Analysis-of-leather-industry-of-babgladesh
Chapter One: (Introduction)
By- MD. Musawir Hasan http://edupedia.educarnival.com/ /September 6, 2012
Introduction
The contribution of the industry sector to Bangladesh economy has been on the increase. Among the fifteen sectors identified for national income “Leather Industry” is one of them. Industry is the backbone upon which the economy of any country prevails. The growth of economy, the internal development of a nation depends upon the development of industrial sector. The cheap, reliable, and abundant labor available in Bangladesh is attractive to the world’s leading transnational corporations, but they have been very slow to move into the country, as they face regular industrial unrest led by radical trade unions, poorly developed infrastructure, red tape, and a very small local market. As in neighboring India, the Bangladeshi government promoted the idea of state-led industrialization combined with heavy state involvement in and state control of enterprise activities. This report is prepared as a fulfillment of partial requirement of “Industrial Organization and Management of Technology” course. It has been authorized by honorable course teacher Professor Syed Golam Maola to make a report on “Analysis of Leather Industries of Bangladesh”.
Objectives:
General Objective:
This study is a partial requirement of the course on “Industrial Organization and Management of Technology”. The general objective of the study is to analyze the leather industry of Bangladesh.
Specific Objectives:
The specific objectives of the study are: * To analyze the leather industry of Bangladesh. * To analyze the different owners, players and government influence existing in the manufacturing sector. * To identify the contribution of leather industries along with its growth performance using. * To show a depict picture of size wise firm distribution and its rates in different industrial sectors * To give a clear idea about the ownership wise firm distribution of Bangladesh. * To identify problems still prevailing in the manufacturing industry sector. * To show the trends of the development of leather industry * To show the contribution of leather industry in the GDP of Bangladesh * To depict a overall scenario of leather industry Scope:
This report primarily concerns the leather sector, its industry size and ownership distribution. By its very nature this report limits itself from going into the latest data of different aspects related to the study. Here the concern is mainly the leather sector and the analysis of this sector along with various comparisons with other sectors. With this view in mind, this report focuses on the issues like size wise firm distribution, its ownership distribution, persons engaged, gross value added of this industrial sectors. Methodology:
Information for this report is collected from secondary sources. The secondary sources of this report are Bangladesh Economic Review, Census of Manufacturing Industries, PhD thesis repots, Research report by Tannery Owners association, books and Internet. Limitations:
The main limitation of the study is the time constraint. The time boundary was not enough to conduct this type of important study and also the lack of sufficient co-operation of related parties because of business nevertheless their intention. As a result, direct interviews of different persons from different industries were not possible. For their views, we had to depend on the national newspapers, internet, Bangladesh Economic review, report of BBS and thesis report. Chapter: Two (Industry Overview)
Industry Profiles:
The first tannery in Bangladesh territory was set up at Narayanganj by RP Saha sometime in the 1940s. It was later shifted to Hazaribag area of Dhaka, which turned into a location that now accommodates a large number of tannery units. Leather Industry developed in Bangladesh on a large-scale basis from the 1970s. About 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. Value addition in these exports averages 85% local and 15% foreign. About 100 modern tannery units are now in operation in the industry. These are located mostly in the Hazaribagh area of Dhaka city. In 1998, the sector exported 178 million sq ft of leather and earned $160 million. The country’s share in the world leather market is 2%. The export of finished products such as shoes, slippers, leather jackets, hand gloves, bags, purses, wallets, and belts also earn a sizeable amount of foreign exchange. Bangladesh intends to increase its range of leather products to penetrate new market segments.
The country is endowed with luxurious vegetation encouraging a large livestock population. The quality of the raw hide and skin is relatively good, as barbed wire fencing that damage the skins of animals is not used in the natural farms and fields. Black goatskin of kushtia is particularly noted for its finegrain structure and tensile strength. The tradition of humane care of domestic animals also contributes significantly to keeping the leather quality high.
About 40% of the supply of hide and skin comes from animals slaughtered during the annual Muslim festival of eid-ul azha. In addition to daily consumption of meat, festivals, Muslim weddings, and other celebrations yield a substantial supply of hide and skin. The tanning industry got a big boost following the government decision to promote more value addition in exports. The installed capacity for crust leather production increased. At present, it is double the domestic supply of raw hide and skin. Investments are also made in installing new finishing capacity. The trends encourage more tanneries to produce finished leather on a commercial basis.
The government of Bangladesh provides a support to the leather industry through various steps, including monitoring the export market, evaluating the performance of the sector by a permanent parliamentary committee, and liberal bank credit.
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. Finegrain leather of Bangladesh enjoys preferential demand in Western Europe and Japan. Low wage level and the ban on exporting wet blue leather helped the industry receive a new thrust in the country. Environmental concerns arising out of the high concentration of production units in a small area of the older part of Dhaka city are being addressed with plans for their relocation outside the city.
Leather goods producers in Bangladesh tend to be associated only with manufacturing and exporting. They do not have much control over downstream operations. However, the success of a number of Bangladeshi firms in attracting such brand names as Puma, Pivolinos and Hugo Boss to source from this country proves that there is ample scope for the industry’s upward mobility.
Present Scenario:
At present, there are about 170 tannery units in Bangladesh and they use locally available raw hides and skins. Of them 114 are large and medium units (by local standards) and are registered with the Directorate of Industries. Others are mostly of small and cottage type and are not on the register of the government. About 150 tannery units are located at Hazaribag of Dhaka in only 50 acres of land popularly known as tannery estate. According to the records of the Bangladesh Tanners Association, about 3,000 workers are employed in the tanning industry. Besides, there are about 100 qualified technologists including foreign nationals who are working in different tanneries. Total capital invested in the tannery industry is estimated at Tk 2.5 billion, of which government/bank finance is about Tk. 1.2 billion. About 1,500 persons are involved in the process of collecting raw hides and skins and making them available at tannery units. About 100 organisations import chemicals for use in tannery industry.
Bangladesh produces approximately 100-150 million sq feet of raw hides and skins, about 85% of which is exported in crust and finished form. The rest is used for producing leather goods to cater to the domestic market. Leather is a traditional export item of Bangladesh. But export earnings from this sector could not indicate any predictable increase in the past. Since the production and supply of leather depend on the availability of livestock and demand of the meat, the total supply of leather cannot be increased in the short run. Therefore, the only way of increasing earnings from this sector is the production and export of higher value leather products for which international demand is growing. International market for leather is highly fluctuating, hence the earnings from its export. Until 2001, annual export receipts from this sector remained below taka one billion. Some projections suggest that if properly organized, this figure could be raised to Tk 5 billion.
Leading tanneries of Bangladesh:
There are some reputed tanneries of Bangladesh that means leading tanneries who are producing well as well as international standards wet blue, crust and finished leather. Some of them are- * Dhaka Leather * Apex Tannery * Lexco * Karim Leather * Samata Tannery * Bay Tannery
Major source of hides & skins:
The principal sources of bovine hides are the meat markets in North America, Europe, Australia, and Latin America. The former Indian subcontinent (India, Pakistan and Bangladesh) is also a significant source of cattle hides, but the quality is not up to international standards. Sheep skins are sourced mainly from Europe, New Zealand, Australia, Iran, and Sudan. Goat skins are supplied largely by developing countries including Bangladesh. Table: Number of Animal Population in Bangladesh (thousand head) | Types | 97 | 98 | 99 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005est. | BovineAnimal | 24816 | 24220 | 24480 | 24730 | 24830 | 24958 | 24882 | 25121 | 25460 | SheepandLambs | 1110 | 1121 | 1132 | 1143 | 1143 | 1150 | 1135 | 1139 | 1148 | GoatsandKids | 33500 | 33800 | 34100 | 34400 | 34400 | 34612 | 34959 | 35389 | 35817 | Source: FAO, 2006 |
Major Products:
Tannery transforms raw hides and skins into leather for manufacturing articles like * shoe * upper * bag * Suitcase * Belt * wallet * Jacket
In the past, leather processing was done manually using certain indigenous chemicals.
Importance and Features of Leather Sector in Bangladesh:
Leather sector is perceived to be one of the important economic sectors in Bangladesh. As a single sector of the economy, the sector contributes modestly to the country’s GDP. Contribution of leather sector (hide &skin, leather and leather goods, and footwear except rubber) to GDP is 0.31% (at constant price) in FY 2003. There was a declining trend in this indicator following 1995. It came down to 0.30% in 2000 from 0.36% during 1995 and 1996. Table-2.1: Contribution of Leather Sector to GDP in Bangladesh | Year | Leather andLeather Goods | Hide andSkin | Footwear ExceptRubber | Total | % of Total GDP | 1992 | 792 | 3022 | 792 | 4606 | 0.33 | 1993 | 878 | 3066 | 878 | 4822 | 0.33 | 1994 | 1104 | 3104 | 1104 | 5312 | 0.35 | 1995 | 1282 | 3147 | 1282 | 5711 | 0.36 | 1996 | 1383 | 3189 | 1383 | 5955 | 0.36 | 1997 | 1471 | 3233 | 1471 | 6175 | 0.35 | 1998 | 976 | 3276 | 976 | 5228 | 0.28 | 1999 | 1529 | 3322 | 1529 | 6380 | 0.33 | 2000 | 1402 | 3368 | 1402 | 6172 | 0.33 | Source: BBS, 2000 An important feature of the leather-manufacturing sector in Bangladesh is that it has been developed entirely by private enterprises. All leather sector firms are owned by the private sector and a few units belong to multinational companies. As of FY2001, Bangladesh produced about 20.0million sq. meters of leather and leather goods. The total production of leather and leather goods shows an increasing trend mainly since 1996-97.Leather sector has some specific features, which are unique to it. The basic raw material of leather sector, the hide and skin are by products of meat production. Due to the poor quality of processing, illegal export to India, poor technological base, inadequate financing, low value addition and lack of marketing skill the sector is not flourishing in its full potential. Moreover, the animal population of the county is more or less stagnant over the period (table-1.2). Table – 2.2: Number of Animal Population in Bangladesh(Thousand Head) | Types | 1990 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | BovineAnimal | 24016 | s24859 | 4433 | 24816 | 24220 | 24480 | 24730 | 24830 | 24830 | Sheep &Lambs | 873 | 1070 | 1124 | 1158 | 1110 | 1121 | 1132 | 1143 | 1143 | Goats &Kids | 21031 | 30330 | 33312 | 34478 | 33500 | 33800 | 34100 | 34400 | 34400 |
Source: FAO, 2003 The largest number of leather enterprises in Bangladesh is small employing not more than 50 persons followed in order by medium and large enterprises. A number of population are directly and indirectly involved in the leather sector firms. Direct employment opportunities increased notably during late 19/0s. During early 1990s about 16500 persons were directly employed in the leather sector firms.2 The proportion of female employees in tanning factories is negligible and they belong virtually to the category of workers. However, about two-third of the total labour forces employed are women in the leather footwear factories and leather garments. A large number of workers have no formal training and adequate education on leather processing, finishing or manufacturing. Leather-manufacturing enterprises produce a variety of leather (e.g. wet-blue, crust and Finished), leather footwear and leather goods (e.g. shoes, bags, readymade leather garments etc.). Wet-blue and crust leather produced is generally sold in the local market, while considerable volume of finished leather is exported abroad. Some enterprises, however, produce a combination of wet-blue, crust and finished leather. Foreign investment to the industrial leather sector has been very limited. As upto March 2003, total foreign investment in the industrial leather sector was $136.12 million, which is only 1.33 per cent of the total foreign direct investment into the country3. As of February 2003, the investment on leather products and footwear units in the EPZ were above $45 million. In 1980s, virtually the entire amount of leather exports comprised wet-blue. An important development in recent years has been the growth of the production of crust/finished leather. At present, the majority exports are of finished leather. Virtually, the exports of hide and skin stopped by 1990. Bangladesh could not achieve notable export growth in the leather sector over time. The export earning of the leather goods mincreased only marginally in the 1990s. According to the Ministry of Finance data, export earnings from leather manufacturing goods increased from $144 million to $255.8 million in between 1991-92 and 2001-02. The share of leather manufacturing goods in the total industrial exports declined from 8 per cent to slightly higher than 4 per cent over the period. The export earnings experienced negative growth during 2001-02 as compared to the pervious year. The only notable positive development has been the increase in the growth of the footwear exports in the 1990s. The footwear export showed remarkable performance mainly since 1996-97. The footwear exports increased to over $19 million in 1993-94 from only around $ 2.5 million in 1990-91, and moved up to over $51 million in 1999-2000. The major 6 importing countries are Italy, Japan, Hong Kong, Spain, Germany, UK and USA. As of 2001, more than 30% of the leather is exported to Italy followed by Hong Kong (26.97%), Japan (7.77%). With regard to the export market of footwear, Japan is the largest importer of footwear from Bangladesh followed by UK and Italy. The leather sector is an important foreign exchange earner for Bangladesh although its relative share in the total exports of the country has substantially declined from 10.1 % in 1981/82 and 12.6 % in 1986/87 to 6.6% in 1993/94. The Leather sector contributed less than 5% to the total export in 2000-01. | General Information
Location of Leather Firms/Units
The census study is based on the firms where at least 15 or above employees are employed. It has been found that there are as many as 131 operational firms having more than 15 employees of which 96 are leather processing units, 26 are footwear manufacturing units and 7 are leather goods producing units. Almost all leather units are located in Dhaka (table-5.1). Of the leather processing units about 95% are concentrated in the Hazaribag area of Dhaka city. Footwear and leather goods producing units are also located mainly in Dhaka. Other than Dhaka some leather units (mainly footwear manufacturing firms) have been found in Chittagong. Of the leather units 5% are located inside EPZ (at Dhaka and Chittagong).
Ownership Pattern of Leather Firms/Units Most leather firms/units covered in the census study are under sole ownership or proprietorship. Especially, about three-fourth of the leather processing units are owned by the sole owners. About 42% of the footwear-manufacturing units are private limited companies and another 42% are sole-ownership firms. Of the leather goods producing units, 80% are either solely owned or private limited companies. Only a insignificant proportion (less than 5%) of the total firms of the leather sector are converted in to public limited companies. Most of the leather firms are of local origin. Only slightly higher than 5% of the total firms are owned by the foreigners all of which are leather processing units. A few footwear manufacturing units located in the country are joint venture companies. All leather goods manufacturing units of the country are owned by the local investors only. Markets for the Leather Firms/Units
More than two-third of the leather sector firms/units are export oriented. Especially over 76% of the leather processing units or tannery produces leather to export outside. About 20% of them supply to both local market and foreign market, and only around 4% supply their entire production to the local manufacturers or markets.
In the footwear around 60% firms produce only to export. Another over 37% of the footwear manufacturing units supply their produce both in domestic and foreign markets. All leather goods manufacturing firms are export oriented. As a whole, only about 12% of the leather firms/units supply their entire production to the local market. Possession and Occupancy
As the census data indicate, four-fifth of the total leather firms (having employees more than 15) are run or operated by their respective owners. Remaining 20% (not operated by the owners) of the leather firm are either leased or handed over. A considerable number of about 38% of footwear manufacturing units are leased. Of the leather firms operated by their owners, about three-fourth (76.6%) engage in producing their own product. Of all the leather units (leather processing, footwear, and leather goods), about 60% produce their own products and around 20% involve in subcontracting or job-work. Some leather units involve both in producing own product and job-work. Almost all footwear units (more than 95%) are engaged in the production of their own products. Assets, Establishment and Turnover of the Leather Firms/Units
As the census data indicate, total fixed assets (added value of land, building, machinery, Furniture, and transportation) of the firms operating in the leather sector are about Tk. 4332 million. Of these assets, about 67% are owned by the leather processing units, and about 29% by the footwear manufacturing units. The collective annual turnover of these leather firms is Tk. 16968 million. Of the total annual turnover of the leather firms, the leather processing units contributes about 80% and footwear manufacturing units about 18%. Raw Materials
Raw Materials used by the Leather Firms/Units
As the survey data show, raw materials used by the leather sector firms are collected mainly from the local sources. Except for an insignificant proportion, almost all raw materials of wet blue i.e. raw hides are collected from the local sources. Raw materials for Crust leather and finished leather are wet-blue and crust respectively. Over 95% of the raw materials of crust and finished leather are sourced locally. Of the broad categories of leather firms, footwear sector used highest proportion of raw materials
(includes finished leather, sole, adhesive etc.) from external sources (around 20%). Raw Materials: Leather Processing
Leather processing units or tanneries produce wet-blue, crust, and finished leather. In producing wet-blue and crust, the firms use raw hides and wet-blue as raw materials respectively. Crust leather is used as raw materials in producing finished leather.
Raw Materials for Wet Blue (Raw Hides)
Raw hides used for producing wet-blue is mainly collected from local sources. Locally, raw hides are collected mainly from leather depot located at Dhaka, Chittagong, Comilla, Kustia, Natore and Rangpur. Only a very insignificant volume of camel hide is imported from external sources. South Africa is the major source of camel hide. Raw Materials for Crust
As in case of wet blue, raw materials for producing crust is mainly collected from local sources mainly from Dhaka. Only some quantity of wet-blue to prepare crust leather is collected from Chttagong and Jessore. Only a very insignificant volume of camel wet blue is imported from external sources mainly from South Africa and Australia. Raw Materials for Finished Leather
Crust leather used for producing finished leather is mainly collected from local sources.Only about 5% of the cow crust is imported from external sources valued Tk.34 million (monthly average). Chemicals and Accessories: Leather Sector
A number of chemicals are used in the leather processing, footwear manufacturing and leather goods manufacturing units most of which are foreign chemicals. Above 95% (of the total value) of the chemicals used in the productions of crust and finished leather are foreign. Over 70% (of the total value) of the chemicals used by the footwear manufacturing are foreign made. However, leather goods manufacturing units depends wholly on local chemicals.

Many accessories are used in the production of footwear and leather goods. These include bukles, belt, button, belco tom etc. Both footwear and leather goods manufacturing units use foreign made accessories for their products. As a whole, only about 20% of the accessories used in the production of footwear and leather goods are locally made. Machineries
Machineries Used in the Leather Sector
A number of machines are used in the leather sector industries: leather processing, leather footwear and leather goods. A huge number of machines used in different leather sector industries are collected from external sources. Machineries: Leather Footwear
In footwear industry generally more than one machine/tool are used in each stage of production. Most of these machines are foreign made. Italy, India, Germany, Taiwan, and Korea are the main sources of machineries used in the production of footwear. Machineries: Leather Processing
Under leather processing, production wet-blue, crust, and finished leather require different types of machines at different stages. Drums are extensively used at different levels in the processing of wet-blue. Platting machine, dyer, hook dryer, drum etc. are some common machines/tools used in the processing of crust leather. In the production of finished leather dedusting machine, buffing machine, spraying machine etc. are commonly used. Most drums used are locally made. Howver, most of the other machineries used in the leather processing are foreign made machines. The main sources are India, Italy and Germany (table-) Chapter: Three (Labor Force)

Labour in the Leather Sector:
The survey data show that a total of 18059 employees are directly employed by the leather sector firms/units having above 15 working force (table-9.2). Of them, about 60% are skilled (having experiences of more than 3 years), about 21% are semiskilled (having experiences of 1-3 years), around 15% are unskilled (having experience of less than 1 year) and less than 4% are professionals. Most of the leather sector manpower/employees (about 80%) are full-time employees, and most of them belong to skilled employees category. A notable number of about 18% of all the manpower are seasonal employees. Of the total employees about 59% are employed in the leather processing units, 37% in the footwear manufacturing units, and remaining 4% are in leather good manufacturing firms. Among the employees about 73% are male. About 97% of the total female employees are full-time employees, however, about 28% of the male employees are either seasonal or part-time employees. Labor: Leather Processing:
In the leather processing units, most of the employees are involved in the production of wet-blue and crust leather. They accounted for over 70% of the total persons employed in the leather processing units/firms. Division of labor at different departments are there in the leather processing units, however, a few workers are involved in more than one departments in some firms (as revealed in the survey). Though the number of cases is very few, there is data overlapping. Of the total employees of leather processing units, about 6% are engaged in finishing and packaging, and management comprised over 9%. Most employees of the leather processing units are having more than three years experiences (skilled). About 30% employees in the management are professionals. umber of professional involved in the production of wet-blue, crust, and finished leather ranges from 2.5-4 % of their respective number of employees. As the normal trend of the overall leather sector, most employees are male and are full time employees. Age distribution of the employees as observed show that most employees involved in the production of wet-blue, crust, and finished leather belong to the age group of 15-29 years followed by 30-44 years. In the management however, over 60% employees aged between 30-59 years. As can be expected professionals are highly paid as compared to the other employees. Of the full time other employees, skilled employees get maximum payment followed by semiskilled and unskilled. No such trend is observed in case of part-time employees. Male employees draw better salaries compared to the female employees, and as expected skilled employees involved in the management get better payments (appendix tables). Chapter: Four (Comparative Analysis)
Gross value added of top ten industries
The total census value added for the manufacturing industries was estimated at Tk. 290911 million in 2001-2002. Gross value added of Readymade garments, Pharmaceutical, Food & beverage, Cotton textile, Non-metallic mineral product, Leather & leather product, Wooden furniture, Paper, printing & publishing , Jute textile and Soap & detergent were Tk. 65282, 53146,30657,20002, 15006,8817,8457, 7491, 7218 and 5302 million respectively.
Gross value added of top ten industries (value in ’000′) Name | Gross value added | | 1997-98 | 1999-2000 | 2001-2002 | Readymade garments | 39350586 | 56994590 | 65282477 | Pharmaceuticals | 8434412 | 9073565 | 53146102 | Food & beverage | 19762109 | 23435906 | 30657203 | Cotton textile | 6470676 | 10013860 | 20001691 | Non-metallic mineral product | 5750683 | 8856723 | 15006158 | Leather & leather product | 16283065 | 17052619 8 | 8,816,822 | Wooden furniture | 264266 | 1722994 8 | 8,456,584 | Paper printing & publishing | 6212528 | 9814705 | 491459 | Jute textile | 8578965 | 6006395 7 | 7,217,582 | Soap & detergent | 2059332 | 1923016 | 5,301,847 |
Source: BBS, Dhaka, 2003. Among all the manufacturing industries readymade garment is on the top position and it has been increasing year to year. Besides though the lower production in the former period, it has been raising at a promising rate FY 1999-2000. Production of major industrial goods: Products | Unit | 2001-02 | 2002-03 | 2003-04 | 2004-05 | 2005-06 | Readymade Garments | Million Tk | 179381 | 188654 | 208604 | 221335 | 275205 | Pharmaceuticals | 000 Tk | 20122359 | 19469750 | 21245600 | 22307084 | 24490160 | Fertilizer | 000 mt | 1753.53 | 2263.53 | 2198.73 | 2102.36 | 1926.67 | Cement | 000 mt | 2514.30 | 2564.69 | 2594.89 | 2942.69 | 3210.76 | Jute Goods | 000 mt | 352.00 | 320.00 | 285.00 | 275.45 | 255.22 | Paper | 000 mt | 40.37 | 30.26 | 28.92 | 25.90 | 25.70 | Soap & detergent | 000 mt | 42.44 | 45.98 | 48.50 | 52.74 | 57.26 | Leather | Million sq.meter | 17.35 | 15.05 | 7.17 | 16.33 | 8.12 | Beverage | Million dz. bottle | 19.87 | 21.15 | 21.82 | 23.74 | 28.70 | Cotton Yarn | Million kg | 65.58 | 69.84 | 84.57 | 105.57 | 120.90 | Source: Economic Review of Bangladesh, 2006.
The production of Leather Goods:
The trend of leather goods production is not in same direction in different years. In FY 2004-05 it has increased to 16.33 million square meters that immediately fall into 8.12 million square metres in FY 2005-06.
Sales and Exports of Leather sector Enterprises/Firms
Total export receipts of Bangladesh during the years 2004-2005 amounted to tk. 50835.04 crore. The total export earnings from leather and leather manufactures in the year 2004-2005 is tk. 1607.6 crore. As leather and leather manufactures are a very important export item of Bangladesh, in every year the total production of leather and leather goods and the export income are targeted. Table: Target and export performance of leather sector (in million $) Commodity | Target for2001-02 | Export performance during2001-02 | Target for2002-03 | Export performance during2002-03 | Target for2003-04 | Export performance during2003-04 | Target for2004-05 | Export performance during2004-05 | Leather | 200.00 | 207.33 | 227.74 | 197.23 | 200.00 | 211.41 | 230.00 | 220.93 | Source: Export Promotion Bureau.
During January-December, 2004, leather sector firms sold 189655 thousand square feet of leather, 16745 pairs of footwear, and 764 thousand pieces of leather goods. Collective sales of the leather sector firms stood at Tk. 18624 million during January-December, 2004. Of the total products of the leather sector firms, over 70 percent are sold outside the country. Leather processing units exported most of their sold products that accounted for about over 80% of their total sales revenue during 2004. Footwear manufacturing firms exported about 50% of the products (in terms of volume), however, sales revenue accounted for only about 40% of their total revenue.
Entire volume of goods produced by the leather goods manufacturing units/firms was exported during 2004. Export of Leather and Footwear
Bangladesh earned 257.27 million US dollar from the export of leather and 102.56 million US dollar from leather footwear in the year 2005/2006. The total export earning of the country for the same year stood at 359.83 billion dollar. The trend of total export of leather and footwear for the past half a decade is shown in the following table. Table: Export of Leather and Footwear (Value in million dollars) Year | Total Export Leather | Total Footwear export | Total($) | 2001-2002 | 207.33 | 48.49 | 255.82 | 2002-2003 | 191.23 | 46.72 | 237.95 | 2003-2004 | 211.41 | 68.30 | 279.71 | 2004-2005 | 220.93 | 87.55 | 308.48 | 2005-2006 | 257.27 | 102.56 | 359.83 |
Source: A study of expansion planning of leather business (28-08-2006) Export Market of Leather and Footwear
Leather and leather products are exported to different countries of the world; the major importing countries are Italy, Germany, Spain, France, U.K, U.S.A etc. In the following table it is shown that, the total export of leather and leather manufactures increase in the year 2004-2005 from tk.464.7 to tk.515.3 crore.
Table-: Country wise Export of Leather & leather manufactures (Tk. in crore) Year | Countries | 2004-2005(1) | 2003-2004(2) | 2002-2003(3) | Changes(1-2) | Changes(1-3) | Italy | 275.2 | 255.8 | 217.3 | 19.4 | 38.5 | Germany | 92.2 | 48.8 | 26.4 | 45.4 | 20.4 | Spain | 44.2 | 53.1 | 41.1 | -8.9 | 12.0 | France | 39.6 | 41.2 | 42.3 | -41.2 | -1.1 | U.K. | 26.9 | 28.0 | 19.2 | -28.0 | 8.8 | Belgium | 13.0 | 15.4 | 8.4 | -2.4 | 7.0 | Netherlands | 12.1 | 14.9 | 7.2 | -2.8 | 7.7 | U.S.A | 8.5 | 7.0 | 12.3 | 1.5 | -5.3 | Canada | 3.6 | 0.5 | 0.5 | 3.1 | 0.0 | Total | 515.3 | 464.7 | 374.7 | | | Source: Export promotion Bureau-2004-2005
Local Investment Project:
Restration of local investment projects grew by 3.4% during the financial year 2004-05. Total registration in this period was $ 2319 million in 1469 projects. Analysis shows that service, textile, engineering, etc are the leading sectoe of invest ment alongwith tannery &leather. Foreign Investment Project: Registration Statistics:
Restration of foreign investment projects (100% foreign and joinventure ) grew by 92.39% during the financial year 2004-05. Total registration in this period was $ 885 million in 120 projects. Analysis shows that service, textile, engineering, etc are the leading sectoe of invest ment alongwith tannery & rubber. Chapter: Five (Findings and Recommendation)
Findings:
By analyzing the leather industries of Bangladesh we find the following prospect and we also find some drawbacks that are creating hindrance to develop our leather industry:
Prospects
* The labor-intensive leather industry is well suited to Bangladesh having low-cost and abundant labor. * Bangladesh has a domestic supply of good quality raw material, as hides and skins are a by-product of large livestock industry. * Adequate government support in the form of tax holidays, duty free imports of raw materials and machinery for export-oriented leather market * The industry lacks domestic technology and expertise and local support industries such as chemicals are still under-developed. * Present government is in the process of setting up of separate Leather Park relocating the existing industry sites to a well-organized place. * Leather exporters have been given 15% Duty drawback of cash incentive. * Low establishment cost. Draw-backs * Leather and leather-based products and footwear sectors were not brought into appropriate rules and regulations after liberation * Lack of infrastructural and other necessary facilities in comparison with competitive countries * Lack of proper roles in the world market by our Embassy * Lack of banking facilities * Higher rate of interest of bank and other loans * Procrastination in granting loans for project implementation * Lack of advanced technology * Natural disaster * Political unrest, hartal, strike, lockout etc. * Stop export of wet blue leather from July 01, 1990 without taking any specific regulations * Recession in world market Twin Tower collapse, attack of Iraq etc causes many organization to shut down Recommendations: * Government should formulate appropriate rules and regulations to support Leather and leather-based products and footwear sectors. * To ensure sufficient and continuous power supply. * They can start joint venture business with other major leather exporting country like India and Japan. * By collaboration with EU and other developed leather importing countries they can import advanced technology. * Government should take initiatives to formulate appropriate leather policies to support the sector which is aligned with the industrial, export, and investment policy and specially strengthen e-diplomacy. * Government needed to arrange some soft loans for the industry to fight against the current financial crisis. * Government must take initiative to enhance R&D and technology transfer to the industry. * Government should take initiatives to enrich the livestock of the nation to ensure higher availability of raw-inputs. * Government needed to arrange some special funding and leather preservation facilities for the industry in occasion of Eid-ul-Azha. * Government should take initiatives to protect lather smuggling to India. * Government should plan and built facilities to increase the value addition through increases production of finished goods. * Government has to ensure the HR development in the sector. * Government has to reduce the environment pollution level of the industry.
Conclusion :
Bangladesh leather industry is dominated substantially by the domestic investment which are mostly export-oriented. The leather includes some ready-made garments, although that aspect is continued mainly to a small export-trade in “Italian-make” garments for the US market. Footwear is more important in terms of value addition. This is the fast growing sector for leather products.
Presently Bangladesh produces between 2 and 3 percent of the world’s leather market. Most of the livestock base for this production is domestic which is estimated as comprising 1.8 percent of the world’s cattle stock and 3.7 percent of the goat stock. The hides and skins (average annual output is 150 million sq.ft.) have a good international reputation. Foreign direct investment in this sector along with the production of tanning chemicals appears to be highly rewarding.
Having the basic raw materials for leather goods as well as for the production of leather shoe, a large pool of low cost but trainable labor force together with tariff concession facility to major importing countries under GSP coverage, Bangladesh can be a potential off shore location for leather and leather products manufacturing with low cost but high quality. In 2004-05 total export of leather goods was 220.93 million US$ on the other hand it is 257.27 million US$ during 2005-06 FY.
Provision of newly announced infrastructural facilities through establishment of an integrated Leather Park and simultaneously, growth in the global demand, opportunities for investing in and setting up export-oriented leather industry in Bangladesh is definitely attractive. Foreign investors are welcome to capitalize on this opportunity Appendix Explanation of key points:
Skilled Employees: Workers having working experiences of three years and above.
Semi-skilled Employees: Workers having working experiences one to three years.
Unskilled Employees: Workers having working experiences less than one year.
Professional: Specialist to perform a particular job and are generally highly paid.
Sorting: In the raw material area the skins are preserved in salt, stored in controlled cool rooms and before processing, presorted for quality and weight.
Soaking: The skin is soaked to remove dirt and salt.An important step in the process of producing wet-blue leather. Enzymes are being used to accelerate the soaking process by providing more efficient rehydration of the skin. Enzymes improve the opening of the fibre structure, allowing better chemical penetration.
Fleshing: Fleshing is done for the removal of flesh and Fleshing M/C machine is used for this purpose.
Liming: The objective of Liming is to remove heir from the rawhide and skin. Drum, lime and water are used for liming. Enzymes and chemicals are best used together in the unhairing process, where the enzyme either assists a chemical process or a chemical assists an enzyme process.
De-liming: After liming, the lime or other alkali in the skin is no longer required, and in most cases it has detrimental effect on subsequent tannage. With chrome tanning it gives a hard green inflexible leather and prevents proper tannage, whilst with vegetable tanning it also slows down or reduces tannage and gives a dark color.
Pickling: A preliminary process for preparing hides and skins for tanning, largely by adjusting the pH with acid and controlling the swelling with salt. It is also use as stable way of holding material, after unhairing, for transport between plants and countries and for trading.
Samming: Process of removing excess water to have smooth leather. Samming and Platting machines are
Splitting: In order to achieve an even specified thickness the leather is reduced in substance. The resulting split-leather can than be processed further as suede.
Skiving: The grain leather is brought to an even thickness. Irregularities are removed from the reverse side and the leather is separated into colour-batches
Drying: Two methods are used to dry leather. The vacuum process during which moisture is removed by suction and the hanging process, when leather is hung and taken through ovens.
Staking: Following drying the leather is mechanically staked in order to soften it. Further processes take place in preparation for finishing.
Finishing: Here the leather is given its final surface treatment and look. Through processes of base coat, colouring, embossing, ironing the leather becomes, depending on the demands of fashion, matt or shiny, two-tone or uni-coloured, smooth or grained.