For two consecutive years, the tanners and leather exporters were happy with the business of sacrificial animals. Incidents of smuggling were a few this year. Good climatic condition was a boon for the industry. And, of course, good price of the rawhides contributed a lot to the sprawling wet blue business.
Reports published in the Financial Express (FE) this week suggested that the country is expected to earn Tk 21 billion in foreign exchange this year from the export of finished leather and leather goods. The earning will be 3.0 billion more than the previous year.
The country's leather entrepreneurs have no conclusive statistics on the amount of hides being smuggled to India every year. But this year, they are expecting to procure between 10 and 15 per cent more hides compared to that of the last year as the government took adequate security measures in the bordering areas to plug smuggling of rawhides.
As per the decision of recent meeting, the wholesale traders were reported to have purchased the rawhides from the retail traders at international market prices. The international price has increased to $3.70 per square metre this year, up from $2.73 last year.
The tannery owners have bought cowhide at a rate of Tk 50 per square feet in Dhaka and at Tk 40 per square feet from outside Dhaka. Price of per square feet of goatskin was fixed at Tk 40 in Dhaka. The wholesale traders said the average price of cowhides ranged between Tk 65 and Tk 70 per square feet.
At the field level, the retail traders said price of a medium size cowhide varied between Tk 1200 and Tk 1500 while a large cowhide was priced between Tk 1800 and Tk 2000. Retail prices of hides registered more or less 15 per cent increase in price.
Initially, the wholesale traders refrained from purchasing rawhides from the retailers for increase in the costs of processing including higher price of salt and devaluation of local currency against dollar. Later on, the dispute between the tanners and the exporters was amicably settled.
Data provided by the Export Promotion Bureau (EPB) shows that in the past fiscal year (2004-2005), finished leather exporters received 26 per cent higher price for their product. During the last fiscal year, export earning from finished leather increased by about five per cent to $220 million, although the volume of export declined by about 17 per cent to 50.71 million square feet. The increased value of exportable leather, following depreciation of the dollar against the Bangladeshi taka, also gave the merchants grounds to be optimistic.
How far has the country gained from the exports of leather and leather products? Tanners estimate that Bangladesh produces 200 million square feet of leather every year and more than a third of the total volume comes from hides of sacrificed animals. During Eid-ul-Azha this year, approximately 2.2 million cows and 10.20 million goats were slaughtered across the country, which is 10 per cent higher than those of the last year.
Leather traders said Bangladesh generally exports leather and leather goods to Italy, Japan and China. India and Pakistan use their own chemicals for the preserving process, but Bangladesh uses European chemicals imported in Euros. But the country earns US dollars by exporting leather and leather goods. The difference in the rates between the two currencies has compelled Bangladesh to increase the price of its leather and leather goods, putting it in a disadvantageous situation.
Law enforcement agencies have been put on high alert against the organised syndicates, who are out with their bid to smuggle out hides and skins of the sacrificial animals to India. The border force this year took effective measures to prevent movement of the hide loaded trucks and vehicles towards the frontier districts as part of the anti-smuggling vigil.
The Fariahs (middlemen) surprising did not get any bank loans and most of them borrowed their capital from the illegal moneylenders at higher interest rates to purchase the hides and skins. After preliminary processing, the Fariahs are now selling these hides and skins to the medium and big skin traders in larger markets of the region.
More than Tk 2.0 billion of the marginal, smaller and medium traders as well as Mohajans (moneylenders) of the country's northern districts were lying unpaid by the big skin traders for the last one decade. But the payment is becoming almost regular this year. The 'Arats' or 'Mokams' in the big markets in northern districts are now flooded with the hides and skins of sacrificial animals. The marginal traders suggest that the government should immediately set up tanneries in the northern districts to make the best use of this item of higher economic value.
The country has already a nascent domestic leather industry-- mostly export-oriented. The leather goods include some readymade garments, although that aspect is confined mainly to a small export-trade in 'Italian-made' garments for the US market. Footwear is more important in terms of value addition accounting for just over US$4.0 million exports in fiscal year (FY) 1992-93. The figure rose to $ 257.17 million in FY 2002-03.
Bangladesh produces between 2.0 and 3.0 per cent of the world's leather market. Most of the livestock base for this production is domestic which is estimated as comprising 1.8 per cent of the world's cattle stock and 3.7 per cent of the goat stock. Local hides and skins have a good international reputation.
Foreign direct investment in this sector along with the production of tanning chemicals appears to be quite promising, in terms of rate of return on capital investment. Having the basic raw materials for leather goods as well as for the production of leather shoes, a large pool of cheap but trainable labour force together with tariff concession facility to major importing countries under generalised system of preferences (GSP) coverage, Bangladesh can be a potential offshore location for leather and leather products manufacturing with low cost but high quality.