Leather exporters stare at grim prospects in 2023
Industry sources have reported that Bangladesh’s leather footwear exports have been underperforming in the first seven months of the current financial year due to the economic repercussions of the Russia-Ukraine conflict.
In the period from July to January of 2022-2023, earnings from leather footwear exports amounted to $458.59 million, representing a meager 4.12% increase from the previous year.
However, according to data from the Export Promotion Bureau (EPB), exports of leather products in the same period grew by 22.23%, bringing in $246.07 million.
In contrast, leather exports plummeted by 8.87% to $77.27 million.
The leather industry, the second-largest export earner after garments, faced significant challenges during the Covid-19 pandemic in 2020 and 2021, with export orders declining sharply amid economic uncertainty.
Despite importers turning to Bangladesh to diversify their sources of products and reduce reliance on China, the leather, leather goods and footwear industry has once again been impacted by the Russia-Ukraine conflict.
After reaching a 10-year-high of $1.25 billion in exports in the last fiscal year that ended in June 2022, the sector is now struggling.
According to Nasir Khan, the managing director of Jennys Shoes Ltd, the company’s exports have gradually declined since clearing shipments for winter and Christmas due to lower export orders for summer footwear compared to last year.
The rise in bank interest rates across the globe amid the ongoing economic crisis has made European retailers reluctant to mobilize capital, leading to reduced demand.
As a result, exporters have become cautious about investing in production due to the reduced volume of orders.
The slowdown in orders for low-priced products, which are commonly exported by Bangladesh, suggests a weakening global economy.
Nasir Khan, the managing director of Jennys Shoes Ltd, expressed uncertainty about whether this trend would continue due to the ongoing crisis caused by the Russia-Ukraine war.
He also called on the government to address issues related to bonded warehouse facilities and provide necessary support to the leather industry.
While some companies like Leatherex Footwear Industries Ltd are still struggling to reach pre-pandemic export levels, others like Akij Footwear Ltd have experienced some growth despite the sector’s overall decline.
According to Mohiuddin Ahmed Mahin, president of the Bangladesh Finished Leather, Leathergoods and Footwear Exporters Association, the decline in exports can be attributed to three factors.
Finished leather exports decreased to $77.27 million in the July-January period of 2022-23 compared to $84.79 million in the same period the previous year.
There are three main reasons for the decline in Bangladesh’s export of leather, leather goods, and footwear.
Firstly, international prices have decreased compared to the previous fiscal year.
Secondly, buyers are hesitant to purchase products from Bangladesh due to the country’s non-compliance with the Leather Working Group’s sustainability guidelines.
Thirdly, the war has disrupted supply chains and created other economic concerns.
Despite exporting the same quantity of finished leather as last year, earnings were lower due to increased production costs resulting from the US dollar’s significant appreciation against the taka.
This appreciation has also made imports costlier, particularly chemicals and other materials necessary for tanning and processing leather.
Bangladesh has experienced a 20-25% decrease in prices compared to last year.
Mohiuddin Ahmed Mahin, the president of the Bangladesh Finished Leather, Leathergoods, and Footwear Exporters Association, believes that the situation is unlikely to improve in 2023 until the global economy fully recovers.
