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Department of Accounting

Term Paper
On

A study on the “Impact of Leather Technology of Bangladesh”

Supervised by

Ganesh Chandra Dey
Lecturer
Department of Accounting
Govt. Asheq Mahmud College, Jamalpur

Submitted By

A.M. Ahsanur Rahman Tonmoy
College Roll: 94
Reg No: 2119731
Roll No: 8101622
Session: 2011-12
Student Type: Regular
Department of Accounting
Govt. Asheq Mahmud College, Jamalpur

Submission Date: July 8, 2015
Letter of Transmittal

July 8, 2015
Ganesh Chandra Dey,
Lecturer,
Department of Accounting,
Govt. Asheq Mahmud College, Jamalpur

Dear Sir,
It is an enormous pleasure to submit my term paper titled “A study on the Impact of Leather Technology of Bangladesh” assigned as a requirement of my course related.

In preparing this assignment I have acquired much knowledge about Leather Technology. I have tried my best to furnish the assignment with relevant data, which I had to collect from online and related journal. I hope this assignment will help the leather Technology sector to gather some insights on the windows to do further studies in this aspect.

I would like to convey my tributes to you and thank you for giving me the opportunity to work on this topic. Your queries in this aspect will highly be expected.

Thank You

Sincerely Yours

A.M. Ahsanur Rahman Tonmoy
College Roll: 94
Reg No: 2119731
Roll No: 8101622
Session: 2011-12
Student Type: Regular
Department of Accounting
Govt. Asheq Mahmud College, Jamalpur

Declaration of Originality

This to certify that the term paper titled “A study on the Impact of Leather Technology of Bangladesh” is an original work and is being submitted in partial fulfillment. The term paper has not been submitted earlier either or elsewhere for fulfillment of the requirement of any course.

(..…………………….…..) (………………..……..)
Signature of Supervisor Signature of Student
Date: Date:

ACKNOWLEDGEMENT

A lot of efforts and study was made to bring this report to a reality. This would not have been possible without the selfless support and assistance provided by the people whom I approach during the various stages of writing this report. Although space and time prevented me to mention all their names, I am nevertheless thankful and grateful for their help.

At the very outset we the research team, would like to express our cordial gratitude to Prof. Muzahid Billah Faruqi, (The Honorable Principle of Govt. Asheq Mahmud College, Jamalpur) for giving us the opportunity to conduct this research.

I would like to thank Abdur Rahman, (Head of the Department of Accounting, Govt. Asheq Mahmud College, Jamalpur) for assigning us and giving opportunity to work on such an interesting topic.

I really thankful to Ganesh Chandra Dey, for providing us effective classes which were very helpful for our research work. This has provided me with the chance of working with realistic aspects, which helped me to acquire clear insights about the subject knowledge and practical issues applicability of Impact of leather Technology.

I am also thankful to all who help me directly and indirectly in completion this research work.

Abstract

The Government of Bangladesh has identified the leather sector as one with considerable growth and investment potential ranked fifth in the export earning sector. Currently Bangladesh produces and exports quality bovine and ovine, caprine (buffalo and cow; sheep and goat) leathers that have a good international reputation for fine textured skins. However, the entire leather sector meets only 2-3% of the world’s leather trade worth US$75 billion. There are reportedly around 220 tanneries in Bangladesh but, in fact, only 113 tanneries are in effective operation that produce 180 million square feet of hides and skins per year. In addition there are about 30 modern shoe manufacturing plants engaged in the production of high-quality footwear, with over 3,500 smaller footwear manufacturers also present in the sector. There are around 100 small-to-medium leather goods manufacturers, and a small number of niche larger manufacturers. The sector directly employs approximately 8, 50,000 people. Most of the tanneries do not have proper effluent plants and there are about 49,300 tones of solid waste generated every year in Bangladesh

Tannery liquid and solid wastes are a potential pollutant but also have a potential value. Specific technologies to convert wastes are required. These vary from crude and simple to highly sophisticated and complex.

A proposed new leather park is expected to bring a clear transformation to the leather industry with a marked increase in production, product diversification and new product lines with increased sustainability of the sector. Sustainable and cleaner production will be a key issue for the development without placing burdens on the environment.

Table of Contents

|Chapter No. |Particulars |Page No. |
|Chapter – 1 |INTRODUCTION |1-4 |
| |1.1 Prologue | |
| |1.2 Statement of the Problem | |
| |1.3 Objectives of Study | |
| |1.4 Research Method | |
| |1.5 Limitation of the Study | |
|Chapter - 2 |BACKGROUND | |
| |2.1 History of the Leather Industry of | |
| |Bangladesh | |
| |2.2 General Classification of Leather Goods | |
| |2.2.1 Small Leather goods | |
| |2.2.2 Medium Leather Goods | |
| |2.2.3 Heavy Leather Goods | |
| |2.3 Leather Industry in Bangladesh | |
| |2.4 Tanning in Bangladesh | |
| |2.5 Livestock in Bangladesh | |
| |2.6 Leather and Leather Goods Export of | |
| |Bangladesh | |
| |2.7 Leather and Leather Products | |
| |2.8 Industry Outlook and Investment Incentives | |
| |2.9 Government Support and Policy | |
| |2.10 Market Player | |
| |2.11 Strength &Growth Prospect of the Leather | |
| |and Leather Products Industry in Bangladesh | |
| |2.12 Leather Sector Value Chain Map | |
|Chapter - 3 |IMPACT IN DIFFERENT SIDES | |
| |3.1 Economical Impact | |
| |3.2 Environmental Impact Assessment | |
| |3.3 Social Impact | |
|Chapter - 4 |OVERALL MARKET SENARIO | |
| |4.1 Business Opportunities | |
| |4.2 PESTEL Analysis | |
| |4.3 SWOT Analysis | |
| |4.4 Limitations Faced by the Industry | |
| |4.5 Contribution from Jamalpur Tanneries | |
|Chapter - 5 |CONCLUSION | |
| |5.1 Recommendations | |
| |5.2 Illation | |
| |BIBLIOGRAPHY | |

Chapter – 1

Introduction

1. Prologue

In Bangladesh the leather industry is well established and ranked fourth in terms of earning foreign exchange. Being sector with considerable scope for value addition the (Government of Bangladesh (GoB), Ministry of Industry (MoI) has declared it as a priority sector. According to Export Promotion Bureau (EPB) for the Financial Year 2011-12, the leather sector grew by 17.5 per cent and earned $765 million in revenue. Of this $434.8 million was attributed from leather products, accounting for approximately 57% of the total revenue. The leather sector includes 220 tanneries, 3,500 MSMEs. The sector generates direct and indirect employment for about 850,000 people, including a significant number of women, particularly in the leather products industries.
The increasing growth of the industry and boosting investment in the sector would definitely make the sector the second highest export industry in the next five to seven years, that the annual production of 5000 crore taka from tanners and a further 1600-1800 crore taka from footwear and leather goods industries will automatically increase by seven to eight thousand crore taka in the coming years with the existing infrastructure in place. But, if the relocation of tanneries is successfully done there, as told by the Industry Associations of Bangladesh.(IAB)

Bangladesh is a developing country with a population of about 152.5 million in a total area of 147,570 sq. km making it one of the most heavily populated countries of the world. The overall economy of Bangladesh has registered a steady improvement with more than 6% average growth during the last five years (BBS, 2013). The industrial sector has been an important contributor to the country’s GDP, its share standing at 28.6% in 2011.

Bangladesh has a long established tanning industry which produces around 2-3% of the world’s leather from a ready supply of raw materials. As leather sector is a labor oriented industry and cheap labor is available in Bangladesh, the industry may attract the foreign customers to establish their leather / footwear units there.
Bangladesh leather industry has three main streams, they are as under:
a) Leather Tanning,
b) Leather Goods (Bag + SLG),
c) Leather Footwear,

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Picture: Leather and Leather Goods Sector

They have sufficient raw material to serve the industry. The sector is growing like ‘Ready made Garments’ Sector, which is the main industry in Bangladesh with a total turn-over of apprx.18 bn dollar.

Tanning industry is an old manufacturing sub-sector in Bangladesh with a long heritage of over six decades. The tanneries of Hazaribag started their journey from 1960. It was first introduced by Punjabi traders from what was then Pakistan. The industries expanded and after the independence of Bangladesh in 1971, the government took over the tanneries abandoned by the departing non-Bengali entrepreneurs and eventually made it a 'cash cow' to earn foreign currencies. The peak time of collection is during the Muslim festival of animal sacrifice, the Eid-ul-Azha. Leather manufactured from this place is being shipped to the US and Europe, and other parts of the world for further processing. Few large factories are providing some facilities while the smaller are in very bad and poisonous situation. Reused chemicals from the larger factories are being used by the small factories which are more dangerous and vulnerable for the workers as well as for the environment. About 40 heavy metals and acids are used for processing raw hides. A few export-oriented factories use some safety equipments for their workers and others don’t pay attention.

2. Statement of the Problem

It is appear that Leather Industry should have got more importance than RMG sector. Because all the raw materials of RMG sector, the highest contributor in GDP, are collected from abroad, whereas, Leather Industry’s raw materials (except chemicals) are local. Furthermore, if we look at international market, China, larger leather product producer and strongest competitor of Bangladesh, is moving rapidly in electronic market leaving manual industry like leather, RMG etc. So there is a big opportunity for Bangladesh to be best in leather industry. Considering those future opportunities, few problems arise in our mind. They are:

❖ What is the present condition of Leather Industry of Bangladesh? ❖ Is Leather Industry of Bangladesh either ready or not for the future opportunities (SWOT Analysis)?

❖ What are the problems in facing future challenges?

3. Objectives of Study

Main Objective:

The main objective of the study is to determine the impact of Leather Technology of Bangladesh.

Specific objectives of this study were:

➢ The contribution of leather technology in Bangladesh’s economy,

➢ Analyze the current status of Leather Industry in Bangladesh,

➢ To identify the problems and opportunities of lather industries,

➢ Put forward some specific recommendations for future growth of leather technology in Bangladesh.

4. Research Method

The study was mainly descriptive in Nature. Mixed-method, both qualitative and quantitative approaches were used. In collecting data and information it used both primary and secondary sources of data.

Data and information collected from various types of secondary sources like books, Journals, Reports, Institutional and Government publications.

Available data were edited and processed manually. Simple measures like average, percentages etc. were followed in data processing. MS word and MS Excel are used for analyzing and interpreting the processed data and result were presented by tabulated and graphical forms in the text. Details will be discussed in subsequent chapters.

1.5 Limitation of Study

I have faced some practical problems in writing this paper. I was not able to make the study much informative, resourceful, Analytical. We could not work outside to conduct survey for a long time mainly due to time constrains

It was not possible for me to give full attention to work on this research. Relevant books and information’s are not available in the college library.

For conducting research work, we should been given more time for thinking and kin observation. But there is a shortage of time, though we had interest in such kind of study.

Chapter – 2

Background

2.1 History of the Leather Industry of Bangladesh

Leather industry developed in Bangladesh on a large scale basis from the 1960s. The leather industry is now reasonably well established in Bangladesh, with about 220 Government-recognized leather plants processing raw hides and skins into wet-blue, crust or finished leather, and over 3,500 leather footwear and leather-goods units (over 90% employing less than 9) producing various kinds of leather footwear and other leather products such as garments, ladies bags, suitcases, wallets and some fancy items. It is, however, the processing of raw hides and skins into some form of crust, finished or semi-processed (wet-blue) leather which has dominated the industry in Bangladesh, as high as 85 per cent of the total output being exported from this sub-sector.

The manufacture of crust/finished leather and that of wet-blue, both for exports, is the dominant activity of the industry. The value of exports from leather goods is negligible, although this sub-sector is dominant in the domestic market especially in leather footwear, as almost the entire demand in this regard is satisfied through local production. Another Important item of output of the leather sector is vegetable tanned leather, made of buffalo hides. The entire output is locally used for shoe-soles and industrial lead.

2.2 General Classification of Leather Goods

There is wide variety of leather goods produced in the Bangladesh. The main groups are below:

❖ Small leather goods/Fancy leather goods ❖ Medium leather goods ❖ Heavy leather goods

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Picture: Some Exclusive Items for Exporting

2.2.1 Small Leather goods

Small leather goods or sometimes called personal leather goods which are usually carried in pocket or hand bags, includes purses, wallets, key case, passport case, note case, card case, cigarette case and cigar case, match box case and so others. Most of those products are made without any internal stiffening of reinforcement. These leather goods require leather having thickness of about 0.5 mm to 1.00 mm. different types of hides and skins which are usually used in making small leather goods are, cow softy, goat glaze, sheep Napa, calf skin etc.

Picture: Some Exclusive Items for Exporting

2.2.2 Medium Leather Goods

It includes hand bags, shopping bags, shoulder bags, document cases, attach cases and so on. These bags are made from calf, goat, sheep and exotic skins and hides finished with range of colors which generates a good appearance and look sophistication and modernity. Leather, which has a thickness of 0.8 mm to 1.2 mm, is used in making of medium leather goods. Cow softy, dry milled, cow Napa, sheep Napa, goat and buff softy leather are widely used in making of medium leather goods.
2.2.3 Heavy Leather Goods

These are made generally from cow and buffalo hides, which are strong and durable. The hides have distinct surface grain patterns and size ranges from 20 to 30 sq. ft is full hide. Cow and buff hides of thickness 1 to 1.5 mm are used for making heavy leather goods. The type to leather goods for making heavy leather goods are, box sides, Katti Leather, Split Leather, Cow Upper, Upholstery, Buff Softy, etc.

2.3 Leather Industry in Bangladesh

Leather is the basis of one of the oldest industries in Bangladesh and plays a significant role in the national economy with a good reputation worldwide. This is an agro-based by product industry with locally available indigenous raw materials having a potential for export development and sustained growth over the coming years. Bangladeshi leather is widely known around the world for its high qualities of fine grain, uniform fiber structure, smooth feel and natural texture.

2.4 Tanning in Bangladesh

There are reportedly around 220 tanneries in Bangladesh but, in fact, only 113 tanneries are in effective operation, out of these 20 units are reported to be fairly large (7 units very large), around 45 units are considered of medium size and around 48 units are considered small groups as detailed in below Table I. In total, 105 of the tanneries are positioned arbitrarily in the Hazaribagh area in Dhaka where 84 per cent of the total supply of hides and skins are processed in a highly congested area of only 29 hectares of land.

|Structure of Tanneries in Bangladesh |
|Number of | Typical Annual |Total Installed |Total Actual |Share of Actual|
|Tanneries |Production |Capacity/ Annum |Production/ |Production (%) |
| |Capacity/Tannery |for all Tanneries |Annum for all | |
| | | |Tanneries | |
|7 |>5 million sq.ft |40 million sq.ft |30 million sq.ft |17 |
|13 |2-5 million sq.ft |60million sq.ft |52 million sq.ft |29 |
|45 |