These companies can be brought to Bangladesh through Taiwanese. But they are desperately looking for a country to set up a factory. They will not be able to go to Thailand, because the wages of the workers there are much higher. Can’t go to Laos because it’s a landlocked country. The population is very small, so can’t go to Cambodia either. Even in Turkey, which is a leader in the shoe industry, Nike and Adidas will not be able to go because of the high labor costs.
I have at least 50 years of experience in the leather goods industry. I will talk about what I have learned from there. I started my journey in 1972. Then the economy was in turmoil. That was the time of permission and license. Half of my time was spent wandering the corridors of the Secretariat. I spent half my time lobbying with the government to make the business environment more liberal.
The Prime Minister also spoke about diversification of export products. She has said this many times. People have been calling for export diversification for a long time. But for some reason it did not happen. Something is stuck.
In this discussion. Dr. Abid Khan says, where there is a lot of room for profit in the local market, why look at exports. I disagree. We can do both at the same time. We can look at both the domestic and export markets at the same time. Both markets have their own advantages.
You see, if we want to make any business successful, we need to grow that business. Business will die without growth. Moreover, there are limitations in expanding the market within the country. It (local market) is not completely open and free. It has a limit. That is why the market outside the country has to be bigger. The same can be seen in the western world. Let’s talk about Mercedes Benz. Only 30 percent of their products are sold in Europe. The remaining 70 percent is exported. Because their country’s market is small.
In the same way, we need to increase the size of our business. Why? Because, I think, the most important thing for any LDC or developing country to enroll in Qatar is to create employment. You need to create jobs. That would be the easiest way to end poverty. And the private sector has to do that. Why? Because, the private sector creates employment.
You need to create jobs. And industry is needed to create employment. It can be a manufacturing industry, it can be a service industry – it can be any industry. The service sector contributes 51 percent to GDP. So we need industry. Because, not everyone is skilled.
Another major weakness of ours is human resources. Thousands of foreigners are working in Bangladesh. According to official estimates, they are taking 500 crore from Bangladesh every year. Then, unofficially, they are definitely taking another 400-500 crore dollars. A country like Bangladesh — virtually no country — cannot allow foreign currency to go out like this.
So we have to diversify. We have to look at exports. Now let’s come to the leather industry. We were supposed to be at another stage today. I am giving some calculations. At present, the size of the global shoe market alone is 365 billion Dollars. The market is expected to reach 500 billion Dollars by 2040. If we could capture even one percent of this export market, our shoe market would be 4 billion Dollars. Huge sums of money.
The second thing is that this industry requires huge manpower. Garment is two-dimensional — length and width. But shoes are three-dimensional — length, width and depth. Because of this it takes a lot of tooling. As a result, tooling costs more. This requires a lot of technology transfer. That is why we have set up a training center. There we train completely unskilled workers. Teach work. Because, as is the case in the garment industry, as soon as someone comes and teaches him to operate a sewing machine, the work is learned, which is not possible in the shoe industry. Here you have to cut the skin. It is a natural product. Two skins are never the same. Each piece of skin is different. It takes a lot of technology here.
Who is leading the sector now? China. Ten years ago, China accounted for 70-80 percent of global leather production. Now it has been reduced to 60 percent. Even then, China is the most advanced here. Then there is Vietnam. Vietnam set up its first factory in 1990. We also set up the first factory in 1990. At present, there are more than 3,000 shoe factories in Vietnam. And we are still stuck in 200-300 factories. Vietnam exports 16-17 billion worth of shoes a year. But we are stuck at 1 billion dollars. Indonesia is in the third position in this sector. This is followed by India’s position. India is moving very fast in this sector. India has finally come to realize that it is important to focus on the labor-intensive industry, not just on high-tech and IT.
You have to create wealth. This also applies to local industries. If people remain poor, what is the future of local industry? Where will people’s purchasing power come from? So both are important.
Now why is the leather industry not doing as well as the RMG sector? Another is the image problem. Yes, our image is much cleaner than it was 15-20 years ago. We don’t get the benefits that the garment industry gets. I am not against it — but the same opportunity must be given to other export-oriented sectors. The garment industry gets a lot of help from the government. We are not getting equal opportunities.
Second, we need a joint venture in the shoe industry. If you analyze the footwear industry of China and Vietnam, you will see that they are all joint ventures. The shoe industry of the two countries was developed by a joint venture of the Taiwanese. I also have a joint venture with the Taiwanese myself. I asked him, ‘Why did you come to Bangladesh?’ He replied, ‘I have a factory in China, I have a factory in Vietnam. But I understand that there is no future in China. Because the Chinese government is no longer interested in the shoe industry, the leather goods industry, the leather industry. They are now interested in the high-tech industry. Moreover, the one-child policy has led to a labor crisis in China. Although two children are now allowed, most Chinese do not have more than one child.
So now we have a golden opportunity. This opportunity must be seized. We now have to set up factories with big companies. We have to take joint initiative with Nike and Adidas. Even today, big companies like Nike and Adidas do not invest a single dollar in this industry. They just give you work orders and you make the product.
They can be brought to Bangladesh through Taiwanese. Why can’t we attract them? But they are desperately looking for a country to set up a factory. They will not be able to go to Thailand, because the wages of the workers there are much higher. Can’t go to Laos because it’s a landlocked country. The population is very small, so can’t go to Cambodia either. Even in Turkey, which is a leader in the shoe industry, Nike and Adidas will not be able to go because of the high labor costs. Even Turkish investors want to come to Bangladesh. But they are not coming. Where is the problem?
I have repeatedly told the government that it is not only labor-intensive and capital-intensive, but also very land-intensive. This industry takes a lot of land. There just needs to be a special economic zone for the shoe industry. It can happen anywhere, including North Bengal, because now the communication system is improving. There will be some logistics problems, but they can be solved. And the logistics problem is not just in the shoe industry, but in all industries.
It can be a great export diversification. We can’t be equal to the garment industry, because clothing is cheaper than shoes. However, the average price of a pair of shoes is 15, compared to that, clothing is much cheaper. So the more shoes are produced, the more the export income will increase.
So, first of all the land problem has to be solved. Then, we have to give the same benefits as RMG. There should be the same export policy for all sectors of the industry. Other sectors cannot be treated like stepmothers. As we know, RMG is the most beloved child of the government. But the government has more children, they also need to be taken care of.
Next, special economic zones have to do. Fortunately our Prime Minister loves the leather and shoe industry very much. I saw it with my own eyes. So we are getting a lot of help from the current government.
If API can get a separate economic zone, why not the shoe industry? The shoe industry is even more labor intensive. And the issue of training can also be solved. If joint ventures are taken, foreign partners will bring the technology. There is no reason to worry about it.
But the environment needs to be created. How to create an environment? Give them land. Give opportunities. Encourage. Lead time is very important. Shoes are very fashionable items. Two types of shoes are worn in winter and autumn.
But I’m not worried about that. We just need partners for joint ventures. That’s the only way to do it. China has done it. Vietnam has done the same. Nike, if Adidas can go to Indonesia, then why can’t they come to Bangladesh?
But I’m not worried about that. My thoughts are on the basics. Give us land, give us special economic zones. I have said this many times. But why our words are lost in the bureaucracy. Now I don’t understand why I have to pay 20 percent VAT for technology transfer. It must be omitted.
Now is the right time to do these things. Because before COVID, big foreign buyers like Adidas didn’t even need to reply to our emails. But now they are showing a lot of interest. Because they don’t want to put all the eggs in one basket. So far, all their eggs have been in the basket of China and Vietnam. Now they are shocked because of COVID. So they are looking for new places.
So now is the time to create the environment. So let them come. Technology will come with them, employment will be created. Life will become easier. Many thanks.
A discussion meeting titled ‘LDC Graduation of Bangladesh: Transformation and Preparedness’ was jointly organized by the Ministry of Commerce and Dhaka Chamber of Commerce and Industries on Thursday (October 28, 2021). Mr. Syed Manzur Elahi, an ex advisor to the caretaker government and the country’s top businessman and chairman of the Apex Group, spoke there.