Introduction:

Bangladesh is a developing country with a population of about 152.5 million in a total area of
147 570sq.km. making it one of the most heavily populated countries of the world. Dhaka has
been the capital city of Bangladesh since it achieved independence in 1971. The overall
economy of Bangladesh has registered a steady improvement with more than 6% average
growth during the last five years. The industrial sector has been an important contributor to the
country’s GDP,1 its share standing at 28.6% in 2011. In the decade since 2004, Bangladesh
averaged a GDP growth of 6.5%, that has been largely driven by its exports of readymade
garments, remittances and the domestic agricultural sector. The country has pursued export-
oriented industrialization, with its key export sectors include textiles, shipbuilding, fish and
seafood, jute and leather goods.

The Leather Industry as A Whole:

Leather is a durable and flexible material created via the tanning of putrescible animal rawhide
and skin, i.e. the conversion of raw hide or skin, a putrescible material, into leather, a stable
material, and finishing it so that it can be used in the manufacture of a wide range of consumer
products.

The leather industries are differentiated by the manufacturing importance of the raw materials
used to make the wares. In the leather industry, the skin and rawhide is commercial valuable
product. It is an intermediate industrial product, with applications in downstream sectors of the
consumer goods industry.

Leather industry is an old manufacturing sub-sector in Bangladesh with a long heritage of over
five decades. This is an agro based bi-product industry integrated with locally available
indigenous raw materials (hides and skins) having tremendous potentials for export development
and sustained growth along a considerably long duration of time length. Sub-segments of this
industry are -
1. Finished Leather
2. Leather Goods
History of Leather Industry In Bangladesh:

In the year 1940, a person named R.P Saha has set the first leather industry of Bangladesh
near Narayangonj area. It was later shifted to hazaribag area of Dhaka. During the period
before partition of Bengal (1947), almost all the raw hides and skins available in East
Bengal were exported to West Bengal, particularly to Calcutta and processed there.
Development of tannery industry in former East Pakistan started after the partition with
an influx of tanners displaced from India and subsequently, with the establishment of
subsidiaries of some companies of the then West Pakistan.

The Key Player in The Arena Of Leather Industry In Bangladesh:

There are over a 150 of leather factories in Bangladesh, which produce huge amount of leather
products in a year.Among them -

Apex Tannery Ltd.

Bata Shoe
Awal Leather Complex,
ABC Leather,
Model Trade International,
Bengal Leather Complex Ltd.,
Chowdhury Leather & Com.Ltd.,
Crescent Tannery Ltd.,
Helena Enterprise Ltd.,
H & H Leather Industry Ltd.,
Janata Tanning Industries Ltd.,
Kalam Brothers Tannery Ltd.,
Kid Leather Industry Ltd.,
Karim Leathers Limited.,
Ruma leathers Limited.,
Dhaka Hide & Skin lmited
Lexco Limited etc
Market Capitalization:

In Bangladesh, most of the industries are export oriented and about 95% of leather and leather
products such as shoes, slippers, leather jackets, hand gloves, bags, purses, wallets, and belts
in the form of crushed leather, finished leather, leather garments, and footwear are marketed
abroad. Value addition in these exports averages 25% local and 75% foreign.About 150
modern tannery units are now in Dhaka city.

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.

Tanning In Bangladesh:

A number of tanneries took the opportunity in 1990s for the production of crust and finished
leather. There are reportedly around 220 tanneries in Bangladesh but, in fact, only 113 tanneries
are in effective operation, out of these 20 units are reported to be fairly large (7 units very large),
around 45 units are considered of medium size and around 48 units are considered small groups.
105 of the tanneries are positioned arbitrarily in the Hazaribagh area in Dhaka where 84 per cent
of the total supply of hides and skins are processed in a highly congested area of only 29
hectares of land.

Livestock in Bangladesh:

Bangladesh has a fairly large livestock population to support a strong and growing tanning
industry. Table II shows that cow hides account for 56% of the production, goat skins for 30%
and buffalo makes up the rest.5 The current output in Bangladesh is about 200 million sq.ft. of
leather annually. Apart from bovine hides, buffalo, goat and sheep; a good quantity of kangaroo
hides (pickled condition/wet-blue) are imported from Australia and finished in Bangladesh,
shoes are made of this kangaroo leather for export, mostly to Japan. Some ostrich leather is also
imported from Australia for production of high quality and high priced bags and wallets for re-
export to Australia.

Export Scenario:

Exports of leather and leather goods crossed $1 billion for the second year in fiscal 2014-15,
according to data from the Export Promotion Bureau. In 2014-15, Bangladesh exported leather
and leather goods worth $1.13 billion, compared with $1.12 billion in the previous fiscal year,
making it the second highest contributor to national exports after garment.
 Export Target Vs Export Performance (July – February 2015-16)

The sector has been performing well, as higher export values have helped the sector earn over $1
billion for two years in a row. Despite earnings growth, the country missed the export target of
$1.4 billion by 19.09 percent in 2014-15. Bangladesh aims to export $1.21 billion of leather and
leather goods in 2015-16, which is 7.28 percent higher from last fiscal year. Italy, the UK,
Belgium, Spain, France, Germany, Poland, the US and Canada are the big markets for the
sector. In recent years, the exporters have been doing well in Japan, India, Nepal and Australian
markets. Of the new destinations, Japan is very promising for us, as our export is increasing
significantly in the market because of a duty-free advantage. The government should negotiate
with Japan as the possibility of a free trade deal to be signed by different countries with the
Asian economic giant may encourage it to cancel the duty benefit.

Products Export Target for Strategic Target for Jul-Feb Export Performance
2014-15 2015-2016 Jul-Feb 2015-2016
All products 33,200.00 29,943.08 28,144.38
Leather 625.00 258.09 187.13
Leather Product 325.00 169.57 241.55
Leather Footwear 447.28 354.87 324.03
LEATHER SECTOR 1,397.28 782.53 752.71

Bangladesh now exports only 0.5 percent of the global leather and leather goods market worth
$215 billion, according to industry insiders. According to experts, the sector may achieve the
target by the end of the current fiscal year, although it missed the target in the last two years.
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. 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.
Growth Potential

The leather industry with over Taka 160 billion annual export earnings is the country’s biggest
third foreign exchange earner after the RMG and the frozen food sectors. Local and foreign
experts believe that this sector could replicate the successes of the Readymade Garment (RMG)
sector if the government and genuine entrepreneurs join hands for effective cooperation and
develop the sector with a comprehensive strategic plan. Leather industry is growing all over the
world –both in market potentials and in installed capacity. For Bangladesh, export earning only
from leather was US$ 160 million in 2010- 2011 and it is expected to reach US$ 235 million in
2015-2020 as the demand for quality raw material for finished leather goods is increasing in
developed countries. The size of the global footwear market is enormous as well. A thorough
analysis of the historic data shows that factors like demographic composition, depth and reach of
urbanization and distribution of wealth have consistently shaped the growth of the footwear
industry. Though till now Bangladesh has shown poor performance in the leather goods sector, it
has a good growth potential if entrepreneurs can avail modern technology to diversify their
products and designs according to international market trends and apply modern tools for
marketing & promotion.

Realizing this sector’s growth potential, Bangladesh Government has reiterated its decision to
treat the industry as one of the thrust sectors and reduce interest rates for industrial credit to this
sector to seven percent (7%). The government has already decided to develop a leather industrial
area at Savar, outside Dhaka where tanneries from Dhaka would be shifted to free the
Hazaribagh area and the river Buriganga in general, where most of the tanneries are
concentrated, of pollution.

Competitor Scenario:

 China

China is today globally the undisputed leader in footwear manufacturing and also has a highly
developed components and accessories industry. This development was favored by the opening
up of the Chinese economy, which enabled the influx of Taiwanese investment amounting to
billions of dollars as well as the transfer of Taiwanese know-how in this sector.

The North-South migration of various industries, which began from the industrialized USA and
West European countries to the newly industrialized countries such as Japan, Taiwan and Hong
Kong continued with the rise of labor costs in those countries to the new cheap labor countries
like China, Indonesia, Thailand, Vietnam and India. In this respect China was certainly favored
by foreign investors because of its political stability, reliability, infrastructure, qualified and
cheap labor forces and big local market.

 India

Like China, the leather and leather goods sector of India has benefited the most from a long-term
development policy. Obviously it capitalizes on its natural advantages of abundant raw
materials, plentiful and low-cost labor, a large pool of skilled and trained human resources, a
strong artisan shoe-making tradition as well as an immense domestic market. Certainly India
remains far behind China because it has in the last decade been more reluctant to open its market
and liberalize the economy.

Conclusion:

Bangladesh leather industry is dominated substantially by the domestic investment which is

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, Bangladesh can be a potential off shore location for leather
and leather products manufacturing with low cost but high quality. 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.