which 200 acres of land will be acquired.

According to a report, Bangladesh produces 350 million square feet of leather annually, of which only 20 to 25 per cent is required locally, and the rest is exported.

According to entrepreneurs, there are currently 200 tanneries and 3500 MSMEs in Bangladesh. On the other hand, the footwear and footwear- component-producing sector is contributing a large part to the leather industry with 2500 footwear units and 90 large firms.

The country has Tk 170.00-billion local footwear market and every year 378 million pairs of shoes are manufactured here. The local footwear- market demand is 200 to 250 million per year, various reports on this sector said.

Bangladesh emerged as the 8th-largest footwear producer in the world two years back with a 2.1-percent share in global shoe production, industry people said. And nearly 0.85 million people are directly and indirectly involved with this sector -- 60 per cent of them women.

Industry analysts also feel that as the big brands are leaving the Chinese market, there is an opportunity for Bangladesh to become a direct investment hub of the global leather industry.

A Bangladesh Bank report shows that net FDI (foreign direct investment) flow into the leather sector was $70.2 million in 2017.

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