Executive summary

The contribution of the industry sector to Bangladesh economy has been on the increase. Among
the fifteen sectors identified for national income “Leather Industry” is one of them. Leather
industry is the 2nd largest export sector in Bangladesh and leather sector’s exports cross $1billion
in 2015. The report “analysis of the leather industries” has been prepared by collecting
information through websites; annual report of several tanneries, various book articles regarding
leather industry.

The entire report is the combination of four portion. Chapter one is the introduction part of the
report.it describe the introduction, objectives of the report, methodology, scope and limitation of
the report. The purpose of this report is to provide a thorough idea about the leather and leather
goods industry in context to the global and Bangladesh scenario. The problem and limitation that
we face during the preparation of this report is the lack of experience for the analyzing data and
maximum data collected from secondary data. Chapter two describe the previous scholars work
on leather industries and summary of the leather oriented articles.

Chapter three mainly describe global and Bangladesh leather industries. It includes worldwide
leather export and import, globally available leather product, recent development in global leather
industries, market capitalization in leather market, and investment prospect of Bangladesh leather
industry, exporter and importer countries of leather products, SWOT and PESTEL analysis and
problems of Bangladesh export oriented industries. Bangladesh Exports of leather goods increased
from USD 765.03 million in 2011-2012 to USD 1130.51million in 2014-2015 amid high political
turmoil, natural disasters, and global recession in the recent past.

The leather goods market in Bangladesh has huge potential with the increasing disposable income
of the middle and upper middle class families. The GDP growth at over 5% over the last decade
shows the strength of the economy and its resilience. Strong export growth despite the global
recession shows the competitive advantage of the entire industry, thanks to mostly the availability
of the superior quality raw materials and cheap labor.

1
Table of Contents
Executive summary ....................................................................................................................................... 1
Chapter 01: Introduction .............................................................................................................................. 3
1.1: Origin of the report: ........................................................................................................................... 3
1.2: Background of the study: ................................................................................................................... 3
1.3: objectives of the study: ...................................................................................................................... 3
1.4: Methodology of the study: ................................................................................................................ 4
1.5: limitation of the study: ...................................................................................................................... 4
Chapter: 02 Literature review ....................................................................................................................... 5
Chapter 03: Overview of Leather industries ................................................................................................. 8
3.1: Brief history of Global leather industry ............................................................................................ 8
3.1.2 Worldwide Leather Export and Import ............................................................................................ 9
3.1.2.1 Global leather Export .................................................................................................................... 9
3.1.2.2 Global leather import.................................................................................................................. 11
3.1.3 Recent Development on global leather industry ........................................................................... 12
3.1.4: Global mostly traded leather products ........................................................................................ 13
3.2: Bangladesh leather industry ............................................................................................................ 16
3.2.1History of leather industry in Bangladesh ...................................................................................... 18
3.2.2 Key players in the arena of leather industry in Bangladesh .......................................................... 19
3.2.3 Market capitalization ..................................................................................................................... 20
3.2.4 Dispute over relocation of leather Industry: ................................................................................. 20
3.2.5 Investment prospect of Bangladesh leather sectors ..................................................................... 21
3.2.6 Strengths of Bangladesh Leather Sector ........................................................................................ 22
3.2.7 Emerging Strengths of the leather Industry .................................................................................. 22
3.2.8 Bangladesh’s export leather and leather products ....................................................................... 23
3.2.9 Major importing countries of Bangladesh leather and leather products and footwear ............... 23
3.1.10 SWOT analysis of Bangladesh leather industry............................................................................ 24
3.2.11 PESTEL Analysis ............................................................................................................................ 26
3.2.12: problems of Bangladesh export oriented leather industry ........................................................ 28
Chapter 04: Conclusion and learning .......................................................................................................... 29
4.1 Conclusion ......................................................................................................................................... 29
4.2 Learnings and findings ......................................................................... Error! Bookmark not defined.

2
 Chapter 01: Introduction

1.1: Origin of the report:

The report on “analysis of leather industries” was carried out as a part of our Bangladesh in
International Business course. The report was authorized by our course teacher as a part of our
academic requirement. After collecting information according to the teacher’s instruction and
guidance, I prepared the report according to the teacher’s guidance.

1.2: Background of the study:

Leather is one of the oldest industries in Bangladesh and at the same time one of the most potential
one. The national and international leather and leather goods business pattern is changing rapidly
because of the growing national and international market competition, economic instability of the
developed and developing countries financial market and those factors create pressure on the
organization to come up with fruitful response to survive. The prosperity of the leather and leather
goods industries depend on the proper planning, execution, management, and all those task
depends on choosing and practicing industry favor government rules and regulations and
procedures.

1.3: objectives of the study:

 The purpose of this report is to provide a thorough idea about the leather and leather goods
industry in context to the global and Bangladesh scenario; its possible future, growth
perspective, hindrance etc.
 Understanding the opportunity and limitation of leather and leather goods industries
 Understanding the practices and procedures govt. favor roles and regulations about the
industry.
 Fulfilment of course requirement

3
1.4: Methodology of the study:
The report has been prepared based on data collected from secondary sources. It was not possible
to rely on primary sources as obtaining data from this source requires lot of trouble and selected
authority permission and we were not also instructed by our respected faculty to search for any
primary data.

Secondary information came mainly from websites; annual report of several tanneries, various
book articles regarding leather industry, various brochures published by the company.

1.5: limitation of the study:

While preparing the report, there are some different difficulties and limitations have to face.
Such as –
 Lack of primary data: the entire report is prepared based on secondary data.

 Lack of experience: lack of personal experience of forming that research and analyzing
data was difficult for us.

 Several information regarding on-going projects could not be used to analyze further the
competitive positioning of leather industry as they were mostly confidential.

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 Chapter: 02 Literature review

The leather and its related downstream industries can claim to be the world's largest industrial
sector based upon a by-product. In the case of leather, the raw material is a by-product of the meat
industry. Hides and skins and their downstream products are vital earners of foreign exchange and
they compare very well with the other agricultural commodities and, in fact, with any
internationally traded commodities. The hides, skins and leather industry is one of the key
agricultural subsectors with a high potential towards commodity development that addresses
pertinent issues of socio economic importance and positively impacts on rural development,
creation of wealth and employment. There are three broad components of the leather industry (i)
Leather tanning (BSIC Code 1911), (ii) Leather footwear (BSIC Code 1921) and (iii) Other leather
products such as handbags, carry bags, wallets, cases etc. (BSIC Code 1912). In 2001-02, leather
footwear contributed 66 percent of total value addition in leather industry (with 10 or more
workers) followed by leather tanning (31 percent), and other leather products (3 per cent).

Table: summary of finding

Authors year Title finding

Committee on 1979- “Report of the The committee gave some recommendation
development 80 Committee on based on the study.
of Development of They are:
Leather Leather 1. Wet-blue export should be prohibited
Export Export” 2. Cash subsidy on export on crust
3. Bank financing for capital investment and for
working capital
4. Infrastructural development ( such as water ,
road &Transportation etc.)

SEHD 1988 “Leather They gave realistic recommendations for

(Society Industry- mitigating pollution.
for Environmental
Environment Pollution and

5
and Human Mitigation
Development) Measures”
Rahman 2001 “Environmental Degree of pollution at Hazaribagh by reason of
Effect of Leather discharge of tannery waste.
Industry in
Bangladesh”
BRAC 2001 “Hide and Skin Review the government development plans and
Production policies on procurement, processing,
in Bangladesh” preservation and trading of hides and skins in
the country and identified the constraints
responsible for hindering the overall production
and trading of hides and skins.

Ahmed 2002 “Prospect of Assessed the present status of raw material

Leather Product supply, capacity and production of leather and
Export from leather products, identified problems of
Bangladesh and production and export and determine needs for
Its Requirements” the development of industries to make optimum
use of the potentials of local raw stock.

Zahur 2006 “Solid waste Leather industries have enough scope for both
management of vertical and horizontal expansion in terms of
Dhaka city: economic return and social benefits.
public private
community
partnership”
Azom et all 2012 “Environmental Physical health of related residential area’s
Impact people is better than that of tannery workers.
Assessment of They also found that tannery creates the job
Tanneries: A opportunity.
Case

6
 Study of
Hazaribag in
Bangladesh”
Rouf 2013 “Characterization The odour of the samples was more or less
of effluents of pungent. The colour of the samples was
leather industries blackish blue, violet, brown, black etc.
in Hazaribagh
area of Dhaka
city”
khan 2014 “Industry in Leather and leather manufacturers constitute an
Bangladesh: indispensable and dependable source for export
Opportunities and trade and foreign exchange earnings. For
Challenges” Bangladesh, leather is a high priority industrial
sector and footwear exports, an extreme focus
area.

7
 Chapter 03: Overview of Leather industries

Leather is a durable and flexible material created by tanning animal rawhide and skin, often cattle
hide. It can be produced at manufacturing scales ranging from cottage industry to heavy industry.

People use leather to make various goods—including clothing (e.g., shoes, hats, jackets, skirts,
trousers, and belts), bookbinding, leather wallpaper, and as a furniture covering. It is produced in
a wide variety of types and styles, decorated by a wide range of techniques.

The leather industries are differentiated by the manufacturing importance of the raw materials used
to make the wares. In the leather industry, the skin and rawhide is commercial valuable product. It
is an intermediate industrial product, with applications in downstream sectors of the consumer
goods industry.

3.1: Brief history of Global leather industry

Global Leather industry dealing with raw leather, finished leather and leather products is
flourishing. Leather and leather products are widely traded globally and used universally. Playing
a prominent role in the world economy, the leather and leather goods industry chalks up
approximately USD 100 Billion trade per year (UNIDO, 2010).

With the world population increasing dramatically in the 20th century and the current economic
and population growth trend of developing countries will ensure the increase in the growing use
of leather and leather products (FAO, 2013). The growing population and the overall increase in
wealth leads to the increase in the consumption of meat and hence kept the supply of raw material
fairly constant. Predictions indicate that the supply of raw material will continue to grow following
the trend of population growth, though higher costs and decreasing pasturing land and higher
consumption of poultry and pork in Asia and Africa seem to exist.

These might eventually lead to sourcing of raw materials from alternate markets and animals like
camel, deer, kangaroo etc. (UNIDO, 2010). Globally, the supply of leather has increased by 0.8%
per year between the years 1986-2003 from bovine, 0.3% from sheep and 3.6% from goat and 38%
of output of raw lather was traded globally in 2001-035 which exceed by over a third of the figure

8
in 1980s. However, goatskin exports have decreased as countries are holding on to their raw
materials for local industries for processing and production of finished goods (FAO, 2013).

3.1.2 Worldwide Leather Export and Import

The value of the world trade in leather and leather products is expected at around US$100 billion,
and the industry has been rapidly growing improving and developing countries. From Table 1, it
is seen that the import value increases from $13.9 billion to $22.7 billion in 14 years period from
1998 to 2012 (COMTRADE, 2014), similarly the export value increases by $8.9 billion. This
increase shows that the leather industry is becoming one of the word most influential sector that is
plays a vital role in improving the own country’s GDP.

Figure: Imports and Exports of Leather and Leather Goods Worldwide (Source: UN Comtrade)

3.1.2.1 Global leather Export

During the last 4 years Italy remain the dominant player in leather products exports and Italy earned
the most export revenue by $ 4638.2 million, this shows that Italy gives excellent service to its
customers.

Even though the growth percentage has decreased by 1.2% in 2012 compared with 2008. But Italy
predominates the World share by 19.6% export revenue.

9
Source: Major Exporting Countries in 2012 (Source: UN Com trade)

Figure: export trends of countries in 2012

Similarly China earned the second most revenue of $2321.1 million. Particularly footwear, because
of its high capacities installed, infrastructure, and component supply industry. Nigeria on the other

10
hand shows exceptional exponential growth to 13.5% over the last 4 years, by earning 1129.8
Billion, even more than India.

There is a decline of leather export trend in Western countries, the export earnings from 2008-
2012 of Argentina, Germany and USA. All though, Europe and USA have vibrant leather products
machinery, but there is a contracts between Classy Italian shoes in with cheap Chinese footwear.
These make Europe to loose share in the global market. In Asia China is the most dominant
followed by India, who has an average increase of 7.9% form 2009-2012.

3.1.2.2 Global leather import

China is the undisputed leather in the import of Leather products and the biggest import market in
the world 13.2% in 2012. China imports cheap quality shoes and high quality designer leather
goods. The size of the markets also varies due to population and consumption trends, and fashion
plays a big part in the mass market.

Similarly the EU partners, Italy, Germany, Romania, Spain, there import of leather materials has
declined drastically December 2008 to 2012. The biggest consumers of footwear and leather goods
in the world are China and Vietnam. EU nations like Germany in particular, and France, Italy to
some extent, have had depressed economic climates and hence has limited growth potential. USA
on the other hand is one of the biggest individual market in the world for leather products, with
earnings of $651 million in 2012.

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Figure: Importing countries 2012 (Source: UN Comtrade)

3.1.3 Recent Development on global leather industry

During the last 25 to 30 years, the leather goods industry has undergone major changes due to
factors such as:

 The overall rise of the standard of living along with labor costs in most leather and leather
goods producing
 Gradual development of marketing and brand strategies by businesses, both at national and
international arena, mainly due to the emergence of new advertising instruments (e.g.,
television);

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  The segmentation of the production process allowing outsourcing and transfer of know-
how to developing and least developed countries;
 The massive development in tourism with the advent of modern modes of transportation
including air travel;
 Modern production technologies and automation;
 High quality production and efficiency with an overall increase in productivity with the
advent of modern high-tech machineries;
 The use of leather and leather goods in the automotive industry.

In the last 20-30 years, production bases of most of the leather goods companies moved out of
industrialized countries, resulting in the closure of a great number of factories, inducing jobs loss
and the gradual disappearance of know-how, disappearance of know-how and the diminishing
significance or shutting down of some vocational training centers are complemented by the
emergence of local manufacturers and induction of foreign direct investments in the leather sector
with modern institutes dedicated to the development of trained personnel for this sector.

3.1.4: Global mostly traded leather products

The history of the industry explains the underlining diversity that characterizes the segmentation
of product groups. This rationalizes the use the term “leather goods industries,” as the products
and related manufacturing techniques are very diverse and the segments that were not available
even a decade ago are now holding a major share of the total industry. Leather Product Groups
Starting from leather parts used in sports equipment to bookbinding, leather goods now include a
wide range of products.

Some product lines have disappeared due to the emergence of synthetic material, a much cheaper
alternative. Industrial products of leather are now produced in such small volumes that they fit
with parchments in a micro-niche and are difficult to classify. Nevertheless, they should not be
ignored.

Handbags: Women’s handbags represent a huge leather goods market. Bags are not only a useful
accessory; they are also a sign of social rank. The use of bags is very much influenced by fashion
and culture, which themselves vary from one country to another. There are many price segments

13
in the market and a wide variety of styles and designs. Consequently, the market for handbags
retailing at US$1,000 and above has been growing quite rapidly in the past five years.

Small leather goods: These are less dependent on fashion. Pocket leather goods, which are mainly
made of genuine leather, follow societal trends and utilizations, such as size of banknotes or credit
cards. The last ten years have seen the rise in importance of holsters for mobile phones, MP3
players, and iPods. The super-luxury leather goods related to electronic equipment is a segment
that is expected to grow.

Travel goods: This category constitutes a large market that has developed in step with travelling
and tourism. The emphasis is basically on usefulness and ergonomics. The major trends over the
last years have been the introduction of wheels to all kinds of luggage and the search for lightness.
This has worked against leather. There have been considerable changes in the last decade with the
arrival of budget airlines and continuously changing security rules. Short-haul passengers not
wishing to check in luggage have created a market for maximum-size hand/cabin luggage of high
quality.

Briefcases and portfolios: This market is linked to travel and business. Laptops have created a
great need for cases with a specific design – they are mostly made from high-performance textiles
and synthetic materials. Similarly, women’s and men’s briefcases made of genuine leather and
synthetic materials hold an important place in the market. Changes in travel are affecting this
market in the same way as they do travel goods.

School articles: This category corresponds to that of the old “leather satchels.” Trends changed in
1980 with the appearance of new and fashionable lines of school bags in France and Germany.
Today, the trend is the rucksack made of canvas and printed with various logos and brand names.
A number of the better-known brands today were initially military packs and evolved into school
bags made of materials such as corduroy.

Saddlery: This is a specialized market with a very specific clientele. Saddles and harness items
belong to the luxury segment due to their time-consuming manufacturing process. They are hardly
affected by fashion, so they can easily be made in countries with low labor costs. There is still a
premium market for superior quality saddles, especially the “English” saddle; most manufacturers
of high-quality saddles are in France, Germany and the UK. Argentina, Pakistan and Morocco are

14
now important suppliers of saddles, and India is also making efforts to get a share of this specialty
market.

Cat and dog articles: A fast growing market in industrialized countries (USA, Europe), where
people are increasingly fond of pets. Many of these products (e.g., collars, leashes, muzzles) are
made predominantly in developing countries. The pet-food sector, which uses raw hides, is a
separate, but important market.

Hunting and fishing articles: This is a specific market that is not really influenced by fashion.
These products are generally purchased by well-to-do people with a wide variety of backgrounds.
Stationery articles and special cases articles such as desk pads and note-pad covers are today in
decline due to the use of computers. But other articles, such as mobile-phone holsters, are booming.
The fountain pen has made a comeback and, with it, the demand for protective carrying cases has
re-emerged. Some evolution at the luxury end of this market can be expected, as the balance
between paper and the computer continues to change.

Military equipment: Historically, leather and the military have been of great importance to each
other in terms of saddles, harness, belting, holsters, footwear, and at one time armor. Today, this
is a very specific market, which has been growing considerably in the last ten years. The main
products are footwear and gloves (as personal protective equipment), which are now usually made
of highly technical leathers.

Belts: This is a steady and relatively large market especially in the traditional men’s belts segment.
Belts are not much influenced by fashion, since changes occur mostly in buckle designs. The
manufacturing process of such items has become highly mechanized.

Watch straps: This also constitutes a relatively large market that has only been slightly threatened
by metal or synthetic straps since it stabilized some years ago. The manufacturing process, as in
the case of belts, is highly mechanized, except for top luxury products (hand-stitched straps made
of exotic skins). Leather for watch straps has to be anti-allergic and to have good levels of sweat
resistance.

Overall, the leather goods industry is characterized by the diversity of its products. These items
are constantly developing according to consumer needs and, for certain articles, to fashion trends.

15
3.2: Bangladesh leather industry

The contribution of the industry sector to Bangladesh economy has been on the increase. Among
the fifteen sectors identified for national income “Leather Industry” is one of them. Leather
industry is the 2nd largest export sector in Bangladesh and leather sector’s exports cross $1billion
in 2015.

Industry is the backbone upon which the economy of any country prevails. The growth of
economy, the internal development of a nation depends upon the development of industrial sector.
The cheap, reliable, and abundant labor available in Bangladesh is attractive to the world’s leading
transnational corporations. Leather industry is an old manufacturing sub-sector in Bangladesh with
a long heritage of over five decades. This is an agro based bi-product industry integrated with
locally available indigenous raw materials (hides and skins) having tremendous potentials for
export development and sustained growth along a considerably long duration of time length.

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Sub-segments of this industry are -

1. Finished Leather

2. Leather Goods

Snapshot of leather industry

 Estimation livestock population item capacity
Livestock Population Bovine …………………..21.5 million heads
Livestock Population Ovine…………………… 28.6 million heads
(Source Bangladesh livestock research institute)

 Estimated annual production capacity of raw material item capacity

Bovine hides and skins……………………… 9 million pieces
Sheepskins and lamb skins ………………….16 million pieces
Light leather from sheep and goats ………….6.14 million pieces
(Source: Bangladesh livestock research institute and Bangladesh tanners association)

 Estimation annual production of finished products item amount

Year

2013 Leather footwear 364.5 million

2013 Leather belt 1.7 billion units

2012 Leather bag 80.22 million pieces

2012 Small leather goods 3.1 billion pieces

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3.2.1History of leather industry in Bangladesh

The first tannery in Bangladesh territory was set up

at Narayanganj by RP Saha sometime in the 1940s.
It was later shifted to Hazaribag area of Dhaka,
which turned into a location that now
accommodates a large number of tannery units.

Leather Industry developed in Bangladesh on a

large-scale basis from the 1970s. About 95% of
leather and leather products of Bangladesh are
marketed abroad, mostly in the form of crushed
leather, finished leather, leather garments, and
footwear. Most leather and leather goods go to
Germany, Italy, France, Netherlands, Spain,
Russia, Brazil, Japan, China, Singapore and
Taiwan. Value addition in these exports averages
85% local and 15% foreign. About 100 modern
tannery units are now in operation in the industry.
These are located mostly in the Hazaribagh area of
Dhaka city. In 1998, the sector exported 178
million sq ft of leather and earned $160 million.
The country’s share in the world leather market is
2%. The export of finished products such as shoes, slippers, leather jackets, hand gloves, bags,
purses, wallets, and belts also earn a sizeable amount of foreign exchange. Bangladesh intends to
increase its range of leather products to penetrate new market segments.

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3.2.2 Key players in the arena of leather industry in Bangladesh

There are over 200 of leather factories in Bangladesh, which produce huge amount of leather
products in a year. Among them-

Janny’s footwear limited

Akij footwear limited
Apex Tannery Ltd.
Bata Shoe
Awal Leather Complex,
ABC Leather,
Model Trade International,
Bengal Leather Complex Ltd.,
Chowdhury Leather & Com. Ltd.,
Crescent Tannery Ltd.,
Helena Enterprise Ltd.,
H & H Leather Industry Ltd.,
Janata Tanning Industries Ltd.,
Kalam Brothers Tannery Ltd.,
Kid Leather Industry Ltd.,
Karim Leathers Limited.,
Ruma leathers Limited.,
Dhaka Hide & Skin lmited
Lexco Limited etc
Bay tannery

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3.2.3 Market capitalization

In Bangladesh, most of the industries are export oriented and about 85% of leather and leather
products such as shoes, slippers, leather jackets, hand gloves, bags, purses, wallets, and belts in
the form of crushed leather, finished leather, leather garments, and footwear are marketed abroad.
Value addition in these exports averages 25% local and 75% foreign. About 150 modern tannery
units are now in Dhaka city.

Bangladesh produces approximately 100-150 million sq feet of raw hides and skins, about 85% of
which is exported in crust and finished form. The rest is used for producing leather goods to cater
to the domestic market.

3.2.4 Dispute over relocation of leather Industry:

The relocation of tanneries from Hazaribagh to Savar is being delayed due to the owners'
reluctance to move. Tannery owners are yet to lay down the foundation stone for their factories,
blaming the holdup on the failure to reach a consensus with the government regarding
compensation and bank loans. Tannery owners are demanding 1000 crore compensation, a
readymade CETP and soft loans to proceed with their re-allocation. Their statement is they would
have to build new infrastructures and repair machinery that would be damaged during relocation.

20
The government proposed sharing costs for the CETP installations, which will require more than
Tk 300 crore. But the Industrialist say that they are supposed to get that by free from government
according to a deal made in 2003. Besides re-allocating the whole industry to a new zone the recent
industry ministry implies its node over installing a CETP (central effluent treatment plant). He also
urge that Bangladesh would have loose its significant leather goods export if the re-allocation
would not have been made within few years and install an CETP immediately as because global
leather importers are demanding environment friendly production besides looking at the quality of
goods.

3.2.5 Investment prospect of Bangladesh leather sectors

Bangladesh is attracting increasing interest from international investors as an emerging preferred

low-cost manufacturing hub in Asia with a steadily growing economy, abundant, easy to train and
affordable young labor force, preferential market access and strategic geo-economic location.
Bangladesh offers exciting investment opportunities under its liberalized Industrial Policy, export-
oriented, private sector-led growth, and the new specialized economic zones (SEZ) being offered.
The rising international investment ratings highlight the growing attractiveness of Bangladesh as
an investment destination for leather and footwear sector: Goldman Sachs listed Bangladesh one
of the "Next 11"(N-11), countries that have the potential, are estimated to grow by over 700% over
the next decade.

Why Bangladesh:

o Bangladesh offers a perfect sourcing diversification opportunity for manufacturing mostly

over dependent on China.
o A young, industrious, affordable workforce growing by roughly 2 million annually.
o Proven volume & quality export capability demonstrated by Bangladesh’s position as the
world’s 2nd largest producer of textile apparels after China. Preferential market access to
EU, Canada, Australia and Japan.
o Investment friendly regulation: Bangladesh offers some of the world’s most competitive
fiscal and non-fiscal investment incentives and the most liberal FDI regime in South Asia,

21
 allowing 100% foreign equity with unrestricted exit policy, easy remittance of royalty, and
repatriation of profits and incomes.
o Growing middle class purchasing power: With improving education, health and human
development indicators, Bangladesh’s own market of 160 million people is becoming
increasingly attractive to business and foreign investors.
o Bangladesh is one of the top 10 remittance earning countries in the world, with flow backs
of more than USD 15 billion per year from Bangladeshis working abroad.

3.2.6 Strengths of Bangladesh Leather Sector

o Bangladesh annually produces and exports 300 million sqft of quality bovine, ovine
and caprine leathers. It has international reputation for high quality of fine grain,
uniform fiber structure, and natural texture, which mostly comes from domestic
farming.
o Goatskins are of globally recognized exceptional quality (special quality of cow
calf/goat).
o 27% annual average export growth rate over the last 4 years.
o Abundant labor force and competitive labor cost.
o Tariff and quota free access to the European Union (GSP), Canada, Australia and
Japan.
o Shipment facilities-both by frequently available air and large seaport.
o Preferred sourcing hub for renowned International brands.

3.2.7 Emerging Strengths of the leather Industry

o A sustainable 205 industrial units Tannery Estate has been developed with CETP
& STP.
o Increasing production of eco-friendly leather.
o Design development initiatives by institutions.
o Continuous modernization and technology upgrades in production process.
o Increased linkage industries – packing, lasts, adhesives, outsoles.
o Constant human resource development program to enhance productivity.

22
 o Promoting EPZ and SEZ to attract and facilitate foreign investment.
o Increasing use of quality components.
o Quality & Compliance test from internationally accredited institutes.
o Nearly 10 million urban populations have annual incomes well in excess of $10,000
offering a sizable market for a wide range of goods and services;

3.2.8 Bangladesh’s export leather and leather products

(Values in million)

category 2011-2012 2012-2013 2013-2014 2014-2015

Leather 330.16 399.73 505.54 397.54
Leather products 99.16 161.62 240.09 249.16
Footwear 335.51 419.32 378.54 483.81
Total (leather & 765.03 980.67 1124.17 1130.51
products)
Growth 17.51% 28.19% 32.12% 0.56%
Source: Export Promotion Bureau

3.2.9 Major importing countries of Bangladesh leather and leather products and
footwear
The European Union (EU) is the biggest destination for footwear exports accounting 60% share
followed by Japan with 30%.

(Value in million US$)

country 2012-2013 2013-2014 2014-2015

Germany 72.44 103.53 142.89
china 41.92 172.65 165.6
japan 123.08 133.27 117.4
U.S.A 33.49 57.59 98.52

23
 Spain 41.96 51.59 60.01
Italy 37.75 38.17 44.4
France 22.88 21.19 25.05
UK 5.98 9.34 15.7
UAE 2.6 3.24 17.51
Source: Export Promotion Bureau

3.1.10 SWOT analysis of Bangladesh leather industry

strength Weakness
 Leather can be treated as renewable  Insufficient research and development
resource. facilities.
 Availability of integrated production  Inadequate Knowledge on proactive
chain from raw materials to tanneries marketing of local leather enterprise.
and leather goods.  Lack of initiative in arranging events to
 Availability of a large rather promote locally produce leather.
inexpensive workforce relative to other  Limited access to financial institutions.
comparable manufacturing societies.  Unavailability of chemicals and
 Reputation of Bangladesh’s premium accessories locally and no provision for
grain leather local chemical industry.
 Price advantage of Bangladeshi  Poor demand in domestic market.
Leather In International market  Inability to come up with innovative
 Durability of leather products. and trendy products.
 Favorable business environment with  Absence of Vertical integration
existence of EPZ (forward and backward linkage)
 Reduced interest rate for industrial  Lack of professional training institutes
credit to leather sector to 7% since it is to improve skills of workers at all
levels.

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 considered as thurst sector by the  Challenge of international brand image
government

Opportunity Threat
 Increasing global demand for leather  Delay in introducing integrated
products. government policy for the development
 High potential for quality raw materials of leather industry.
and maximum value addition inside the  Leather sector growth was stagnant in
country. some years because of political
 Availability of Cheap labor force instabilities leading to apathy
inside the country. international investment communities.
 GSP (Generalized system of  Political instability of Bangladesh,
preferences) facilities to exporters. poor governance at all levels including
 Duty free access in major markets. corporate governance.
 Potential footwear market in Middle  Intensive competition for gaining
East and southern Africa. market because of strong competitors
 Opportunity in establishing by product like: china, India and Pakistan.
industry based on solid and liquid  Huge dependency on high priced
wastes tannery and slaughter house. imported chemical and accessories.
 Unlike resin and other synthetic and  Limited product diversification
artificial fibre elemnets, leather compared to competing countries like:
products are hygienic and most China, India and Pakistan.
importantly environment friendly and  Availability of low priced imported
bio degradable. homogeneous products made of rexin
 Promise of setting up ETP with and other artificial fibres.
allocation of a substantial modern  Illegal export of raw hides and skins to
industrial place in savar by the India and neighbouring countries is
government. creating scarcity of raw materials for
local production.

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  Insufficient measure to address the
environment pollution, health and
safety issues by the tanneries.

3.2.11 PESTEL Analysis

Stakeholders need in-depth insight into the industry they delve into. A PESTEL analysis is a
framework or tool used by businesses to analyze and monitor the macro-environmental (external
marketing environment) factors that have an impact on an organization. The result of which is used
to identify threats and weaknesses which is used in a SWOT analysis. PESTEL stands for: P –
Political, E – Economical, S – Social, T – Technological, E – Environmental, L – Legal.

Political

 The political environment is highly volatile with frequent strikes and clashes between the
major political crises.
 The government policies are highly favorable with the sector being declared a “Thrust”
sector, whereby enjoying 7% interest rate for loans, bonded warehouse facility, 15% cash
incentives, Generalized System of Preference (GSP) facilities etc.
 Trade policies fixed by the government has always been favorable to businesses though
bureaucratic red tape has always hindered the smooth operations of business.
 EPZs provide excellent environment throughout for smooth operations of the business.
 The government has set highly attractive incentives for the foreign investors to lure in FDI,
including 100% foreign ownership, 100% profit transfer to country of origin and that too
without prior permission from the central bank.

Economical

 The economy has been growing at over 5 percent over the last decade and is set to continue
this trend for years. This has increased the number of middle to high income group in the
economy who can afford leather goods with higher than average disposable
 Interest rates have been set at the minimum possible level by the government whereby
ensuring cheap source of capital for the business.

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  Exchange rates are heavily monitored by the central bank, and is always favorable to the
exporters. However, the relatively devalued local currency makes imports of chemicals
used in the processing of raw hide and machineries used in the production process
expensive.
 While the economy sees high level of food inflation, the overall inflation level has been
quite consistent over the last few years at less than 8 percent26 showing a downward trend.

Social

 Social factors like the acceptability of leather goods by the vast majority of the population
helps the sector gain popularity.
 The trend of the present generation to lean towards fashionable and expensive products
like leather belts, side bags, jackets etc. increased the prospect of the sector.

Technological

 The local companies are lacking behind major international brands in terms of innovation
and quality.
 The small firms in the local market are overshadowed by the bigwigs producing in large
scale allowing for them to be able to afford expensive technologies.

Environmental

 The long awaiting shift of the tanneries to Savar from Hazaribagh is yet to see any light of
day. When done, it will mean expensive relocation for the tanneries, and even more
burdensome costs to the small businesses who will not be allocated any land in the selected
area.
 The ETPs in Savar will allow to increase the value and acceptability of the local leather
whereby allowing for premium pricing and entry into previously untapped market due to
restrictions.

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Legal

 Health and safety rules in Bangladesh are barely monitored and controlled.
 Labor rate is the lowest in the world and there seems to be no interest in the government to
push the bar higher in the foreseeable future.
 There are no major restrictive laws in place that hamper the smooth operations of the
companies.

3.2.12: problems of Bangladesh export oriented leather industry

The problems of Bangladesh export oriented leather industries may be-

 A total lack of adequately trained and skilled human resources for production as well as
for managerial personnel in the leather footwear industry.
 No training institute or facilities for skill development.
 Poor representation in major international product fairs and shows.
 No awareness of international quality standards such as Eco- labelling and packaging.
 Lack of an integrated comprehensive policy with proper inputs by all the stakeholders such
as exporters, government, suppliers and buyers;
 A small number of factories that have been set-up by mainly inexperienced entrepreneurs
and ever eager machinery suppliers, who have used the myth of the buyback agreements
to push their machine sales. These factories by and large have been unable to get off the
ground despite considerable investment in machinery and infrastructure;
 No support industry in terms of linkage factories such as lasts, cutting dies etc., so there is
a high import dependence thereby reducing price competitiveness as well as increasing
lead times.
 Lack of a suitable enabling environment in the customs facilities of the country at time of
import of raw materials, due to harassment and delays in clearance
 Inadequate working capital finance as most banks insist on Master L/C and back to back
L/C procedures for import. Unfortunately in today's highly competitive market most
buyers no longer operate on L/C. Our competitors offer much easier payment terms such
as open account, D/A basis delivery, etc.;

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 Chapter 04: Conclusion and learning
4.1 Conclusion
The leather goods market in Bangladesh has huge potential with the increasing disposable income
of the middle and upper middle class families. The GDP growth at over 5% over the last decade
shows the strength of the economy and its resilience. Strong export growth despite the global
recession shows the competitive advantage of the entire industry, thanks to mostly the availability
of the superior quality raw materials and cheap labor. However, the lack of backward linkage,
especially in the case of chemicals may set back the industry in the long run.

The leather goods market in the country is very small, concentrating mostly on the corporate gift
sector. Major segment of the leather market consists of small enterprises at 57%. These enterprises
mostly sell directly to corporate clients and to major consumer brand shops like Aarong, Deshal,
Jatra etc, who then sells these products to the consumers at high profit margin. There is a lack of
strength of the small enterprises to compete with these leading brands.

With growth rate of the country has been quite consistent at over 5% over the last decade and
enjoyed strong growth in the exports of leather, leather footwear, and leather goods. Exports of
leather goods increased from USD 765.03 million in 2011-2012 to USD 1130.51million in 2014-
2015 amid high political turmoil, natural disasters, and global recession in the recent past.

With wage rates ranging below 85 dollars, the country can easily compete with China, India and
Vietnam despite low productivity rates. The country enjoys having environment suitable for
excellent hide production leading to higher price range for local leather and leather goods in the
international market.

ETPs are almost non-existent in the tanneries leading to major concerns stated by the importing
countries, affecting the price quoted by them. The government is working on the shifting of the
tanneries to Savar, from Hazaribagh which will allow for the products to be marked as more eco-
friendly and prices correspondingly at higher price range. However, the shifting of the tanneries
will affect the micro and small enterprises producing leather goods as they will not be
accommodated in the government-sanctioned land and will have to avail expensive lands outside
the tannery region.

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