[🇧🇩] Footwear, Rubber and leather Industry in Bangladesh

[Saif]

Can leather industry exploit its potential?

That the country's leather industry had immense potential is universally agreed. Similarly, the fact that it failed to flourish due to policy flaws and a lack of decisive actions to overcome some infrastructural constraints bedevilling the sector is undisputed. Now that the leather industry is faci

thefinancialexpress.com.bd

Can leather industry exploit its potential?​

FE

Published :​

Feb 14, 2024 21:35

Updated :​

Feb 15, 2024 21:43

That the country's leather industry had immense potential is universally agreed. Similarly, the fact that it failed to flourish due to policy flaws and a lack of decisive actions to overcome some infrastructural constraints bedevilling the sector is undisputed. Now that the leather industry is facing a tough time globally, the fragility of the footwear and leather goods sector at home is badly exposed. Had it not been mired by the decades of foot-dragging on relocation of tanneries from the capital's Hazaribagh to Savar Tannery Industrial Estate and then the installation of a defective central effluent treatment plant (CETP) there, quite a few footwear and leather goods manufacturers would have by now received the much vaunted Leather Working Group (LWG) certification. Notably, this certification opens the opportunity to export leather goods and footwear to markets in Europe and America. With just three factories earning the coveted LWG certification--- Apex Footwear (gold), ABC Leather Ltd and Riff Leather Ltd (silver) ---the industry naturally could not achieve the desired position next to the RMG in terms of garnering foreign exchange.


As part of diversification of the export basket, however, this had to be on the priority list. The country's pharmaceutical industry and leather industry are two leading candidates for taking on the mantle of the RMG in case the number one forex earner faced a reversal for some reason. But at a time footwear and leather goods are bogged down by lower demand worldwide, leather factories -- particularly the smaller and the medium ones among them -- are witnessing a sharp decline in export. Already handicapped by their limited market with no access to the high-end destinations, these factories now find a daunting challenge for their survival. The export of leather and leather goods declined by 14 per cent but that of footwear declined by 26 per cent between July and January of 2023-24. Since footwear production is more than leather goods, a bigger market slump for the former means the value addition has also suffered in the process.

It is exactly at this point the Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) has been looking for ways to tide over the current crises. As part of pre-budget proposals, it has asked for a unified tax rate of 1.0 per cent on import of raw materials. This will reduce the lead time by 20 days, triggering a 50 per cent increase in export of their products, it claims. Currently, the bond management stands in the way of easy access to industrial inputs.

The proposal certainly has its merit because the manufacturers and exporters of leather and leather goods are not asking for too much when they also seek rationalisation of tax at source by reduction of the 1.0 per cent freight on board (FOB) value to 0.5 per cent. In the context of the January 30 circular by the Bangladesh Bank to the effect of slashing cash incentives for export of some key exportable items, the demand for tax holiday may hardly be entertained. But synthetic and fabric footwear along with chemicals and spare parts for CETP certainly deserve special considerations. If the objective is to give the leather industry a competitive edge in the global market, such concessions ought to be granted at least for a reasonable period.​

 

[Bilal9]

Non-leather sports shoe mfr. in Bangladesh, will source Adidas shoes from Bangladesh

 

[Saif]

MK Footwear to raise Tk 55cr by issuing bonds

After raising funds from the SME board of the Dhaka Stock Exchange (DSE), MK Footwear is going to secure funds amounting to Tk 55 crore by issuing non-convertible fully redeemable bonds.

www.thedailystar.net

MK Footwear to raise Tk 55cr by issuing bonds​

After raising funds from the SME board of the Dhaka Stock Exchange (DSE), MK Footwear is going to secure funds amounting to Tk 55 crore by issuing non-convertible fully redeemable bonds.

The Bangladesh Securities and Exchange Commission (BSEC) yesterday approved the bond at a meeting.​

​

The tenure of the bond will be eight years and its coupon rate will be the Six months Moving Average Rate of Treasury bill (SMART) and additional 2 percent.

The bond will be issued to institutional investors and high-net worth individuals through private placement. The offer price of each bond is Tk 10 lakh.

With the proceeds, the footwear company will meet its working capital demand.

Community Bank Investment is the trustee of the bond, while Alpha Capital Management is the arranger.

Last year, the company raised Tk 10 crore by issuing one crore shares and got listed on the SME board of the DSE.

MK Footwear PLC was incorporated in 2015. It produces and exports several types of leather and synthetic footwear.​

 

[Saif]

A shot in the arm for leather sector

Of the export sectors that did not perform well in the previous fiscal (FY2022-23), 'leather and leather goods' was one. The Export Promotion Bureau (EPB) data say that in FY23, this sector earned US$1.25 billion from exports which was 2.0 per cent less than that of the previous fiscal (FY22). In t

thefinancialexpress.com.bd

A shot in the arm for leather sector​

FE

Published :​

Mar 12, 2024 22:02

Updated :​

Mar 13, 2024 21:51

​

FE file photo

Of the export sectors that did not perform well in the previous fiscal (FY2022-23), 'leather and leather goods' was one. The Export Promotion Bureau (EPB) data say that in FY23, this sector earned US$1.25 billion from exports which was 2.0 per cent less than that of the previous fiscal (FY22). In the eight months between July and February of the current fiscal, the export earnings from this sector decreased by 14 per cent compared to those of the same period in the previous fiscal. Similarly, three other sectors including live and frozen fish, agricultural products and jute and jute goods also registered a decline in export. However, poor performance of the leather sector, which is the second biggest export earner after garment, is indeed concerning. Understandably, the decline in the demands for leather items in the European market, the main export destination of these products, had no doubt to do with wars and high inflation affecting that part of the world during the time in question. But that apart, the main hurdle before Bangladeshi leather items remained the tariff barrier raised by the export markets largely attributable to the failure (of local leather products) to meet the standards set by the Leather Working Group (LWG).

Notably, the LWG is a global non-profit platform dedicated to promoting best practices in leather sector. But meeting LWG's standards is an expensive option. The criterion set for leather and leather goods production facilities is to make them environment-friendly, which requires a lot of investment. Small wonder that our leather items fail to get fair price from western buyers as those are not LWG compliant. Against this backdrop, the government is learnt to have decided to reduce the tax deducted at source (TDS) on leather and leather goods export from the current 1.0 per cent by 50 per cent to 0.5 per cent.

The finance ministry has meanwhile directed the National Board of Revenue (NBR) to implement the order, to be effective till June 30, 2025, exclusively for leather and leather goods export. But, as reported, some pieces of good news are also there for companies paying below the usual 12 per cent year-end tax in addition to the uniform 1.0 per cent tax paid on their export value will also be allowed to pay source tax at a lower rate. In fact, the government move will prove to be a shot in the arm for the leather sector, especially after the reduction of cash incentive or subsidies on the export sector last January. As a result, leather was hit hard as the government decision practically eliminated all export incentives from this sector. Undeniably, the government move to cut TDS against leather items export will enable Bangladeshi leather and leather goods to be more competitive in the western markets. However, it is still going to be a stopgap measure until leather and leather goods from Bangladesh are fully LWG compliant and the only way to do that is by way of installing central effluent treatment plant (CETP) at the Savar Tannery Industrial Estate (STE). With only three factories of the country earning LWG certification, the leather sector has to surrender a large portion of its rightful share in export earnings. The reduction of tax at source has to be complemented by turning the CETP at Savar fully functional. Much depends on the CETP for the leather sector to become LWG compliant and vibrant. Thus the tannery industry can take its rightful place in country's economy, diversifying and enriching its export basket.​

 

[Saif]

Bangladesh: A rainmaker for Bata

Bangladesh is already one of the top 10 markets for Bata Shoe but its Chief Executive Officer Sandeep Kataria thinks the country offers further growth opportunities for the multinational company.

www.thedailystar.net

Bangladesh: A rainmaker for Bata​

Bata CEO Sandeep Kataria says Bangladesh can be the global sourcing hub for the footwear industry

Bangladesh is already one of the top 10 markets for Bata Shoe but its Chief Executive Officer Sandeep Kataria thinks the country offers further growth opportunities for the multinational company.

"So, it's a very important market for us."

Although the top official did not disclose Bangladesh's position among the top ten markets, he said it moved up in the ranking last year.

"This was partly because of what the company has done in Bangladesh, and partly because of the dollar impact on some of the countries," Kataria told The Daily Star in an interview in Dhaka last week during his visit to the country.

Bata Shoe started its operations in Bangladesh in 1962, nearly a decade before its independence.

"We have received a lot of love from the consumers of Bangladesh in the past 62 years. Still, we are seeing a lot of opportunities for growth in the country in the coming days."

Kataria said some of Bata Shoe's managers played a role during Bangladesh's struggle for Independence. "Therefore, our company has been very much part of Bangladesh's growth trajectory."

"We continue to look at this as a strategic market for us, not just for business, but also for sourcing from the country."

Sandeep Kataria, CEO of Bata Shoe Company

Kataria is a business and marketing leader with more than 25 years of experience in the consumer products and retail industry across developing and developed markets.

He worked for several international companies such as Vodafone India, Yum! Brands and Unilever, in different markets before joining Bata in 2017 as the CEO of Bata India.

An engineer from IIT-Delhi, he was appointed as the CEO of the Bata Shoe Organization in December 2020 with the task of transforming the footwear giant into a modern and contemporary brand for generations to come.

This time, he came to Bangladesh after a gap of two years and he was impressed by the massive change Bangladesh is witnessing in the infrastructure sector. The country has also maintained a steady economic growth and per capita income despite challenges at home and abroad.

Kataria thinks Bangladesh can be the global sourcing hub for the footwear industry.

"We already make a lot of shoes in our two big factories here. We also have some partners. We want to turn some of them into large, important, sourcing partners for our markets across the world. They can actually make shoes for the world, not just for Bangladesh."

One of the things that makes Bangladesh more interesting to Bata is the trading treaties it has with partner countries and the deals it is going to sign with them in the coming years.

Kataria thinks there are two more things that will allow that to happen.

One of them is the opportunity for the partners to be able to secure some of the raw materials that may not be easily available in Bangladesh. Therefore, there is a scope to look at the duty structure around raw materials.

The second issue is local entrepreneurs need to be ready to innovate as consumers always want new styles.

"So, partnering with us to innovate and bring in new styles and new trends to the market is always helpful."

The CEO terms Bangladesh as lucky since manufacturing costs are comparatively lower in the country.

"All of these factors will transform Bangladesh into a good sourcing hub for us."

Sales of Bata Shoe Bangladesh rose 1.3 percent year-on-year to Tk 754 crore in the January-September period of 2023. During the same period, profits rose 53 percent to Tk 42 crore.

Kataria also spoke about the recent situation of the footwear business in Bangladesh.

"It is similar to what is happening in many of the discretionary categories, whether it is apparel, footwear, or even eating out to some extent, since many consumers are tightening their belts."

The footwear business has recovered from the slowdown induced by the coronavirus pandemic. But the lingering impacts of the worldwide health crisis and the Russia-Ukraine war sent consumer prices as well as raw materials costs high globally, hurting the business growth.

"As higher inflation is putting pressure on the wallets of consumers, they are sometimes prioritising expenditures."

Although elevated consumer prices have affected the number of pairs sold, the value is going up because of inflation. Some consumers are ready to upgrade and get a better quality.

"But overall, there's a bit of a tightening of volume demand," Kataria said.

Shares of Bata Shoe (Bangladesh) also traded at the Dhaka Stock Exchange and were up 1 percent to Tk 1,000 yesterday. It provided a 330 percent interim cash dividend for the first nine months of 2023.

Kataria says one of the big things about Bata is it is more local and less multinational.

"If you ask a Peruvian, an Indonesian, or a Bangladeshi, they will probably tell you that Bata is a local company."

He, however, says one shoe does not fit all because of different weather conditions in different countries.

"So, you will have to provide consumers something that they want and suits the weather and the wallet. Therefore, what we've always tried to do is to make sure that there's a good mix of global ideas and trends and we get inspired by them and we share that locally."

Bata also gives local teams a lot of power to develop products.

"In Bangladesh, more than 85 percent of our shoes are actually manufactured by our own factories."

Speaking about sustainability, the CEO said the company is using alternative sources of energy wherever possible and trying to recycle products.

​