Tanners fear grimmer days ahead as leather exports drop 11% in H1

Infographic: TBS

Leather exporters fear worsening prospects due to declining competitiveness in the international market, blaming the state's failure to implement the necessary environmental measures to secure mandatory Leather Working Group (LWG) certification for local companies.

Bangladesh's leather exports fell by 11.65% year-on-year in the first half of the current fiscal year, according to the Export Promotion Bureau (EPB). Exports totalled $62.48 million, down from $70.72 million during the same period in FY24.

The declining shipments serve as an example of how companies are affected in their export competitiveness. 

A tannery firm in BSCIC Leather Industrial City at Hemayetpur, Savar exported 47.25 square feet of leather in the first six months of FY24, earning Tk39.46 crore. However, its export income dropped by 48%, falling to Tk20.57 crore in the same period of the current fiscal year.

Traders say the lack of LWG certification hampers the country's tanneries from competing globally, deepening the sector's crisis due to reliance on China.

Tannery owners blame the previous government's short-sighted decisions and negligence. They believe LWG certification is crucial for progress, with the main challenge being the compliance of the Central Effluent Treatment Plant (CETP) and solid waste management in the industrial city. 

These issues remain the biggest obstacles to obtaining LWG certification, with no clear roadmap for resolution, the businesses pointed out.

Exporters warn that without immediate government action to prepare the industry for LWG certification, its future survival is at risk.

Despite the critical situation, Md Golam Shahnewaz, managing director of Dhaka Tannery Industrial Estate Wastage Treatment Plant Company Limited, which manages the CETP, remains hopeful.

"In February, an expert team from the European Union will assess the CETP and solid waste management, focusing on capacity improvements," he told The Business Standard. "Based on their report, we'll receive a roadmap outlining necessary actions and reforms. All next steps will follow accordingly."

He added, "A year ago, this CETP was in the ICU. Now, it's in a much better position with several reforms and improvements already made, and the treatment quality has significantly improved."

Mujibur Rahman, president of the Leather Industry Development Committee, representing 13 tannery owners, told TBS, "It feels like eight years have passed, yet the sector's main issue remains unsolved. Instead, the government has shifted blame onto tanneries to cover its own failures. You may see export figures, but only we know the cost of survival – leather that once sold for $1.60 now sells for just $0.60."

He added, "This problem won't be resolved until the CETP and waste management are fixed. Not all tanneries have space for their own ETPs, and chrome recovery is impossible for smaller ones.

"We will appeal to the government to urgently address the CETP and waste management issues. This won't be fixed with empty gestures. If necessary, bring in domestic or foreign funds to resolve it once and for all. The country's economy will benefit, and the sector will survive."

Md Sakhawat Ullah, general secretary of the Bangladesh Tanners Association, told TBS, "Everyone knows the crisis in this sector and the solution. Without LWG certification, we have no access to the European market, and brand buyers can't come. Our dependence on China has allowed Chinese buyers to exploit the situation, constantly driving down leather prices."

He explained, "For example, when a buyer orders EFGS grade leather, they downgrade a large portion to TR grade during inspection, reducing its value by 20 to 25 cents."

"This situation won't improve without LWG certification. Unless new markets open for traders, the crisis will worsen. Many tanneries are prepared for LWG certification, but the main obstacles remain the CETP and solid waste management. Once these are resolved, the sector's problems will follow," he added.

Sakhawat, also owner of Salma Tannery, noted that his tannery's exports have almost halved this fiscal year. The company exported leather worth Tk40 crore in the first five months of the previous fiscal year, but its export revenue hasn't reached Tk20 crore in the same period this year.

Abdullah Al Mamun, factory manager of Samina Tannery, told TBS, "The crisis began when the industry moved from Hazaribagh to Savar. The biggest challenges now are CETP and waste management." He added that the company's exports have significantly dropped this year.

Imam Hossain, managing director of ABS Tannery, said, "The crisis is so severe that if it continues, many traders will go bankrupt."

A tannery owner, wishing to remain anonymous, explained, "A group of Chinese buyers has formed a syndicate. They order high-grade leather, but later cancel or discard large portions, citing various reasons. 

"They then inform other buyers and agencies, making it impossible to get the desired price from anyone else. As a result, you're forced to sell at least 20 to 25 cents below the contracted price."

Sakhawat Ullah mentioned that on 16 December, the industries and commerce advisers visited the industrial city to discuss sector issues with traders. The advisers highlighted efforts to address some problems before the next Eid-ul-Adha, emphasising the industry's potential.