<xmp id="sukwc"><wbr id="sukwc"></wbr><acronym id="sukwc"><optgroup id="sukwc"></optgroup></acronym>
<rt id="sukwc"><xmp id="sukwc">
<rt id="sukwc"></rt> <acronym id="sukwc"><xmp id="sukwc">
<rt id="sukwc"></rt>
<option id="sukwc"><xmp id="sukwc">
<wbr id="sukwc"></wbr>
<rt id="sukwc"></rt>
<tr id="sukwc"><xmp id="sukwc">
<rt id="sukwc"><optgroup id="sukwc"></optgroup></rt>
Home > Textile News > Why is leather sector of Bangladesh underperforming?

Why is leather sector of Bangladesh underperforming?

Published: 2019-10-24

Introduction

The leather sector has always been regarded as a high potential in industrialization and export-related discussions in Bangladesh. The fact that Bangladesh constitutes around 5% of the total livestock in the world.

Bangladesh leather sector underperformingFigure: Sustainability, more value addition, athleisure and continuous shift in competitiveness are the major trends that are shaping the global leather market.


This potentiality and expectation for the leather sector is coined as the ‘next growth engine’ of Bangladesh after Ready Made Garment. However, this comparative advantage is less utilized.



In this backdrop, the sector has been underperforming for the last 2 years featured in dwindling export performance. In FY18 and FY19, the export of the leather sector annually decreased by 12.03% and 6.06% respectively. The relative share of the leather sector to total export earnings also decreased to 2.52% in FY19 for 3.72% in FY14.

Leather & Leather Products Export BangladeshSource: Export Promotion Bureau, 2019.


When the ‘next growth engine’ started to see negative growth, it becomes evident that there is a big gap between expectation and reality and turning it as a big concern. Analyzing the external factors like world leather market trends and internal factors like the composition of the leather export basket and industry structure may help us to understand the causes of this underperformance.



Trends of the global leather market


Sustainability, more value addition, athleisure and continuous shift in competitiveness are the major trends that are shaping the global leather market.



Sustainability


Sustainability in production technology and the system is one of the key concerns for leather Brands. Brands are incrementally investing in R&D for innovation in production technology which is helping to produce a low-cost product with less waste, customization and speedy market entry. For example, Nike and Adidas have innovated knitting technology that is creating a competitive advantage in the market in terms of cost and time to market entry.



Leather Working Group, a multi-stakeholder group of the global leather sector is certifying tanneries on factors like effluent treatment and less usage of water, solid waste management, chemical use and labor welfare, etc.



The leather sector of Bangladesh is way behind in the sustainability issues which can be said is the most contributing factor of recent underperformance. Though we have achieved significant progress in sustainability standards in the RMG industry getting pressure from buyers this progress couldn’t be reflected in other sectors. Despite having a commitment in policy level, Bangladesh has done little progress to build a sustainable industrial ecosystem.



In the ‘growth versus sustainability’ debate, growth is ruling the game as it provides more incentives like political and private economic gain. Seriously polluted Buriganga, Shitalakhay and Karnaphuli rivers are the most obvious example of this industrial practice.



In the leather sector, the commitment of the government for sustainability becomes evident when tanneries of Hazaribag were made bound to relocate to Savar Leather Industrial Park BSCIC area where wastes of all tanneries will be treated with Central Effluent Treatment Plant (CETP).



But CETP is not fully operational yet and consequently polluting the nearby Dhaleshwari River. Because of this noncompliance, the tanneries are facing difficulties to get Leather Working Group (LWG) certification, which makes it easier to sell goods to the global buyers.



However, Leather footwear export was less affected by this relocation and continued to see positive growth as most of the raw material for exported footwear is coming from import source relishing buyers’ preference. In FY2017-18, Bangladesh imported finished leather of USD92 million which was 10.14% of the total export of leather products and footwear. Finished leather import increased by 19% in FY2018-19, following the same growth of FY2017-18.



Value addition


In the last 4 years, global rawhide and processed leather export reduced annually by 10% while the export of leather products increased annually by 3%. It shows that countries are going for more value addition utilizing their raw materials. During the aforementioned timeframe, Italy, the largest processed leather exporter, reduced its leather export annually by 5.34% and increased its export of leather products by 3.9%.



The same trends are observed in other top processed leather exporters like the United States, Brazil, Hongkong, etc.



The export trend of Bangladesh also shows that there is a shift in the composition of leather export basket featuring more contribution by leather footwear than processed leather indicating augmented value addition in the leather sector.

BD Export share of Leather Products

In FY2012-13, in leather sector export, the contribution of processed leather was 46% which is now reduced to only 16% in FY2018-19. Whereas, in FY2012-13 contribution of leather footwear and leather products exports were 35% and 19% which is increased to 60% and 24% respectively in FY2018-19.

This shifting was started due to rawhide export restrictions and other policy incentives like tax incentives, duty-free import of raw materials and machinery for 100% export-oriented factories. Bangladesh’s duty-free quota-free facility in major export markets also contributed to this shift.



Athleisure


Athleisure is one of the current fashion trends mixing fashion and function, for example, using sportswear in a working environment for relaxing and comfort. Athleisure is dominating in the footwear industry also shifting from leather footwear to footwear knitted by textiles. In the 2015-2018 period, global leather footwear export reduced annually by 1%.

Global Footwear Export TrendSource: ITC International Trade Statistics


In the same period, the export of footwear of textile materials has grown by 13.5% from USD29.75 billion to USD44.50 billion. China is leading the market holding 31% share followed by Vietnam 25%, Belgium 8% and Germany 6%. However, among the top five countries, Vietnam has grown the highest by 32% followed by Germany 23%. Bangladesh is also growing very well 26% but the amount is too less than the other competitors.



In 2015 the amount was only USD102 million which increased to USD197 million in 2018.



Shifting competitiveness  


Vietnam is offering more cost-efficient leather products and footwear than China which is causing shifting production from China to Vietnam. In 2018, global export from the leather sector was about USD164.02 billion decreasing at 9% annually in the last four years. China is leading the export contributing 24% of total export but export is decreasing annually by 4.7% since 2015.

Leather sector export growthSource: ITC (International Trade Statistics)


On the other hand, the share of Vietnam is 7% but the market is growing at 3.2%.



Bangladesh exports leather and leather products to many countries while Hongkong is the largest importer of processed leather constituting 27.57% replacing China in 2018. On the other hand, the USA is the largest importer of both leather products and footwear constituting 25.51% and 23.67% of total exports respectively.



Import decrease can largely be attributed to the drastic import decrease of leather products in China to only USD2.24 million which was USD144.75 million in FY2016-17. Positive growth of leather footwear export was due to an export increase in the USA to USD143.88 million in FY2018-19 from USD87 million in FY2016-17.



However, leather products imports of China from Italy and France during 2017 and 2018 increased more than average growth. While in 2015 and 2016 China’s imports from Italy was decreasing by 6% and 7% respectively, in 2017 and 2018 imports increased by 30% and 24% respectively.



From 2016 China’s import from Italy increased by 470 million when relocation of tanneries in Bangladesh was started. It can be stated that Bangladesh’s export share to China is partly snatched away by Italy and France due to losing competitiveness.



Conclusion


Analyzing the above trends, it can be stated that noncompliance to the sustainability standards is the major cause of the recent underperformance of Bangladesh’s leather sector. In addition, slower adoption of international fashion trends and losing competitiveness are also putting Bangladesh behind in the world leather market.



Source:Textile Today


免费黄色视频app