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

[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

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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.

​

 

[Saif]

‘Leather export potential remains untapped’

Breaking News, International News & Multimedia

thedailynewnation.com

‘Leather export potential remains untapped’​

28 Mar 2024, 12:00 am

Tasnuba Akhter Rifa :

The leather and leather goods industry in Bangladesh has garnered the trust of both domestic and foreign buyers owing to its combination of low prices and high quality.
Nevertheless, its export potential remains largely untapped due to a lack of international standard certification.

In response, the National Board of Revenue (NBR) has implemented a reduction in source tax on leather and leather goods exports from 1% to 0.5% until June 30, 2025.

While this move is expected to provide some relief to entrepreneurs and potentially stimulate employment, industry insiders caution that it may not significantly bolster exports.

Experts emphasise that enhancing compliance within the sector is crucial to unlocking its full export capacity.

Foreign buyers insist on satisfactory working conditions, worker safety, and environmental standards before engaging with factories, necessitating compliance with government regulations and buyer-imposed rules.

Compliance not only ensures adherence to laws and policies but also guarantees benefits for workers and employees.

According to the NBR Chairman, environmental pollution stands out as the primary challenge in the leather and leather goods sector, hindering entrepreneurs from tapping into significant global markets. Improved compliance, he argues, would lead to an increase in exports of leather and leather goods.

“The main problem in the leather and leather goods sector is environmental pollution. That’s why entrepreneurs are not able to capture big markets around the world.
If compliance improves exports of leather and leather goods will increase.” said NBR Chairman.

Despite being the country’s second-largest export product, the leather and leather goods sector faces hurdles. In the current financial year (2023-24), it aims for exports totaling $13 billion.

However, exports during the first eight months (July-February) amounted to approximately $71 crore, marking a 14.38% decrease compared to the same period last year.

In the previous financial year (2022-23), exports reached $122 crore, down about 2% from the preceding year.

During a pre-budget discussion in February, the Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) highlighted various challenges in the sector and proposed reducing the source tax on leather goods and footwear exports from 1% to 0.5%.

LFMEAB Senior Vice President Mohammad Nazmul Hasan expressed optimism to The New Nation regarding the government’s initiative, anticipating an increase in leather goods exports and the creation of new jobs.

However, he highlighted challenges such as decreased demand for these products in the international market and increased production costs in the domestic market, especially with a 45% rise in sea transportation costs due to fuel price hikes and Middle East conflicts.

Contrary to the reduction in incentives, Dr. Mahfuz Kabir, a Senior Research Fellow and economist at BIISS, argued that such measures wouldn’t facilitate market entry into Europe or other regions, attributing the sector’s export challenges primarily to compliance issues.

“There is no benefit in reducing the incentive in this sector. Even if we reduce it, we will not be able to enter the European or other markets.

We are not able to capture the market due to compliance issues.” said Dr. Mahfuz Kabir, BIISS Senior Research Fellow and Economist.

He emphasised environmental pollution as a significant hurdle, citing the incomplete functionality of the central effluent treatment plant (CETP) at the planned leather industrial city in Hemayetpur, Savar.

This pollution impedes tanneries from obtaining international standard certification, thereby hindering Bangladesh from fully capitalising on its export potential.

In order to sell leather and leather goods at a good price to international brands, one has to have the certification of the Leather Working Group (LWG), a global leather industry organisation.

It is known that only six establishments in Bangladesh have LWG certification.

Domestic entrepreneurs export leather and leather goods to markets where there is no brand value. Each leather processed in a non-LWG-certified factory in the country is being exported for a minimum of 45 cents to $1.60.​

 

[Saif]

Leather shipment recovers, fetches $100 million in 9 months

Leather exports rose 9.8% year-on-year in Jul-Mar of FY24

www.thedailystar.net

Leather shipment recovers, fetches $100 million in 9 months
Leather exports rose 9.8% year-on-year in Jul-Mar of FY24

The shipment of leather has started to revive as Bangladesh fetched $100.40 million from the sales of the semi-finished raw materials in July-March of 2023-24, data from the Export Promotion Bureau (EPB) showed.

The exports were up 9.8 percent from the identical period a year prior.

A spike in the import of semi-finished leather by China is helping local suppliers export a higher volume of the product.

According to industry insiders and exporters, China has started to import a significant quantity of semi-finished leather from Bangladesh to remain competitive in the US market by the way of keeping the production cost lower.

"Export orders for semi-finished leather from China have increased substantially in the last three to four months," Diponkar Tripura, owner of Life & Race Bangladesh, a manufacturer and exporter of leather and leather goods.

The dragging trade row between Washington and Beijing has brought about a positive impact on leather exports from Bangladesh.

Besides, the production cost in China has gone up in the last few years driven by a surge in labour wages, prompting manufacturers in the world's second-biggest economy to source raw materials from the South Asian nation.

Chinese companies import semi-finished leather from Bangladesh and process them in China before manufacturing finished products in Vietnam and Cambodia for the US markets, said Tripura.

If Chinese firms export products from China, the US importers will have to pay an elevated level of tariffs, which are comparatively higher than Vietnam and Cambodia, he said. "Therefore, they are importing raw materials from Bangladesh."

Besides, Chinese companies use imported raw materials to meet the demand for their domestic leather goods market, which was valued at $22 billion in 2022.

Bangladesh has 161 tanneries that process rawhides into finished leather. However, 98 percent of them are not compliant as per global standards, forcing local suppliers to sell semi-finished leather, said Tripura.

Arifur Rahman Chowdhury, general manager of ABC Footwear Industries Limited, said China is phasing out industries hazardous to the environment such as the initial processing of rawhides. "So, they import semi-finished leather from Bangladesh."

However, he said, the price of semi-finished leather is low in Bangladesh, making the country a lucrative sourcing destination for Chinese importers.

Although the exports of semi-finished leather are gaining pace and generating foreign currencies for the country, Bangladesh is, in reality, losing out since it could have earned more had it been able to export finished leather and finished goods produced from the local leather directly.

For that to happen, local processors will have to secure certification from the Leather Working Group (LWG), a global multi-stakeholder community committed to building a sustainable future with responsible leather.

A top official of a leather product exporter says the Bangladeshi firms that process world-class finished leather don't sell them in the local market since they don't receive cash incentives from the government.

The government provides a 12 percent cash incentive on the shipment receipts of semi-finished leather. Of the semi-finished leather produced in Bangladesh, 70 percent is exported, mainly to China.

The official says there is a scope to add value to the products sold abroad and then export them directly. Direct exports can earn as high as $5 billion for Bangladesh, he said.

A senior official of the Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) said the global economy has begun recovering, which will raise the demand for luxury products like leather items.

"As a result, the orders for leather from Bangladesh will grow in the coming months and we will receive better prices as well."

Finished leather exports fetch less than one-third of footwear: one square foot of leather fetches only $0.60, according to the LFMEAB .

Bangladesh would have received at least $1.5 per square foot if the central effluent treatment plant in the tannery estate in Savar could treat all of the toxic chemicals released, said MA Awal, vice-chairman of the Bangladesh Finished Leather, Leathergoods and Footwear Exporters' Association.

Bangladesh produces 400 million square feet of leather annually, according to industry people. There are 165 footwear and leather factories in the country.​

 

[Saif]

CPD for nearly doubling tannery workers’ wages

Tannery workers in Bangladesh should get a minimum monthly wage of Tk 22,776 considering the current market conditions and high inflation in the country, according to the Centre for Policy Dialogue (CPD).

www.thedailystar.net

CPD for nearly doubling tannery workers' wages
Says current market and living conditions should be considered

Tannery workers in Bangladesh should get a minimum monthly wage of Tk 22,776 considering the current market conditions and high inflation in the country, according to the Centre for Policy Dialogue (CPD).

A study by the CPD revealed that a worker's food and non-food expenses stand at a combined Tk 33,478 per month in 2024, or Tk 20,564 and Tk 12,914 respectively.

A minimum wage of Tk 13,500 was fixed for workers of the export-oriented tannery industry in 2018.

"But the owners did not implement that," said Tamim Ahmed, a senior research associate at the CPD, during a discussion and media briefing on the new minimum wage for tannery workers at the CPD office in the capital's Dhanmondi yesterday.

The CPD recently surveyed 35 tanneries and 105 tannery workers in the BSCIC Hemayetpur Tannery Estate in Savar in partnership with OSHE Foundation and under coordination of the Leather Development Forum.

At least 16 percent of the surveyed tannery workers are receiving less than Tk 13,500 as monthly wages despite working in their respective positions for more than a year.

Meanwhile, 43 percent of them received less than Tk 15,881 per month despite having held their position for at least six years.

Around 59 percent of the surveyed workers indicated that they have zero awareness of any sort of grading system in regard to wages.

Also, 71 percent do not know about the minimum wage set by the government, the CPD found.

Under the current wage structure, there are no mechanisms for promotion from one grade to another. Hence, the issue of increments is crucial for this sector.

The survey said that other than the amount paid, deviations between factories were also observed in terms of timely payment of wages.

The lack of implementation of the minimum wage could be attributable to the weak monitoring of the Department of Inspection for Factories and Establishments (DIFE).

The CPD found that 46 percent of the surveyed tanneries had not undergone a single inspection till date.

Liaquat Ali Mollah, chairman (senior district judge) of the Minimum Wages Board for tannery workers, said the tannery owners would not be able to implement the CPD's recommendation.

However, a respectable minimum wage will be fixed through discussions with the owners and workers considering both sides' interests, he added.

Mollah also said working conditions in the tannery industry are hazardous for workers' health, so medical allowances should be included in wages to ensure their livelihood.

"If the workers enjoy sound lives, they will perform better and the owners will do well in business," he added.

Mollah suggested owners ensure that factories are compliant with industry regulations and said they could bargain with buyers for better prices, thereby providing reasonable wages to workers.

However, tannery owners feel that it is not possible to implement the minimum wage proposed by the CPD.

"Tannery owners are not doing well, so implementation of the CPD's proposal is not possible," said Md Shaheen Ahmed, chairman of the Bangladesh Tanners Association (BTA).

Besides, due to the increase in tariffs of electricity and gas, the cost of production has increased, he said.

On the other hand, he said they were being compelled to sell leather to non-compliant Chinese companies at low prices due to the non-compliance of tanneries at the Savar Tannery Industrial Estate.

Still, Ahmed assured they would introduce a reasonable and implementable salary structure following a tripartite discussion including owners, workers and the government.

Ahmed also said they are trying hard to avail Leather Working Group (LWG) certification for at least 10 factories within the next six months, which will help improve their bargaining power with European buyers.

Md Abul Kalam Azad, president of the Tannery Workers Union (TWU), stressed the need for compliant factories and changing the mindset of owners to sustain their business.

According to him, the leather sector has the potential to grow a lot as the required raw materials are easily available in the country.

"So, this industry should be protected at any cost," Azad said.

Md Abdul Malek, general secretary of the TWU, said the tannery industry is different from other industries as it is has some health risks since more than 100 chemicals are used.

"Therefore, we need to give protection to the workers," Malek added.

The session was moderated by Khondaker Golam Moazzem, research director of the CPD. SM Morshed, vice-chairperson of OSHE Foundation, and Md Mizanur Rahman, vice-chairman of the BTA, also addressed the discussion.​

 

[Bilal9]

The majority of future exports for Bangladesh shoe export sector is non-leather sneakers. New factories are being set up almost every month and compared to barely a few tears ago, non-leather sneaker and sports-shoe exports have doubled. If past history with other countries is any indication, it will double again in a couple more years. Winding down of non-leather sneaker exports from China is the reason. China is not subsidizing this sector any longer.



Hiking boots, snow. boots, steel toe working boots (though leather based) are also being made in Comilla and Chittagong export zones. Some boots are being supplied to the US Army.

 

[Saif]

Leather losing its shine in exports

Rising local value addition, poor compliance with international standards, and buyers shifting to other countries have thwarted exports of leather, which was once among Bangladesh’s three main export items.

www.thedailystar.net

Leather losing its shine in exports

Rising local value addition, poor compliance with international standards, and buyers shifting to other countries have thwarted exports of leather, which was once among Bangladesh's three main export items.

The relocation of tanneries from Hazaribagh in Dhaka to the Savar Tannery Industrial Estate (STIE) in 2017 and the severe fallout of the Covid-19 pandemic and Russia-Ukraine war are other major reasons for declining leather exports.

In the face of such challenges, leather exports have declined by more than half over the past decade.

In fiscal year 2022-23, leather exports amounted to $123.44 million, down sharply from $397.54 million in FY14, according to data from the Export Promotion Bureau (EPB).

In the July-May period of the outgoing fiscal year, leather exports stood at $125.72 million, EPB data showed.

The rise in value addition means the number of factories, be it for domestic or export purposes, has increased, thereby increasing domestic consumption of tanned leather.

The significant rise in consumption of tanned leather and subsequent value addition can also be gauged from Bangladesh's exports of leather and leather goods.

In FY15, exports of leather and leather goods amounted to $1.13 billion and it has stayed above the billion-dollar mark for the past decade.

In FY23, exports of leather and leather goods brought in $961.49 million.

Exports of jute, tea and leather, once considered the most valuable products of Bangladesh, have been fading either due to loss of competitiveness globally or owing to rising consumption in domestic markets.

For instance, in the case of tea, the consumption in the domestic market increased over the years. At the same time, jute has failed to grab a bigger share as it competes with low-priced plastic.

Even 25 years ago, leather contributed more than 75 percent of the total exports of leather and leather goods, according to Md Saiful Islam, former president of the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh.

But its share has now declined to nearly 13 percent, which indicates that local value addition has increased, he said.

Moreover, poor compliance with environmental standards in tanneries and the tannery estate at Savar is a major reason for lower exports of leather. Those factors also lead to lower prices from international buyers, Islam told The Daily Star over the phone.

Md Shakawat Ullah, general secretary of Bangladesh Tanners Association (BTA), echoed those sentiments.

He said local exporters cannot sell tanned hides to renowned international retailers in Europe, North America or other major destinations due to poor compliance at the STIE.

The poor compliance has barred tanners from obtaining a Leather Working Group (LWG) certification, a vital recognition for doing business, he said.

As a result, local exporters are having to send 65 percent of the tanned leather to China, which pays nearly 60 percent lower compared to international prices, he added.

To read the rest of the news, please click on the link above.​

 

[Saif]

Govt plans forming dedicated leather industry authority

The government has taken an initiative to establish a dedicated authority for the development and management of the leather industry, Bangladesh’s second-largest sector in terms of export earnings, with a focus on public and private enterprises.

www.thedailystar.net

Govt plans forming dedicated leather industry authority

Photo: Star Archive

The government has taken an initiative to establish a dedicated authority for the development and management of the leather industry, Bangladesh's second-largest sector in terms of export earnings, with a focus on public and private enterprises.

As a part of this, the Ministry of Industries published a draft of "Bangladesh Leather Industry Management Authority Act 2024" on its website on June 13 to avail feedback from stakeholders.

The move comes in response to demands from businesses for the creation of a dedicated authority under the Prime Minister's Office to diversify the country's export portfolio.

Prime Minister Sheikh Hasina had informed of the plans while inaugurating the Bangladesh Leather Footwear and Leathergoods International Sourcing Show in October last year.

Leather was once among Bangladesh's three main export items.

However, rising local value addition, poor compliance with international standards and a shift of buyers to other countries have led to leather exports declining by more than half over the past decade.

In fiscal year 2022-23, leather exports amounted to $123.44 million, down sharply from $397.54 million in FY14, according to data from the Export Promotion Bureau.

Bangladesh produces 400 million square feet of leather annually while there are 165 footwear and leather factories in the country, according to industry insiders.

According to the draft, the authority will be comprised of a chairman and three members while its main office will be in the Savar Tannery Industrial Estate.

The chairman will bear the rank of an additional secretary while the members of joint secretary, it said.

However, the draft also mentions that the authority will operate under an eight-member board, chaired by a secretary or senior secretary of the Ministry of Industries.

The members will include the chairpersons of the Bangladesh Small and Cottage Industries Corporation, Bangladesh Finished Leather, Leather goods and Footwear Exporters' Association and Bangladesh Tanners Association.

It will also include the director of the Institute of Leather Engineering and Technology under the University of Dhaka and representatives from the Ministry of Environment, Forest and Climate Change and the Ministry of Commerce.

Businesses have been demanding the formation of the authority for a long time, said Shaheen Ahamed, chairman of the Bangladesh Tanners Association, adding: "It would be great if it is under the Prime Minister's Office."

"…the problems of our sector will be identified very quickly, and it will be possible to solve those promptly. We have some observations…We will present them very soon," said Ahamed, also managing director of Anjuman Trading Corporation.​