The Pakistan Leather Industry

(LEATHER)

About TED Categories and Clusters

CASE NUMBER: 309
CASE MNEMONIC: LEATHER
CASE NAME: Pakistan's Leather Industry

A IDENTIFICATION

1. The Issue

The rampant discharge of untreated effluents tanneries is a

growing problem in Pakistan's leather industry. Pakistani exports
of tanned leather is on the increase following a decline of leather
production in the developed world due to more stringent
environmental controls. The increase of tanneries in Pakistan is
causing severe environmental degradation as the untreated effluent
used in the tanning process is released into nearby water
reservoirs and the sea. In addition, air pollution is on the rise
with the tanneries burning residuals (i.e. hair) from the tanning
process into the atmosphere. Due to a need for foreign exchange,
the national government is encouraging the growth of tanneries by
offering these industries export rebates while at the same time
lagging on implementing the sparse existing governmental
environment regulations in leather tanning. The combination of an
increasing demand for the product and a lack of government
regulation is exacerbating whatever fragile balance existed between
the Pakistani leather trade and the environment.

2. Description

The relationship between the Pakistani leather trade and the

environment is being strained by a growing demand for the product
in the world and ignorance of environmental problems resulting
from the tanning process. A one noted Pakistani news journalist
commented, "The tanning industry is notorious for its heavy
pollution through effluents containing organic and inorganic
matter, dissolved and suspended solids, accompanied by
requirements of high oxygenic demand and having toxic metal salt
residues...these tanneries discharge effluents without any
treatment into water reservoirs and the sea."(1) Often, the
tanneries are located in industrial areas within Pakistan that
contain a large percentage of the population. With scarce land
resources, the pollution is affecting large numbers of people.
While the effluent contaminates the water supply on the land, it
also pollutes the sea. This pollution in turn affects the food
supply for the population. Moreover, much of the country is
subjected to the direct air pollution caused by burning the
tannery residuals into the open atmosphere. All of these forms of
pollution are having detrimental effects upon the health of
Pakistanis.

The primary pollutants that leather tanning in Pakistan

creates are heavy metals (chromium, cadium, etc.), various organic
chemicals, and acids. The Pakistani government recently tested
the effluent runoff from leather tanneries in Pakistan and
verified that the discharges were toxic. The sample of tannery
effluent contained .30 copper milligrams per liter, .15 cadmium
milligrams per liter, 7 zinc milligrams per liter, 1.14 nickel
milligrams per liter, and 1.8 lead milligrams per liter.(2) These
levels were almost all well above the suggested standard for toxic
substance concentrations in effluent. Very few of the tanneries
have any type of waste treatment facility and this runoff is
released into the nearest drain (most likely an open one) or body
of water such as the sea or a river. The effluent is uncontrolled
by any process treatment, waste recycling, or end-of-pipe
treatment.

Leather tannery discharge, combined with mangrove destruction

and over-fishing, are contributing to a sharp decrease in shrimp
production. The mangroves--whose leaf litter is a major source of
nutrients--provide a diverse habitat for a complex and
interdependent community of invertebrates, fish, birds, and
reptiles.(3) In addition, almost 90 percent of tropical marine
species seek shelter in the mangroves for one stage of their life
cycles. The loss of the commercially important shrimp in Pakistan
is having a devastating effect on the fishing industry, which is
partially dependent on the shrimp supply. Shrimp exports are an
important foreign exchange earner for the fishing industry and
Pakistan as a whole.

Moreover, the leather tannery operations near Peshawar are

polluting the Kabul river and threatening its use for domestic and
irrigation purposes as a freshwater fishery.(4) Although the
majority of the leather tanneries are centered around Karachi and
have negatively affected the coastal area, the other factories
located further inland near rivers are having just as devastating
effects. This pollution is having a particularly costly
environmental effect on the Pakistani government's attempt to
encourage private freshwater fisheries in order to combat rampant
overfishing along the coastline. Due to the increase in river
pollution from the tanneries, and therefore tainting the available
water resources for the fishponds, the project to alleviate the
strain being place on the coastal marine life is not likely to be
a success.

The leather industry in Pakistan is continuing to grow. In

fact, the overall bulk of industrialization still lies ahead and it
is expected that industry will double in 10 years and then double
again.(5) The leather tanneries will no doubt be a part of this
burgeoning trend. As long as there is a profit to be made in the
arena, new factories--small or large--will continue to start up.
In 1990 the leather sector jumped to become the second largest
foreign exchange earner for the country by contributing 10.41
percent toward the total export revenue.(6) The increase in tanned
leather exports (not even including leather garments) from
1990-1995 alone is astounding. The leather products industry
increased its amount of exports from $271 million USD in the
1990-1991 fiscal year to $349 million USD in 1994-95!(7)

The impetus behind the increase in tanneries in Pakistan is a

rising world demand for tanned leather. Indeed, a Pakistani
journalist explains that "while the production of tanneries in the
developed countries has grossly come down due to either closure of
tanneries or the leather produced there has become too expensive
due to strict environment control laws, the developed countries
have become more and more dependent on the supply of lather from
the developing countries...mainly due to the violation of even
basic civic laws in the developing countries whereby the tanners
discharge all the effluent without any treatment ... Pakistan is no
exception."(8) This problem is immediately apparent when one
researches the limited body of environmental guidelines for
leather tanneries and the lack of enforcement of any existing
environmental legislation.

Paradoxically, the national government--in seeking to increase

government revenue and employment opportunities--is encouraging
the growth of the leather tanning industry with export rebates.
This policy of encouraging the growth of the leather industry with
little regulation is compounding the environmental problem in
Pakistan. Although some NGOs and concerned citizens are working
to raise awareness of the dangers of these policies, little is
being done to control the situation. Until Pakistan is forced to
adhere to international norms for pollution control in its
domestic leather tanneries, the situation will likely worsen at
the expense of the average Pakistani citizen in terms of a
declining quality of life.

3. Related Cases

See MINIMATA
See HONGKONG
See TANTALUM
See BALTIC
See BAIKAL

Key Words

(1): Environmental Problem Pollution Sea [POLS]

(2): Industrial Category Leather [LEATH]
(3): Forum Pakistan

4. Draft Author: Theresa Augustus (May, 1996)

B. LEGAL Clusters

5. Discourse and Status: INPROGress

The Pakistani state, while at the same time needing to promote

industry in the country, is the only entity that can formulate the
strict environment protection laws and ensure effective
implementation of these laws at the local level. However, due to
the leather industries prominent position in Pakistan's export
industry, the national government has instead offered incentives--
such as a rebates on the export of leather and leather products,
duty-free import of raw hides and skins for re-export after value-
addition, and export refund scheme on export of leather footwear--
to bolster the leather industry with very little environmental
guidance.(9) These incentives are increasing the profit margin of
the leather industry and encouraging more operations to set up
shop--without the environmental controls. By falsely inflating the
profit margin for such leather tanning operations, however, the
government has created that much more of a difficult task in
inevitably mandating the installation of waste-treatment equipment.
The strong leather industry is currently still in a position to
lobby strongly against such increased costs.

NGOs and other concerned citizens are trying to work with the
Pakistani government and the Pakistan Tanners Association (PTA) to
establish some environmental safeguards. Although the PTA has
reportedly agreed to establish effluent treatment facilities,
there has been very little progress. There are currently very few,
if any, waste treatment centers. Finally, there is one
organization, the Pakistan Council of Scientific & Industrial
Research (PCSIR) which does R&D on leather technologies, such as
chemical research.

6. Forum and Scope: Pakistan and UNILATeral

7. Decision Breadth: 1

8. Legal Standing: Law

C. GEOGRAPHIC Clusters

9. Geographic Locations

a. Continental Domain: Asia

b. Geographic Site: South Asia
c. Geographic Impact: Pakistan

10. Sub-National Factors: YES

In addition to the need for national environmental legislation

on the leather industry, local laws could be promulgated as well
to combat the growing tannery effluent problem. In fact, certain
industrial areas are suffering greater environmental damage and
would benefit from local legislation. For example, in Karachi, the
Korangi Industrial Area has the largest number of tanneries working
in that sector and is the most polluted area with "open drains and
effluent being discharged without any treatment."(10)

Although national regulations need to be put in effect, it is

often left up to the state enforcement agencies. In addition,
there needs to be some attention given to the differing
circumstances of each region, which would suggest some form of
state/region legislation as well. For example, it would be far
more effective to address the local tannery pollution problems at
the local level, given adequate support to such enforcement by the
national government. Therefore, more attention should be place on
straightening some of the state agencies in order to effectively
address the leather tannery effluent dilemma.

11. Type of Habitat: TEMPerate

D. Trade Filters

12. Type of Measure: Regulatory Standard [REGSTD]

13. Direct vs. Indirect Impacts: INDirect

14. Relation of Measure to Impact:

a. Directly Related to Product: YES Leather [LEATH]

b. Indirectly Related to Product: NO
c. Not Related to Product: NO
d. Related to Process: YES Pollution Sea [POLLS]

15. Trade Product Identification: Leather

Mostly intermediate (finished leather) and some final product

type (garments.) The Pakistani government is attempting to
increase its production (and subsequent export) of the final
product types in order to increase profits in such a value-added
sector. However, this will probably only increase demand for the
intermediate product in the country and thereby increase the
pollution created by the tanneries.

16. Economic Data

Industry Output: $628 million USD (fiscal year 1993-1994), 5 % of

GNP with an annual growth rate of about 4.7% in its exports.(11)
$621 million USD (fiscal year 1992-1993), 9% of Pakistan's total
exports.(12) Employment: 200,000 persons(13)

According to the Leather Industry Development Organization,

there are 526 tanneries in Karachi, Lahore, Multan, Kasur,
Faisalabad, Peshawar, Gujranwala, and Sialkot, with the majority
of leather production taking place in medium-size tanneries. The
leather industry as a whole--including both tanned leather and
leather garments--is an important foreign exchange earner. As
mentioned previously, the industry was the second largest foreign
exchange earner in 1990. The leather tanning industry produces
about 6 million hides and 36 million skins annually.(14)

The leather industry has slowly increased since Pakistan's

independence. Following partition from India, there were few
tanneries and hides and skins were imported. However, the leather
industry today has developed into an indigenous industry that is
the second biggest export-oriented industry in the manufacturing
sector and third in the overall exports of Pakistan.(15) Although
the production of hides and skins used in the tanning industry--
cattle, goat, sheep, and buffalo--has been steadily increasing, the
supply has not been able to keep up with demand and some
importation continues. To alleviate the increased costs of the
importation and supplement the local production, the government
has currently allowed wet-blue (unfinished) and skins to be
imported duty-free.

17. Degree of Competitive Impact: LOW

18. Industry Sector: TEXTile

19. Exporter and Importer: Pakistan and Many

Case Exporter: Leather Industry, Pakistan

$628 million USD (fiscal year 1993-1994), 5 % of GNP with an annual
growth rate of about 4.7% in its exports.(16)
$621 million USD (fiscal year 1992-1993), 9% of Pakistan's total
exports.(17)

Case Importer: Italy, Spain, Portugal, South Korea, Germany,

France, UK, Holland, USA, and Hungary.(18) Other markets that are
emerging as importers include China, Thailand, the Middle East,
and South Africa.

E. ENVIRONMENT Cluster

20. Environment Problem Type: POLlution Sea

The leather tanneries use highly toxic chemicals which are

released into water reservoirs and the sea--untreated--during the
tanning process. These chemicals include copper, cadmium, zinc,
and lead. In addition, these tanneries burn residuals from the
tanneries which pollutes the atmosphere.

21. Species Information

22. Impact and Effect: [HIGH] and [REGULatory]

23. Urgency and Lifetime: Low and 100s of years

24. Substitutes: Synthetic

The tanneries could benefit from R&D in order to not only cut
down on polluting effluents, but also how to recycle many of the
discharges. In addition, effluent treatment facilities need to be
established in order to limit the environmental damage caused by
the direct dumping of untreated effluent.

F. OTHER Factors

25. Culture: YES

The polluting aspects of the tanneries inevitably hit the

poorest the hardest. Traditionally, in Pakistan, the "lower-
caste" (poorer) people work in the tanneries, which is strenuous
and labor-intensive. These jobs have been handed down in the
family for generations. Moreover, in a populous and developing
country such as Pakistan, people often compete for these jobs and
are forced to put up with dangerous working conditions. In
addition, the pollutants are often released in areas that will
affect the people with the least political power. The lower-caste
inhabitants of these areas are affected by the effluent on a daily
basis.

26. Human Rights: [YES]

The untreated effluent released by leather tanneries impinges

on the health and quality of life of Pakistanis. By releasing the
untreated effluent into the water supply, citizens not only drink
the toxic chemicals, but the effluent affects the food supply chain
as well. In addition, the increase in air pollution has
repercussions to health problems, specifically leading to lung
illness.

27. Trans-Boundary Issues: [NO]

28. Relevant Literature

1. Kazmi, Shabbir. "Leather Garments" Pakistan & Gulf Economist.

29 July - 4 August, 1995, pg 10.

2. Naqvi, Hanif. "Water-borne diseases" Pakistan & Gulf

Economist. 25 - 31 March 1995, pp. 50-51.

3. Zafaruddin, Mohammad. "Leather industry: Backbone of Pak

exports" Pakistan & Gulf Economist. 28 January - 3 February 1995,
pp 9-10.

4. Kazmi, Shabbir. "Leather Industry in Pakistan" Pakistan &

Gulf Economist. 28 January - 3 February 1995, pp 6-8.

5. Kazmi, Shabbir. "Pakistan exports: Can we deliver?" Pakistan

& Gulf Economist. 26 November - 2 December 1994, pp 7-9.

6. Rao, Vasuko. "Pakistan Leather Trade Seeks Aid As Exports

Slump, Factories Close". Journal of Commerce. 16 June 1994

7. "Export of leather garments increases". Economic Review. 01

April 1993. and Zafaruddin, Mohammad. Pg. 10.

References

1. Kazmi, Shabbir. "Leather Industry in Pakistan" Pakistan &

Gulf Economist. 28 January - 3 February 1995, pg 6.

2. Dr. G.R. Sandhu. NCS Agriculture Sector Paper.

3. "Pakistan National Environment Plan" Pakistan National

Conservation Strategy, Volume 1. 1991.

4. "Pakistan National Environment Plan" Pakistan National

Conservation Strategy, Volume 1. 1991. Pg. 3.

5. "Pakistan National Environment Plan" Pakistan National

Conservation Strategy, Volume 1. 1991. Pg. xxii.

6. "Decline in Leather Exports" Pakistan & Gulf Economist. 18-24

June 1994. Pp. 36-37. 7Kazmi, Shabbir. "Exports: Let's broaden
our vision" Pakistan & Gulf Economist. 16-22 December 1995. Pg.
11.

8. Kazmi, Shabbir. "Leather Garments" Pakistan & Gulf Economist.

29 July - 4 August 1995, pg 10.

9. Zafaruddin, Mohammad. "Leather industry: Backbone of Pak

exports" Pakistan & Gulf Economist. 28 January - 3 February 1995,
pg 9.

10. Kazmi, Shabbir. "Leather Industry in Pakistan" Pakistan &

Gulf Economist. 28 January - 3 February 1995, pg 8.

11. Kazmi, Shabbir. "Leather Industry in Pakistan" Pakistan &

Gulf Economist. 28 January - 3 February 1995, pg 9.

12. Rao, Vasuko. "Pakistan Leather Trade Seeks Aid As Exports

Slump, Factories Close". Journal of Commerce. 16 June 1994.

13. Zafaruddin, Mohammad. "Leather industry: Backbone of Pak

exports" Pakistan & Gulf Economist. 28 January - 3 February 1995,
pg 9.

14. Kazmi, Shabbir. "Leather Industry in Pakistan" Pakistan &

Gulf Economist. 28 January - 3 February 1995, pg 6.

15. Zafaruddin, Mohammad. "Leather industry: Backbone of Pak

exports" Pakistan & Gulf Economist. 28 January - 3 February 1995,
pg 9.

16. Kazmi, Shabbir. "Leather Industry in Pakistan" Pakistan &

Gulf Economist. 28 January - 3 February 1995, pg 9.

17. Rao, Vasuko. "Pakistan Leather Trade Seeks Aid As Exports

Slump, Factories Close". Journal of Commerce. 16 June 1994.

18. "Export of leather garments increases". Economic Review. 01

April 1993, and Zafaruddin, Mohammad. Pg. 10.
 EXPORT VISION

Pakistan produces very fine quality leather which is recognized worldwide and a good
quantity of Finished Leather is also sold locally to the Manufacturers of Leather
Garments, Upholstery, Footwear, Gloves and other Leather Goods to enable them to
meet their production requirements.

PTA’s leather producers have also started exporting fine quality furniture leather
(upholstery) to the international market.

Due to unfavourable business atmosphere and various Int’l pressures the export of
leather & leather products was drastically on the decrease. However, with passage of
time and due to our exporters’ untiring efforts, extensive marketing strategy and quality
improvement as well as through active participation in the international fairs, the sagging
position has started improving satisfactorily. Now leather sector industry has come out of
declining trend and started picking up gradually.

The export of leather and leather products has registered 7.11% increase as compared to
the last year’s exports of $ 695 Million. The industry’s exports reached at $ 744 million
during the year July-June 2003-04 evidently more than the export target of US$ 715
Million set by the Government. This is the highest achievement in exports by leather
industry during the last decade.

Based on upward trend of exports of leather sector industry it is vividly foreseen that the
target proposed by the Pakistan Tanners Association at US$ 265 Million for Leather
Tanned and US$ 525 Million for Leather Garments and other Leather Products for
the next financial year 2004-05 would also be achieved.

In order to meet the requirements of WTO, Leather Industry has to develop quality
consciousness by upgrading its products to be competitive in the world market.

There are also challenges to meet the NEQS & Environmental regulations particularly in
the wake of WTO regime to be effective from 1st January’2005. The leather industry is
prepared to face such challenges with determination and sense of responsibility.

Pakistani tanners have ample potential to move ahead but in order to further develop the
leather industry the Government has been requested to provide some due incentives and
concessions to PTA’s member exporters.
Leather Sector Buys Hides Worth Rs 3.5b
By Asif Khan

KARACHI: The leather industry in Karachi bought animal skins and hides worth a total
of Rs 3.5 billion during the two days of Eid ul Azha from social welfare organizations
and individuals.

“The industry waits for this season because the quality of skins and hides is much better
than normal days because fresh skins and hides are bought,” said Fawad Ijaz, chairman
Pakistan Leather Garments Manufacturers and Exporters Association (PLGMEA). The
leather garments made by these skins and hides are of best quality and fetch handsome
profits in the international market, he said.

The industry bought about 1.3 million skins (of sheep and goats) worth Rs 2.5 billion and
hides (of cows and bulls) worth Rs 1 billion.

The hides and skins of sacrificial animals are considered a valuable by-product for the
leather industry and the Rs 3.5 billion worth of skins and hides purchased this season in
Karachi account for 80 percent of the total country-wide turnover.

The main sources of skins and hides in Eid ul Azha are social organizations like Al-
Khidmat Foundation, Edhi, Khidmat-e-Khalq and other organizations of different
communities.

“The skins and hides supplied during Eid account for almost 20 percent of total annual
purchases of the tanning industry of the country,” said S M Muneer, former chairman
PLGMEA. Middlemen in the trade pay around Rs 100 per skin during Eid which they sell
onward to industry representatives for Rs 200 to Rs 225 each.

Meanwhile, hides were bought in the range of Rs 1,400 to Rs 1,600 each. These skins and
hides are bought through open bidding and tenders. The registered organizations float
tenders for the sale of skins and hides but most of them sell these through auctions.
Karachi and Lahore are the main source of skins and hides during Eid ul Azha.

The traders and social organizations earn substantial profits on hides. Some large tanning
industries also set up their own camps in the city to buy skin and hides from individuals
directly.

“Some people don’t give the skin of their sacrificial animals to any social organizations
so they sell these to traders,” Mr Ijaz said. These traders pay Rs 100 to Rs 150 for skins
and Rs 300 to Rs 400 for hides to such customers, he said. Social organizations and
others have established around 10,000 camps in Karachi for the purchase and collecting
skins and hides from citizens.

Leather is the second largest sector of foreign exchange earnings in Pakistan after textile,
contributing more than 7 percent to export earnings. It constitutes more than 5 percent of
the manufacturing GDP of Pakistan. According to an estimate, more than 200,000
workers are directly employed by the sector.

Pakistan’s large livestock population generates a large number of hides and skins.

The availability of indigenous raw material has triggered the development of the tanning
industry in the country. With the passage of time, the leather products industry has also
developed in the country. The local market for leather products is small and major
quantity of leather produced in Pakistan is exported, either as finished leather or in the
form of leather products.