The leather and leather goods industry in Bangladesh needs equalized, innovative and implementable long-term policy support to attain its $5 billion export target by 2021, stakeholders said at a workshop on Sunday.
They also called for the government to reduce the cost of doing business by removing trade barriers and invest in product and market diversification.
The stakeholder consultation workshop titled “Leather and Leather Goods Exports from Bangladesh: Performance, Prospects, and Policy Priorities” was organized by Bangladesh Enterprise Institute (BEI) at Lakeshore Hotel, Dhaka.
“We have an ambitious target of exporting up to $60 billion annually by 2021. We are hoping that leather and leather goods sector will contribute $5 billion to this,” Farooq Sobhan, president and CEO of BEI, said in his address.
Bangladesh earned $1.23 billion in the last fiscal from exports in this industry, he said.
“We cannot ignore the fact that the global export market is undergoing transformations. We have to keep in mind the US trade policy, and take into account what is happening around the world because these things affect our exports directly and indirectly,” he said.
On the other hand, as Bangladesh graduates to a middle-income country from an LDC, it will lose certain trade facilities that have been benefiting the export sector, he added.
Policy and strategy are required to reach the target, he said.
“We are left with four fiscal years to achieve our export targets. The formulation of a new Export Policy (2018-2021) should take the opportunity for providing concrete inputs,” he added.
He emphasized that before Bangladesh phases out of LDC, the time that Bangladesh has until 2027 has to be effectively utilized.
“Policy support needs to be innovative, strengthened, re-energized and, where possible, its scope and coverage has to be deepened,” Farooq added.
Nasim Manzur, the managing director of Apex Footwear Limited, said a long-term policy is needed to draw in foreign and local investment.
Investors cannot be encouraged to come to an economy where businesses do not know what policy changes will be in effect when the budget is announced next year, he said.
“We need policy changes because our competitors are offering more incentives and policy support to capture the market,” he said.
“Incentives for all exporters – why two rules?
“Equalize incentives and policy support for all export-oriented sectors to tap the vast opportunities,” the business leader, who is a former president of MCCI and LFMEAB, said.
A study presented at the workshop pointed out infrastructural bottlenecks as one of the major problems affecting the overall export industry including the leather sector.
In the World Bank Doing Business surveys, Bangladesh typically is outperformed by most others in inland transportation, port infrastructure, trade logistics – affecting export competitiveness, it said.
“Bangladesh’s leather export is still highly concentrated in crust and finished leather,” Dr Mohammad Abdur Razzaque, project leader for BEI, said while presenting the study.
In 2015, the share of crust and finished leather was 28% in all leather and leather goods export. The industry should shift towards exporting more finished leather products than concentrating on exporting crust and finished leathers, he added.
The study recommended reducing the cost and lead time to exports by establishing more off-dock facilities like private container freight stations (CFS) or inland container depots (ICDs), expanding export markets and export products by strengthening all export support measures. Acute skilled-manpower crisis is a severe constraint for the sector, specifically at the technical and upper-end managerial positions. The study recommended relaxing the hiring rule of the foreign experts.
Jute and jute products were the main export of Bangladesh, and then that got replaced by ready-made garments. So the question is what will RMG be replaced by? Bangladesh has comparative advantage in leather, but still we have not gotten its benefits. Tannery relocation has also been a big issue for the sector. Sustainability and compliance issues are the main reason behind the slow progress of the industry.
Abu Yusuf, chairman, Department of Development Studies, Dhaka University
Bangladesh is suffering because of its inflated lead time. Vietnam is doing better because most of their tanneries are a result of FDI, and not local entrepreneurship. Bangladesh earns money through selling labour, but we have very little design and innovation capability. The problem is that all our policies are knee-jerk reactions to a particular problem. Policies should be tailored for long-term sustainability. Only Bangladesh charges tax on technical-know-how, which should stop.
Nasim Manzur, MD, Apex Footwear Limited
Efficiency of the Chittagong Port is dropping day by day. Shipping should not take more than 4 weeks, but it takes double that. The government should allow ports to be managed by international port operators. Ports are businesses, they should not be under a ministry. Turning the Matarbari port into a deep sea port is a good decision that will help reduce lead time.
Md Saiful Islam, president, Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh
We need a policy for technical training to create experts. We brought experts from China and the Philippines and them for transforming knowledge. That is why Foreign Direct Investment (FDI) works quite well as it bring lots of technical experts and knowledgeable mangers, which helps sharing knowledge with Bangladeshi people. Designs and innovation should be the focus of training, as that will define the quality of products.
Fayaz Taher, MD, Fortuna Footwear and Leather