Dhaka, Thursday, 30 June 2022

Leather sector needs more support

Leather sector needs more support

Apparel Report: The debate over how long the government should be dishing out incentives, often in cash, to export-oriented sectors, is still on. Despite this, it is indisputable that the country’s manufacturing base still stays in its infancy, even after four and a half decades of its independence. As for the leather sector, it is otherwise doing fine.

But it still needs more cushioning to live up to its high prospects, particularly for the sake of value addition and diversification of products and markets as well as exploration of its huge untapped potential. In this context, the government’s reported move to continue with the existing cash incentive to the leather goods and footwear sector for the next five years cannot be dismissed as unwarranted. Rather, it is a welcome move towards boosting exports as well as attracting foreign direct investment (FDI).
The government offered 15 per cent cash incentive against export of leather products in the current fiscal. In case of crust and finished leather, it is 10 per cent.
Undeniably, Bangladesh’s leather sector is yet to flourish as it should have by now given some inherent advantages — not just cheap labour. The capital- and skill-intensive nature of manufacturing quality leather products is indeed a major barrier. This has restricted the expansion of the industry beyond a handful of well reputed firms capable of accessing world market, even the high-end segment of choosy European markets.
The overall situation, however, is not bad. Exports have been growing, that too in the competitive European markets, steadily. It is thus obvious that the growth would surely have been more satisfying, had there been more well-equipped firms capable of meeting buyers’ requirements in terms of compliance and quality assurance.
Over the past years, export of leather and leather goods, according to Export Promotion Bureau (EPB) data, has been hovering around little over $1.0 billion, though with progressive year-on-year increase. In the last fiscal year (FY), 2016-17, export value stood at $1.23, a slight increase from $1.16 billion in FY’16 and $1.13 billion and $1.12 billion in FY ‘14 and ‘13 respectably.
One must not term it a stagnating scene because sustaining the growth is the all important matter in the fiercely competitive and recession-hit business environment.
There is therefore a definite need to apply enough thrust on encouraging entrepreneurs in the leather goods sector. The crucial need for skill upgrading also calls for government’s support. For the sector to thrive up to its potential, highly skilled workforce, as is generally believed, is a key requirement for up-end products.
In this regard, the government, in consultation with the stakeholders, can work out a methodology to provide necessary support to exporters engaged in up-end manufacturing. Besides, with the leather estate established in Savar — though lacking in adequate facilities until now — should be the focal point to put in place required infrastructure for various leather goods manufacturing enterprises. There has to be a well coordinated initiative to ensure that the potential of the sector gets realised.