Non-compliance hindering growth of country’s leather industry

Bangladesh’s leather sector is grappling with challenges in establishing a formidable presence in the global market, despite abundant raw materials and a skilled workforce.

Presently, the industry struggles to achieve a value addition of over 65 per cent, while there exists untapped potential to reach up to 90 per cent.

Industry insiders point out that the guaranteed generation of rawhide during Eid festivals, stemming from animal sacrifices, ensures a consistent supply of raw materials.

However, the sector faces limitations in maximising value addition, primarily because local demand for high-value products has not been sufficiently stimulated.

The lack of certification from the Leather Working Group (LWG), a global entity dedicated to a responsible and transparent leather supply chain, further exacerbates the issue.

For products destined for export markets, the value addition drops to 30 per cent due to this certification gap.

To unlock the full potential of the leather sector, there is an opportunity to achieve 85 to 90 per cent value addition through investments in quality tanning and the production of high-end goods.

The current scenario indicates that Bangladesh, home to 200 tanneries and 223 leather product manufacturers, only boasts five LWG-certified tanneries.

This dearth of certification contributes to the country’s underperformance in the international market, with shipments declining by 1.74 per cent year-on-year to $1.22 billion in the fiscal year ending June 30, 2023.

Despite accounting for approximately 3.5 per cent of global rawhide production, Bangladesh struggles to utilize much of the material for exportable products.

The industry’s capacity to produce 300 million square feet of leather annually, as stated by the Bangladesh Tannery Association, is hindered by the fact that only a fraction of the tanneries are LWG-certified. Additionally, the value addition for domestic leather footwear has dipped from 85 per cent to 65 per cent in the past year due to declining demand for high-end products.

For leather footwear manufacturers targeting the export market, achieving a value addition of 20-30 per cent is contingent on the product type.

The recent appreciation of the US dollar against the taka has further diminished the value addition, underscoring the importance of LWG certification.

Without meeting LWG prerequisites, including the establishment of a central effluent treatment plant at the tannery industrial estate in Savar, the leather sector faces barriers to higher value addition and increased exports.