The interest of international buyers has opened up an opportunity for local footwear and leather industries of Bangladesh to raise export. The development of the leather sector has been increasing annually. If Bangladesh attracts investors by providing them with land and capital at affordable rates, the sector is forecasted to become the second-largest earner of foreign currency after ready-made garments (RMG). In Bangladesh, growth in exports has also increased due to a low production cost compared to the neighbours – China, India and Vietnam have well-entrenched leather industries. Bangladeshi manufacturers believe that the country’s $1 billion worth of footwear industry may grow to a sector worth $15 billion within a decade. Leather export is growing faster and our workforce is considered prime asset in this sector. According to a report by the country’s Export Promotion Bureau (EPB), Bangladeshi leather sector already exported $1.06 billion of products in FY-13 while scoring a record. In addition, Bangladesh earned $1.29 billion from exports of raw leathers, leather goods and footwear in FY-14. The figure for FY-15 is estimated at $1.13 billion and this amount accounts for 4.2 per cent of Bangladesh’s total exports. Gradually, this rate should be accelerated to attain a target of $5 billion by 2020, if Bangladesh can address specific issues in this sector – health, environment and compliance. At present, the leather industry faces a number of problems – the tanneries of Hazaribag in Dhaka could not be shifted to a nearby industrial estate like Savar or Gazipur despite several efforts since the ’90s. Production of new items requires the latest machineries. Constant updates in production facilities, product specifications and marketing strategies are required to cope with the changing demands and preferences of the consumers in potential markets. Other challenges facing the leather sector of Bangladesh include – (1) inadequate and underdeveloped processing-facilities for raw leather hamper the quality and quantity of finished leathers; (2) a lack of local raw-materials for non-leather footwear; (3) inadequate diversification of leather products in line with changing tastes and fashion in the developed markets. Besides, there is a limited focus on footwear and leather products from public and private enterprises in Bangladesh. According to Bangladeshi economists, the country could grab more orders if there was no political unrest. On the other hand, Japanese buyers had almost cancelled new orders for Bangladeshi leather products due to this year’s political crises. Yet, Bangladesh is not a member of International Footwear Conference. The country needs to become a member of this platform, like China and India, in order to have a global voice. Overall, the government should offer adequate policy support and sufficient patronisation for swift diversification of leather-footwear industries in the country. Conversely, the cost of Bangladesh’s land and capital is too high compared to China – the world’s largest footwear manufacturer with a 60 per cent share of worldwide shoe production. Bangladesh’s share in the global market is still below 1 per cent. If the country wants to attract foreign direct investment (FDI) into the sector, it should reduce the cost of sustaining a business. After the RMG sector, local manufacturers are seeing bright prospects for the leather sector due to an amended policy in China. Bangladesh should take the competitive advantage in leather sector from China+1 Strategy as there has been a recent drop in China’s leather footwear production, and buyers may shift from China to other Asian countries to minimise their costs. If Bangladesh can overcome all challenges, it can become a global player for leather goods and footwear by addressing social compliance in line with other business skills. United States, EU and Japan have become worried over future supply from China as their domestic markets are expanding quickly. Western importers are desperately chasing after fresh sourcing destinations and Bangladesh lies in the latest spotlight. We should negotiate with Japan which has 30 per cent share of our export to retain a duty-free advantage. Generally, Bangladesh exports leather products to Italy, New Zealand, Poland, United Kingdom, Belgium, France, Germany, United States, Canada and Spain. In addition, Japan, India, Nepal, and Australia have emerged as the potential importers of Bangladeshi leather goods. Presently, Bangladesh exports only 0.5 per cent of finished leathers and leather products to a market worth $215 billion. The government has offered cash incentives at 12.50 per cent for leather export in FY-16. According to researchandmarkets.com, China’s annual leather footwear production had dropped by 5.29 per cent in 2012 and 7.45 per cent in 2013. Bangladeshi manufacturers have planned to fill the vacuum in the international footwear market abandoned by China. In this context, it is a golden opportunity for Bangladesh’s leather and footwear sector to increase its global market share. Australia’s Bonbon Shoes, a supplier to German luxury fashion-store Hugo Boss, and Taiwan’s Genford Ltd. are also building footwear factories in Bangladesh. Several buyers have already diverted orders from China, where the production cost has increased drastically. Now, leather businessmen are confident in meeting the export target. Bangladesh is set to emerge as the next manufacturing hub for the global footwear industry because the cheap labour is prompting top manufacturers to relocate their factories in the country. The good news – many foreign investors as well as buyers have already shown interest in Bangladesh’s leather and footwear sector. All these developments look promising for this sector. According to the general secretary of Bangladesh Tanners Association (BTA), apt delivery is another reason for the increase in export earnings. Leather industry can ship goods on schedule as there is no labour unrest inside. A new opportunity should be created to diversify the range of Bangladeshi export base by including footwear and other leather goods in the list of exports to EU and other latest markets. Last year, Vietnam experienced a thriving business in Western markets earning US$4.0 billion from footwear export to EU alone. However, Vietnam and Brazil are cutting down on this sector despite being large-scale manufacturers of leather products and footwear. Therefore, Bangladeshi experts opine that leather industry is the most prospective sector after RMG for attracting foreign investments and Bangladesh is an attractive destination for leather sector entrepreneurs. According to HSBC, Bangladesh is currently one the three countries where China-based factories are planning to relocate, as the manufacturing of low-cost products is becoming expensive in the world’s second largest economy. Meanwhile, Bangladesh’s footwear industry has attracted the attention of multinational retailers. According to EPB, United Kingdom’s JC Penny, Marks & Spencer and Tesco, USA’s Walmart and Macys, Germany’s Deichmann, and Japan’s ABC-Mart are sourcing footwear products from Bangladesh at highly-competitive prices. Furthermore, thread and other accessories of the country’s RMG sector are imported, although the raw hide used in leather and footwear industries is widely available in the country. If the government adopts a viable policy of strategic partnership with the private enterprises, Bangladesh will be able to increase the exports further and create numerous employment opportunities. Nevertheless, such opportunities do not wait till eternity. Thus, Bangladeshi entrepreneurs will have to do all it takes to turn such opportunities into realities. Mostly, these developments sound positive for the leather and footwear sector of Bangladesh. It is high time for Bangladesh to compete with China, India and the entire Asia-Pacific region. The government’s duty is to ensure the policy and satisfaction of buyers. Leather sector will be able to encompass the production and thereby export will result in creating additional job-opportunities and hence maximise the nation’s economic growth. The writer is the Assistant Deputy Secretary of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), and an independent researcher on economics.
