Diversification helps drive up exports of leather goods, shoes

Exports of leather products and footwear have been rising in recent years on the back of diversified products and markets and skill development initiatives in the sector, insiders have said. They said the shipment of leather products and footwear expanded by 15.55 per cent to $579.07 million in the July-January period of the current fiscal year 2016-17 compared with the same period a year ago, according to data from the Export Promotion Bureau (EPB).

The data also showed exports of leather products and footwear have nearly doubled to US$883.05 million since FY 2012-13. Talking to the FE, president of Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB) Md. Saiful Islam said the country's leather and leather goods sector had the potential, but policy support from the government and sincere efforts from the industry were crucial to tapping such potentials.

He said that sensing the potential of the sector, the prime minister declared the leather, leather goods and leather footwear to be the 'product of the year-2017' and asked all involved to take steps for the betterment of the sector. "We hope the prime minister's declaration of the product of the year will translate into some policy support for the sector," he added. In the last few years, entrepreneurs ramped up capacity of the factories, diversified products and markets while focusing on the skill development of workers, the factors, he said, have started paying dividend.

Mr. Islam, also managing director of Picard Bangladesh Limited, said the country's leather factories were "purpose-built" buildings and now they were working to make the sector a model and going beyond the required compliance practices. "We have also taken a lot of initiatives to go beyond the country's required compliance practices to ensure employees' well-being, more growth and a global reputation for the sector," he said. He said that the sector employs around 70,000 people and all workers are covered by life insurance.

Mr. Islam said that they are also providing workers with health insurance facilities, though it is not mandatory by the country's labor law and compliance standards.

"Already 17,000 employees of the sector received health insurance cards and we hope within August this year all of the workers will get health insurance cards," he said.

He insisted that they are focusing on welfare and skill development as it is a labor-intensive sector.

Mr. Islam said the entrepreneurs and exporters of the industry had established Centre of Excellence for Leather Skill Bangladesh Limited (COEL) to create skilled workforce for the sector.

"We provided training to about 30,000 workers through the COEL by national and international experts, which have been significantly playing a role in making the sector more productive," Mr. Islam added.

Still, Mr. Islam seeks policy support from government such as the release of raw materials within 72 hours like the garment industry, allowing covered van to go inland container depo (ICD) during daytime and relaxing licencing rules.

He said the government should also make the rules more flexible so that the sector can hire overseas expertise more easily than now.

The current rule has capped foreign agents' fees at 15 per cent of profit and eight per cent of turnover, which prevents entrepreneurs from hiring overseas specialist services and fostering innovation.

"I hope as product of the year-2017, the government will sincerely consider such demands to make the sector more vibrant," he added.

However, Mr. Islam said the government initiative to shift tannery units from Hazaribagh to Savar will significantly help the country's leather sector become eco-friendly and economically viable. "I think, speedy relocation, central effluent treatment plant and solid waste management system should be ensured in a timely fashion," he added.

In July-January period of the FY 2016-17, the country's leather, leather products and leather footwear exports totalled $743.77 million against the target of $688 million.

"In the July-January period, export income is more than 7.19 per cent of our target," the association boss said.

He said Japan was the country's prime exports destination for leather, leather products and leather footwear accounting for around 18 per cent of the country's overseas sales. Other major exports destinations are the European Union countries, the USA, Italy, France, Germany, Canada, Poland, the UK, Belgium, and Spain.
New and emerging markets of the sector include Turkey, South Korea, Brazil, Mexico, South Africa, Australia, Russia, China and UAE. He said the country exports leather shoes, finished leather, travel bags, wallets, belts and some other products. Leather is the second-largest exporting sector of the country and it has set a target of exporting $ 5.0 billion by 2020.

The LFMEAB has more than 150 member companies who are 100 per cent export-oriented. While exports of leather products and footwear are on the rise, shipment of finished leather has declined in the last three-four years.

The EPB data shows exports of leather were $397.54 million and $277.9 million in FY 2014-15 and FY 2015-16 respectively. In the July-January period of the current fiscal, exports of leather was $161.91 million against $164.70 million in the same period of last fiscal.

Sector-insiders have said use of leather for making value-added products and footwear are the main reason behind the fall in exports of finished leather.