In 1947, there were a few tanneries operating on a small scale producing sole leather.  In 1950·s tanneries were set up at Karachi and Lahore  1960·s and 70·s marked the establishment of tanneries at Hyderabad, Kasur, Multan, Sialkot, Sahiwal and Gujranwala.

Leather Industry Today 
Today, the leather tanneries are divided into two sectors ²

organized and unorganized sector 

700 units in total ² 450 units in the unorganized sector

and 250 units are members of organized sector  The tannery units in the unorganized sector producing leather on cottage basis, with negligible use of machinery 
These are concentrated in the form of clusters
-Kasur has 275 tanneries -Sialkot houses 250 tanneries -Karachi has around 150 tanneries

 The Pakistan Leather Industry started with the production of pickled and vegetable tanned hides and skins.  Today we produce not only wet blue and crust forms of leather but we also produce fully finished leather and leather based products -Such as jackets, belts, gloves and footwear

 The industry plays a pivotal role in stimulating export volumes .22 billion.In 2007-2008. the industry achieved exports of worth US$ 1. registering an increase 21% when compared to the previous year  Export of finished leather increased 26% in terms of quantity and 16% in terms of value in the year 2007-08 .

%4 %2 %0 1% 3% 3% . The major export partners are: European community(accounts for 65% of the total exports) North and Latin American countries as well as Central Asian states(contributing 35% of total exports) %16 %14 %12 %10 %8 %6 15%  Pakistan has 1% share of the world leather market.  This is a reflection of the deteriorating situation our leather industry is in.

Leather associations in Pakistan Pakistan garments association(PLGMEA)-Karachi Pakistan tanners association(PTA) Karachi - Pakistan footwear association(PFMA)Lahore Pakistan gloves association(PGMEA)Sialkot .


Mehmood Brothers tanners and manufacturers Prime tanners Pvt Ltd. Ltd Omar Leathers Pvt. Ltd Noor Leathers Shafi tanners and co.Ltd Pakistan Tanners Association National Institute of Leather Technology . Model used: Porter·s Diamond model  Research methodology used: o Published data o Primary research conducted at Nova leathers Pvt. Blooming Leather Pvt. Ltd KHAS Pvt.

Factor conditions Raw material  The basic raw material used are the hides and skins of ovine and bovine animals.  The word skin is used for small animals or ´ovineµ(sheep and goat)  The word hide is used for bigger animals ´bovineµ(buffalos and cows) .

Category-wise usage of the hides and skins:  Cow hide and sheep skin is mostly used for smooth finishes of the upper sole of shoes. inner side of gloves and designer bags and clothing  Buffalo hides and goat skin are used in coarser items like leather soles and joints Tanning methods used:  Vegetable-tanning ² uses ¶tannin·  Chrome-tanning ² uses salt compound of chromium .

 Interestingly enough we import around 70-80% of hides and skins from Europe. Africa and Middle-east. tanners usually procures the raw material from slaughter colonies(kamelas) situated in the outskirts of various cities . while goat and sheep is of much better quality in Sindh. Buffalo and cow skins mostly come from Punjab.  Locally.

. The leather tanneries purchase quite a lot of the hides and skins during Eid-ul-Azha (some of them stock raw materials for the 4-5 months of usage)  The local slaughtering is mainly done by unprofessional slaughterers during Eid-ul-Azha  This results in a lot of unnecessary cuts that decreases the net worth of the raw material or at times renders the skin useless.

.  Local slaughterers do not have state-of-the art preservation houses and they use the traditional method of ´saltingµ to preserve the skin. They start rotting soon due to the flesh and blood residue. Hides and skins are perishable items.

3 28.6 30.LIVESTOCK POPULATION IN PAKISTAN (2001-02 TO 2007-08) Million Numbers Buffalos Sheep 24.6 24.9 1.5 26.0 .3 27.7 31.2 29.2 56.8 23.1 Fiscal Year 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 * 2007-2008 * Cattle 22.0 24.8 27.9 0.7 56.8 0.9 26.7 Camels 0.0 24.7 0.2 29.3 23.7 24.8 Goats 50.7 53.4 24.8 55.8 0.8 25.8 24.9 52.5 26.7 0.8 54.

 Dyes and Chemicals  90% of the dyes and chemicals used in the tanning of leather are imported mainly from Germany Spain Italy  10% dyes and chemicals are taken from MNCs which have got their set ups in Pakistan Sandoz Bayer BASF Clariant .

 The proportion of imported to local dyes is very high because of the poor quality of dyes and the restrictions (regarding the usage of certain chemicals in the manufacture of dyes) by international buyers. .

 The smaller tanneries have 2 to 5% of graduates in their workforce . loading and packaging)  Apart from this there are around 15 to 20% graduated . engineers and diploma holders In the big players of the industry.000 people of Pakistan  Almost 80% of the labour is skilled( they have the required expertise to operate the machinery)  Approximately 20% are the unskilled workers who are basically helpers( they help in unloading. Labour  The leather industry provides employment to 200.

which is the lack of interest of today·s literate class to opt for working in these industries . Almost all the tanneries have the minimum age requirement of 18 years. below which they do not employ the candidate  Basic training methodology prevalent is the ´Ustaad-shaagird ´ method  The tanneries we visited have not conducted any sort of workshops or skill development programs for their workers over the past two years  They believe that the expertise that the workers have is sufficient enough to meet the buyer preferences  Our leather industry is facing the same problems as the other industries in Pakistan.

Sialkot(LPDI) Institute of Leather Technology. Some of them are: National institute of Leather Technology. Charsadda(FTI) Facility cum Training centre. Kasur Cleaner Production centre. Gujranwala(ILT) Pakistan Institute of Fashion Design. Kasur . Karachi(NILT) Leather products development institute. Lahore(PIFD) Footwear training institute. Training institutes:  There are various training institutes that have been established to provide leather based academic degrees.

a good Library. There are various programs that NILT is offering in order to impart Leather related knowledge. Physical. Information Technology Centre. Some of them are: Diploma of Associate Engineering(DAE) Diploma in Leather Technology Diploma in Leather garments Diploma in Leather goods  NILT has fully fledged mini tannery. Research & Design Laboratories with other essential facilities which is catering to the needs of upgrading the leather sector . Chemical and Analytical Laboratories.

. Such machinery is locally known as chukrum.  Around 5 to 10% machinery used by the small tanneries is locally produced.Capital and Machinery  Around 80 to 95% of machinery is imported from countries like Italy and France  The high percentage of import in terms of machinery is a reflection of the insignificant manufacturing base in Pakistan.  These are smaller in size and available at reasonable prices.

Research & Development:  There are numerous institutes related to leather. Lahore and PTA have signed a research project for the identification of skin diseases in animals and geographical patterns of these diseases. yet the rate at which research and development is being carried out is very slow and is in it·s initial stages  Our primary research showed that only big players of the industry such as Nova leathers and Mhmood Brothers have come up with a new dyeing technology(steel dyeing drums) which ensure better quality of dyeing.  The university of veterinary and animal sciences(UVAS). .

 The drainage system is in a very poor condition as well.  Being a water-based industry. Korangi Industrial Area (sector 7-A) does not have a single metal road. tanneries have to purchase water and they have also arranged for company-owned generators to ensure uninterrupted power supply. These tanneries are also deprived of the basic utilities(such as water and electricity). .  The industrial hub of Karachi.Infrastructure:  There are severe infrastructure problems faced by the Leather industry.

‡ The demand can still be created by focusing more on the products which are not affected by the climate. There are also wide variations between extremes of temperature at various locations. characterized by hot summers and cool winters. the climate is generally arid.Demand Conditions Climatic conditions: ‡ The demand of Leather is highly dependant on natural factors such as climate ‡ Pakistan lies in the temperate zone. .

809 521 .220.589 5.75% +36.358 10.115 38.263 17.08% +2.73 33.121 % Change +16.94% +21.257 1.225 848 Value 356.258 9.M & 000 DOZ July-June 2006-2007 Qty 19.26 161.62 97.36% -7.EXPORT OF LEATHER & LEATHER PRODUCTS FROM PAKISTAN DURING JULY-JUNE 2006-07 VIS-À-VIS JULY-JUNE 2007-2008 Value = US Dollars in Thousand Commodities Leather Leather Clothing Apparel Unit 000 SQM AUP/Sq.934 9.31 105.169 6.979 1.154 39.52% +10.74 10.60% -20.884 18.477 24.64% 21.53 1.02% AUP/Pcs Leather Gloves 000 DOZ AUP/Pair Leather Footwear 000 Pairs AUP/Pair Other Leather 000 KGS Manufactures AUP/Kg TOTAL : 3.14 132.31% +8.360 4.62 1008.12 528.177 19.56 388.56% +12.121 Value 415.15 4 July-June 2007-2008 Qty 24.40% -69.089 9.


Global Demand for Leather Products Product Profile Other Leather Products 1% Footwear 8% Garments 42% Gloves 4% Automotive 7% Leather Goods 9% Gloves 16% Clothing 11% Footwear 56% Leather 33% Upholstery 13% .

‡ The inhabitants of these areas do not take care of animals in a professional manner ‡ Animals become victims of wobble fly disease and skin rash.Absence of commercial farming: ‡ In Pakistan. . 65% of the population resides in rural areas.

 We identified 4 factors that are significant for the development of any industry. that are: Country image Logistics Price Quality  In Pakistan. .Country Image and Price:  70% of tanneries that we visited mentioned that the major impediment in the growth of the Leather industry is the unfavorable image Pakistan has in the international arena. we gave minor attention to these four aspects which are otherwise essentials for success.

 The law and order situation is making foreign investors reluctant to invest  Even the hoteling facilities and country ambience is not up to the standards .

due to which people are becoming more and more conscious about the environment and extinction of animal life  There have been recent activist movements such as the one by Pamela Anderson and the Chetus organization .Animal activists:  A recent culture shift has been observed.

Livestock Industry:  In Pakistan. we regard the meat industry to be of prime importance. Leather is just seen as a by-product.  This perspective needs to be changed for the sophistication of local demand .


 Certifications of social compliance and standardization for the use of chemicals. .Effluent treatment plant & REACH agreement  This plant has been made in Korangi with the collaboration of Dutch government.


the leather industry will get a boost as more and more people will be inclined to buy leather based products(such as belts and bags) .Related & supporting Industries Fashion Industry:  The fashion industry of Pakistan is not up to the standards.  There is lack of awareness among the masses regarding the latest trends in fashion  If the fashion industry flourishes and creates awareness about its products.

.  Over the years. and that makes Indiaa one of our major competitors. Film Industry:  Pakistan·s film industry is almost non-existent. India·s clothing industry has prospered due to the fact that its film industry has been progressing at an amazing rate.

Feed Industry:  In the process of tanning. . leather passes through the shaving process in which a lot of wastage(burada type) is gathered  This wastage is then sent to the feed industry where it is used in the manufacture of animal feed.

 This fat is used in the manufacture of low-grade soaps . Soap Industry:  During the fleshing stage. the access fat is removed from the animal skin.

Our local manufacturing base is insignificant and no conscious effort is being made to locally produce low priced and good quality machines. Machinery: 90% of the machinery used in the leather industry is imported from countries like Italy and France. .

The initiative taken by the government to reduce the Bank·s spread from 3% to 2% ( in 06-07) can help the industry grow. . The borrowing cost is high which deters further investment in the industry. Banking and finance industry: The credit availibilty to the leather tanneries is an on going issue.

 Severe need to commercialize livestock farming in order to breed healthy animals for provision of quality hides and skins.  Hides and skins are worth more money and can have more value- addition done to them therefore. Livestock Industry  Livestock provides the most important raw material to the Leather industry. therefore the quality and quantity of livestock available matters a lot. . this should be focused as a primary product rather than a secondary product of the meat industry.

none of the companies meet the international standards.Dyes and chemicals  Our local chemical and dye manufacturing is not supporting the Leather industry.  Our local chemical and dyes should address various health issues associated with the chemicals they produce in order to abide by all the set international regulations. . as apart from a few MNCs mentioned earlier.

which is reflected in the minute number of the present class at the institute(currently 110) . Training. proper academic curriculum. faculty.  The NILT has taken initiatives to train individuals in Leather and Leather products but they are not capable of attracting people. research and educational institutes  The institutes(already mentioned in the factor conditions) are not working to their full capacity due to the lack of students.

Organized sector Unorganized sector .Firm structure. strategy and rivalry Structure:  Divided into two subsectors ² organized and unorganized sector Leather Industry  700 units in total ² 450 units in the unorganized sector and 250 units are members of organized sector  The unorganized sector has retailers in the area of in Joria Bazaar and Zainab market.

 The associations of leather in Pakistan are: Pakistan garments association(PLGMEA) Pakistan tanners association(PTA) Pakistan footwear association(PFMA) Pakistan gloves association(PGMEA) .

. The Pakistan tanners association fully represents the tanneries all over Pakistan. and has represented the issues of its member exporters at the federal level for consideration  Pakistan Tanners Association central sub committees are also in touch with SMEDA to discuss some relevant issues of the leather industry towards to the formulation of the leather vision.

Clusters formation  The organized sector is mainly concentrated in the main hubs of the Country ² Karachi. Lahore and Sialkot. Kasur. Sheikhupura. Gujranwala. and Peshawar  In Karachi Korangi industrial area an informal cluster emerged. Multan. of tanners has . towns industries are: having leather  Other Hyderabad. Sahiwal.

National Institute of Leather and southern zone office of Pakistan Tanners Association.  Apart from these 150 tanneries we have a few scattered units in Sher Shah and SITE . The tanneries residing over here are all export oriented . Informal Cluster: Korangi Industrial Area (Sector 7A)  This cluster comprises of not only over 150 tanneries but also an effluent treatment plant.

This informal cluster has always remained a high processing center mostly catering to the needs of local.  There are 275 tanneries in total  Average daily input is 190 tons of wet salted weight  The units tend to provide hides and skins up to the wet blue form only. low priced bracket footwear manufacturers .  The structure of industries in Kasur is a traditional family owned business.Informal Cluster: Kasur  Apart from this we also have a cluster in Kasur. in this cluster there are mostly unorganized and unregistered tanneries.

Research proved that there is minimal

domestic rivalry among the tanneries in Pakistan each tannery is working in isolation and the actions of the rivals does not have any direct affect on it, as mostly the big industry players are export-oriented 
So in order to brew competition and

innovation we need to propel a competitive environment in the local arena.


the leather industry has engaged in various fairs domestically and internationally in order to increase awareness of leather products among the masses Pakistan Tanners Association collaboration with the EPB. in 

Pakistan Pavilions was organized by 

The government of Pakistan gives

50% government subsidy in various international fairs and exhibitions held at different destinations in the world

 Some of the fairs in which Pakistan tanners

participated are mentioned below: 
Lineapelle Fair held in October 2005, at Bologna, Italy.  IDF Leather Fair, held in January 2006, at Istanbul, Turkey.  MMT Section of APLF, held in March 2006, at Hong

All China leather exhibition, held in September 2006, at

Le Cuir, held in September 2006, at Paris

 The government of Pakistan assigned a task of Comprehensive development Strategy for the sector.  The entities that are involved in this venture are
SMEDA Ministry of industries Production & special initiatives 

The aim of this strategic step, is to reposition the leather industry on the domestic, regional and the internationla front.

 The leather vision and strategy also includes the goal of setting up leather parks in Sialkot. .  SMEDA has initiated the project of IIN( industry information Network)  The goal is to provide a common platform which will stimulate coordination among the members.

 Repeated efforts have been made by the Pakistan Tanners Association to let the government know of their problems however they haven't yet achieved anything worth mentioning.  EPB has helped the leather industry by providing easy access in international fairs and is also offering subsidies from 50%-75% .Government  The government of Pakistan is not providing the Leather industry with channelized and adequate support.

9130 million to save its leather industry. The article published in business recorder on the 28th December 2008. . mentions that government of India and China are taken various measures such as Indian government has injected Rs.


Swine 12% Bovine: 0-6% Sheep: 0-12% 10% ( Wet Blue & Crust) 0 % 0% Certain Categories 25% 10 % 1 . Equine 5% Sheep.22% Gloves 1.17% Apparel 3. 16% Sales Tax 3% Finished 7.5 % Apparel 11. Goat. crust & finished) Custom Duty on Import of Raw Hides and skins INDIA CHINA BANGLADESH 1% Finished 0.POLICY COMPARISON MATRIX PAKISTAN Global Market Share Duty Drawback/ Tax Rebate Custom Duty on Import of Inputs and Accessories Tax on Import of Inputs and accessories Export Duty on Finished Leather Custom Duty on Import of Leather (wet blue.8-1.5 % Footwear 11.76% Footwear < 2 % 25 % Finishing Foils 25% Income Tax.4 % 15 % Finished 7-11% Footwear/Bags 11 % Apparel 5% 2-3 % 15 % 3-25 % 0-13% 0% 0% 0% 0% 0% 0% (A few items have up to 25 % duty) 0% (Export Duty on Raw 20%) 0% 0% 0% Wet Blue : Bovine.

the provision of 25% financial costs for setting up design centers and individual units). The Pakistani government should also provide the much needed financial support (as proposed by Pakistan Tanners Association.  There have been many unchannelized haphazard activities by the government to promote the leather industry of Pakistan . water and gas).  Even the logistic support is in a very poor situation.  Another outcry by the tanners was over the high cost and unwarranted supply of utilities (electricity.

 Furthermore. as we read in the dairy sector. the smuggling and exporting of live animals is disadvantageous for the Leather Industry. The government needs to take great strides in order to improve the image of Pakistani products. . The Government needs to look into this matter.

which has now been reduced to a meager 0. Export rebates of upto 23% were given uptil 10 years ago. where as the Bangladesh exporters get 15% rebates.8 to 1% for finished goods.  This reduces our ability to compete with countries giving high export rebates. 1.76% for gloves and 2% for footwear. . 0.22% for apparels.  For example. Indian and Chinese Leather exporters receive around 7 to 11% export rebates for finished goods.

there are varying levels of tariffs on processed goods.  Under WTO. as a restriction in this case would give the leather garment industry a stronger edge over the leather tanners.  A major debate is about whether or not unfinished leather should be exported or not. no import tariffs are applied to raw hides and skins in Pakistan at present.1 . e.Impact of WTO on Leather Industry  Some of leather products from Pakistan especially leather jackets are much in demand but under the foreign renowned brand names. However. Marks and Spencer. and NEXT.g Zara·s.

WTO is still seriously concerned about the matter and it is still a dispute.1 .  Despite the fact that Pakistan removed the restrictions on the export of hides and skins. A major dispute with WTO concerning Pakistan·s leather industry is the export restrictions on hides and skins which were initiated by the European communities.

The drains carrying the industrial waste are not covered. where all that is available are the ´Katchaµ roads. yet there is extreme water shortage that tanneries have to face. which disrupts the production process. ‚ There is an unwarranted supply of electricity. ‚ Road networks are in a very bad shape. ‚ The drainage system is also in a very poor condition. Lack of Infrastructure: ‚ The industry is a water based industry. .

‡Availability of quality Raw material ‡raw material is not good enough to meet the needs of the international buyers ‡ 80-85% tanneries import their raw material. . ‡NewZeland ‡Sudan ‡Spain ‡Europe ‡Animals in Sindh become victims of the wobble fly disease and skin rashes.

Internationally there is a huge demand for footwear.1% share of global footwear market. . Pakistan is not at all competent in this arena and accounts for 0. Demand conditions: The local production is not reflective of international demand.

India PR-inside.5 Billion Market Share: 3.com Source: DGCI&S. Council of Leather Exports. PR-inside. India April 07± March 08 Directorate General of Commercial Intelligence and Statistics Exports for 2007 Source: Sina.1 % Growth: 8 % per year since last 4 years orld Production: 15 Billion pairs Production: 150 Million pairs (1 % of world) Source: UNSD 2007 Source: UNSD.com.2 Billion Market Share: 20 % Production: 10 Billion Pairs ( % of world)  4 .com ¨ St t gy Wo ing oup ± eather Sector ©© £§ ¦£ ¥ ¤£ ¢  ¡  U $ 47 llion  U $ 110 Million US$ 1. Geneva.Global Mark orld Impor s Analys s Mark Shar 0. 2007 Ref: US$40B. 2005 IT .2 % Growth: 20% Production: 2 Billion pairs (14% of world) US$ 9.

We do have numerous institutes for leather based technology. shared by tannery owners is that their workforce is good enough. Increasing global market competition: Pakistan·s Leather industry accounts for 1% of the total world share of Leather. While countries like Bangladesh which entered this industry after Pakistan. This needs to be changed and employees must be encouraged to take the courses offered by institutes like NILT .  Lack of R&D and workforce training. Moreover the general perception. yet they have not been performing up to the standards. is grabbing around 2-3% of the global market share.

. forcing tannery owners to import all the machines ands the chemicals.Gaps in the qualities of local supplies ‚ This is reflected in the inefficiency of the local machinery and dyes manufacturers. ‚ Our local machinery and dye manufacturers are not competent enough. ‚ Empirical research shows that 80% dyes used are imported.

‚ There isnt a shortage of institutes  NILT  Leather products development ( LPDI)  Institute of leather technology(ILT) ‚ But there is a need of unanimity of effort. Sialkot and Karachi are the most important.Poor coordination among the cluster-players ‚ The clusters in Kasur. Yet there isn·t a concerted effort taking place to turnaround things for the sector. .

76% for gloves and 2% for footwear. 0.8 to 1% for finished goods. 1. ‚ Over and above this. .Cumbersome regulatory procedures ‚ Export rebates of upto 23% were given uptil 10 years ago. ‚ This reduces our ability to compete with countries giving high export rebates. which has now been reduced to a meager 0. the Pakistan Leather Industry is subject to high L/C Margin approximating to 35%.22% for apparels.

Brand Pakistan ‚ The biggest impediment in the way of the industry.Lack of intercompany competition/rivalry  Lack of awareness in the local arena  Red tape and bureaucracy ‚ There are 32 departments in the government to look after the industries ‚ Unfortunately all that they is to hinder the growth of the industry rather than support it. has been Pakistan·s image in the international arena .

 .  Product development in the Leather industry is majorly required. Coordination between the relevant training institutes across Pakistan. The tanneries in Pakistan should improve upon their product lines through R&D and innovation.  Management of the training institute facilities is not proactively focused to meet the needs of the industry.  Workforce development should be high on the list of strategic interventions to be made within the leather industry due to the challenge that they face in maintaining a workforce that has the skills and qualities required for the sector to remain competitive.

people have become more aware of the hazards caused by these industries to human as well as animal life.  Increase awareness about the courses offered by NILT in conjunction with the Northampton University. there should be linkages with other universities and institutes as well. Kasur and Charsadda should be taken seriously and proper work should be done upon them. therefore proper testing process of the chemicals produced locally should be done. These days.  As the Leather industry has affiliation with the PIFD. .  The initiatives to make leather parks at Sialkot.

 The strategy focuses on the need for the Pakistan leather industry to brand itself in the international market. ´Leather Pakistanµ should be presented as a brand through marketing initiatives. fairs and other promotional activities should be used to build our name.the use of the internet in order to make people more aware of leather industry in Pakistan  Provide investment incentives ‚ Higher duty drawback / tax rebate ‚ 6% R&D subsidy .  Major trade shows. and thus improving the position of ´Brand Pakistanµ.  E-marketing.

 The industry has some excellent clients in the US and Europe and building on these with a marketing campaign.  The focus on production of products specifically for the motorcycle industry by Sialkot producers is a good example of a specialty that can be promoted worldwide to draw positive buyer attention to Pakistan. perhaps allied with warehousing assistance. Sustainable Pakistan leather sector competitiveness requires greater concentration on fashion and design  Government of Pakistan should support the establishment of a renowned and reputed international lab for leather and leather products to engage in R&D. . there is potential for Pakistan to compete for clients with countries like Turkey who deal in a generally higher price bracket.

 Utilize the skin of aquatic animals.  The people at the slaughter houses who skin the animal. such as the sting ray fish and the white sharks. Commercialization of livestock farming to make the standard of breeding practices better. should be made more aware of the use of those hides and skins and how a little cut on the skin can make the whole skin useless. as well as crocodiles and alligators  More emphasis on the foot wear  Differentiate products in terms design .

 The cost of production is also very high in Pakistan as compared to our competitors like China. the firms in the industry should atleast try to collaborate and thus contribute global competitiveness together. This is mainly due to the utilities. According to Porter's diamond model. India and Bangladesh. domestic rivalry is healthy but if Pakistan is not very capable of that. so Pakistan can work on that to capture its lost market . import costs and taxes.

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