Hides are being discarded, while we turn to leather import

How plausible due you think is the price fixed for rawhides this year?

From many years ago, a base price has been determined for rawhide. Every year, based on that, the commerce ministry fixes the price of the hides.

I feel the commercial value of the hide is not taken into consideration when fixing the price in this manner. The hide is considered as a qurbani charity item and since the value of charity items is placed at the minimum, the price of the hides is also fixed in that way.

However, the hides should be considered a raw material and the prices fixed based on the market. This is not done here and so the price is always low and the value of the hides is not assessed according to the market.

This year the price of salt-treated cowhide has been fixed at Tk 50 to 55 per sq ft in Dhaka and Tk 45-48 outside of Dhaka. This is a slight increase from last year. There has been around 6 per cent adjustment of the price. Yet inflation is around 9.9 per cent. Even in that consideration, the price of the hides should be Tk 52 to 57.

If it is seen as a raw material for import, the perhaps the importers will get a better price, given the devaluation of the taka against the dollar. But of the taka devaluation and inflation is even 15 per cent, then the price of the hides should be been Tk 54-60. In that light, the minimum indicators of normal times were not even taken into consideration while fixing the prices fixed this time. If we consider this a raw material, then I feel its price should have been higher.        

There was a time when the hides were sold at prices higher than that determined by the government, but this has been the opposite over the last few years. There are instances of people even throwing away the leather, burying it under the ground, as they did not get a good price. Will we see such a scenario this time too?

Hides were sold at prices higher than fixed by the government at a certain time due to the higher demand. Leather export had been steadily on the rise then. The demands have been fluctuating in the recent years.

We are failing to keep up the high growth expected through export of leather goods. It was not satisfactory last year and we will have to face the same predicament this year. If the export sees negative growth, then finished leather or that in stock will simply pile up. This leather will drop in demand for those making shoes and other leather products. This has a steady negative impact on the overall industry, particularly on the tanneries, as they prepare the hides and make the products, meeting the demands. If the demand falls, then the tanneries cut down on procuring hides.

The situation this year so far, the tanneries are not likely to show much interest in collecting hides, given the price that has been fixed and the existing demand.

The weakness lies in our market structure. We have made the rawhide market a local captive market. But unfortunately, the normal buying and selling of hides or the opportunity to fix higher prices, has been halted. Last year there was an opportunity created for exporting wet blue on a limited scale. We feel this year, too, the government should keep that window open. In fact, there should be opportunity to export the hide before the wet blue stage, when the hide has just been treated with salt. Then our leather and leather products will be able to search for export markets as against the downhill domestic market. If this can be brought about, there is less chance of our leather being wasted. This will generate a demand and, in turn, create scope for the hides to be sold at higher rates.

These steps should have been taken much earlier. It would have been better to determine the price of rawhide taking into consideration how durable the leather is, how much demand it has, how much new hides can be bought and how open the market should be made. The commerce ministry should take all this into consideration and give due importance to the matter when taking these decisions.

Qurbani Eid offers a huge opportunity to our tannery industry. People involved in the industry themselves say that the European buyers buy our leather at high prices, but less in volume. Does that mean the government or the ministry pays less attention to creating a market or there are limitations in our relevant policies?

It is most unfortunate that despite having such huge volumes of raw material, we have failed to create a footprint in the international leather market. We sometimes cross the billion dollar mark in leather export and then again, we fall behind. Yet there is a USD 300 to 400 billion leather market globally. In the eighties, our tannery industry was doing better than our readymade garment industry. In this case, it is the government, the entrepreneurs, the tannery owners, the leather producers and the leather goods manufacturers who are all responsible for this situation.

It must be kept in mind that in preparing the leather and manufacturing the leather goods, all this must be done in an environmentally friendly manner. Leather is not processed here in an environment-friendly manner. There are only four leather factories here that are certified by the international quality control Leather Working Group (LWG). That too, they took the initiative on their own accord to be certified. But on a national level, the BSCIC industrial park in Savar is not at all of that standard. As our leather is still not of the internationally accepted environmental-friendly standard, the leather goods manufacturing industries are told not to use this leather.

It is even more unfortunate that every year leather imports to our country are increasing. Yet our own leather is being wasted, buried and disposed. Despite having the raw material, we are importing leather increasingly by the year. Our big leather factories and companies are importing LWG-certified leather. That means until we are LWG certified, we will not be able to enter the global leather market. We are talking about opening up the leather market. If that happens, our hides will be taken to India, Vietnam, Taiwan or China where they will manufacture leather goods and sell as their own brand in the international market.

We have become dependent on exports in the case of many products. Despite so much raw material in the country, we are even becoming import-dependent for leather. This is a matter of concern.

It certainly is a matter of concern. Despite having efficient industries here, the big international brands that have their products manufactured here, tell us to import the leather. In 2020-21, perhaps leather worth USD 111 million was imported. This is increasing by 10 to 12 per cent a year. Import-dependence is being created.

The government and the entrepreneurs both lack in the effort needed to change this situation. The tannery owners in recent times have taken certain initiatives, working with some international agencies to gain LWG certification. This will increase costs in finished leather products in accordance to the international certification. This will require large investment for which our tannery owners and leather manufacturers are not prepared. Unless this investment is made, we will not be able to be LWG certified in order to earn international recognition.

The ETP in our BSCIC industrial park is not of international standards. This too will need investment to bring up the standard.

Another matter is that a large part of Bangladesh's leather market is domestic and our tannery owners still give more importance to this market. So do the producers. The domestic consumers actually are not aware of this environmental standard and so it makes no difference to them. So when a tanner prepares leather for the domestic market and the outside market, they use the same standards. This does not stand up to the global standards. It has become imperative to have a separate type of tannery for exports. This must have international certification and be completely separate from the domestic market. An industrial structure is required for leather to be processed and produced there.

You said that because there is not much demand for leather, the prices are low. But we often here the general people talking about how many thousands of taka it costs to buy a pair of shoes from this company or that company. Yet the qurbani hides are sold for pittance or just thrown away. How do you view that?

You are right. The supply chain -- from the raw material to treating the hide and then manufacturing the goods -- is not fully commercialised here. As I was saying, the rawhide is seen as a charity item, not as an industrial commodity. This hide is captive to the domestic market so it cannot go outside. As a result, people are forced to sell it at low prices. This is a big weakness.

The companies that use this leather are not many in number, around only 8 to 10. Of these, one or two have 60 to 70 per cent of the market share. If that is so, there is always the fear of a monopoly emerging in such a market structure. The leather producers or leather manufacturers take this opportunity to sell their goods to the consumers at high prices. This is possibly what is happening here.

If there was a balanced market structure there, then there would be a good price for raw materials too and the customers would not really object to paying the prices for the goods. With better prices for the hides, everyone in the supply chain would benefit. If this market was not captive but open, then the leather goods would be cheaper even at the consumer level.

We may be providing facilities to uphold the interests of the local industry, but the consumers are not fully benefitting from this. Those collecting the hides or selling the hides are not benefitting either. A few producers at the mid-level are reaping the benefits.

It is heard that the tannery owners, or a syndicate, control the leather market. What is you view on this?

This problem prevails in almost all sectors here. In the bigger sectors we see the big business or industry owners controlling the market. In the leather industry too, there is scope for the tanneries or those manufacturing the goods, to create such a syndicate. Allegations about the existence of a syndicate are not unfounded.

The main reason behind this problem is that this industry has not been able to reach the level of a formalised market structure. The leather or leather goods supply chain remains informal to a greater part. Outside of the registered traders, unregistered or seasonal buyers and sellers also emerge. There is no initiative to bring them under any proper framework. There is a lack of transparency in the transactions. That is why the loans provided by the banks to the leather sector, fall into default. Often, the returns from the business do not even cover the loans. If the sector is to be freed of the syndicate and other problems, there is not alternative to a formal framework.

Everyone, from those collecting the raw material in the market to those producing the treated leather, must be registered. They must be licenced. They will only then be able to carry out transactions. Even seasonal buyers and sellers will have some sort of licence. All transactions will require receipts and all larger transactions much be done through mobile financial service (MFS) or banks so that there is visibility. The banks will be interested in providing loans then.

We have failed to enter such a formal market structure. Yet we are exporting goods or around USD 1 billion. It is such a large export industry, yet its market remains in the informal or traditional framework. In such a system, the products and transactions cannot be traced or tracked. If the outside companies are not assured of the source of our raw materials and production, they will not be interested in doing business with us. So in order to achieve international standards, we must enter a registered and transparent tracking and tracing system and move away in phases from the informal market structure.

A large project was taken up to restructure our tannery industry, a lot of money was spent, but the industry still hasn't become durable. Was there a lack of commitment from the government, the ministry and all involved in the industry, or would you call it their irresponsibility and failure?

Actually all of this is involved there. Firstly, the international standard required for modernising the tannery industry should have been taken into consideration when the project was drawn up and implemented. That was not done. If initiative was taken to set up the tannery industrial estate in Savar based on LWG standards, then from the very outset there would be adequate investment, space for the CEPT, open spaces, green and environment-friendly industries, treatment plants and structures for treating solid waste and such. The industrial village was set up without all these elements and so does not meet the demands. It is nowhere near LWG standards. That is why we could not retain the interest shown by foreign buyers in our leather sector.

The government has liability here. Then again, on a private level, Bangladesh Tanners Association (BTA), Bangladesh Finished Leather, Leather-goods and Footwear Exporters Association (BFLLFEA) and the other concerned organisation should have made the government aware of all these matters. The government certainly didn't reach a full-fledged decision of this project without consulting them. I feel these organisations or associations did not fully cooperate in the matter.

Now, however, I feel BTA is taking initiative to turn around. But there is a lack of adequate interest in investing to take the industry to international standards and to prepare the owners accordingly. The BTA initiative needs to be stronger.

Separate tannery and industrial structures need to be built up for our domestic and export-oriented markets. The government is considering another tannery village in Jamalpur. This should be export oriented. If LWG standard can be set here from the beginning, we may be able to reap benefits.

Assistance should be sought from international certified agencies and brands when taking up such an initiative. Their views and evaluation should be taken. Technical assistance must also be taken from outside. Opportunities must be created for anyone wanting to build up an LWG certified factory on individual initiative. There must be bank loan facilities so they can invest accordingly.

At the same time, anyone wanting to make such a standard factory in the Savar industrial estate too, should be facilitated accordingly. Easy interest loans will attract entrepreneurs. But most importantly, if we want to make leather an industrial commodity in the international market like the readymade garment industry, there is still scope and possibility. It must be understood that this will require big investment and expenditure. If the domestic market remains lurking in the minds of the entrepreneurs and they muddle things up, we will never be able to gain a foothold in the international market.

Thank you

Thank you too