From rawhide to finished products: The self-sufficiency of Bangladesh’s leather industry
With the expansion of the manufacturing industry coupled with cheaper hides and increasing middle-class purchase power, leather products are finding more domestic customers
With a rich heritage of craftsmanship and a robust supply chain, the leather sector is the second largest export earner in Bangladesh. Given the sector's considerable growth and investment potential, the government has declared it a thrust sector.
The industry is highly labour-intensive, with a workforce that is 60% female, according to the Leathergoods & Footwear Manufacturers & Exports Association of Bangladesh (LFMEAB).
Currently, there are 271 leather factories including 90 large firms, 15 big enterprises and many SMEs. The growth of the industry as an export sector is thwarted by compliance issues, being one of the worst polluting industries in Bangladesh.
Still, the leather industry is one of the two industries in the country that fetch foreign exchange in the billion-dollar figure every year.
In the 2022-2023 fiscal year, the industry brought home $1.12 billion. This number, however, is 1.73% lower than the previous year and the industry is currently seeing a continuous fall when it comes to forex earnings.
But the domestic market is still seeing a healthy growth.
From rawhide to finished products
Bangladesh produces approximately 350 million square feet of leather annually, positioning it as one of the top leather producers in the world. The sector is primarily based on cattle hides. The country's favourable climatic conditions and the abundance of livestock contribute to the steady supply of high-quality rawhide. Apart from meeting domestic demand, rawhide is also exported to international markets.
The industry encompasses a wide range of activities from rawhide collection to the manufacturing of finished leather products. Unlike the biggest export industry in the country, i.e the RMG sector, the leather industry is not dependent on imports for raw materials.
The transformation from rawhide to finished leather products involves a sophisticated manufacturing process. The industry is doing fairly well and produces a wide array of leather goods, including footwear, bags, belts, wallets, and jackets.
Footwear is the most prominent segment, with an annual production exceeding 400 million pairs, according to LFMEAB data. The industry also manufactures an estimated 1.7 billion units of leather belts, 80.22 million pieces of bags, and 3.1 billion pieces of small leather goods.
Three Bangladeshi companies have acquired certifications from global quality assurance bodies (Leather Working Group, LWG), enhancing their credibility and marketability in the international arena.
Moreover, the adoption of advanced technologies and machinery in recent years has significantly improved the efficiency and quality of leather product manufacturing in the country. The industry gets preferential market access to the European Union, Japan, South Korea, China, Australia and India.
Challenges and opportunities
The tannery sector is the backbone of any leather industry. There are over 200 tanneries in the country, primarily concentrated in the Savar Tannery Industrial Estate, which was established to centralise operations and minimise environmental pollution. This move to Savar from the previously scattered locations in Dhaka was driven by the need to adhere to environmental regulations and create a more organised industrial ecosystem.
The establishment of a Central Effluent Treatment Plant (CETP) to treat the substantial amount of wastewater generated by tanneries was a key move in that direction.
However, the CETP at the tannery estate in Hemayetpur, Savar, is still not fully functional despite the tanneries being relocated there eight years ago. Tannery owners and Estate officials have long been blaming each other for the CETP not being fully functional.
The greatest price that the leather industry pays for the failure of the CETP is that the factories located at the Estate cannot export leather goods to good international brands as they cannot get the required Leather Working Group (LWG) certification.
As a result, a large part of the exports in this sector consists of animal hide, and the irony is that we eventually end up buying foreign-made leather goods made from that very hide. In addition, the lack of certification means the companies cannot get a good price for the hide.
In the last ten years, the import of leather goods and leather footwear has shot up from about $15 million to $22 million. At the same time, the import of non-leather footwear has skyrocketed from around $35 million to $177 million.
The leather and leather goods industry is still one of the highest export earners for Bangladesh. The primary markets for Bangladeshi leather exports are the EU, the United States, Japan and China. Footwear accounts for the lion's share of these exports, followed by leather goods and finished leather.
The industry holds tremendous opportunities for growth. The global demand for leather and leather products is still high, driven by changing fashion trends and increased consumer spending power.
Bangladesh, with its competitive labour costs and expanding manufacturing capabilities, is well-positioned to capture a larger share of this market. Investments in sustainable and eco-friendly tanning processes can open up new avenues in the increasingly environmentally conscious global market.
Apart from the international market, the domestic one is also promising.
About half of the rawhides collected throughout the year come from the Eid-ul-Azha alone. The price of rawhide has fallen drastically in recent years. Unhappy with the price situation, many destroy or dump the rawhide. At a stage, the government set prices for hides, but tanners and middlemen defied the set price and bought at half the price fixed by the Ministry of Commerce.
Riding on the dirt-cheap rawhide, new manufacturing hubs sprang up here and there, most renownedly in Bhairab and Brahmanbaria.
Mr Md. Atikur Rahman, Proprietor of the Boston Footwear Industry and a member of the Bangladesh Leather Goods Manufacturing Association said, "The domestic leather market is growing bigger. The industries in Bhairab and Brahmanbaria are seeing exponential growth."
These pockets of local factories are apparently a cause of concern for the larger companies.
"They are taking over the market with cheaper and lower quality products," Atikur added.
However, with the expansion of the manufacturing industry coupled with the cheaper hides and increasing middle-class purchase power, leather products are finding more domestic customers. SME Fairs organised by the Small & Medium Enterprise Foundation and other entities see dozens of leather product stalls where the customers flock to buy their favourite items.
Centred in Hazaribag and Savar, these factories also attract customers online year-round.
Government initiatives and future prospects
The Bangladeshi government has recognised the potential of the leather industry and has implemented several initiatives to support its growth. These include financial incentives for exporters, infrastructural developments and training programs to enhance the skills of the workforce. The government's Leather and Leather Goods Development Policy aims to increase export earnings from the sector to $5 billion by 2030.
To achieve this ambitious target, the policy focuses on modernising the industry, improving compliance with environmental regulations and fostering innovation.
The future of Bangladesh's leather industry is not just about expanding production and exports but also about building a sustainable and responsible sector that contributes positively to the economy and the environment.