Bangladesh has 2 percent of the world’s total livestock population. As a result, Bangladesh’s tannery industry can meet about 1 percent of global leather demand. Bangladeshi has an international reputation for producing high-quality fine-grain leather, uniform fiber structure, a smooth feel, and natural texture. In FY 2021-22, Bangladesh exported leather worth 151.37 million dollars. However, there are still several challenges in this industry, due to which the tannery industry of Bangladesh has yet to reach its full potential despite having a lot of growth opportunities.
The tannery industry in Bangladesh was started by businessman Ranada Prasad Saha (RP Saha). He first established a tannery near Narayanganj in 1940. Later, a new tannery industry was based at Hazaribagh in Dhaka through a gazette announced by the then government in October 1951. Until the country’s partition, all raw hides produced in East Bengal were exported to West Bengal, especially Kolkata. During the Pakistan period, some of the then-West Pakistani companies, through their various subsidiaries, also set up several new tanneries in East Pakistan. Until the 1960s, the tanneries of then East Pakistan used to applying salt to raw hides and dry them in the sun, known as “Shaltu”.
A non-profit organization named ‘Pakistan Tanners Association’ was established in 1964, and renamed Bangladesh Tanners Association (BTA) in 1971 after independence. This organization mainly promotes the development of the tannery industry in Bangladesh by liaising with government departments and issuing export certifications. After the war, the government of Bangladesh entrusted the management of about 30 abandoned tanneries left behind by Pakistani tannery owners to the newly formed Tannery Corporation. However, the government later abolished the Tannery Corporation by handing over the management of most of the tanneries to the “Bangladesh Chemical Industries Corporation”. But, when the authorities in charge failed to manage the tanneries, in 1982, the then government transferred the tanneries to private ownership under the Disinvestment Policy.
Previously, Bangladesh’s leather exports were mainly dependent on wet blue leather. Wet blue leather refers to unfinished leather preserved by salting the hairs from the skin. However, raw leather has the potential to add about 90 percent value to leather products if it is further processed to produce finished goods. To increase the production of higher value-added leather goods, the Bangladesh government banned the export of wet blue leather in 1990. As a result, entrepreneurs are forced to further modernize their operations, which helps the industry’s growth. Since then, the manufacturing of Crust and Complete leather in the country has started. In 2003, the Leathergoods And Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB) was established to increase linkages between local producers and exporters with international clients. According to a report by EBL securities LTD, published in August 2019, Bangladesh produces 350 million square feet of leather annually, of which only 20 to 25 percent meets local demand, while the rest is exported. According to Prothom Alo, there are currently 220 tanneries in Bangladesh that only process raw leather.
Bangladesh mainly exports three types of leather: crust leather, finished leather, and split leather. Crust leather refers to a kind of leather that has been appropriately dried after tanning but not colored in any way. On the other hand, finished leather is made by polishing the leather in various colors after processing. Also, split leather is a type of leather made by separating it into several layers. However, the texture of this leather is not smooth, as it needs to be prepared through heavy pigmentation and plating processes. Apart from these three types of leather, the government of Bangladesh allowed five companies in the country to export a total of 10 million square feet of rawhide from July 2021 to June 30, 2022, after being closed for the past 21 years to ensure a fair price of leather. As a result, Bangladesh has earned a total of $151.37 million in foreign exchange from leather exports in the fiscal year 2021-22. However, the government has yet to decide whether this period will be extended later.
However, there is potential for Bangladesh to earn billions of dollars every year from leather exports. According to Mohiuddin Ahmed, chairman of BFLLFEA, since the USA and EU countries do not import leather from Bangladesh, the country’s tanneries are selling leather to China and other countries at a rate of just $1 per square foot. However, if Bangladeshi producers can produce the leather without pollution, then the leather can be exported at a price of at least 50 to 60 percent higher than this. Considering that, the Bangladesh government is planning to close the tannery estate of Savar and establish a full-fledged ‘leather industrial city’ with tanneries, a forward and backward linkage industry, and a proper waste management system on 400 acres of land next to it. According to a source from Bangladesh Small & Cottage Industries Corporation or BSCIC, besides Tannery Industrial City in Savar, the government has decided to establish two more tannery villages in Bangladesh, one in Rajshahi and the other in the Mirsharai area of Chittagong.
Weak Waste Management Facilities
The lack of proper waste management in tanneries in Bangladesh causes a lot of environmental pollution. Although the government has taken several measures to prevent this pollution, it has yet to be effective. In 2003, the Bangladesh Government decided to establish the BSCIC Tannery Industrial Estate on 200 acres of land at Hemayetpur, Savar, to prevent pollution of the Buriganga River from waste from tanneries. Later, in April 2017, all tanneries were shifted from Hazaribagh in Dhaka to there. However, the facility has only half the capacity for discharging liquid waste discharged from the tanneries operating in the industrial estate, the rest of the water is being dumped into to nearby Dhaleshwari river with toxic chemicals. Due to this, like Buriganga, the Dhaleswari river is also getting polluted continuously. At present, tanneries at Savar Tannery Industrial Estate are releasing about 40,000 cubic meters of liquid waste per day, against which the facility has a capacity of only about 25,000 cubic meters. On the other hand, after Eid al-Adha, the quantity of this waste increases further. Besides, as the area still lacks proper solid waste management, all the solid waste from the tannery complex is being dumped in the open on the banks of the Dhaleswari river, polluting the environment as well as the river itself. Being relatively small in terms of size, if a tannery is established in any part of the country without improved waste management in Bangladesh, it will create an adverse situation for the citizens of the country, starting from the pollution of the surrounding environment.
Inefficient Production & Import Dependency
According to BTTC, the total supply of rawhide in Bangladesh is 20 million units, of which 50 percent comes during Eid-ul-Azaha. After procuring large quantities of raw hides collected, processing has to be done quickly to maintain quality. But several steps, like the leather procurement, preservation, and processing system in Bangladesh are still being operated manually, which is very time-consuming. Due to this, the leather’s quality decreases considerably during processing and production. Moreover, most Bangladeshi tanneries do chemical-based tanning, for which chemicals must be imported from abroad at a high cost. Besides, the leather processing and production machinery in tanneries are also imported from abroad. As a result, the overall cost of leather manufacturing increases significantly.
Lack of Skilled Workforce & Healthy Environment
An adequate skilled, and efficient workforce is very important to add higher value to any product. However, tanneries in Bangladesh need a sufficient skilled workforce, which is a major challenge for the industry. Due to a lack of proper skills, tannery workers take longer working hours and do not ensure proper quality. As a result, the product rejection count also increases significantly, which is a big challenge for this sector. Besides, the environment in and around tanneries is very dirty due to poor waste management. Moreover, most tanneries do not follow basic health compliance guidelines, which poses a major health and safety problem for all workers involved in production.
Heavily Reliant On Brokers
Bangladesh’s leather and tannery industry is mainly dominated by a few large tanneries that directly source leather from small and medium-scale operating tanneries. As a result, small and medium-sized tanneries cannot directly market the leather they produce on their own. This has made most of the small tanneries in the market dependent on brokers for leather sales. As a result of this market structure, tanneries also fail to reach foreign markets like conglomerate companies.
Globally, the demand of lather products is increasing day by day. According to a report by Grand View Research, the global leather market size in 2021 was $407.92 billion and is expected to grow at a CAGR of 6.9 percent from 2022 to 2030. And to serve such a large leather product market, there is a need for a large amount of leather, for which Bangladesh can be a good destination as a source. On the other hand, although China has long been the market leader in the global leather industry, China has begun to lose the natural leather market due to increased production difficulties and a greater focus on artificial leather. As big brands are leaving the Chinese market, there is an opportunity for Bangladesh to become a direct investment hub for the global leather industry. The raw leather market of Bangladesh has been very unstable for the past few years. Most of the dealers are forced to sell the skins at low prices or dump them due to a lack of fair prices.
In other industries like RMG or electronics, most raw materials must be imported and sourced. Whereas the raw material of the tannery industry, leather, can be sourced in large quantities from our domestic sources. Developing the tannery industry requires the government to reduce corporate taxes and source taxes on imports of tanneries, as well as Customs duties and VAT on imported equipment and chemicals. By aligning this industry with other production and export-dependent industries such as RMG, Electronics, business people will find this sector more lucrative to invest in. And the new investment will benefit other stakeholders in the sector such as leather traders, encouraging them to collect and preserve leather properly. As a result, it will be possible to produce better quality leather in the country, following all kinds of environmental rules and regulations. By doing so, Bangladesh will be able to earn more foreign exchange by making direct export qualifications to the high-value markets of Europe and the USA and strengthen its position globally as a leather exporting country like RMG.
The authority can take some necessary steps for rapid and sustainable growth of the tannery industry in Bangladesh. Firstly, in the case of rawhide collection, the establishment of quality collection and preservation facilities, as well as proper pricing of rawhides, should be fixed so that rawhide brokers get fair prices and put more effort in the conservation of rawhides. Especially during Eid-ul-Azaha, when the country collects the most extensive rawhide collection. Therefore, the government can establish proper backward linkages and preservation facilities in each district to speed up skin collection and preserve quality. Furthermore, a proper waste management system should be ensured in tanneries in operation in Bangladesh. Because, due to a lack of a waste management system, USA and EU countries do not import leather from Bangladesh and have to export it to China at low prices. If various international certifications can be obtained by ensuring proper waste management, it will be possible to export leather to global markets like the USA and EU instead of China. Moreover, to ensure that leather quality is maintained after chemical treatment, chemicals must be sourced from sources that follow international standards for chemical tanning processes. Besides, tannery owners in Bangladesh can adopt eco-friendly tanning processes in addition to chemical tanning. By doing this, even if the amount of investment increases, it will be possible to produce leather of better quality and grade, which will help increase the demand for leather produced in Bangladesh in the international market.