DIAGNOSTIC STUDY OF KORANGI TANNERIES

ZONE(KORANGI LEATHER CLUSTER)

FOR

UNIDO/EPB

BY

QAMAR ZAMAN

Assistant Director

(CLUSTER DEVELOPMENT AGENT)

EXPORT PROMOTION BUREAU, KARACHI

 CONTENTS

CHAPTER NO TITLE

1. LEATHER INDUSTRY IN PAKISTAN

2. KORANGI TANNERIES ZONE

3. SUPPORT INSTITUTIONS

4. ANALYSIS OF INDUSTRY AND BUSINESS

OPERATION

5. SWOT ANALYSIS OF THE CLUSTER

6. TENTATIVE ACTION PLAN

CHAPTER 1

LEATHER INDUSTRY IN PAKISTAN

The leather industry in Pakistan has developed significantly over last fifty years.

At the time of independence, there were few tanneries; the exports were only minimal

and included only wet blue exports. The contribution to manufacturing GDP was

nominal.

Today, after 56 years down the road, leather industry has emerged as a robust

indigenous industry that is not only the second biggest export-oriented industry in the

manufacturing sector but also the second in overall exports of Pakistan. At present, it

adds 5% to manufacturing GDP and 7% to total exports. Besides, more than 200,000

people are employed by this sector.

Being an agricultural economy, Pakistan has a natural advantage in the area of

livestock population, which is the major input (Hides & Skins) of the industry. Estimated

livestock population comprises of cattle, 22million; Buffalo 23m; Sheep 24m and Goat

49million. At present, the country produces 7.8m Hides & 38m Skins per annum.

Although the local production of hides & skins used in the tanning industry has been

increasing, the supply has been insufficient to keep up with growing demand. Therefore,

industry has to import raw hides & skins from international market to keep its tanning

industry remaining. Pakistan imported 13.6 million worth of raw hides and skins in the

year 2002-2001.Hides and skins are mainly imported from Iran, Afghanistan, and Africa.
ESTIMATED LIVESTOCK POPULATION OF PAKISTAN.

(MILLION HEADS)

TYPE OF 1996 1997 1998 1999 2000

LIVE

STOCK

Cattle 20.8 21.2 21.6 22 22.4

Buffalo 20.8 21.4 22 22.7 23.3

Sheep 23.7 23.8 23.9 24.1 24.2

Goat 42.7 44.2 45.8 47.4 49.2

Pakistan’s leather industry has been export oriented for several decades. Until the

70s Pakistan exported raw hides & skins and semi processed leather in the form of

pickled, wet blue and crust leather. It was not until the early 80s that finished leather and

leather products became a major export earner, subsequently; the local supply of hides &

skins was fully utilized by the new tanneries that were being set up. Soon thereafter, a

liberal import policy encouraged the import of raw hides & skins.

The leather and leather product industry is concentrated mainly at Karachi, Kasur,

Sialkot, Gujranwala, Faisalabad, Multan & Peshawar. However the major clusters of

tanneries are located at Karachi (Korangi), Kasur & Sialkot. There are 784 tanneries, 461

leather garment units, 348 gloves manufacturing units and over 525 footwear-

manufacturing units the country. Leather industry produces fine quality products, which
include finished leather, leather footwear, garments, gloves and wide variety of leather

goods (hand bags, purses, suitcases, key chain, wallets, etc).

The industry promises a bright future given its established nature and increasing world

market opportunities. Industry needs to exploit this potential to its full extent by operating

at full capacity and realizing the world economic scenario represented by tough

competition, growing quality awareness and environmental and social concerns.

PAKISTAN’S LEATHER EXPORTS GROWTHS.

The leather industry is basically an export-oriented industry. Almost 100% of

leather garments and leather gloves are exported. However, only 4% of leather footwear

is exported & the rest is consumed locally.

Pakistan leather exports have grown substantially over last 35 years with

very few years (1981-83 & 1997-2000) of negative growth. The overall growth rate of

impressive 11% is hardly matched by any other traditional exportable product over this

period of time. The export figures have increased from 77mUS$ in 1978 to 693m US$

during 2000-2001. The change has occurred not only in volume but also in the

composition of items Just ten years ago in 1988-89, the exports of Leather & Leather

product were only 400m US$ & out of this the share of value added leather garments &

leather products was only 39%. In 1999-2000 the share of value added leather products
has increased to 68%. Performance of Pakistan’s leather and leather product exports for

last five years is given below:

PAKISTAN'S EXPORTS OF LEATHER & LEATHER PRODUCTS

(VALUE IN 000USD)

ITEMS. 1996-97 1997-98 1998-99 1999-2000 2000-2001

i) Leather Tanned 239,608 207,819 177,291 175,163 232,921

ii) Leather Gloves 18,887 27,242 26,270 29,839 37,332

iii) Apparel & Clothing of Leather 338,207 306,630 303,471 300,143 375,597

iv) Leather Manufactures n.s. 6,943 9,552 4,582 8,680 12,587

V)Leather Footwear 39,620 28,228 23,625 28,044 34,755

TOTAL: 643,265 579,471 535,239 541,869 693,192

MAIN MARKETS

The main markets for Pakistani leather and leather products include Europe,

America, Canada, japan, Saudi Arabia and the far eastern countries.

CHAPTER 2

KORANGI TANNERIES ZONE

INDUSTRY SCENARIO

1. There are nearly 150 Small & Medium Enterprises operating in Korangi

Tanneries Zone. However, the total number of units working in this zone is more than

170. About 5-6 thousand people are employed within the cluster. Total exports from this

cluster is about 25% of Pakistan’s total exports of leather & leather products. Most of the

SMEs are involved in tanning and finishing of the Raw hides & skins. These SMEs

purchase raw hides & skins from local market or from merchant traders on cash or

credit. Where as processed leather is sold on cash as well as on credit in the local market.

Most of time trade is done on credit basis.

- Most of the SMEs(nearly 100 units)operate on same lines..

- Most of such SMEs do not avail Export Finance due to religious reasons that

is involving interest obligations.

- While other SMEs are restrained by cumbersome procedures involved in bank

finance.

- Even some of small & medium sized enterprises are not aware of services

offered by EPB.

- Most of SMEs are also unaware of various institutions involved in the uplift

of the leather industry.

- Some of SMEs (7-10) are involved in job working.

- Few medium sized manufactures are involved in exports.

 - Raw material processed and finished by SMEs is sold to big manufacturers in

the zone and other parts of Karachi and also sold to manufacturers in up

country (Sialkot and Lahore).

2. Most of the enterprises are dissatisfied with the services provided by govt.utility

providers like Pak Telecommunication, KMC, KDA, SBP (EFS), KESC, CBR, labor

department etc. That they receive higher/inflated bills from KESC and told about

frequent load shedding in the tanneries zone. This is seriously affecting their production

capacities and cost of production. The quality of reception of telephone lines was very

poor. This was practically observed by the undersigned. It was also reported that number

of lines were lying dead. This state of affairs was seriously affecting communication with

business partners within & outside the country.

3. The most pressing problem of the Korangi Tanneries Zone identified by all the

entrepreneurs was the possibility of cleanliness of the area. It was informed that no

foreign visitors can be invited to visit this area due to extreme dirtiness, very bad smell,

wastage on the roads & streets. Big exporters can afford to arrange meetings of their

buyers in five star hotels but it is not possible for the SMEs to do so. SMEs believe that if

this area is made clean then they will have also a chance to invite foreign buyers &

extend their export business. They believe that if this area is made clean worth moving

around then business opportunities will definitely increase. Combined effluent Treatment

Plant(CETP) is near completion, it is hoped this largely solve problem of disposal the

liquid effluent. However, the issue of solid waste management will still remain.
4. PTA (SZ) is poorly provided for disposal of solid waste management. Mr.Gulzar

Firoze ex Chairman, PTA & President environmental committee of Korangi Tanneries

zone told that disposal is the responsibility of KMC. KMC has never made an effort of

cleaning this area. Mr.Firoze thinks that if few more loaders are provided to PTA the

whole area can be cleaned.

5. NILT is the most prestigious institute for HR development in Karachi Tanneries

Zone. The institute offers various courses in Leather Technology. Prof.Saeed Siddiqui,

Director NILT, thinks that there is lack of awareness not only in the general public about

the nature of education & services provided by NILT but most people in industry are also

unaware about necessity of NILT & its development. He believes that importance of

NILT needs to be highlighted. If more & more people realize the need for the skilled

manpower NILT will be only solution it. Prof.Saeed suggested that an advertisement

about the institute should be put up in the news with EPB Logo. This, he believes, will

improve the credibility of the institute.

He also informed that although LPDC has been made part of NILT but the issue

of employees of former LPDC stands unresolved. Since some of the faculty at LPDC

specialized in leather technology is not available to LPDC, then the very purpose of

handing over of LPDC is not served. There is dire need of technical expertise at NITL for

product development and leather technology.He believes that if the NILT is strengthened
properly it can play a crucial role in the development of leather industry in the country let

alone Korangi Tanneries Zone.

CHAPTER 3

SUPPORT INSTITUTIONS

ASSOCIATIONS

1.PAKISTAN TANNERS ASSOCIATION:

PTA is the apex body of tanners & leather product manufacturers in the country. Its

membership consists of 249 members which is very low as compared to total strength of

the industry. Its members hail from different part in the country but majority are from

Karachi, Lahore, Sialkot, and Kasur. Its Headquarter is located in Karachi, with two

regional offices one at Lahore called PTA northern zone & one at Korangi Karachi,

called PTA southern zone. PTAs main thrust has been on securing maximum concessions

from the Central Government. It negotiates with Central and Provincial governments. It

also organizes International exhibition in collaboration with Export Promotion Bureau. It

has established National Institutes of Leather Technology and Combined Effluent Plant

in Korangi Leather Cluster with the help of Export Promotion Bureau. Although its

mandate includes holding of workshops & seminars to educate the exporters of leather

industry but it has less to show on this front.

2.PAKISTAN TANNERS ASSOCIATION -SOUTHERN ZONE:

The association working in Korangi Tanneries Zone in actually a part of Pakistan

Tanners Association, and is known as PTA southern zone. Its office is located in the

center of Korangi Tanneries Zone. It is a separate body different from PTA central. It

looks after the interest of tanners & manufacturers of Korangi Tanneries Zone. Most of

its energy is directed towards settling disputes between different government agencies

and individual tanners/exporters. It also settles disputes between different tanners of the

Zone. PTA southern zone is highly influenced by PTA central office because of more
influence of PTA central. It has also not enough to show on the side of skill development

in the zone. It manages the combined effluent treatment plant.

3.PAKISTAN LEATHER GARMENTS MANUFACTURERS EXPORTERS

ASSOCIAITON:

PLGMEA, has been recently established(2001). It represents Leather garments

manufacturers exporters in the country .It intends to highlight the problems of leather

garments manufacturers at relevant forum. Since it is a new body, there is very low

membership and is believed, in times to come this association will emerge as one of the

effective association in the industry. As such Pakistan’s more then 60% exports comprise

leather garments and leather goods.

4.PAKISTAN FOOTWEAR MANUFACTURERS ASSOCIATION:

PFMA, is located in Lahore, since the industry is mainly located in this city. Although

number of footwear manufacturers do exists in other cities of Pakistan also. The total

numbers of big and small & medium enterprises in the footwear sector may run in

hundreds but interestingly the total membership of this association is not more then 60.

This association has also got enough influence with the government since its is

dominated by big footwear manufacturers such as M/s. Services Industry, M/s.Bata

Industry M/s.Elegent Footwear industry. M/s.Topfit Ltd. etc. The association has largely

been concentrating on securing maximum incentives from the government. Its

membership could be increase substantially and this association can play a productive

role in the uplift of footwear industry in the country.

5.PAKISTAN GLOVES MANUFACTURERS EXPORTERS ASSOCATION:

As such leather gloves industry is largely concentrated in Sialkot, the PGMEA, has its

headquarter located in Sialkot. Its total membership is nearly 200. Most of its members

are from Sialkot. It represents manufacturers of wide variety of gloves including leather

gloves, sports gloves, industrial gloves, fancy gloves etc. The association like others

associations has been trying to get incentives from the government and to serve as a

bridge between exporters & the government.

6.FEDERATION OF PAKISTAN CHAMBERS OF COMMERCE INDUSTRY

Since its inception in 1950,the FPCCI has also advocated the collective opinion, concern

and aspiration of the private sector. It is the main trade body, which has a great say in the

policy matters with the Government. FPCCI serves as a bridge between the private sector

and the Government. FPCCI tackles efficiently various problems of Trade , Export,

Development, Industrialization and foreign Investment. All other associations are

registered in this forum.

7.MANUFACTURERS IN KORANGI TANNERY ZONE:

It is quite normal that a single manufacturers may be a member of two to three

association at a time in case of big units only.. Suppose a unit producing leather

garments, gloves and leather goods may be a member of PTA,PGMEA and PLGMEA

besides most of the big units in the leather industry are also members of Karachi

Chamber of Commerce &Industry as well as Federation of Pakistan Chamber of

Commerce & Industry. Big manufacturers of leather & leather goods have got
substantial influence in both the associations. Some time back Mr.S.M.Munir of M/s.Din

Leather, had also been Chairman, FPCC&I.

B.SUPPORT SERVICE INSTITUTIONS

1.COMBINED EFFLUENT TREATMENT PLANT (CEPT) KORANGI,

KARACHI AND ENVIRONMENT MANAGEMENT PROJECT.

The Pakistan Tanners Association(PTA)is the first industrial association that had realized

the need for controlling environmental pollution. PTA initiated its environmental

pollution control activities in early 90’s and organized numerous seminars and workshops

all over Pakistan on the subject. A Project document was prepared in 1993 for the

establishment of Combined Effluent Treatment Plant(CETP) for the Korangi Tannery

Cluster. Thus the stage was set for start of implementation on this project. The project has

a unique distinction of being the largest environmental project that was conceptualized,

initiated and is being implemented by the Private Sector. Because of its nature the project

serves as a model environmental project for the Industry in Pakistan.

PROJECT OBJECTIVES & SCOPE.

Objectives:

The project follows on integrated approach, and as such endeavors to find solutions to all

types of environmental problems associated with tanneries in Korangi Karachi. The key

objectives of the project are:

• To reduce pollution and in-turn control environmental degradation.

• To improve working conditions within tanneries.

• To reduce health hazards for area inhabitants.

Scope:

Following are the 6 components of the project.

• Setting up of a Combined Effluent Treatment Plant (CETP).

• Up gradation of the Effluent Collection & Conveyance System.

• Provision of Pre-treatment Facilities in Tanneries & in-house improvements

• Installation of Chromium Recovery & Re-use Plants in Tanneries.

• Setting up of Solid Waste Management Programme.

• Setting up of Occupational Health & Safety (OHS) Programme.

PROJECT FINANCING:

The Capital Cost of the project is estimated as Rs.521 million. Government of Pakistan is

mainly financing the project through Export development Fund(EDF), while the tanners

are also generating their share towards the Capital Cost. The Government of the

Netherlands is providing a technical Assistance Grant for designing of the project. The

Government of Sindh is also sharing the Cost in the form of Cost of Land.

INSTITUTIONAL FRAME WORK:

The PTA(S.Z) has a separate body by the name of PTA(S.Z) Environmental

Society(PTA-ES) which is responsible for the implementation and operation of the

project. The PTA-ES is headed by its Presidents and is managed by a Managing

Committee comprising of leading tanners of the area.

2.NATIONAL INSTITUTE OF LEATHER TECHNOLOGY(NILT).

The National Institute of Leather Technology was established in 1998 jointly by PTA and

Export Promotion Bureau. National Institute of Leather Technology(NILT) is constructed

on 4.5 acres of land in Sector 7-A of Korangi Industrial Area amongst the largest cluster

of leather industries in Pakistan with all modern academic facilities.

NILT is under the academic and administrative control of a Board of Governors,

members of which are from Pakistan Tanners Association and a representative of EPB,

NILT has been established with assistance from Government of Pakistan out of EDF for

capital expenditurs to the tune of over Rs.70 million with additional financial, planning

and administrative inputs from Pakistan Tanners Association.

FOREIGN AFFILIATION & REGISTRATION:

Collaborative arrangement and accreditation is being negotiated with the British School

of Leather Technology Nene College, Northampton for Leather Technology.

NILT has been registered with Sindh Board of Technical Education for its Certificate and

Diploma Programs.

PHYSICAL & CHEMICAL TESTING FACILITIES:

Facilities:

National Institute of Leather technology(NILT), with its foreign trained and qualified

staff and modern facilities, offers the following Physical and Chemical Testing facilities

at most competitive rates: Other tests could be developed at NILT for the clients with the

help of official methods of analysis.

Academic Program:

Full Time Programs.

i) Leather Technology:

• One year Certificate Course(2 Semesters)

• Two Year Diploma course (4 Semesters)

ii) Leather Garments Technology:

• One year certificate course.

Part Time Programs:

• Fifteen days/One month Short course

(Fundamentals of Leather Technology).

For the personnel from a wide variety of backgrounds and who are already

involved in leather industry in various capacities.

• Short Course on Pattern Cutting/Stitching.

Services:

Job Work:

i) Samples Processing for tanners, chemical companies & exporters.

ii) Physical and chemical testing.

Other Services:

i) Holding seminars, symposiums, workshop etc.

ii) Research & Development in collaboration with relevant institutes & industries
3.SMALL BUSINESS FINANCE CORPORATION(SBFC)

SBFC was established by the Government of Pakistan in 1972 with the objective of

assisting small entrepreneurs for self-employment and setting up cottage industries. Over

the past three decades, SBFC has supported more than 85,000 entrepreneurs from all over

the country.

Recognizing the importance of small and medium enterprises (SMEs) and their role in

the economic development of Pakistan, SBFC is now focused towards supporting and

developing such enterprises. To enable it to do so effectively and efficiently, SBFC has

undertaken a major institutional restructuring and capacity building exercise. With a new

and professional management team in place, SBFC is now geared to meeting the

challenges of catering to the needs of the SME sector.

Whether it is the developed economy of the USA, Japan & Germany, or the developing

economies of Thailand and Malaysia, SMEs form the backbone of all economic

activities. An effective SME sector helps to achieve many socioeconomic objectives of a

country, i.e.:

• Provides low cost employment

• Assists in regional and local development

• Achieves fair and equitable distribution of wealth

• Is a key driver for value-added exports

• Assists in fostering a self help and entrepreneurial culture

VISION:

SBFC intends to become the premiere financial institution providing medium and long

term assistance (financial and technical) for the development of SMEs in Pakistan; thus
contributing to the growth of local entrepreneurs, developing export markets and

providing employment opportunities.

4. FINANCIAL INSTITUTIONS:

There exist a sound Network of financial institutions (Commercial Banks &

Development Financial Institutions). To cater the credit needs of the industry. State Bank

of Pakistan supports exporters through a scheme called export finance scheme. Under this

scheme exporters can avail through commercial banks export finance on concessionary

terms. The export finance under this scheme is availed by many exporters. However,

number of SMEs due to unawareness and documentary requirements do not avail this

scheme.

5. PAKISTAN COUNCIL FOR SCIENTIFIC & INDUSTRIAL RESEARCH

INSTITUTES:

PCSIR, is a national body having a highly qualified manpower in the field of research. It

develops technologies which have industrial uses. There is a small section within PCSIR

that conduct research on leather industry.

6.EXPORT PROMOTION BUREAU:

EPB, is the important national organization on trade promotion. It was established by the

government of Pakistan in 1963, as an attached department Ministry of Commerce, with

the objective of promotion & facilitation of sustainable growth in the quantum and value

of exports of goods and services.

FUNCTIONS OF EPB:

• Market research
 • Fairs and exhibitions local and international

• Trade Delegations for exploring International Market

• Overseas publicity to create brand/country/product awareness

• Participation in trade related events

• Facilitation through Commercial Counsellor abroad

• Expo Centre-holding of international/local exhibitions

• Seminars/conferences/workshops to create awareness about export related

issues

FACILITATION:

• Face to face counseling

• Export Facilitation Committee-to resolve related problems

• Standardization & simplification of procedures

• Establish buyer-seller contacts

• Information dissemination through website/Fax-on-Demand/Pakistan Export

Information Bulletin

REGULATION:

• To Assist Government in formulation of export policies and setting of export

targets

• To monitor exports and implementation of export strategy

• To recommend establishment of export oriented industries

• Implementation of Trade Policy

• Textile Quota Management

• Registration of Importers/Exporters
 • Determination of Quality related Benchmark Prices(Q.R.B.P) for rice.

• Issuance of GSP certificates.

ENHANCEMENT OF COMPETITIVE EDGE OF EXPORT SECTOR:

• Skill Development Council

• Establishment of training institutes for capacity development in sectors like

Textile, Leather, Surgical, Jewellery, etc.

• Seminars on export related issues

• ISO-9000 and 14000-helping industry to adopt the standards

• Create awareness about social issues such as Child Labor

TO ENSURE THE EFFECTIVENESS OF ITS SERVICES,E.P.B. HAS THE FOLLOWING

ELEVEN DIVISIONS/DIRECTORATE:

1. Human Resources, Finance & Administration Division

2. Supply-I Division

3. Supply-II Division

4. Geographical & regional Economic Groups Management Division

5. Communication Division

6. Planning, Procedures & International Division

7. Quota & Regulatory Management

8. Technical Skills Development & Export Development fund division

9. Information Technology Division

10. Marketing Division

11. Leather, Livestock and Poultry Directorate

7.PAKISTAN EXPORT FINANCE GUARANTEE AGENCY:

PEFG, has been established with an authorize capital of Rs.610 million. The Agency’s

objective is to provide a comprehensive range of export trade finance guarantees to

exporters, indirect exporters; of the their nominated representatives, focusing on Small

and Medium Sized Exporters (SMEs) and growth sectors. Exporters and indirect

exporters can face a slow-down in the process of credit access without any significant

collateral that fails to meet a financial institution’s rules of commercial acceptability.

Such a slow down is inefficient and hampers exporter’s ability to secure a deal. PEFG is

bridging this gap and allowing the constraint of collateral to be diminished.

8.CENTRAL BOARD OF REVENUE:

CBR is a central government department which formulates and implements taxes and

tariff policies of the country. The Central Board of revenue (CBR) by virtue of its ability

to control customs, excise, sales tax, income tax and other federal government revenue

collection agencies, has a very major impact on the proper development of the leather and

leather made ups industry. Infect without due support and understanding of the CBR, the

leather industry will not be able to play its targeted role.

9.SMALL & MEDIUM ENTERPRENEUR DEVELOPMENT AUTHORITY

The government of Pakistan, realizing the importance of SMEs and the need to provide a

focal institutions for them, established a high-powered Federal-level agency, The Small

and Medium enterprise Development authority(SMEDA), to take on the challenge of

developing SMEs in Pakistan.This organization mission statement is to Develop Small

and Medium Entrepreneurs in Pakistan. SMEDA provides various sports

services(technical managerial, marketing, etc.) to the SMEs it also place key role in

strengthenin the already existing SMEs support institutions in the public & private sector.

SMEDA also serves as one window information & support resource base for SMEs.

10.SIND SMALL INDUSTRIES CORPORATION

This is established in 1972 by the Sind Government. This is an official body committed

to promote the development of handicrafts and ensure the economic betterment of the

working craftsman. SIC not only provides education and assistance to working craftsman

in the field of designing and the quality control. SSIC has established various Display

Centers and Training Centers in the interior of Sind

LOCAL INSTITUTIONS:

There are number of other provincial institutes which have some kind of influence on the

leather industry. These includes Karachi Development authority, Karachi Metropolitan

Corporation, Labor Department. Better working coordination with these institutes will

facilitate the business activity of the Korangi Tanneries Zone.

CHAPTER 4

ANALYSIS OF INDUSTRY AND BUSSINESS OPERATIONS

1. Machinery

Some leather industrial machinery is being manufactured locally specially the one

required for tanning. However, most of the machinery is imported from Europeon

Country specially Italy and Spain. Imported machinery is basically used by big

manufacturing units and few medium size entrepreneurs. There is a need for

improvement of local machinery. This machinery is generally manufactured in

Lahore.Most of the machinery imported is reconditioned but effective,

2.CHEMICALS:

Tanneries consumed more then 20 twenty different type of chemicals in processing and

in large quantities. Therefore, all the leading manufacturers of the chemicals have their

units located in Karachi. These include BASF, Clariant, Bayer have their units located

within the proximity of Korangi Tanneries Zone. Besides there is a very good market of

chemical agents nearly 30-40 agents operating within the zone in a small cluster market

for chemical suppliers. There is a good number of private traders of chemicals operating

within the zone.

3. ANALYSIS OF BUSINESS OPERATION:

I. RAW MATERIAL-COMMISSION AGENTS/TRADERS ARE THE MAJOR SOURCE.

There is enough availability of raw material (raw hides & skins). The exist an old system

of collection and transportation. This business is dominated by commission

agents/traders. The manufacturers purchase their raw material needs from these

commission agents. The major markets for raw material procurement are major cities of

the country specially Lahore Kasur, Peshawar, Karachi,Hyderabad, Sukkur, Sialkot,

Gujranwala, Quetta. The tanneries normally purchase raw hides & skins form the

commission agents all over the country. There are 8 to 10 traders of raw hides & skins

who have their presence within Korangi Tanneries Zone and bulk of raw material is

supplied by them withon the zone.

II. PRODUCTS AND THEIR MARKET:

Semi finished leather

Most of the small tanneries process raw hides & skins to the level of semi finished leather

in the form of crust and wet blue. The production is sold mainly within the cluster but

also manufacturers in Sialkot, Lahore and other parts of Karachi. The buyers most of

them manufacturers finish the semi finished leather and use the same for product

manufacture for sale in the foreign market.

Finished Leather:

Other than forward integrated composite units, Very few units do the job till final

finishing. of the leather. Very few SME s do the job till finishing of leather and most of

them are jaob workers. Finished leather is also sold to the local market by SMEs. Buyers

are either product manufacturers and or traders who export their final product. Finished

leather is supplied from this zone all over the country. There are very few finished leather

manufacturers involved in export business. Export of finished leather is generally

dominated by traders.

III. CAPACITY UTILIZATION:

During survey most of the units visited were found operating low capacity. There

capacity can be enhanced if job work is found for them. Currently the SME componet of

the korangi cluster is operating at 50-60 percent of capacity.

IV. ENTREPRENEURIAL BACKGROUND, LABOUR AND TRAINING:

1. Most of the business in leather industry is family controlled. These

families have been in this business for long time and have got

experience in this field.

2. Labor involved in the industry is not properly trained but learns by

experience.

3. Very few big units employee trained skilled labor.

4. SMEs generally purchased raw material on credit and also sell on

credit.

5. Quality of machinery in tanning industry is old and normally

recondition.

6. The type of products manufactured in this zone mainly include leather

garments and gloves.

7. There is acute absence of coordination among industry and the

institutions related to human skills development for the industry.

ASSESMENT OF ORGANIZATION AND LINKAGES IN THE CLUSTER:

The SME component of the cluster remains under achiever they have hardly any say in

the affairs of the association they continue to be the suppliers to the local industry. There

is role for Networking and linkages among SMEs to enhance their productive capacities.
CHAPTER 5

SWOT ANALYSIS OF THE CLUSTER

STRENGTH WEAKNESSES:

Easy availability of raw material Insufficient level of modernization and technology

Management skills learned up gradation
through experience Low labor productivity
Easy availability of labor Lack of confidence among SMEs for further growth
Presence of institutional supports Lack of skilled labor
for technical, Environmental problems
services, designing, manpower Lack of market information(for SMEs)
and marketing
Export market in Europe and
USA and far East
Export friendly government
policies

OPPORTUNITIES: THREATS:

Room for capacities utilization
Scope for bulk supply of finished
leather to big
Units.
Product diversification & new
markets
Competition from regional players such as china,
India, Turkey, Thailand, Indonesia etc.
New regulations of environmental and social
compliance
WTO regulations
CHAPTER 6

TENTATIVE ACTION PLAN

Korangi Tanneries Zone is an underachiever cluster with low capacity utilization and

narrow product range . Environmental pollution is a growing problem. Multifarious and

multidimensional interventions in the cluster will bring growth and dynamism in this

cluster. Following interventions are suggested for the cluster:

1. Networking among SMEs is possible but very difficult due to very

psychology of the people in the industry. Trust has to be built among SMEs

through practical steps such as export orders for the SMEs.

2. Although some finishing facilities do exist set up by job workers,

strengthening of the same and or setting of new common facility centre can be

of an added advantage. The common facility centre should consist of all

processes right from tanning to product making.

3. Creation of some consortiums for the purchase of raw material is also possible

. but like networking it also needs to based on mutual trust.

4. Strengthening of National Institute Of Leather Technology can play a

productive role in the growth of the cluster by providing skilled manpower to

the industry. The importance and necessity of skilled manpower and the role

of NILT needs to be highlighted among the entrepreneurs. More over the

Institute also needs to be strengthened in terms of equipment and trained

faculty.
5. SMEs need to be appraised of the availability of different service providers

especially Financial Instiutuions and possible contribution from them.

6. SMEs in the Cluster are very enthusiastic about the exports provided they get

export orders. Market information network for SMEs in the cluster may

provide market opportunities for the entrepreneur.

7. A series of workshops and seminars needs to be conducted to create

awareness and utility of each cluster actor

8. Financial implication of different interventions need to worked out

9. Possibility of foreign direct investment in the leather product sector should be

explored. This will infuse modern technology and an element of competition

in the cluster.

10. A project on Solid Waste Management in the Korangi Tanneries Zone shall be

the top priority.