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:
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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.
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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
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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
33800
34100
34400
34400
34612
34959
35389
35817
33500
Source: FAO, 2006
Major Products:
Tannery transforms raw hides and skins into leather for manufacturing articles like
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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 Hide andSkin Footwear
Goods
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 $)
Export
Target Export
Target
Commodity Target
for2001- performance for2002- performance for2003during2001- 03
during2002- 04
02
02
03
Leather
200.00
207.33
227.74
197.23
200.00
Export
Target Export
performance for2004- performance
during2003- 05
during200404
05
211.41
230.00
220.93
Source: Export Promotion Bureau.
During January-December, 2004, leather sector firms sold 189655 thousand square feet of
leather, 16745 pairs of footwear, and 764 thousand pieces of leather goods. Collective sales of
the leather sector firms stood at Tk. 18624 million during January-December, 2004. Of the total
products of the leather sector firms, over 70 percent are sold outside the country.
Leather processing units exported most of their sold products that accounted for about over 80%
of their total sales revenue during 2004. Footwear manufacturing firms exported about 50% of
the products (in terms of volume), however, sales revenue accounted for only about 40% of their
total revenue.
Entire volume of goods produced by the leather goods manufacturing units/firms was exported
during 2004.
Export of Leather and Footwear
Bangladesh earned 257.27 million US dollar from the export of leather and 102.56 million US
dollar from leather footwear in the year 2005/2006. The total export earning of the country for
the same year stood at 359.83 billion dollar. The trend of total export of leather and footwear for
the past half a decade is shown in the following table.
Table: Export of Leather and Footwear (Value in million dollars)
Year
Total Export Leather
Total Footwear export
Total($)
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
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
7.0
12.3
1.5
-5.3
8.5
12.0
Canada
3.6
0.5
0.5
Total
515.3
464.7
374.7
3.1
0.0
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

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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 byproduct 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.
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

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 leatherbased 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.