Future growth Prospect of Bangladeshi Tannery Sector

1. Executive Summary
The Government of Bangladesh has identified the leather sector as one with considerable growth and
investment potential ranked fifth in the export earning sector. Currently Bangladesh produces and exports
quality bovine and ovine, caprine (buffalo and cow; sheep and goat) leathers that have a good international
reputation for fine textured skins. However, the entire leather sector meets only 0.5% of the world’s
leather trade worth US$75 billion. There are about 113 tanneries in Bangladesh that produce 180 million
square feet ofhides and skins per year. In addition there are about 30 modern shoe manufacturing plants
engaged in the production of high-quality footwear, with over
2500 smaller footwear manufacturers also present in the sector. There are around 100 small-
to-medium leather goods manufacturers, and a small number of niche larger manufacturers. The sector
directly employs approximately 558,000 people. Most of the tanneries do not have proper effluent plants
and generate 20, 000m3 tannery effluent and 232 tones solid waste per day. Tannery liquid and solid
wastes are a potential pollutant but also have a potential value. Specific technologies to convert wastes
are required. These vary from crude and simple to highly sophisticated and complex.
A proposed new leather park is expected to bring a clear transformation to the leather industry with marked
increase in production, product diversification and new product lines with increased sustainability of the
sector. Sustainable and cleaner production will be a key issue for the development without placing
burdens on the environment.
Environmental impact of Tanneries:
Bangladesh has a long established tanning industry which produces around 2-3% of the world`s leather
from a ready supply of raw materials. The country is therefore an established and attractive location to
source and outsource the manufacture of finished leather products. The leather industry is ideally suited
to Bangladesh with its abundance of labor and natural resources at internationally competitive rates.

2. Environmental impact from Tannery Waste The openly discharged solid and liquid waste from tanneries
causing lot of environmental impacts to the society. Human health impact of pollution depends on the type
of diseases. It has been found that the incidence of illness among the people living at Hazaribagh and
adjoining area is 15% higher than the people living in the neighboring area. More people are suffering
from diarrhea, fever, jaundice, cramp, headache, sinus, lung disease etc. in the tannery based area like
Hazaribagh as the effluents are being discharged openly. Resource use impact is the change in land use,
fisheries etc. Socio- culture dislocation, i.e. loss of homestead land, neighborhood changes in socio-eco
system. Loss of bio-logical resources i.e. bio-diversity or endangered species including effects of flora
and fauna and loss of inhabitants. The effluents released from the tanning industries at Hazaribagh are
huge in quantity. It is unimaginable how much damage the effluents have caused to the environment over
the years. The level of environmental pollution is not acceptable. The inhabitants of the surrounding areas
(approx. 2.0 million) are seriously affected by openly discharged waste water from the tanneries of
Hazaribagh. (Ahmed J.). Henceforth, in the same the central bank, which controls the monetary policy
of Bangladesh has urged all the commercial private banks to ease their loans for relocating tanneries to
Savar from Hazaribagh, in an environment friendly zone.
Structure of tanneries in Bangladesh
Number of
Tanneries
Typical
Annual
Production
Capacity/
Tanner
y
Total Installed
Capacity/
Annum for all
Tanneries
Total Actual
Production/
Annum for
all
Tannerie
s
Share of Actual
Production (%)
7 >5 million sq.ft 40 million sq.ft 30 million sq.ft 17
13 2-5 million sq.ft 60 million sq.ft 52 million sq.ft 29
45 <2 million sq.ft 70 million sq.ft 60 million sq.ft 33
48 <1 million sq.ft 60 million sq.ft 38 million sq.ft 21
Total= 113 230 millon sq.ft 180 million sq.ft 100

3. Livestock in Bangladesh
Bangladesh has a fairly large livestock population to support a strong and growing tanning industry.
The portion ratio is cow hides account for 56% of the production, goat skins for 30% and
buffalo makes up the rest. The current output of leather in Bangladesh is approximately 200 million
square ft annually. Apart from bovine hides, buffalo, goat and sheep; a good quantity of
kangaroo hide are imported from Australia and finished in Bangladesh, shoes are made of this
kangaroo leather for export, mostly to Japan. Some ostrich leather is also imported from Australia for
production of high quality and high priced bags and wallets for re-export to Australia.
Global Segment ofLeather Business:
The global markets for Bangladesh in terms of leather and tanning industry is up roaring, since the
independence of the country in 1971. Lately during 2003, BELA (Bangladesh Environment Lawyers
Association) has requested law suit from the Supreme Court regarding the shifting of leather tannery
industry at Hazaribagh, and locating at a more environment friendly zone. The lawsuit also mentions
about recycling the tons of tannery disposals, (Writ Petition no. 891 of
1994) henceforth, creating a tannery recycling industry at the location of the new leather and tannery
zone, which was later on shifted to Savar area. This has played a positive role, for the foreign investors
to invest in this industry, especially Japan and Italy, to observe the new areas, and work alongside the
existing leather and tannery industry. Whilst Bangladesh is expanding its leather market in Italy, it holds
strong chances of entering the EU (European Union), roughly shifting the countries trade blocs, giving it
a positive role to dominate the leather market in future years.
Technological advancement:
Chrome-tanned leather tends to be softer and more pliable than vegetable-tanned leather, hashigher thermal
stability, is very stable in water, and takes less time to produce than vegetable-tanned leather. Almost all
leather made from lighter-weight cattle hides and from the skin of sheep, lambs, goats, and pigs is chrome
tanned. The first steps of the process (soaking, fleshing, liming/dehairing, deliming, bating, and pickling)

4. and the drying/finishing stepsare essentially the same asin vegetable tanning. However,in chrome tanning,
the additional processes of retanning, dyeing, and fatliquoring are usually performed to produce usable
leathers and a preliminary degreasing step may be necessary when using animal skins, such as sheepskin.
Fatliquoring is the process of introducing oil into the skin before the leather is dried to replace the natural
oils lost in beamhouse and tanyard processes. Fatliquoring is usually performed in a drum using an oil
emulsion at temperatures of about 60E to 66EC (140E to 150EF) for 30 to 40 minutes. After fatliquoring,
the leather is wrung, set out, dried, and finished. In commercial practice, vegetable and chrome tanning
methods are widely used. The vegetable tanning method does not need the prior preparation stage of
pickling and therefore the contributions to pollution load from sulfate salts are lower. Vegetable tannins,
however, are known to be hard to biodegrade (Healy, J.B.,Jr.,and Young, L.Y.),and hence wastes bearing
vegetable tannins degrade slowly. The development of internet, communications system, product
innovations at leather and industry sector has boosted the sector more than expected.
Industry Outlook and Investment Incentives
Bangladesh produces between 2% and 3% of the world’s leather. Most of the livestock base for this
production is domestic, which is estimated as comprising 1.8 % of the world’s cattle stock and 3.7 % of the
goat stock. The hides and skins (average annual output is 15m sq.m.) have a good international reputation.
Foreign direct investment in this sectoralong with the production of tanning chemicals appearsto be highly
rewarding due to this presence of basic raw materials for leather goods including shoes, a large pool of
low cost, trainable labor, and a tariff concession facility to major importing countries under Generalized
System of Preferences (GSP) coverage. Thus Bangladesh is an ideal offshore location for leather and
leather products manufacturing with low cost but high quality.
The government is in the process of setting up a separate leather zone, relocating the existing
industry sites to a well-organized environment. Footwear is more important in terms of value addition.
This is the fast growing sector for leather products.

5. Value Chain analysis:
The leather industry in Bangladesh, already enjoys the low production cost advantage than other countries,
moreover, receives subsidies from many financial organizations. The distribution system, tends to be
cheaper, as they mostly use the local animals and that of the neighboring countries. Due to government
subsidies, it became ease of use for them to cater in this sector than other sectors.
Core competencies:
Core competencies are the combination of pooled knowledge and technical capacities that allow a
business to be competitive in the marketplace. Theoretically, a core competency should allow a company
to expand into new end markets aswell as provide a significant benefit to customers.Some companies have
already started to focus at tanning crocodile skins, snake skins and other forms of animal skins available
for tanning. They are mostly targeting to gain the premium leather market, which deals with specialized
animal skins, like Maxwell Scott and some other Italian firms, who cater the high – end leather customers
around the world. Many tanners firms have focused at serving the local market alongside capturing the
international markets. Like – apex industry, bata, have taken steps to cater in the local market, continuing
to gain more profit, and gains higher market shares. Foreign direct investment in this sector along with the
production of tanning chemicals appears to be highly rewarding due to this presence of basic raw materials
for leather goods including shoes, a large pool of low cost, trainable labor, and a tariff concession facility
to major importing countries under Generalized System of Preferences (GSP) coverage.Thus Bangladesh
is an ideal offshore location for leather and leather products manufacturing with low cost but high quality.
SWOT analysis:
A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evaluate the
strengths, weaknesses, opportunities and threats involved in a project or in a business venture.

6. Strengths:
The leather goods producing enterprises only a few in number (
15-20 units) with product lines relating to travel goods, suitcases,briefcases and fashion accessories,along
with belts, wallets, hand bags, case holders etc. For overseas export. Export of leather goods made of
Ostrich bird leather, is an unique collection amongst many other exciting products made of goatskins,
cow calf, Buff-Calf etc.. Articles made of ostrich bird leather are exported to Australia (ostrich bird leather
is imported from South Africa and Australia). Bangladesh has also entered the field of Leather fashion
garments with items of distinction. The leather goods manufacturing firms use basically finished leather
and lining leather as raw materials and all are collected from local sources.
About 95% of leather and leather products of Bangladesh market is abroad, mostly in the form of
crushed leather, finished leather, leather garments, and footwear. Most leather and leather goods go to
Germany, Italy, France, Netherlands, Spain, Russia, Brazil, Japan, China, Singapore and Taiwan. Value
addition in these exports averages 85% local and 15% foreign. About 100 modern tannery units are now
in operation in the industry. These are located mostly in the Hazaribagh area of Dhaka city. In 1998, the
sector exported 178 million sq. ft of leather and earned $160 million. The country`s share in the world
leather market is 2%. The export of finished products such as shoes, slippers, leather jackets, hand gloves,
bags, purses, wallets and belts also earn a sizeable amount of leather products to penetrate new market
segments.
Weakness:
The industry is now heavily concentrated at Hazaribagh in Dhaka, with three-quarters of the total number
of registered tanneries located here. Besides, a large number of tanneries at the cottage level, estimated at
over 100, are located at Hazaribagh. Such a concentration is likely to offer a number of benefits in the form
of sharing knowledge, raw materials, spare parts by the investors, and also helping a rapid development of
vertical and horizontal integrations of the industry centering on the locality. However, Hazaribagh is a
wrong place for the concentration of an industry like leather manufacturing. Firstly, the area was originally

7. developed as a residential locality and, consequently, its narrow street and limited sewerage facilities are
highly inadequate to meet the needs of a growing Industry like leather manufacturing. Secondly, the
unplanned growth of the industry at Hazaribagh and the limited land area available in the locality has not
made it possible to make any provision for the much needed effluent treatment.
Opportunities:
There is anenormous scope for entrepreneursand investors. The sectoris still catering to the low-end export
market. In order to advance it must move to the next levels. Business friendly policy: The sector needs
business friendly policy by Government to increase the investment. Needs more skilled workers and
managers: Although there are unskilled competitive labor forces,there is shortage of skilled workforces,
managers and entrepreneurs. Limited access to market - Bangladesh has a limited or small share (~0.56%)
in the global business, so there is a tremendous opportunity to grow to capture more market share around
the world. Vietnam can be a benchmark for Bangladesh who imports 70% of raw materials and exports
Shoes and footwear products: USD 6.549b, Bags & leather handbags: USD 1.289billion.
Threats:
Limited access to market information: A deeper, more widely held understanding of market trend in terms
of quality, fashion, leather product prices, competitors, importers and consumers’ preferences, and
anticipated regulations and restrictions needs to be developed in Bangladesh. Poor cooperation between
firms/ stakeholders: strong connections between value chain members for a strong sector position, the
stakeholders should hold their hands together for mutual benefits. Unfortunately this is still not the case.
Low product quality and productivity: Product quality and overall productivity is always a concern for this
sector. The product quality means the reliability and aesthetics of the finished products. It stems from the
quality of basic raw materials including flayed hide/skin and chemicals, the overall workmanship and the
machines/process used in the industry, so the sector still today target mostly the low end product market.
Outdated Machineries - Traditional status quo mind set of the owners; they lack information on appropriate

8. machineries, sources, prices etc. They also lack awareness on incentives for product / productivity
improvements, are using traditional tanning and manufacturing methods and process.
Corporate Social Responsibility:
CSR is a management concept whereby companies integrate social and environmental concerns in their
business operations and interactions with their stakeholders.
The research centers throughout the world have undertaken studies on new tanning processes and have
updated old methods in an attempt to find an alternative to conventional chrome tanning (Gratacos et al.,
1993). Till date there is no effective substitution for chrome tanning system.Chrome tanned leatherspossess
high stability to wet heat and they have shrinkage temperature above 100oC. Considerable research has
shown that the tanning effects of minerals other than chromium (Al, Zr, Ti, or Fe) are enhanced when they
are usedin combination with vegetable tannins, aldehydes, or other organic molecules (Madhan,et al, 2007).
Leathertanned with these combinations had Ts of near100oC and physical-mechanical properties adequate
for variety of application. The vegetable–oxazolidine combination tanning has been adopted to make
different kinds of soft leather (Chandrababu et al.,1995). Oxazolidine has been found to be bio- degradable
(Rahman, 1995). This explicates that oxazolidine is highly potent to be a re tanning agent for vegetable
tanned leather. Treatment of tannery wastewatersis always required. Some streams, such as soaking liquor
(which has high salinity), sulfide-rich lime liquor, and chrome wastewaters should be segregated.
Preliminary screening of wastewaters is required because of the large quantities of solids present. Recovery
of hair from the dehairing and liming process reduces the BOD of the process effluent. Physical-chemical
treatment precipitates metals and removes a large portion of solids, BOD, and COD. Biological treatment
is usually required to reduce the remaining organic loads to acceptable levels.
Conclusion
Developed countries are treating Bangladesh’s leather sector as a secure for investment. However, the
sector has a rather constrained demand structure in the domestic market due to the limited national

9. purchasing power. Nevertheless, industry insiders are expecting a growth in the domestic market in
consideration of the fact that approximately 10% of Bangladesh’s total population (around16 million) is
estimated to have an income level comparable to that of the developed countries. Hence, there appears
to be a large unexplored domestic market for footwear and other leather products for Bangladesh
with an estimated demand for 30 million pairs per year. The footwear sub-sector of Bangladesh earned
revenues in excess of US$250 million in 2010-2011. The European Union (EU) is the biggest destination
for footwear exports with a 60% share,followed by Japan with 30%, and the rest of the world accounting
for 10%. Bangladesh has only a 1% share of the world footwear market. There are about 49,300 tons of
solid waste generated every year from tanneries in Bangladesh. The government should try to facilitate
growth in industries which can use these wastes to make other value added products. A by-product
manufacturing unit (chrome and protein recovery) and energy generation could be useful
options.Bangladeshi leather products will have no access to developed countries, including those
of European Union if the government fails to set up the CETP by June 2016. The industry in
Bangladesh as a whole faces considerable concerns with regard to end-of-life, recycling and re-use of
leather and leather products. To make progress, the Government is keen to relocate tanneries from
Hazaribagh to Savar, this gives the unique opportunity to adopt sustainable practice in a suitable
environment.