Three days’ sacrifices of animals during Eid provide 600 tanneries with almost 15-20% of their annual demand of hides and skins. Analysts are estimating a fall in animal sacrifices this Eid compared to previous years because of higher prices, rising domestic inflation and unemployment.
The global recession is posing a big question mark over export prospects for all value added ranges of leather products in the second half of this fiscal year.
‘Our buyers of leather garments in Europe are asking for a drastic price slash, booking a much reduced volume of business for next spring in March/April 2009’, said Fawad Ejaz, chairman of the Pakistan Leather Garments Manufacturers and Exporters Association.
Traditionally, winter is the real business opportunity for leather garment exporters when stores in Europe and US give their sample orders almost a year in advance. For winter 2009, these have been significantly reduced, indicating that export prospects for 2009-10 are not bright.
Leather product exports showed a normal trend during July/October 2008. The overall export of leather and leather products dropped 0.44% to $357.35 million as against $358.92 million last year. However, what is of more concern is the 14% drop in the same period for exports of finished leather to $112.68 million as against $131.60 million the previous year.
A drop in demand for leather suggests fall in demand of leather products in the world market.
The leather garment manufacturers are being asked to lower the prices of their products. Importers are placing orders for lower volumes of business. ‘We are servicing winter orders given in July and August’, he said. But the deepening of recession in Europe and US since September has started to hit suppliers of textiles and leather products in Asia.
China, the biggest supplier of leather products to the US and Europe is battling the situation by offering its exporters rebate of 17% to help them stay in the market and enable them to secure a bit more space by squeezing other countries out. ‘Our repeated pleas to give a 6% research and development subsidy on exports remained un-responded till today’, he said. ‘Once pushed out for any reason, it is next to impossible to regain that position again in the market’, he warned.
The federal commerce secretary, Syed Asif Shah also sees hard days ahead for exporters as recession in the western markets is eroding purchasing powers of consumers. Officials in finance and commerce ministries in Islamabad and Karachi, however, rule out any financial assistance for the exporters as the government is facing acute cash crunch.
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As against more than Rs20 billion annual subsidy given to textile exporters in 2006-07, the demand of the leather exporters is only Rs1.6 billion a year’, Fawad said.
The leather industry leaders are planning to meet the government at various levels - from federal minister to secretary and officials of the Trade Development Authority of Pakistan (TDAP)- to brief them about their pressing problems.
Only three years ago, leather and leather products joined the billion dollars export club. These fetched $1.2 billion export in 2007-08 up almost 20% over $1 billion in 2006-07. Encouraged by this trend, the planners were expecting $1.5 billion export of leather and leather products in 2008-09.
Even though leather exports are being hit by global recession, the footwear segment had offered some optimism. It was the only product given the 6% R&D subsidy on exports, though this came quite late. This subsidy has been suspended since June 25 and shoemakers are seeking its restoration.
Footwear exports in the first four months are up by more than 19%. It is reported to have made some inroads in European markets but without any presence in the US where annual demand for shoes is more than $10 billion. China controls almost 50% of the US market followed by Brazil which is said to be sharing barely 7%.
‘Supply orders from the US are very big and at much more competitive rates’, said Nasir Anwar Sheikh, the recently elected chairman of Pakistan Shoe Manufacturers Association (PSMA), Lahore. He said the shoe industry is gradually coming of age but still does not have the capacity to service huge orders from the US.
While making inroads in the export market, the local shoe market is catering to the domestic market as well. The two big shoe units - Bata and Service - control the lion’s share of Rs50-Rs60 billion market while the upcoming units are also emerging as tough competitors. A recent development in the local shoe industry is the formation of almost two dozen independent marketing companies that have come in a long way with brand names.
Source: Daily Dawn
