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The decline of the leather industry in Bangladesh and its causes

The decline of the leather industry in Bangladesh and its causes
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A recent report by a government intelligence agency paints a grim picture of the leather industry’s decline. Besides, the traders of this sector have given information about the crisis in the leather industry.

According to a special report by a government intelligence agency on the demand, production, supply and decline of the sacrificial animal industry on Eid-ul-Adha, leather and leather products are currently the second largest export-oriented sector in the country. More than 50 percent of the annual supply of raw hides, the mainstay of the leather industry, comes from the sacrificial animals of the holy Eid al-Adha. At the time of last year’s sacrifice, there was a supply of 94.50 lakh animal skins. This year, about 12 million different types of well-fed animals were ready to meet the demand for sacrifices in the country. But this promising sector of the country has been continuously counting losses for the last three years.

It has been said that about 9 lakh people are directly and indirectly involved in this sector. The government has already taken several steps for the development of the industry, including shifting the tannery from Hazaribagh to Savar, but for some reason it is still not working.

In December 2019, China canceled the agreement with Bangladesh to export about 100 containers of ready-made leather. As a result, the leather industry of Bangladesh has to suffer a huge loss. A large part of the demand for leather and leather products in the country is met through imports. In order to develop the domestic leather industry, it is possible to meet the domestic demand and capture the market by producing quality products by reducing import dependence as well as exports, the report said.

It has been said that even though the leather traders get loan facility from the bank, they do not get the full amount of the loan as the bank deducts the arrears. Again, many leather traders are not getting the real benefits of bank loans as they have invested in other financial sectors instead of investing in the leather sector with bank loans.

It added that the tannery industry generates 170 metric tons of solid waste per day. The full operation of the Central Waste Treatment Plant (CWTP) set up for the treatment of tannery waste at Savar has not yet begun. As a result, the newly established factories are not able to achieve international environmental standards.

The report also said that many tannery owners have shut down the Hazaribagh factory for fear of making it unusable if the machinery is shifted.

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The decline of the leather industry
The country’s leather market has been declining since 2013 and the country’s leather and leather products have been facing huge financial losses since 2017, the report said. It has been said that since 2013, the price of raw cow skin was Tk 85-90 per square foot. In 2020, the government set the selling price of leather of the same size and quality at Tk 35-40. In many cases, leather has to be sold at a lower price because there is no buyer. In the last three years, there have been many cases of burying leather without finding a buyer. Such a scenario of this potentially largest export product of the country poses a threat to the economy.

The reason for the decline of the leather industry
The report highlights six reasons for the country’s declining leather industry. These include:

  • On April 8, 2017, when the tannery industry started shifting from Hazaribagh to the infrastructural unprepared tannery industrial park in Savar, it took a long time for the relocated factories to go back to full-fledged production. This protracted production has led to the loss of many foreign buyers as well as increased import dependence to meet domestic demand.
  • Domestic leather is not able to achieve exportable quality due to non-protection of leather, non-removal of leather in proper manner, improper transportation and storage and problems in various stages of supply chain.
  • On Eid-ul-Adha, a class of traders kept extra time for themselves without proper storage of leather, resulting in loss of quality of leather and loss of international export value.
  • The cost of leather processing has increased due to the increase in the price of chemicals used in leather processing. In addition, due to the decline in the price of leather in the international market and the relatively high cost of processing domestic leather, the export income of the leather industry in the world market is declining.
  • China is one of the importers of processed leather in Bangladesh. China, the world’s single largest producer of leather as well as synthetic and fabric products, is not currently importing leather from Bangladesh. In addition, the demand for leather products has declined significantly due to the increase in the use of synthetic and fabric products such as shoes, bags, wallets, belts, jackets, etc. due to their comparatively low prices and taste.
  • Despite being the second largest foreign exchange earning sector in the country, it is not possible to achieve the desired export earnings target from this sector as the leather industry has relatively few government facilities as compared to the garment industry.

-SZK

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