The Fascinating Tale of “Made in Bangladesh” Leather.​

Chronicles of the rise of the Bangladesh Leather Sector.

Are Timberlands made in Bangladesh? That seems to be the question of leather product manufacturers all across the world. A staple among New Yorkers, Timberlands keep your feet warm, cosy and dry all day. And what makes them so popular worldwide? Their thick, durable and luxurious leather. The same characteristic, in fact, is found in leather products of the leather industry in Bangladesh.

The title of “Made in Bangladesh” leather is one that has been achieved after much struggle and experimentation. And it’s a deserving title, one that has given leather products manufacturers in Bangladesh an identity in the world. Known for its high-quality fine grain leather, uniform fibre structure, smooth feel and natural texture, leather products in Bangladesh have become one of the country’s key exports to destinations like the EU, USA, Australia, Japan, Singapore, and South Korea.

But what is it that makes Bangladesh’s leather sector so lucrative that brands far and wide flock to revel in its richness? The answer lies in its geographically advantageous position. Situated in the south-eastern part of the Indian subcontinent amidst the Ganges basin, the leather industry in Bangladesh is benefitted by the highly fertile alluvial soil bearing natural green vegetation, providing the most ideal conditions for high-quality animal hides and skins. Just like it once provided the optimum climate for the production of the legendary fabric, muslin, it continues to be a blessing for the Bangladesh Leather Sector. But how did leather products manufacturers in Bangladesh get started in the first place?

History of the Bangladesh Leather Sector

The leather industry in Bangladesh traces its roots to 1964, when the non-profit Pakistan Tanners Association was founded. In the aftermath of the 1971 Civil War, the Association was renamed the Bangladesh Tanners Association (BTA), in charge of liaising between the leather industry in Bangladesh and government bodies, and of export certification. 1990 saw a government ban on the export of wet blue hides. Why? If the salted raw hide can be processed to the stage of finished goods production, it can add up to 90% value!

In 2003, the Leathergoods And Footwear Manufacturers & Exporters Association of Bangladesh (LFMEAB) was established with a view to consolidate and monitor leather products manufacturers in Bangladesh. And this five decades-long evolution of the Bangladesh leather sector has culminated to form the BSCIC Tannery Industrial Estate at Hemayetpur, Savar today, with the leather industry in Bangladesh having ready availability of the highest quality full grain natural leather. Further developments to Bangladesh leather sector occurred in subsequent years, like the building of Dhaka’s first Central Effluent Treatment Plant (CETP) for 30 years by the Bangladesh Export Processing Zone Authority (BEPZA) and FDC to build, that began commercial operations on the 1^st of February 2012. Following that, exports of leather products in Bangladesh achieved 1 billion USD for the first time in its history – a humongous achievement, no doubt, but one that still has a long way to go, with the government currently targeting a growth to $10-12 billion by 2030!

To give reality to its ambitious dream, the Government began a strenuous process of relocating leather products manufacturers in Bangladesh to the Savar Tannery Estate from the capital 2016 onwards – an objective that has only seen completion on the 30^th of June in 2021. Because of this, the CETP established was only able to start fully functioning onwards of 2017. So, with all these developments taking place, where does the Bangladesh leather sector stand presently?

Current Position of the Leather Industry in Bangladesh

Presently, Bangladesh has been ranked as one of the top-ranking leather-producing nations of the world. With 2 percent of the total livestock population in the world, the production output of the leather industry in Bangladesh consists of 56% cowhide and 30% goatskin, the remainder being sourced from from buffalo hide. Not only is the Bangladesh Leather Sector said to be self-sufficient in terms of rawhide sourcing, only about 18% of its estimated annual supply of 300 million square feet and an output of approximately 200 million square feet is used to meet local leather demand. So, nearly 76% of the production units in the leather industry in Bangladesh are geared towards export.

The leather products manufacturers in Bangladesh, therefore, exports nearly 50 different types of leather and leather goods to more than 80 countries  around the globe. Leather products made in Bangladesh are also supplied to world-renowned brands like ABC Mart, Adidas, Aldo, Armani, Bass, Esprit, Hugo Boss, H&M, Hush Puppies, Kate Spade, K-Mart, Michael Kors, Marks & Spencer, Nike, Picard, Steve Madden, Sears, and Timberlands. So if you’re asking if Timberlands are made in Bangladesh, now you have your answer.

Leather products in Bangladesh include various divisions, including crushed leather, blue wet leather, finished leather and split leather, as well as finished products like garments, shoes, belts, bags, jackets, suitcases and wallets. But footwear is undoubtedly the biggest, with the Bangladesh Leather Sector being the 8^th largest producer of footwear (423 million pairs) and 9^th largest consumer market (366 million pairs, generating over $3.0 billion from the domestic market alone) in 2020, according to the World Footwear 2021 Yearbook. Internationally, the leather industry of Bangladesh is estimated to have an export potential of US$1.0 billion, making it the 2^nd largest foreign currency earner after garments.

Internally, the LFMEAB estimates that there are currently 200 tanneries and 3500 MSMEs in the leather industry in Bangladesh employing over 200,000 people directly and around 0.85 million indirectly, amongst whom 60% are women.

Performance of the Leather Products Manufacturers in Bangladesh in Recent Years.

Prior to 2017, investments in the leather industry in Bangladesh were thought to be rising, motivated by the confidence of environmentally compliant factories and the promise of high quality. The actual scenario of the leather products manufacturers in Bangladesh, however, was quite different. Exports of leather and leather products had declined by more than 12% from 2017 to 2018 and missed the targeted amount for the period by 20.15%. The Export Promotion Bureau (EPB) also estimated that export earnings of leather products in Bangladesh declined by 16.11% in the fiscal year 2018-19.

But the biggest setbacks for the Bangladesh leather sector occurred during the initial stages of the COVID-19 pandemic. RAPID Chairman Dr Mohammad Abdur Razzaque expressed his concerns that domestic sales of the leather industry in Bangladesh had fallen by 22% during that period. This was, in fact, proportionately much larger than the 10% fall in worldwide trade.

In the first 5 months of FY20, the Bangladesh leather sector’s export earnings from crust leather fell by 5.42% and leather products a whopping 49%.

Many reasons have been cited for this gradual decline in the earnings of the leather products manufacturers in Bangladesh, like:

• Declining demand for the crust and processed leather.
• Increasing use of artificial leather.
• Lack of proper waste management facilities.
• Safety and compliance issues.
• Lack of new investment during this period.
• Lack of diversity in product portfolio.

The chairman of the Bangladesh Tanners Association also stressed on the massive 40% decrease in work orders for finished and processed leather from Spain, Italy, Hong Kong, and South Korea due to the pandemic, which accounts for nearly 60% of the Bangladesh leather sector’s exports. Additionally, 30% of the leather and leather products in Bangladesh are exported to China at prices 40% lower than the prices paid by European or US clients. Furthermore, the US-China trade war has also had its repercussions behind this negative export growth rate of the Bangladesh leather sector.

In the later stages of the pandemic, however, individual categories of the leather industry in Bangladesh has started to show improved performances. Leather footwear, for instance, showed a 4.54% growth in FY20, while finished leather exports went up by 34.67%, actually overcoming the monthly target (11.19 million US dollars). Other leather goods too showed an increase by 14.33% from the performance in July 2020.

Apex Footwear Limited Managing Director Syed Nasim Manzur reportedly estimated that daily global footwear sales amounted to $300 million and this demand would not be decreasing. He further emphasized that the leather industry in Bangladesh’s export for the six months ending June 2021 grew 54%.

Not only that, Mohammed Nazmul Hassan, Vice President of the LFMEAB and Managing Director of Leatherex Footwear Industries Limited has expressed his confidence that, “Every year, 15–20 new leather products and footwear factories are being opened in the country.” There might be light at
the end of the tunnel after all.

Opportunities for the Bangladesh leather sector

Currently, the leather industry in Bangladesh is on a promising trajectory. Now, there are 4 strategic areas for leather products manufacturers to develop the industry and grab more market share: chemical imports, leather exports, compliance with foreign markets and environmental regulation. The general manager of Solidaridad Asia, Tatheer Zaidi, said that around 200-220 million sq ft of leather is produced by the Bangladesh leather sector, netting around 3% share global market. This, however, can be extended in ways like:

• Proper rawhide management during Eid-ul-Adha, the primary season for the supply of raw materials for the leather industry in Bangladesh.
• Carrying out solid waste management at the Savar facility in an environment-friendly way to improve the image of the industry.
• Partnering with the Netherlands to introduce the technology of using surface water at an affordable cost.

In fact, the Bangladesh ambassador in the Netherlands, Riaz Hamidullah, said,

“Why is the conversation regarding the leather industry limited to effluent treatment only? It should be discussed in Dhaka among the industry owners and relevant ministries … we should discuss more about understanding the global trend to increase leather export.”

His belief is that the strategies recommended above can help increase export volume of the Bangladesh leather sector to European countries. The opportunities for the leather products manufacturers in Bangladesh are much more expansive, some of which are highlighted below:

• Huge untapped international market.
• Increasing global demand for value-added, diversified products.
• Strong backward linkage and estimated 95% value addition.
• Significant employment opportunities as the industry is labor intensive.
• Interest by local and foreign direct investors in the value-added leather products in Bangladesh sector.
• China, Vietnam, India and Indonesia are losing competitiveness owing to wage increases, forcing foreign manufacturers to look elsewhere.
• GSP, cash incentive and other government policies to benefit leather products manufacturers in Bangladesh.
• Increased international fashion and sourcing houses previously in Bangladesh for RMG now interested in leather products (are Timberlands made in Bangladesh? Yes, yes they are).
• Bangladesh exports footwear at zero percent tariff rate, attracting foreign buyers.
• Exports to non-traditional markets: Australia, Singapore, Japan, South Africa, India, and Spain, have increased, especially during the pandemic.
• Government renewal of export permits for wet-blue hides onwards of June 30, 2022 to ensure fair prices and reduce wastage.
• Growing demand and potential from the domestic market.
• Several leather products manufacturers in Bangladesh are working on making exotic skin (like python, crocodile and lizard) lookalikes using domestic animal skins.
• Companies designing and tanning process of leather is being done in an eco-friendly way.
• Japan-Bangladesh bilateral Free Trade Agreement (FTA) for the RMG and the leather industry in February 2022 opened a new horizon for expansion and growth of the Bangladesh Leather Sector.

Challenges of the Bangladesh leather sector:

While compliance is easy to advise, it is difficult to execute, especially in the case of the leather industry in Bangladesh. The industry is currently losing out on many of the opportunities due to the delay in construction of the Central Effluent Treatment Plant (CETP) in the Savar Industrial Tannery Estate. Because of this, leather products manufacturers in Bangladesh have been unable to capture the opportunity of the US-China trade war as well. Besides CETP, other significant challenges to the development of leather products in Bangladesh include:

• Lack of sufficient solid waste management facility, discharging their untreated waste into a nearby river in Savar and causing significant pollution.
• Child laborers employed in almost all processes along the leather supply chain – from animal slaughter and skinning to dyeing, waste disposal and manufacturing of leather products and by-products such as glue and meat – on less than 13% of the average salary.
• Absence of integrated policies regarding Common Facility Center (CFC), SME cluster development or branding and promoting leather products in Bangladesh.
• Political instability & corruption
• Lack of backward linkage industry for chemicals/accessories and substandard quality of the products.
• Illegal export of raw hides/skins.
• Stringent compliances from buyers.
• Opposition from animal rights organizations around the world to stop the use of animal skins, like snakes and crocodiles. This is resulting in brands looking for leather alternatives as well.
• Machinery & chemicals required for leather preparation imported at high overall costs.
• Inefficient and outdated procurement, preservation, and processing systems of hides resulting in declining quality of skins.
• Lack of skilled workforce.
• lack of funding for small and medium-sized tanneries due to the high rate of loan default in the Bangladesh leather sector.
• Small and medium-sized tanneries heavily dependent on brokers for their leather sales, thus failing to reach foreign markets like conglomerates.
• Poor work environment and non-compliance with Basic Health Compliance Guidelines.

But having said all of that, a “Made in Bangladesh” leather is all about its finished quality, refined polish, and fine grain texture that the leather industry in Bangladesh is renowned and reputed for. The making of this high-quality fine grain leather requires the most carefully salted hide, tanned with the elbow, grease and sweat of the concentration that a labour pours in, the correct processing practices and polishing before being passed on to the craftsman. It requires the most sophisticated skills & techniques and the perfectly trimmed edges & stitches before being approved as a “Made in Bangladesh” leather.

In fact, in a presentation titled “Back to the Future: Towards a sustainable leather industry,” the leather industry magnate Syed Nasim Manzur said that the ‘Made in Bangladesh’ tag has already gained ground for shoes and bags around the world. Brands desire sustainable leather, and new investment, talents and effective policy focus are the way forward. Plus, the government is already planning to establish a full-fledged ‘leather industrial city’ of 400 acres will have a tannery, forward and backward linkage industry, and a proper waste management system, alongside two tannery villages, next to the BSCIC Tannery Industrial Estate.

All these give leather products manufacturers in Bangladesh as well as investors immense confidence. It is time to showcase the story behind the famed “Made in Bangladesh” leather around the globe. It’s time to make these high-quality fine grain leather products in Bangladesh accessible to fashion retailer & startups, leather & leather goods enterprises everywhere across the world.