How non-compliance hindering leather industry growth

The leather and leather goods industry, the second-largest foreign currency earning sector of Bangladesh, is not experiencing a significant boost in exports primarily due to non-compliance with waste management and effluent treatment.  

All this discourages foreign buyers and investors, preventing the industry from expanding its presence in the global market despite having ample opportunities and potential.

During a seminar yesterday, tanners and exporters expressed these grievances and emphasised the urgent need for the central effluent treatment plant in Savar Tannery Industrial Estate to become fully functional. They believe this would attract foreign buyers and lead to increased exports.

To ensure proper management of the CETP, they also suggested bringing it under the Prime Minister's Office or the Bangladesh Export Processing Zones Authority (BEPZA).

The seminar, titled "Bangladesh Tanneries: Towards Compliance Sector," took place at a city hotel, jointly organised by the Asia Foundation and the Bangladesh Labour Foundation.

"About 222 tanneries were shifted to the Savar estate almost by force in 2017 when CETP was not in operation. Solid waste management was also not there," said Shakhawat Ullah, general secretary of Bangladesh Tanners Association. 

"We thought we were moving to a well-planned industrial estate which would be compliant and environment friendly. But that hope is still not fulfilled," he added. 

Demanding the formation of a Leather Development Board under the Prime Minister's Office, Shahin Ahmed, chairman of the Bangladesh Tanners' Association, said a new company has been set up for waste management, but its managing director visits the estate once a week. 

CETP is in a "very delicate condition", he said. "We are suffering because of red tape. We want to get rid of it. We are trying to be compliant. At least 20 of our tanneries have the potential to fulfil the requirements of LWG certification."

Leather Working Group (LWG) is a not-for-profit organisation, which provides a path to a more responsible and transparent leather supply chain through audit standards. 

Its certification has been developed with input from key actors in the supply chain to promote best practices in a facility's performance across environmental, social and governance considerations. 

At the seminar, Diljahan Bhuiyan, vice chairman of Bangladesh Finished Leather, Leathergoods and Footwear Exporters' Association (BFLLFEA), said, "We never knew that exporters need LWG certification. But now we see it has become a major standard for exporting our goods."

Bangladesh's leather export in 2022-23 was $1.22 billion, which is 1.74% down from the previous fiscal year. The country has been discussing initiatives like a fully functional CETP for over a decade, but little progress has been made.

As a result, the industry is missing out on its potential share in the $350 billion footwear market, despite having favourable trade agreements with affluent nations.

Addressing the seminar, Tapan Kanti Ghosh, senior secretary of the Ministry of Commerce, acknowledged that there have been some issues with CETP, and said the government is thinking of alternatives regarding its management.   

"We are thinking about options whether to bring it under the Leather Sector Development Board or the Prime Minister's Office or give the responsibility to Bepza," he said.

"It is a pity that we are not able to increase the export of leather despite having our own resources. We are talking about a total of $120 billion in exports by 2030. RMG is doing well but other sectors are not."

In the case of Savar industrial town, the CETP has to be compliant, not just individual tanneries. "Tannery owners are also to blame here. Everyone must be compliant."

Mustak Ahmed, managing director of Dhaka Tannery Industrial Estate Waste Treatment Plant Company Ltd, speaking at the seminar, said rectification and modification will be required to make the CETP fully functional.

Initially, there were flaws in the CETP. The chrome recovery unit is disabled from the start. It needs to be modified. And 18 pumps and the tank need to be changed.

"There have been shortcomings regarding the CETP compliance," he said, adding his company is in discussion with a foreign firm about CETP modification. The firm made some recommendations. 

"Compliance is possible within six months but that requires an investment of 10 million dollars," stated Mustak Ahmed. 

"The sooner this is done, the better it will be for the industrial city."

In the keynote paper, Dr Abu Eusuf, professor of development studies at Dhaka University, said the export target of leather and leather products by 2030 has been set at $12 billion. 

"As a result, 40% growth is required to reach this target. But we are stuck almost at the same export that was in 2017. The leather sector is not thriving due to compliance issues."

He came up with some suggestions that may help the leather sector grow -- formation of a Leather Development Board, effective CETP, acquisition of LWG certificates for at least 15 factories, Tk500 crore interest-free loan entrepreneurs (of which Tk300 crore for CETP and Tk 200 crore for individual ETP) and declaration of Central Bonded Warehouse for Tannery Industrial Estate.

The unique nature of the leather and tannery industry demands specialised technical expertise and entrepreneurial knowledge to drive sustained growth and ensure effective operation, he added. 

Talking about the potential of the leather sector, Mohammed Mizanur Rahman, director of the Institute of Leather Engineering and Technology at Dhaka University, said the global leather market is worth about 320 billion US dollars and Bangladesh produces 3% of its raw materials. As such, if all the raw materials are used, the export can reach at least $12 billion.

The CETP non-compliance is now a major hurdle which hinders export growth, he added. "Those responsible for leaving the CETP non-functional should be brought to book."