Leather industry: A call for revival and sustainability

Bangladesh's leather sector and its export prospects have suffered due to some wrong decisions, and we, the entrepreneurs, are bearing the burden of that. 

In 2016, we were forcibly shifted from Hazaribagh to the tannery village in Savar. We were told that every arrangement was ready there, including the Central Effluent Treatment Plant (CETP). 

However, it was not ready; it was not even built when we shifted there. Even today, the CETP and works on treatment of waste like solid waste or leather processing in an eco-friendly way, have not been completed.

As a result, we are not certified by the globally recognised Leather Working Group (LWG). Gradually, we began to withdraw from the world market. Our burden of huge investments and bank loans continued to increase. In the last seven years, all the industries are slowly walking the path of becoming sick industries because we do not have good customers.

We have to take orders at 30% less than usual, which has shrunk our profits. Currently, we are struggling to survive. According to government estimates, the amount of loans in this sector now stands at Tk13,000 crore, although Tk6,000 crore has been given to only one company.

In addition, due to the Russia-Ukraine war and global economic slowdown, demand has reduced, which has also decreased the export volumes of our sector, just like the readymade garment sector.

When our industries were in Hazaribagh, we had a workforce of 24,000 people. Now it has come down to 18,000 or lower. Apart from this, if the workers in Chattogram, Jashore, Gazipur, and various EPZs of the country are calculated, the total workforce in this sector will be about 70,000, of which more than 50,000 are in the shoe industries.

Now we are looking for a way out of this situation. Factories outside the CETP are moving towards creating separate ETPs of their own. It has also started to yield benefits. Four leather industries have already received LWG certification for eco-friendly ETPs – TK Group, Akij Group, ABC Footwear Limited, and Apex Group.

A total of three companies, including Bay Emporium Limited, our company Bengal Leather Complex Limited, and one more company, have received permission to set up their own ETPs. We have already obtained bank approval for Balancing, Modernisation, Rehabilitation, and Expansion (BMRE). Initially, Tk70 crore was allocated, but now the cost has been reduced, and a sustainable ETP is being set up for Tk24 crore.

The Prime Minister's Office has also come forward to help in this regard. Following the instructions of the prime minister, the principal secretary has made decisions to set up the CETP, chrome recovery, and a central dumping yard in accordance with international standards at our Savar tannery village.

If we receive a circular from the Bangladesh Bank regarding loans, the process will be easier. If the ETPs can be established through this process, obtaining LWG certificates will become more straightforward. Consequently, our export opportunities will readily open up to the European market.

Certainly, issues such as the European Union's (EU) Due Diligence Act, environmentally friendly industry, and sustainable supply chain have come to the forefront. However, based on the current acts or policies, our industry is less likely to be affected, as we have not heard of any new special conditions being added for this sector yet. Nevertheless, we must implement what is already in place.

In addition, on 16 November last year, the issue of the US presidential memorandum arose. It is understood that they will take a serious stance on issues like trade unions and labour rights in the future. However, we have a trade union in this sector, and workers can voice their demands. 

Recently, they demanded an increase in wages similar to the workers in the garment sector, and it is currently under discussion. Consequently, any potential labour-related risks to our sector are unlikely to come from the US or any other countries.

Instead, we believe that as we gradually make progress in environmental sustainability, purchase orders will increase in Bangladesh. Particularly, some orders from Myanmar may be shifted to Bangladesh. We maintain regular contact with our buyers and have learned that buyers in the US and the EU are reducing their orders from China and Myanmar, redirecting them to other countries.

A lot of customers from these countries are also reaching out to us. In addition, customers who prefer synthetic leathers are increasing in other countries. As a result, there is a great possibility in the future. If environmentally friendly products are made properly and products are diversified, it will be possible to strengthen our position in the global market.

The government's plan is currently in the implementation stage, and if new factories are added through our own ETP initiative, it is possible to triple exports in the next five years compared to the current level.

Sketch: TBS

The author is the managing director of Bengal Shoe Industries Limited.