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Crisis and relevant thinking of Bangladesh leather industry

Crisis and relevant thinking of Bangladesh leather industry
Author: Mr. Mosharraf Hossain Bhuiyan, Former Senior Secretary and former Chairman of the National Board of Revenue (NBR) is currently Bangladesh’s Ambassador to Germany.

Bangladesh’s leather industry is currently going through a crisis. Even a few years ago, the leather sector was the second largest export earner in the country. In the first year of coronavirus (2019-20), the production and exports of this sector decreased compared to the previous year and in terms of export earnings, the leather sector lost its second place and dropped to the third place.

In the last seventy-eight years, the leather industry has come to this stage. About 120,000 people are being employed in this industry and about 3 lakh more people are indirectly involved in this industry. In addition to meeting the demand for leather goods, including shoes and sandals, for a large section of the population, the country has earned an average of tens of millions of dollars in exports in recent years.

At present, 85 per cent of the country’s export earnings come from the readymade garments sector. The leather sector can play an important role in export diversification and diversification. In fact, in the nineties of the last century, it was possible to diversify the leather sector by producing crushed and finished leather, shoes, bags and other leather goods, beyond the limited range of wet blue production. Bangladesh’s leather and leather products are also known abroad and become the second largest export product. In the 2013-14 financial year, the export of this sector reached a maximum of 1258.82 million dollars. Although the export income decreased slightly in the next two years, the income in the 2016-17 financial year was 1234 million dollars. After the onset of the Corona epidemic all over the world, there was a massive collapse in the leather sector of Bangladesh. In the fiscal year 2019-20, the export income decreased to 797.61 million. While other exports of Bangladesh turned around in the fiscal year 2020-21, export earnings in the leather sector declined to 796 million. The businessmen engaged in this industry for many years have been trying their best to survive and have been holding various debates with the government.

The main problem of the leather sector is environmental pollution. In the eighties of the last century, the government issued a warning to the tannery establishments to control the pollution of the Buriganga river due to the contamination of the Hazaribagh tannery in Dhaka. Subsequently, after discussions between the government and trade associations in the leather industry, it was decided at the policy-making stage of the government that tanneries at Hazaribagh in Dhaka would be shifted to Savar to prevent pollution and leather would be processed there in an environmentally friendly manner. At the beginning of the present century, the Ministry of Industries took up a project, acquired about 200 acres of land in Savar and started construction of ‘Dhaka Tannery Estate’. The workload of the project is increased by increasing the amount of money several times. The project was entrusted to Bangladesh Small and Cottage Industries Corporation (BSCIC), an agency under the Ministry of Industries. The government continues to implement projects to complete the work of Central Effluent Treatment Plant (CETP), Sewage Treatment Plant, Dumping Yard, Solid Waste Management etc. with its own funds. But despite increasing the project time by 11 times, the project did not see any success due to the incompetence and negligence of the Chinese contractor JLEPCL. None of the water, salt, chemicals etc. are being treated properly through CETP. Moreover, 40,000 cubic meters of waste is generated daily from the relocated factories in Savar industrial city, but there is a maximum capacity of 25,000 cubic meters in waste management.

The tannery owners blamed the government for the delay in implementation of the project, failure and forcible relocation of Hazaribagh industrial plant to Savar before the project was completed. However, despite the allotment and compensation of land to 155 tanneries, the transfer process was slow and the pollution in Hazaribagh reached a high level. Finally, on the direction of the High Court, the government transferred all the tanneries from Hazaribagh to the leather industrial city of Savar in April 2017. In addition, the negligence, deception and excessive delay in the work of the Chinese company was beyond the comprehension of the government. In fact, the Ministry of Industries and BSCIC have taken the Chinese company JLEPCL hostage. Only 130-135 companies have been able to relocate their factories to Savar. Many small tannery owners who were allotted land could not afford to build a factory in the tannery industrial city of Savar.

Chinese institutions and BUET experts also lacked estimates of how much waste would be available for daily treatment. Where 25,000 cubic meters of waste treatment has been set up in the CETP, if all the factories were in full production, it would produce almost twice as much waste. Fault of CETP, excess waste of capacity coming into CETP is causing factory waste and water to be discharged untreated into Dhaleshwari and Banshi rivers. Due to the connection of Kaliganga, Buriganga, Turag and Balu rivers with these two rivers, the water of six rivers is getting polluted. The existence of these river fish and aquatic plants is endangered. Moreover, CETP does not have solid waste segregation and treatment system. The health, agriculture and livelihood of the people in these riverside villages are being polluted.

The Department of the Environment has been raising objections to tannery pollution for several years. They have ordered fines against BSCIC and tannery owners. A meeting of the Parliamentary Standing Committee on Environment, Forests and Climate Change held on August 26 recommended the closure of Savar Leather Industrial City. Although some big industries have been given environmental clearances earlier, the Department of Environment is not giving clearances to any other factories at present.

At present the country’s tannery and leather industry is in crisis. Foreign customers are gradually turning away as production is disrupted due to various problems. Besides, the main challenge of this industry is compliance. The deficit of tannery and leather industry in Bangladesh is long standing in all three areas – environmental, social and qualitative. As a result, international brands are not going to attract buyers. The free export of this industry is being hampered as our companies are not getting ‘Leather Work Group’ (LWG) certification. If the tannery production and leather processing is stopped, the leather industry will be on the verge of destruction. This industry cannot be sustained only on imported leather.

Shutting down the tannery industry is not a practical solution to prevent environmental pollution. Concern was expressed about the current state of the industry at a meeting of the task force on leather industry formed on September 23. After a detailed discussion in the meeting chaired by the Minister of Industries, it was decided that tannery industrial city should not be closed but CETP should be effective, proper solid waste management and leather processing should be done in an environmentally friendly way.

The industry ministry has already allowed Apex and Bay Tannery to set up separate ETPs. The pressure on the CETP will be lessened if a few more large tanneries start work on their own initiative with permission to set up ETP. However, it is important to identify the errors in the established CETP and fix them and make arrangements for effective refinement.

Savar’s Dhaka Tannery Estate has several other problems. The factory owners have not yet understood the plot or land lease deed allotted by BSCIC. As a result, it is becoming difficult to take bank loan with land mortgage. On the other hand, BSCIC is not registering the lease deed as it does not understand the value of the land as per the terms of the agreement.

Tannery owners who have land in Hazaribagh are not able to sell this land. Because the government has declared the abandoned tannery area as a ‘red zone’. Small tannery owners could not afford to relocate or build new tanneries in Savar. There are about 30 such industries. The number of such tanneries which did not get land in Savar is not less. Many have already closed.

The owners and workers involved in the tannery industry are the children of this country. They did not come from an alien planet. No solution can be found by imposing fines by the Department of Environment and closing down industries and pushing the traders involved in the industry into uncertainty.

The rise and expansion of the readymade garment industry in Bangladesh has been driven by extensive government policy and financial support, easy loans and other logistical facilities. During the Corona period, this industry has been given ample incentive facility. The government needs such a big initiative to save the leather industry and to continue tannery processing and production of leather products in an environmentally friendly way. However, from the beginning of the present century till now there has been no lack of government initiative and goodwill in the development of leather industry. Admittedly, BSCIC did not have the capabilities and skills needed to move this large industry to a single place and make it environmentally friendly. Lack of public-private coordination has also been observed.

Many of the small and medium enterprises involved in the leather and tannery industry are plagued with long-term defaulted debts. Bangladesh Bank, however, has announced some more facilities, including rescheduling of defaulted loans in the leather industry for 10 years. But the specific ‘incentives’ announced by the Bangladesh Bank and the Prime Minister could not be accepted by the small and medium entrepreneurs involved in the tannery and leather industry due to various conditions and complications. In addition, the Corona epidemic has hit them hard. Production, sales and exports have been severely disrupted due to the ongoing lockdown at home and abroad and about four to five thousand workers have become unemployed.

In the context of the above discussion, it is necessary to adopt a long-term and sustainable plan for this industry. Some have proposed the formation of a leather industry authority under the Ministry of Industries. An experienced European organization can be hired to make the current CETP operational and environmentally friendly. And the responsibility of its management can be entrusted to a committee consisting of public-private persons. Since it is not possible to treat all factory wastes in one CETP, setting up of another CETP on PPP land on government land could be considered as a long term measure.

Government policy support such as back to back LC, bonded warehouse, easy loan, cash assistance etc. have been provided in the readymade garment industry. If similar support is given to the export oriented leather industry, this industry can turn around again.

|Source: Online/KSU

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