Tannery Industry of Bangladesh

In the current fiscal year export earnings from the leather product & footwear posted a robust growth of 107 percent as the exporters in the sector shifted their focus from finished leather to leather goods exports. The exporters see a bright future of the leather products of Bangladesh as the sector is now competing with China and India and the competitive edge of the local industry is increasing. Tannery Industry developed in Bangladesh on a large-scale basis from the 1970s. About 90- 95% of leather and leather products of Bangladesh are marketed abroad, mostly in the form of crushed leather, finished leather, leather garments, and footwear. Most leather and leather goods go to Germany, Italy, France, Netherlands, Spain, Russia, Brazil, Japan, China, Singapore and Taiwan. This industry classified into three sub industry such hides & skins, leather & leather goods, and footwear industry.

Global market share & production

In 2003, tannery industry acquire 1.3% world share by increase their production & export. After that, the percentage of share fall down because of global economic problem. Now Bangladesh holding above 2% share in world Leather & footwear market.

23% 47% 25%

china India Bangladesh Europ Others 2% 3%

Bangladesh market share of Leather & footwear world market China is a leading producer and exporter country in Asia as well as World market. For mass leather production and exportation, 2003 represented the most rapid development and increased by 28%. From 23.5%. Now they holding 47% share in world market & 87% in Asia. India is second largest country& highly competitive for Bangladesh in Asia market. And also Asia is the dominant force of footwear exports, Europe being a distant second. Over the last decade Asia has increased its share of the world total, both in terms of volume (from 78% to 84%) and value (from 49% to 57%).

In the above chart shows the production of developing countries is continuously increasing. In 2010, global production of hides and skins is expected to continue growing at a slow rate. Also slow or negative growth in production in developed countries because of faster growth in developing countries.

Contribution to national GDP in a decade

Contribution of leather sector to total GDP was 0.40% in 2000-2001 but it decreased during 2002-2004 because of economic recession in Bangladesh. After that, it was increased in increasing rate till 2007 (0.47%), which indicate the significance of leather sector to GDP. Again it fell down due to Lehman shock and now it is recovering.

Contribution of leather sector to GDP (% of leather sector GDP to total GDP from 2000-2010. Data source: EPB). This industry is second large industry after textile. Now the industry contribute to GDP about 4.1% in FY 2013 as the growth rate is increasing.

Growth trend of Tannery Industry

During the 1990s, the export market for Bangladeshi leather grew at an average of 10 - 15% per annum. The average yearly exports accounted for $225 million. Bangladeshi tannery industry process more than 250 million square feet of animal leather every year, The South Asian country fetched 429.52 million U.S. dollars from exports of leather and 99.36 million U.S. dollars from leather goods in the last fiscal year 2011-2012, according to EBP. Year Growth rate in % 22 2012-13 17.5 2011-12 31.72 2010-11 18 2009-10 Source: Export Promotion Bureau

Projected year 2013-14 2014-15 2015-16

Growth rate in % 23 28 30

The table shows that growth rate had falling highly at FY 2011 due to global market down. Also loses incurred in tannery industry for reduce price according to production cost in national market. After that the Industry has also positive projected growth as the manufacturer focused leather product rather than finished leather and the world market are more interested about Bangladesh due to economic price. According to EPB earning from the leather products export posted a robust growth of 107 per cent in the first half of the current financial year. As the exporter now focus on leather goods export rather than finished leather. The exporters sees the bright future in this sector because the Bangladesh now competing with China and India as increasing the local industry in Bangladesh. Global buyer are more interested in BD for economic price comparative china and India. Cheap labor cost such as $150-200 per month in BD and China pay $400-500 per month in Tannery Industry.

Export trend & value of Bangladesh Tannery Industry

The leather industry, which has grown on local hides and skins, now emerges as the third largest sector to contribute to exports after garments, and jute and jute goods. Footwear and leather goods accounted for one-fifth of the total export earnings of the leather industry a decade ago. The share of the two sub-sectors rose to 56 FY (FROM JUNE-JULY) percent in fiscal US $ (MILLION) 2011-2012. 1.04 b (expected) 2013 $ 764 2012-13 $ 663 2011-12 $ 535 2010-11

Source: Export Promotion Bureau From June 2011 to July 2012, Bangladeshs tanneries exported close to $663 million and $735 in last fiscal year in leather and leather goodssuch as shoes, handbags, suitcases, and beltsto some 70 countries worldwide, including China, South Korea, Japan, Italy, Germany, Spain, and the United States. Over the past decade, leather exports have grown by an average of $41 million each year. Bangladesh exports leather products mainly to Italy, New Zealand, Poland, the UK, Belgium, France, Germany, the US, Canada and Spain. Also, India, Nepal, Australia and some other countries are emerging as the potential importers of Bangladeshi leather goods.

Demand and supply in national & international Market

The leather sector includes 220 tanneries, 3,500 MSMEs and 110 large firms of leather products controlling more than 90% of the export market in country. Most of the enterprises are located in Dhaka, followed by two big clusters at Hazaribag and Chittagong. The larger enterprises like BATA, Gallerie Apex, Bay, Jennys are controlling the domestic market.
1.50% 5.50% 3% local producer Bata 10% Apex Bay 20% 60% Jennys other brands

Source: Bata ltd, Apex ltd, BTA Bangladesh's market is growing by about 20 percent a year, as people's purchasing capacity is also increasing. Cheap shoes account for about 60 percent of the total market, a segment still dominated mainly by small-scale retailers, according to industry insiders. Bangladesh's footwear market is estimated to be expanding at 20 per cent a year, with a steady movement to better quality and more fashionable designs, especially in urban areas. Bangladesh produces high quality leather and also leather goods which are very demanding in the European Union (EU) along with other countries. But Bangladesh cannot earn much profit

because with the imported rawhides tannery industries cannot reduce the gap between the purchases and sell price. According to the BFLLMEA, the price of the rawhides falls because of the low demand of the leather and leather made goods on the global market. To meet the demand of the countrys tannery sector, 22 crore feet of rawhide is required. Because of the low supply, governments spend million dollars to import hides. This year, the nationalized banks gave about TK 3.56 billion to the tanners to purchase rawhide. Report says that rawhides are smuggled as a result the supply cannot meet the local demand. Proper patronization is needed to boost up the tannery industry. According to the Bangladesh Finished Leather & Leather Goods & Footwear Exporters Association, the export of high-value leather goods like bags, ladies' bags, belts, money bags, purses, hand gloves etc. are in high demand in both national & international market. According to FAO, Bangladesh position is in 16 from 20 (2007) of top 30 countries in leather and leather goods (million square feet) in FY 20011. EPB data shows that Italy, New Zealand, Poland, UK, Belgium, France, Germany, the USA, Canada and Spain are the main importing countries of Bangladeshi leather products.

Current situation of Tannery Industry

Tanning industry is one of top 10 fast growing industry according to world industry analysts. With expanding global market, developing countries are leader in this industry because of easy trade and economic price with quality. Bangladesh is one of next-11 and D-8 or Developing Eight. It has booming industrial sector, and tannery is third largest sector. Bangladesh tannery industry having above 30 years experience. It hold above 2% world market share by increasing production & quality. Now the Tannery Industry of Bangladesh has arrived at a critical point. Recently there has been a barrage of criticism from Human Right Watch, Reuters and other world media about the working conditions in Hazaribagh tannery area. Govt. was taking action about reallocation of Hazaribagh tanneries at Savar. The move to relocate tanneries suspended for a decade, due to disagreements between the authorities and tannery owners over who should bear the cost of the move. Tannery owners are unwilling to pay for relocation. They reasoned that the estimated cost for the project has risen fivefold in the last decade, and the government was originally responsible for the costs associated with relocation. Later, the tannery association demanded that the government pay Tk2.5bn as compensation for the shift, which the government had earlier agreed to. If the govt. take positive action with this industry, growth will cross the 30% between 3-4 years according to producers. With all above problem exporters and industry experts said a robust growth of the demand for leather and leather goods last year and new market opportunities clearly indicate that even more growth is possible this year. "The FY '13 should be better than FY '12 for Bangladesh's leather goods sector due to more growth in shipments, both in terms of volume and value according to

Deputy General Manager (DGM) of Dhaka Hide and Skin Ltd Mohammad Rezaul Karim. He said competitive price and maintenance of global standard by local companies have attracted the international buyers to import Bangladeshi leather goods. Every year the demand for Bangladeshi leather goods is increasing, especially in the European countries (EU) and Japan, mainly due to restriction on Chinese products and the foreign buyers have already increased their orders for Bangladeshi leather goods, expressing hope that the number of buyers shifting to Bangladesh would increase in future according to Mohammad Shahin, president of (BTA).

Source: The Daily Star The leather industry aims to cross the $1-billion mark in export earnings this fiscal year (set by govt.) as the sector is witnessing a robust demand for leather and leather goods in the global market. And also the rising labor costs in China have forced the US buyers to come to Bangladesh. The employer need to pay $180-$200 for two workers a month, while the amount is $400-$450 for each worker in China. During the last few year, the investment in footwear were increasing. Many local companies expanded while concurrently there was direct investment from new ventures. Because the local footwear industry is experiencing an annual growth rate of 21 per cent.

Future of Tannery Industry

Bangladesh is going to take the next position after India in economy among the South Asian Countries-reported in very popular Pakistani magazine naming Don. There are much opportunity in industrial sector especially Tannery Industry. Authorities of Tanners are more planning about this industry. "We need to adopt an appropriate strategy to regain the lost image for our survival. In fact we must start to prepare a practical road map for an integrated and sustainable growth of

the total leather industry," Mr Syed Nasim (President (LFMEAB) said in a recent seminar titled 'Roadmap for a sustainable growth of leather sector. They try To meet the demand of the countrys tannery sector by reduce the gap between the purchases and sell price of imported rawhides, training employee & produce quality product than early. If the govt. take positive action with this industry, growth will cross the 30% between 3-4 years according to producers.

Reference:
http://ec.europa.eu/enterprise/sectors/leather/statistics/index_en.htm http://www.tannerscouncilict.org/statistics.htm http://www.hrw.org/sites/default/files/reports/bangladesh1012webwcover.pdf http://archive.thedailystar.net/newDesign/news-details.php?nid=25713 http://newagebd.com/detail.php?date=2013-01-18&nid=37149 http://www.batabd.com/about-us.html http://www.epb.gov.bd/detailsexportdata.php http://archive.thedailystar.net/newDesign/news-details.php?nid=265699