Leather and leather goods producers are fearing a decline in exports due to the post-pandemic economic shocks and the Russia-Ukraine war triggering an inflation surge in the United States and Europe.
The Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh wrote to the commerce ministry in October predicting a decrease in leather goods purchase in major European countries.
Besides, with increased production cost and declining export orders, the association leaders said capacity enhancement is essential for them to maintain the competitive edge with global competitors for which they sought their inclusion in the Program to Support Safety Retrofits and Environmental Upgrades (SREUP).
The association said that the purchase of non-essential goods, including leather, is likely to drop by 22% in the UK, 14% in Spain, 12% in Italy, 11% in both France and Germany in the last three months of the year.
Entrepreneurs of this sector want to be part of the SREUP program to easily secure finance for necessary initiatives to achieve global compliance.
Since 2019, the Bangladesh Bank has been implementing the SREUP programme which aims to provide RMG manufacturers with financial and technical assistance for safety reforms, environmental and social upgradation of their factories.
Syed Nasim Manzur, president of the Leather Goods and Footwear Manufacturers' Association, stated in the letter that the initiative of the government is playing a major role in increasing the competitiveness of exporters by making the textile industry environmentally friendly.
"The textile, leather and footwear industries export products to the same export destinations," he said, adding, "We have to export to the same buyers constantly facing the same compliance pressures."
Nasim Mazur, who is also managing director of Apex Footwear Ltd said, "The leather and footwear industry is not included in the quick and long-term funding and easy loan terms (5% interest rate)."
Demanding inclusion in the SREUP program, he said that the leather and footwear industries are facing the same challenges as the RMG industry in the aftermath of the Russia-Ukraine war.
The letter mentioned that the association is already identifying safety concerns in its factories in collaboration with the Leather Sector Business Promotion Council.
However, the manufacturers are not able to inject the additional investment required in infrastructure development in order to achieve these compliances, it added.
"Inclusion of leather goods and footwear industries in the ongoing SREUP program will lead to more factories coming forward to renovate and upgrade factories with loans from the fund," said the association.
Leather & leather products export outlook
According to EPB data, exports of leather and leather products have been steadily increasing since 2010 and in the fiscal year 2017-18 the volume of exports increased to $1.23 billion.
Since then, the export of leather and leather products has been declining for three consecutive years. In FY 2018-19 exports amounted to $1.02 billion while in FY 2019-20, during the coronavirus pandemic, export earnings from this sector slipped to $797.6 million.
However, in FY2020-21, the export increased by 18% compared to the previous fiscal year and stood at $941.7 million. In FY2021-22, export earnings from leather and leather goods hit a record $1.25 billion, which is 32% more than the previous year.
In July-October this year the leather industry saw a 17% growth in exports with goods worth $428.5 million exported against $364.9 million in the same period last fiscal.
The global leather goods market size is anticipated to reach $624.08 billion by 2028, according to a new report by Grand View Research.
In 2020, 30.3% of the global value of exported leather goods was realised by China, making the country the leading exporter for leather goods in the world, according to Statista, a global business data Platform.
Italy and France represented the traditional European tanning industry, with respectively 17.8% and 14.8% of the global export value for this product.
Other Asian countries, such as Vietnam and India, also had a share of the global export value – Vietnam with 6.4% and India with 2.6% of the worldwide export value.