The Leather Tanning Industry: In Focus

Among the three sub-sectors of the leather sector, the tanning industry is the most important and fundamental of all. There are more than 200 tanneries while the majorities are concentrated in the Hazaribagh area of Dhaka. More than 400 million square feet of raw hides and skins are processed and exported by tanneries each year in recent times. This sub-sector earned revenues in excess of USD 330.16 million during 2011-12 with a growth rate of more than 10 percent. The importance of this sub-sector is grounded on the regular and abundant supply of raw materials from the local livestock base. Additionally, the significance of this sub-sector also stands on the fact that it holds key to the enormous growth potential of other two sub-sectors. It is evident from research that the sector loses massive value addition opportunities in exports as 50% of leather is being exported as lower value-added products in the form of semi-finished and finished leather. Even though the other 50% is being converted into footwear and leather products, most of the exports are targeted towards low-end market. These findings indicate that the planned development of the tanning industry could help entrepreneurs of other leather sub-sectors to tap bigger export potentials. Nevertheless, the quality of processed leather from local tanning industry has not much helped leather goods and footwear exporters to garner more export earnings by using locally processed leather for producing and exporting leather goods and footwear to high-end market.

However, there have been several reasons behind the inability of this sector to reach the fullest potential. This is primarily due to operating constraints stemming from its production base in Hazaribagh, Dhaka, where there are minimal waste management systems and inadequate industrial layout planning. In recent times, EU has shown deep concerns about the environmental damages caused from open discharge of effluents and chemicals by the tanneries to the river Buriganga. Many developed countries including EU do not import leather and leather goods processed in Hazaribagh. On this backdrop, government and leather associations agreed in 2003 to relocate leather factories to a new Tannery Estate outside the capital city to a new tannery estate where there would be a CETP (Central Effluent Treatment Plant) for environmental safeguards. Nonetheless, as some technical issues remained unresolved for a long time since then, it took almost a decade for leather associations and BSCIC to reach a consensus regarding cost-sharing of CETP construction and of the overall tannery estate.

However, after a long time, the relocation issue regained the momentum in the face of immense pressure from the EU, with threats from EU to stop importing Bangladeshi leather goods and footwear besides leather. Relevantly, formation of a unique coalition to put forward proper incentives for the entrepreneurs, and regaining of confidence and understanding between leather associations and BSCIC have also helped the momentum to thrive. Lately in October 2013, BSCIC and leather associations signed the revised MoU to finally relocate the tanning industry to the new Tannery Industry Estate by 2015. As a result, the Hazaribag-centric tanning industry is now legally bound to relocate most of the factories from Dhaka to a new environmentally compliant tannery estate that is somewhere 20 kilometer away from the current location. This relocation of tanneries to the new industrial estate would help tannery entrepreneurs to process leather in environmentally compliant factories. Additionally, it will also help other producers to produce leather goods and footwear by using locally processed leather that will eventually ensure higher value addition for these products, and entrance to high-end market as well.