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Footwear country’s next export potential sector

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Though the readymade garment (RMG) industry has become the single largest export earner for Bangladesh, the experts opine that the footwear sector has the potentials to get as bigger as the apparel industry. The sector’s export has grown by almost 10 times over the last decade, as the foreign exchange earnings from footwear export has increased to $495 million in 2015-16 from $68 million in 2004, and to $673 million in 2014-15. Industry insiders said, currently the sector has a very potential global market, which is about $240 billion annually for all types of footwear like made by leather, manmade leather and denim or others fabrics. If our entrepreneurs concentrate on manufacturing all types of footwear, the earnings from footwear could surpass the proceeds fetched from RMG products, they expressed the hope. If they want to increase their market share by 10-20 percent and fetch $40 billion to $50 billion a year, it’s a matter of a decade only, experts hoped.China, the current market leader in footwear exports is facing problems in this sector and they are not doing better in footwear manufacturing. This is one of the main reasons for slide in the country’s leather exports in the recent times, experts said. The rising labour costs in China have made big retailers look to the countries like Vietnam, the Philippines, India and Bangladesh. Bangladesh has become an attractive destination for leather sector due to available good quality raw hides when the low labour cost has become an advantage for them. Some international investors have set up footwear manufacturing factories in the local Export Processing Zones (EPZs).At present, the country’s footwear industry is at a preliminary position to play a larger role in Bangladesh’s export fortunes in the next decade and what is urgently needed is to robust backward linkages, especially leather sourcing, the experts opined. The sector has experienced a meteoric rise since the last decade, they added. With about 26 percent growth annually, total footwear exports grew from $68 million in 2004 to $673 million in 2015. At this moment, Bangladesh only holds one percent of this market. Bangladesh produces superior quality leather from local livestock, which is subsequently processed by tanneries mostly concentrated around the capital city, especially based on Hazaribagh. Those tanneries have under criticism for being environmentally unfriendly. The annual production of leather hovers around 250 million square feet each year with peaking supply season during the religious festivals of Eid-ul-Azha. The government has a mega project to prompt tanneries in Leather Industrial Estate at Savar at 200 acres of land built at a cost of Tk 545.36 crore. The estate comprises state-of-the-art Effluent Treatment Plants (ETPs) to treat the waste generated while processing the leather in the tanneries. M Abu Taher, former chairman of Bangladesh Finished Leather, Leathergoods and Footwear Exporters’ Association told daily sun that “The government allocated plots to 155 tannery owners at the industrial estate to relocate their units. After that if we can use our 100 percent capacity the industrial estate may boost the sector’s export earnings up to $5 billion. ”The country’s entrepreneurs are very use leather for manufacturing footwear, but it is only 15 percent of the global market, while 75 percent footwear produced by manmade leather and various fabrics, he added. M Abu Taher, a pioneer among the manmade footwear industry entrepreneurs, said, “Our industry also produces non-leather footwear for export market. ”The strong leather industry in Bangladesh gives unique advantages to the footwear industry, as there is the opportunity of total vertical integration in the value chain, from raw leather to the final product.A good strategy for footwear manufacturers would be shifting their focus to the top export destinations in the long run. Currently, Bangladesh exports footwear to over 50 countries, including the EU, China, Japan, Korea, Canada and North America. The EU is the largest export destination of Bangladesh’s footwear industry. And the majority of leather (54 percent) is exported to the EU market. According to the Euro monitor, only 4 EU countries (Germany, France, United Kingdom, Italy) are the top 10 global footwear markets. Industry insiders said, to gain a greater share of the sector, Bangladeshi entrepreneurs should target both established top markets such as USA, China and Japan and also emerging markets such as Mexico, which will be thriving by 2018. The growing middle-class segments in the key Asian markets such as China and India indicates that products such as footwear are going to become a large market in this region. That will create the opportunity to market high-value products here, they added. Besides, the domestic market has good potential for growth due to rising per capita income. According to the EPB, during the first two months of the current financial year 2016–17, the country posted 23.62 percent growth in footwear exports over that during the same period a year ago. Bangladesh has received $120.59 million foreign exchange from exports of leather footwear in the July–August period in this fiscal year.