No End in Sight for Bangladeshi Leather Industry Struggles

4 September 2019

The lack of a fully functional central effluence treatment plant (CETP) and solid waste management at the Savar Tannery Industrial Estate has proved to be a huge hindrance to Bangladesh’s leather and leather goods exporters.

According to industry insiders, the situation has meant Bangladeshi exporters have had no choice but to sell their goods at rates 30% lower than the global price, due to non-compliance. Leather goods exporters do not get a good price for their products unless the Leather Working Group (LWG) and the global compliance audit organisation has certified that their companies are compliant.

The issue of non-compliance was also partly responsible for the rawhide price crash last Eid-ul-Azha. Tanners couldn’t pay the rawhide merchants before Eid, as they were still sitting on 50% of their old stock on account of low demand from international buyers. Major global brands also stopped buying leather and leather goods from Bangladesh several years ago, because of the country’s environmental pollution. Because of this the government has shifted the tanneries from Hazaribagh to Savar.

However, environmental non-compliance at the new Savar Leather Industrial Park and the recent crisis over the rawhides of sacrificed animals, have caused a drop in the share costs of the leather and leather goods manufacturing companies listed on the country’s stock exchange. According to Dhaka Stock Exchange (DSE) data, share prices of five companies out of the six listed witnessed a decline after Eid-ul-Azha.

Currently, six companies — Apex Footwear, Apex Tannery, Bata Shoe Company (Bangladesh), Fortune Shoes, Legacy Footwear and Samata Leather Complex Ltd — are listed on the Dhaka and Chittagong Stock Exchanges.

According to DSE data, 50% of the listed companies have reported higher earnings per share (EPS) for the first nine months (June-March) of the FY19, compared to the same period of previous year. For the fall in share prices in the leather category, stock market analysts and stakeholders blamed the sorry state of the tannery industry, which drove away the buyers.

“Relocation of tanneries was aimed at making the industry environmentally compliant and to boost the global buyer's trust so that they would buy goods from here. However, the relocation did not translate the government vision into a reality,” Rajib Kumar Das, head of research of UCB Capital Management Limited, said.

Economists have also said that the fall in exports earnings from leather sector, the second largest export earner after the apparel sector, has dented the stock investors’ confidence.



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