LEATHER: Controversial Raw-Material in Fashion World

Term-Paper on Leather: Controversial Raw-Material in Fashion World

Submitted to:Mr. Md. Gazi Salah Uddin Senior Lecturer & Assistant Proctor Department of Business Administration East West University

Submitted by:Students Name Nusrat Binta Nasir Sabrina Zaman Saima Nusrat Shorna Samir Ahmed Md. Shafiar Rahman Rana Students ID 2009-1-10-272 2009-1-10-054 2009-1-10-055 2009-1-10-051 2008-3-10-038

Section: 03 Submission Date: 06/04/2011

Letter of Transmittal
Mr. Md. Gazi Salah Uddin Senior Lecturer & Assistant Proctor Department of Business Administration East West University

Subject: Letter of Transmittal.

Dear Sir, Here is the report that you have assigned to us a partial requirement of the ITB301 course. We have thoroughly enjoyed the work. Thank you very much for assigning this important job to us.

Yours sincerely,

Nusrat Binta Nasir Sabrina Zaman Saima Nusrat Shorna Samir Ahmed Md. Shafiar Rahman Rana

ID: 2009-1-10-272 ID: 2009-1-10-054 ID: 2009-1-10-055 ID: 2009-1-10-051 ID: 2008-3-10-038

............................... ............................... ............................... ............................... ................................

Acknowledgement:

We express our heartfelt thanks to Mr. Md. Gazi Salah Uddin from whom we have received instructions and advice for making a report on this subject. We will pay regards to him for his kindest co-operation to prepare the report.

Executive Summary

Leather Industry developed in Bangladesh on a large-scale basis from the 1970s. It is also known as Tannery Industry. About 95% of leather and leather products of Bangladesh are exported abroad, mostly in the form of crushed leather, finished leather, leather garments, and footwear. The first leather objects were primarily functional, but people soon learned the decorative potential of the material. The timeless appeal of leather lies in its luxurious texture, warm color, wholesome aroma, and exceptional durability. The world's love affair with fine leather continues to be influenced as much by its appeal as a status symbol as by its utilitarian value. Bangladesh Tannery industry is currently located in Hazarybug area of Dhaka city, Bangladesh. The labor-intensive leather industry is well suited to Bangladesh having cheap and abundant labor. There are many entrepreneurs who come in the leather industry and invest their money. The entrepreneurs also get governments financial help and also different loan facilities from local banks. Bangladesh Leather Industry has all kind of infrastructural facilities like: Electricity, gas, water, road, telecom, e-mail etc. It has factory buildings available on rental basis and other business support services The rise in demand for leather from the local footwear manufactures might be around 20 per cent in recent period ending sluggishness in the local market. Bangladesh procures around 200 million square meters of leather per annum, of them the country's 52 shoe manufacturers consume around 60 million meters a year. The related and supporting industries of leather industries in Bangladesh are mainly leather garments industry, finished leather goods; such as leather bags, wallets, belts etc, and leather footwear industry. Bangladesh mainly export leather as raw material. Bangladesh mainly process the leather as raw material and then export it. So the tanning industries have the most contribution in the leather industry of Bangladesh. Leather footwear gained in importance in the overall manufacturing sector of Bangladesh during this period raising its share in manufacturing value added. Beside the two main industries of leather in Bangladesh there are some other products which have much contribution in the leather industry. These products are mainly leather handbags, carry bags, wallets, purses, belts, cases etc.

The strategy of Bangladesh leather industry is to make quality product, making our domestic market superior in the world market and exporting finished good to other countries to have good will of our country. There are more total 214 in Bangladesh and their main target is to lead in the domestic as well as world market. For this they are more focused on trade and development and also to export their products. The countrys tanneries and leather and leather goods makers are putting on warpaint to battle for more orders in the international markets. An analysis of the EPB data showed that the countrys leather product export earnings were forging ahead due to growing international demand for Bangladeshi leather products, mainly for quality and cheaper prices. But in terms of export earnings leather products lag far behind finished leather. The first tannery in Bangladesh territory was set up at Narayanganj by RP Saha. Some reputed markets from where leather are mainly processed of Bangladesh are Dhaka Leather, Apex Tannery, Lexco, Karim Leather, Samata Tannery and Bay Tannery. Bangladesh is blessed with the worlds best quality leather of cow and goat. With this abundant supply of raw material they have been able to attract customers and create export markets for footwear and leather goods to developed countries. The exporters of leather mainly export the raw leather from Bangladesh. Leather products are also exported by them to some extent. Among them leather footwear, garments and other leather products such as bags, wallets, belts, purses etc are important. Government of Bangladesh supports leather industry to make it more successful source of export earnings to our economy.The standard and quality of leather is very high and it is suitable for international market. The price is also less than other country. During the time of EID-ULAZHA the production of leather increases very high. On that time the supply of leather of also increases. All the export quality leather products are exported through waterway shipment so the packaging of those products is very important. It may be raw materials or may be leather goods but they are packaged too sensitively.

The government of Bangladesh provides a support to the leather industry through various steps, including monitoring the export market, evaluating the performance of the sector by a permanent parliamentary committee, and liberal bank credit.

Leather goods producers in Bangladesh tend to be associated only with manufacturing and exporting. They do not have much control over downstream operations. Leather footwear sector has two categories of exporters, those with bonded warehouses and those with no bonded warehouses. Leather production is based on the use of indigenous cowhides and goatskins. Two opportunities for increasing export value of the leather industry are: a) Increasing value addition of the exported products through exporting only finished leather and leather products; and B) importing raw hides or skins if necessary, and converting these to leather and leather products to utilize the production capacity as much as possible. we can realize that if we produce more finished leather goods we can generate our export.

Table of Contents
Introduction: ................................................................................................................................................. 9 Factor Endowments: ..................................................................................................................................... 9 Land and Labor:........................................................................................................................................ 9 Capital: .................................................................................................................................................... 10 Raw Materials: ......................................................................................................................................... 10 Technology: ............................................................................................................................................. 10 Infrastructure: .......................................................................................................................................... 11 Local Demand Condition: ............................................................................................................................ 11 Related and supporting industries: ............................................................................................................. 12 Leather tanning:....................................................................................................................................... 13 Leather footwear:..................................................................................................................................... 13 Other leather product: ............................................................................................................................. 14 Strategy and Structure: ............................................................................................................................... 14 Rivalry: ........................................................................................................................................................ 15 Foreign Demand Condition: ........................................................................................................................ 16 Location of The Market:.............................................................................................................................. 16 Market Access Issues: ................................................................................................................................. 17 Major Exporters in the World Market: ....................................................................................................... 18 Strengths of The Present Exporters: ........................................................................................................... 19 Possibility of matching standard and price in international market: ......................................................... 20 Mode of Transportation: ............................................................................................................................ 20 Packaging: ................................................................................................................................................... 21 Preferential treatment in foreign market and local subsidy: ..................................................................... 21 Value Addition: ........................................................................................................................................... 23 Conclusion: .................................................................................................................................................. 29 Reference: ................................................................................................................................................... 30

LEATHER: Controversial Raw-Material in Fashion World

Introduction:
LEATHER is one of the most forthcoming industries in Bangladesh for trade and development. It has enough scope for both vertical and horizontal expansion in terms of economic return and social benefits. Leather Industry developed in Bangladesh on a large-scale basis from the 1970s. It is also known as Tannery Industry. About 95% of leather and leather products of Bangladesh are exported abroad, mostly in the form of crushed leather, finished leather, leather garments, and footwear. (Bangladesh Strategic & Development Forum , Post # 1). Leather is a material created through the tanning of hides, pelts and skins of animals, primarily cows. Leather was a very important clothing material of todays fashion world. Leatherworking is one of the oldest crafts known to humankind. The first leather objects were primarily functional, but people soon learned the decorative potential of the material. The timeless appeal of leather lies in its luxurious texture, warm color, wholesome aroma, and exceptional durability. The world's love affair with fine leather continues to be influenced as much by its appeal as a status symbol as by its utilitarian value. Bangladesh is becoming an alternative and profitable supplier for the importing countries for her leather products which are at the same time cheap and world class in quality. The main importing countries of general Leather goods in order of importance are UK, USA, Germany and Italy. (Research Proposal Handicrafts).

Factor Endowments:
Land and Labor:
Bangladesh Tannery industry is currently located in Hazarybug area of Dhaka city, Bangladesh. The labor-intensive leather industry is well suited to Bangladesh having cheap and abundant labor. A large pool of low cost but trainable labor force

together work in tannery. They are working day and night and making leather products, by exporting these products our country economy is taking a stable position in the world market.

Capital:
There are many entrepreneurs who come in the leather industry and invest their money. Leather making is capital-intensive, with labor costs in the region of 10 percent to 15 percent. (Zahur, Wednesday,2009,November 18). The entrepreneurs also get governments financial help and also different loan facilities from local banks. The leather industry with over Taka 1,600 crore annual export earnings is the countrys third biggest foreign exchange earner after the RMG and the frozen food sectors. Many investors would invest in the leather industry of Bangladesh if bank loans with low interest rate, uninterrupted supply of gas and electricity and good institutions to train workers were ensured, said an official of Bangladesh Finished Leather and Leather goods and Footwear Exporters Association (BFLLFEA).

Raw Materials:
The major raw materials are cowhides and goatskins. Though there has been some appreciable improvement in animal husbandry and butcher's techniques in Bangladesh in recent times it may take quite some time to reach the international standard. On the other hand, Bangladesh goatskins enjoy an excellent reputation for quality. The goatskins are usually pulled from the animal rather than flayed, thereby avoiding damage to the flesh side and the grain side is usually free from defects. (Zahur, Wednesday, 2004, January 21).

Technology:
Despite having a leather technology college, we do not get sufficient numbers of skilled workers for the sector due to the shortage of teachers. Bangladesh Leather

industry has lack of R & D facilities for this the environment is getting effected day by day. The tanning process in Hazarybug involves chrome tanning, vegetable tanning and combined chrome and vegetable tanning. Chrome tanning is used for light leather, and vegetable tanning for heavy leather for example: shoe soles, handbags, straps and belts. (S.M.I.Huq, Page no. 22,23). Various chemicals are used during soaking, tanning and post-tanning processes of hides and skins, some are made and some are imported from other countries. One of the market leaders for leather made shoes is BATA.

Infrastructure:
Bangladesh Leather Industry has all kind of infrastructural facilities like: Electricity, gas, water, road, telecom, e-mail etc. It has factory buildings available on rental basis and other business support services like: Courier (DHL, Fed EX), Banks, Police station, post office, shipping agent etc. And also administrative support services like: shopping center, green area etc.

Local Demand Condition:

The demand for finished leather has surged in the domestic market in recent Years. The rise in demand for leather from the local footwear manufactures might be around 20 per cent in recent period ending sluggishness in the local market. Industry people said relocation of a number of shoe factories in Bangladesh by China, Vietnam and Taiwan has also caused the sudden surge in demand for local leather. Withdrawal of quota by European Union on Vietnam in 2008 and imposition of anti-dumping duty on China encouraged many leading shoe manufacturers to shift their plants to Bangladesh.

Taiwanese shoe maker Pau-Chen has already built a plant in the Chittagong Export Processing Zone and Youngone Corporation is planning to set up a plant at a cost of US$ 110 million there. This plant is supposed to be one of the biggest shoe plants in the world.

However, local footwear manufacturers alleged that they had been facing shortage of quality leather in the domestic market. Bangladesh procures around 200 million square meters of leather per annum, of them the country's 52 shoe manufacturers consume around 60 million meters a year.

Bangladesh Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh said the local shoe producers have consumed more than 75 million square feet over the past few years. However, local shoe manufacturers earned $169.77 million during July-May period of the last fiscal (2008). This is a 16.50 per cent higher than that of the previous financial year.

Export of leather dropped by 37.51 per cent to $163.51 million during the first eleven months of the just ended fiscal year (Haroon, July 25, 2009).

Related and supporting industries:

Leather Industry developed in Bangladesh on a large-scale basis from the 1970s. The related and supporting industries of leather industries in Bangladesh are mainly leather garments industry, finished leather goods; such as leather bags, wallets, belts etc, and leather footwear industry. There are three broad components of the leather industry (i) (ii) (iii) Leather tanning (BSIC Code 1911) Leather footwear (BSIC Code 1921) and Other leather products such as handbags, carry bags, wallets, cases etc (BSIC Code 1912). In 2001-02, leather footwear contributed 66% of total value addition in leather industry (with 10 or more workers) followed by leather tanning (31 %), and other leather products (3%). Leather footwear accounted for 28% of export earnings from leather and leather products in 2007-08, while the share of leather and other leather products were 68% and 4% respectively. Thus

notwithstanding its small size, leather industry in Bangladesh seems to have undergone significant transformation during the past two decades from a low value addition tanning activity to a producer of leather footwear and leather goods along with high value added crust and finished leather.

Leather tanning:
Leather tanning contributed 31% of total value addition in leather industry. Bangladesh mainly export leather as raw material. Bangladesh mainly process the leather as raw material and then export it. So the tanning industries have the most contribution in the leather industry of Bangladesh. At present, there are about 170 tannery units in Bangladesh and they use locally available raw hides and skins. Of them 114 are large and medium units (by local standards) and are registered with the Directorate of Industries. Others are mostly of small and cottage type and are not on the register of the government. About 150 tannery units are located at Hazaribag of Dhaka in only 50 acres of land popularly known as tannery estate. According to the records of the Bangladesh Tanners Association, about 3,000 workers are employed in the tanning industry. Besides, there are about 100 qualified technologists including foreign nationals who are working in different tanneries. Total capital invested in the tannery industry is estimated at Tk 2.5 billion, of which government/bank finance is about Tk 1.2 billion. About 1,500 persons are involved in the process of collecting raw hides and skins and making them available at tannery units. About 100 organizations import chemicals for use in tannery industry.

Leather footwear:
Leather footwear contributed 66% of total value addition in leather industry. Between 1991-92 and 2001-02, value addition in leather and leather goods industry having 10 or more workers increased at an annual compound rate of 8.5%. During the same period, value addition in leather footwear industry in the

same size group increased at an annual rate of 15.4% raising the share of leather footwear in leather and leather goods output from 35.7% in 1991-92 to 66% in 2001-02. In fact, leather footwear gained in importance in the overall manufacturing sector of Bangladesh during this period raising its share in manufacturing value added (10 or more workers) from 1.4% in 1991-92 to 2% in 2001-02. Growth of leather footwear industry also contributed to growth of manufacturing employment. Thus, in the 10 or more workers size group employment in leather footwear experienced a yearly compound growth of nearly 6.6% during 1991-92 to 2001-02 (Leather Footwear Industry in Dhaka: A Case Study; Nazneen Ahmed, Zaid Bakht, June 2010)

Other leather product:

Beside the two main industries of leather in Bangladesh there are some other products which have much contribution in the leather industry. These products are mainly leather handbags, carry bags, wallets, purses, belts, cases etc. These products are used both locally and internationally. As leather products are luxurious items Bangladesh mainly export these leather items. These products contribute 3% of total value addition is leather industry. Leather garments products such as leather jackets, hand gloves etc are also manufactured and exported from Bangladesh.

Strategy and Structure:

The strategy of Bangladesh leather industry is to make quality product, making our domestic market superior in the world market and exporting finished good to other countries to have good will of our country. At present leather sector accounts for 3-4 per cent of total export earnings. Of the total 214 tanneries in the country the majority are wet blue producers. Hardly 45 per cent of the total hides and skins are now processed into finished leather -- 18 per cent low grade for local consumption and 27 per cent for export either in the form of finished leather or leather products. Only a few tanneries are capable of producing export quality finished leather for export. There are about 15 export oriented shoe manufacturing units located mostly in and

around Dhaka city. There are more than 2000 shoe making units supplying the domestic market. Leather and leather products have the potential to make a major contribution to export earnings and to the economic development of the country. (Zahur, Wednesday, 2004, January 21).

Rivalry:
There are more total 214 in Bangladesh and their main target is to lead in the domestic as well as world market. For this they are more focused on trade and development and also to export their products. There are many exporters: Dhaka Hide & Skin Limited, APEX, Creative Leather Craft, Alliance Trading, Bengal Leather Complex Limited etc. Dhaka Hide & Skin Limited is one of the leading modern tanneries for finished leather in Bangladesh. The vision of the company is to contribute to the economy through more value addition to the products and proper utilization of human resources. Dhaka Hide & Skin has earned worldwide reputation for its consistent endeavor to produce quality products. Since inception the company is famous for its integrity, sincerity and commitment to serve the valued customers. In recognition of its worldwide reputation and business achievements the company was awarded 'National Export Trophy' several times. The Dhaka Hide & Skin Limited is specialized for high quality finished leather for shoe upper, leather goods and garments. The daily production capacity of the company is 50,000sft of cow and buffalo crust leather and 20,000sft finished leather. Major export market of the company are mainly Italy, China, Hong Kong, Brazil, Spain, France, UK, Holland, Australia, Portugal, South Africa, Taiwan, Thailand, Japan, Vietnam, Singapore, Turkey, Uruguay, Korea, USA. (Export-Incentive Needs to be offered to Finished Leather, Post # 5, 2004, April 4). In spite of local competitors Bangladesh has foreign competitors also. The major foreign competitors in leather industry are: Italy, UK, USA, Germany, Pakistan, India. Italy is famous for its leather soles.

Foreign Demand Condition:

The countrys tanneries and leather and leather goods makers are putting on warpaint to battle for more orders in the international markets. The latest data published on the website of Export Promotion Bureau (EPB) shows that the countrys leather export earnings rose 29.94 per cent to US $149.46 million, in the last seven months of the fiscal 2010-11, as against $115.02 million in the corresponding period of the previous year. The EPBs data revealed that leather goods exports, during the period between July 2010 and January 2011, were to the tune of $149.46 million, which is 8.46 per cent lower than the target of $163.28 million. An analysis of the EPB data showed that the countrys leather product export earnings were forging ahead due to growing international demand for Bangladeshi leather products, mainly for quality and cheaper prices. But in terms of export earnings leather products lag far behind finished leather. According to the statistical data of EPB, the country earned $31.40 million through exports of leather products during the July 2010-January 2011 period; the earning was 62.11 per more than the targeted figure of $19.37 million. During the last seven months of the current fiscal, exporters of leather products registered 145.70 per cent earnings growth over that in the corresponding period of the previous year (Hossain, February 19, 2011).

Location of The Market:

The first tannery in Bangladesh territory was set up at Narayanganj by RP Saha. Some reputed markets from where leather are mainly processed of Bangladesh are Dhaka Leather, Apex Tannery, Lexco, Karim Leather, Samata Tannery and Bay Tannery. There is also locational concentration of leather footwear industry in Bangladesh. Nearly 90% of all leather footwear making units is located in and around Dhaka city with some leather footwear making units existing in Chittagong and Khulna city and in Bhairab of Kishoreganj district. Within Dhaka

city, there is a concentration of small leather footwear making units (having 10-49 workers) in two areas known as Siddique Bazaar and Bongshal where nearly half of these small units are located. Others areas of concentration of small and medium leather footwear making units in and around Dhaka city include 3 Lalbag, Nazirabazar, Sitpatli, Bangladuar, Alu Bazar, Dakkhin Moishundi, Pagla and Nawabpur. (Leather Footwear Industry in Dhaka: A Case Study; Nazneen Ahmed, Zaid Bakht, June 2010). About 95% of leather and leather products of Bangladesh are marketed abroad. Most leather and leather goods go to Germany, Italy, France, Netherlands, Spain, Russia, Brazil, Japan, China, Singapore and Taiwan.

Market Access Issues:

The term Market Access in trade negotiations refers to the set of tariff and Non-tariff barriers (NTBs) that can be used to restrict the flow of goods and services from one country to another. The vital issue of Market Access could be of four types of barriers: Government participation in trade and restrictive practices, customs and administrative entry procedures. Technical Barriers to Trade. Specific Limitations. Import Charges.

Among the Government participation in trade and restrictive practices, customs and administrative entry procedures; customs valuation, formalities and the rules of origin are found to be the most significant issues towards market access for the leather and leather goods industry. Among the Technical Barriers to Trade; technical regulations, standards and certification arrangement problems are the major problem for the industry. Of the Specific Limitation barriers; labeling rules, packaging and marking requirements are the major problems towards market access.

 The in-depth interview results show that the leather industry has been facing market access barriers of the four types listed before. Of the Type I barriers; customs and administrative Shipping related problems (known as barriers related to formalities) had been identified as significant issue regarding market access. Lack of adequate knowledge and appropriate training regarding use of shipping marks and putting hazardous materials shipping labels creates misunderstanding with the respective authorities of the importing countries which hampers smooth market access drastically and sometimes rejection of consignments. Another major problem is regarding inspection certification (known as barriers related to formalities). The most important impediment is in terms of the environmental friendly chemical usage (e.g. preservative chemical) certification (known as barrier related to certification arrangement). According to one of the prominent leather industry operators of Bangladesh, the leather product has to be AZO free certified on health grounds due to its risk of cancer hazard (strictly prohibited in Germany; one of the major importers in EU). (Dr. A.K. Enamul HAQUE , Azreen KARIM, Wahid ABDALLAH; Market Access Issues: EU-Bangladesh Trade Regime A Case Study on Market Access - Myths and Realities)

Major Exporters in the World Market:

Bangladesh is blessed with the worlds best quality leather of cow and goat. With this abundant supply of raw material they have been able to attract customers and create export markets for footwear and leather goods to developed countries, especially Japan in Asia, all European countries and others including North America. EU and Japan have been the traditional market for Bangladeshi footwear industry, but huge demands are coming recently from USA, which is quite a new market destination for Bangladeshi footwear exporters (Islam, March 9, 2011). Apex-Adelchi Footwear, the countrys largest shoe-exporting factory. Fortuna Shoes Ltd, Rakin Trading Corporation, Duce Leather, Bexim Craft, Advance Industrial Management Co. Ltd.,

M/s. People's Fashion's Group, Rafiq Leather Export, Glorina Leather export Company, Poyran Leather Complex, Imex International, Lia Leather Corporation, Beta Bangladesh Ltd., Westyle Bd., V. L. Enterprise, Gulfeshan Enterprise, Fashion Mode L.l.c, Baye of Fashion House, Mikon Trading, Tex Way Export, All Right Leather Group are the major leather and leather goods manufacturers and exporters of Bangladesh. They manufacture finished leathers, leather bags, belt, shoes, clothes etc. and export them in various countries of the world.

Strengths of The Present Exporters:

The exporters of leather mainly export the raw leather from Bangladesh. Leather products are also exported by them to some extent. Among them leather footwear, garments and other leather products such as bags, wallets, belts, purses etc are important. The current exporters export these leather items to the foreign countries. As leather products are expensive these kinds of product are used in abroad rather than locally. Bangladeshi exporters have some advantages or strengths regarding exporting leather to abroad. First of all the raw materials used in producing leather is available in our country. As the country is endowed with luxurious vegetation encouraging a large livestock population. The quality of the raw hide and skin is relatively good, as barbed wire fencing that damage the skins of animals is not used in the natural farms and fields. About 40% of the supply of hide and skin comes from animals slaughtered during the annual Muslim festival of Eid-ul-Azha. In addition to daily consumption of meat, festivals, Muslim weddings, and other celebrations yield a substantial supply of hide and skin. Secondly the labor cost is very efficient in Bangladesh in producing raw leather as well as finished leather products. The manufacturers can produce leather apparently in low price as compare to others. Which is a strength for the exporters of leather goods. Overall government of Bangladesh supports leather industry to make it more successful source of export earnings to our economy. This support from the government help the present exporters to export comparatively easily to the foreign market.

Possibility of matching standard and price in international market:

Bangladesh is a high quality leather producing country. Bangladesh is producing huge amount of leather in every year. The standard and quality of leather is very high and it is suitable for international market. The price is also less than other country. During the time of EID-ULAZHA the production of leather increases very high. On that time the supply of leather of also increases. The country is endowed with luxurious vegetation encouraging a large livestock population. The quality of the raw hide and skin is relatively good, as barbed wire fencing that damage the skins of animals is not used in the natural farms and fields. Black goatskin of kushtia is particularly noted for its finegrain structure and tensile strength. The tradition of humane care of domestic animals also contributes significantly to keeping the leather quality high. Many countries import leather from Bangladesh. ASTM's leather standards are instrumental in the determination, testing, and evaluation of the various physical and chemical properties of different forms of leather. These standards help users and producers of leather goods all over the world in assessing their materials for good quality and workmanship towards satisfactory use. The price Bangladesh is offering crust and finished leather to international market is US $ 0.95-2.10. India is offering finished leather price US $ 1.50-2.30. Pakistan is offering price of finished leather US $ 1.80-2.00. China is offering price of finished leather US $ .80-1.60. Bangladesh has many advantages to produce leather and it has a big international market.

Mode of Transportation:
The only way to transport leather and leather goods in the world market is ship. Sea way is mainly used to export finished leather and leather goods from Bangladesh to USA, EU and Japan. So, shipping is the only way to transport leather. Shipping is a discipline in and of itself. When it comes to leather goods, proper caution must be taken, whether in the transport of raw leather materials or finished goods.

Packaging:
All the export quality leather products are exported through waterway shipment so the packaging of those products is very important. It may be raw materials or may be leather goods but they are packaged too sensitively. Bangladesh mostly exports raw materials and import finished goods but in both case the efficiency in packaging is must. The transportation way of exporting and importing leather products is waterway, so the packaging must be in such a way that any type of accident cant effect the shipment. Bangladeshi producers, exporters and importers are aware of these facts which give them a good trade experience

Preferential treatment in foreign market and local subsidy:

Leather Industry developed in Bangladesh on a large-scale basis from the 1970s. About 95% of leather and leather products of Bangladesh are marketed 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. The government of Bangladesh provides a support to the leather industry through various steps, including monitoring the export market, evaluating the performance of the sector by a permanent parliamentary committee, and liberal bank credit. During the 1990s, the export market for Bangladeshi leather grew at an average of 10 - 15% per annum. The average yearly exports accounted for $225 million. Fine grain leather of Bangladesh enjoys preferential demand in Western Europe and Japan. Low wage level and the ban on exporting wet blue leather helped the industry receive a new thrust in the country. Environmental concerns arising out of the high concentration of production units in a small area of the older part of Dhaka city are being addressed with plans for their relocation outside the city.

Leather goods producers in Bangladesh tend to be associated only with manufacturing and

exporting. They do not have much control over downstream operations. However, the success of a number of Bangladeshi firms in attracting such brand names as Puma, Pivolinos and Hugo Boss to source from this country proves that there is ample scope for the industry's upward mobility. The government is also providing incentives and supports to various sectors and urged the entrepreneurs and businessmen to cope with the demand of the international market and buyers, bring more international buyers in Bangladesh and enhance exports. In the leather processing industries there are three categories of producers, large industries, small/medium size industries and commercial exporters. The large industries with bonded warehouses pay no import duties or VAT. They are not eligible for duty draw-back and have to operate on a virtual 100 per cent export basis. There are 6-7 large producers, estimated to be 60 per cent of the total country leather output. Small/medium size industries pay import duties or VAT on chemical and other items at differing rates. These industries take duty draw-back at prefixed rates after each consignment of export is executed. Commercial exporters are engaged in the export of crust and finished leather purely on a job-work basis. All their production inputs are from local suppliers. They also claim duty draw-back. Leather footwear sector has two categories of exporters, those with bonded warehouses and those with no bonded warehouses. Those with bonded warehouses do not pay import duties or VAT. They are not eligible for duty draw-back but receive a cash incentive of 15 per cent on the export (FOB) value of their products. Only 6-7 producers are responsible for 40 per cent of footwear exports. The exporters without bonded warehouse pay all import duties and VAT on duty paid values. They are eligible for duty draw-back and receive 15 per cent cash incentive on the export (FOB) values (Bangladeshobserveronline.com).

Value Addition:
Leather Industry developed in Bangladesh on a large-scale basis from the 1970s. About 95% of leather and leather products of Bangladesh are marketed 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 foreign exchange. Bangladesh intends to increase its range of leather products to penetrate new market segments. The leather industry in Bangladesh is well established and is an important foreign exchange earner. Leather production is based on the use of indigenous cowhides and goatskins. Two opportunities for increasing export value of the leather industry are: a) Increasing value addition of the exported products through exporting only finished leather and leather products; and B) importing raw hides or skins if necessary, and converting these to leather and leather products to utilize the production capacity as much as possible.

List of products exported by Bangladesh

Product group : Leather
Sources : ITC calculations based on COMTRADE statistics. Data based on the partner reported data (Mirror data) are shown in orange

Unit : US Dollar thousand Code Product label Exporte d value in 2005 9,331,58 3 102,209 17,613 Exported value in 2006 11,696,70 0 112,469 16,822 Exported value in 2007 13,142,95 3 147,887 19,084 Exported value in 2008 16,750,70 2 215,782 112,798 Exported value in 2009 16,832,79 6 245,618 112,107

TOTAL

All products Leather Footwear, outer soles of rubber/plastics uppers of leather, nes Footwear,outer soles of rubber/plast uppers of leather covg ankle nes Footwear o/t sports,w outer soles of rubber/plastics&upp ers of tex mat Footwear, outer soles/uppers of rubber or plastics, nes Footwear,outer soles/uppers of rubber or plastics,coverg the

'640399

'640391

1,387

663

1,322

31,225

44,780

'640419

4,206

5,702

8,905

20,024

33,350

'640299

734

1,963

10,213

10,408

8,554

'640291

5,476

5,760

347

574

7,132

'640411

'420500

'420292

'420221 '640610

'420291

'640359

'420231

'640699 '410410 '640520

'420222

'420211

'420310

ankle,nes Sports footwear w outer soles of rubber o plastics&uppers of tex mat Articles of leather or of composition leather, nes Containers,with outer surface of sheeting of plas or tex materials,nes Handbags with outer surface of leather Uppers and parts thereof, other than stiffeners Containers, with outer surface of leather, nes Footwear, outer soles and uppers of leather, nes Articles carried in pocket or handbag, with outer surface of leather Parts of footwear nes Bovine skin leather, whole Footwear with uppers of textile materials, nes Handbags w outer surface of sheetg of plastics o of textile materials Trunks,suit-cases & similar containers with outer surface of leather Articles of apparel

116

142

873

6,277

6,882

566

333

111

417

4,455

11

75

4,680

3,831

2,003 1,100

1,829 278

1,268 46

3,455 2,298

3,607 2,927

13

2,261

2,759

28

105

3,877

2,664

64

11

27

1,519

1,830

923 0 3,946

786 0 3,714

899 0 3,276

894 4,659 486

1,461 1,136 1,114

269

190

371

1,181

918

150

137

3,695

566

702

54

90

1,102

680

'640510

'640590 '640351

'640420

'640320

'640340

'420100

'640319

'420212

'640220

'420299 '420330

of leather or of composition leather Footwear with uppers of leather or composition leather, nes Footwear, nes Footwear, outer soles and uppers of leather, covering the ankle, nes Footwear with outer soles of leather and uppers of textile materials Footwear,outr sole/uppr of leathr,strap across the instep/arnd big toe Footwear,outr sole of rber/plas/leathr,uppe rs of leathr w/met toe-cap Saddlery and harness for any animal, of any material Sports footwear,o/t ski,outr sole of rbr/plas/leather&upp er of leather Trunks,suitcases&sim container w/outer surface of plastics/textiles Footwear of rubber or plastics,upper straps assembled to sole by plugs Containers, nes Belts and bandoliers

5,358

3,606

3,466

193

665

3,374 424

4,171 75

5,265 156

118 1,738

476 438

1,315

1,797

4,208

138

393

13,222

16,052

20,849

358

372

245

240

352

310

318

427

13

328

290

28,692

34,814

47,626

585

285

12

19

539

263

57

677

137

99

7 157

86 17

24 81

105 112

93 85

'410390 '420239

'640192

'420340

'640312

'420321

'410210

'410221

'410229

'410310 '420400

'640110

'640191

of leather or of composition leather Raw hides and skins of animals, nes Articles carried in pocket or handbag, nes Waterproof footwear,outr sole/upper of rbr/plas,covg ankle nt knee nes Clothing accessories nes, of leather or of composition leather Ski-boots, snowboard boots, uppers of leather Gloves,mittens & mitts,for sports,of leather or of composition leather Sheep or lamb skins, raw, with wool on, nes Sheep or lamb skins, pickled, without wool on Sheep or lamb skins, raw, o/t pickled, without wool on Goat or kid hides and skins, raw, nes Articles of leather or of composition leather, for technical uses Waterproof footwear,outer soles&uppers of rubber/plastic,metal toe-cap Waterproof

369 3

263 0

350 0

255 11

82 65

43

27

246

17

36

201

64

216

202

155

19

43

23

31 0

214 0

0 0

46

30

55

126

'640199

'640212

'640230

'640330

'640691 '420329

'420219

'640219

'420232

'420229

'640620

footwear,outer sole/upper of rubber/plastic,cover g knee,nes Waterproof footwear, outer soles/uppers of rubber or plastics, nes Ski-boots, snowboard boots, all rubber/plastic Footwear,outer soles/uppers of rubber/plastics,with metal toe-cap,nes Footwear,wooden,o uter soles of rubber/ plas/leather&uppers of leather Parts of footwear of wood Gloves mittens&mitts,o/t for sport,of leather o of composition leather Trunks, suit-cases and similar containers, nes Sports footwear, outer soles and uppers of rubber or plastics, nes Articles carrid in pocket/handbag,w/o uter surface sheetg of plas/tex Handbags, of vulcanised fibre or of paperboard Outer soles and heels, of rubber or

129

27

104

116

22

136

151

148

0 101

9 127

6 258 391 158

195

140

97

64

139

793

409

25

1,186

116

118

107

2,430

3,673

3,520

120

106

6,217

7,045

9,542

48

101

plastics

From the above table we can realize that if we produce more finished leather goods we can generate our export.

Conclusion:
Government of Bangladesh supports leather industry to make it more successful source of export earnings to our economy.The standard and quality of leather is very high and it is suitable for international market. The price is also less than other country. During the time of EID-ULAZHA the production of leather increases very high. On that time the supply of leather of also increases. Bangladesh is blessed with the worlds best quality leather of cow and goat. With this abundant supply of raw material they have been able to attract customers and create export markets for footwear and leather goods to developed countries. The exporters of leather mainly export the raw leather from Bangladesh. Leather products are also exported by them to some extent. Among them leather footwear, garments and other leather products such as bags, wallets, belts, purses etc are important. The strategy of Bangladesh leather industry is to make quality product, making our domestic market superior in the world market and exporting finished good to other countries to have good will of our country. we can realize that if we produce more finished leather goods we can generate our export. The world's love affair with fine leather continues to be influenced as much by its appeal as a status symbol as by its utilitarian value.

Reference:

A.B.M.S.Zahur (Wednesday, 2009,November 18). Developments in leather industry, The Law and Our Rights page: The Daily Star. Retrieved March 7, 2011; from:http://www.thedailystar.net/newDesign/newsdetails.php?nid=114472

Ahmed Nazneen, Bakht Zaid, June 2010, A Case Study: Leather Footwear Industry in Dhaka A.B.M.S.Zahur (Wednesday, 2004. January 21). Prospect of leather industry should be sustained, Raw materials. Retrieved March 6, 2011; from: http://www.thedailystar.net/2004/01/21/d40121150395.htm

Bangladesh Strategic & Development Forum > Economy, History & Politics > Bangladesh Economy & Development > Business & Industry, Post # 1. Retrieved March 6, 2011; from: http://www.bdsdf.org/forum/index.php?showtopic=1420

Bangladeshobserveronline.com, Available: http://www.bangladeshobserveronline.com/ne...03/economic.htm Dr. A.K. Enamul HAQUE , Azreen KARIM, Wahid ABDALLAH; Market Access Issues: EU-Bangladesh Trade Regime
A Case Study on Market Access - Myths and Realities

Export-Incentive Needs to be offered to Finished Leather, (2004, April 4), Post # 5. Retrieved March 24, 2011; from: http://www.bdsdf.org/forum/index.php?showtopic=1420

Haroon Jasim Uddin, July 25, 2009, Domestic demand for finished leather goes up. The Financial Express. Hossain Akram, Februrary 19, 2011, Leather industry gung-ho over global demand Bangladesh Economic News.

Islam Kazi Azizul, March 19, 2011, Finished leather goods export on rise Bangladesh Economic News. Research Proposal Handicrafts. Retrieved March 7, 2011; from: http://www.scribd.com/doc/15458779/Research-Proposal-Handicrafts S.M.Imamul Huq, Critical Environmental Issues Relating to Tanning Industries in Bangladesh, Processing, Page no. 22,23. Retrieved March 24, 2011; http://aciar.gov.au/files/node/319/PRO088%20part%202.pdf