The leather industry of Bangladesh. An industry which traces back its origin to the colonial era, stepped into the footwear segment after modernization in the 1980’s. At the time of Independence in the year 1971 Dhaka city’s Hazaribagh area was home to merely 30 tanneries.
From crafting traditional cottage based footwear to paving the way of becoming one of the major player in the global arena, the journey of leather and footwear industry of Bangladesh is a remarkable one.
As of Today Bangladesh has emerged as a key player in the global leather and footwear industry. Positioning itself, firmly, as the second highest export earning sector of the country, right after the ready-made garments industry.
But, how did a small industry find its way into the global market? What were the key components that catalyzed this rise? Is the export opportunity truly there? Let’s dive in and unravel that story.
Over the last decade Bangladesh, a strategic regional trade hub, achieved unparalleled growth and transformation. Predicted to carve its way to become 21st largest economy in the World Economic League Table rising from 41st Largest economy by 2039, Bangladesh, in true sense is the next Asian Tiger. This booming economy was complemented by significant strides in human development indicators and major infrastructural advancements. Which, apart from uplifting the lifestyle has significantly influenced the industries to grow. With 11.2% of total government allocation for the development of Transport and Communication in FY 2023-24, 22,476.28 km of highways and extensive network of quality roads, 3 Asian highways and 97 economic zones truly bolstered Bangladesh’s growth.
But, can infrastructure alone catapult an industry? Herein, comes a significant factor into play, competitive cost of labor. Compared to its competitor, Bangladesh has the most competitive cost of labor. The average monthly wage rate in Bangladesh is less than half that in India and less than one-third of the cost in China or Indonesia. Due to the availability of a skilled and abundant young workforce Bangladesh has a unique advantage of becoming successful in growing export-oriented labor-intensive manufacturing industries. Following the success of the apparel industry, the country’s leather goods and footwear industry is now poised to achieve a speedy growth.
The population of Bangladesh which was once considered as burden has now become a blessing. An extensive amount of credit goes to the demographic dividend. Bangladesh’s demographic dividend holds a working-age population of more than 65.08%. Which is a once in a lifetime opportunity for Bangladesh to excel and transform itself into a developed country. Every year 2.3 million adaptive young professionals are joining the workforce as 45% of the entire population is under the age of 24.
Another major factor which plays a pivotal role in the growth of Leather and Footwear industry of Bangladesh is diversification of manufactured product. With 250+ tanners, 3500+ small and medium manufacturing units and 90+ large manufacturers, Bangladesh’s leather and footwear industry produces world class leather, leather goods and accessories, leather footwear and non-leather footwear. Abundant raw materials and low production costs fuel growth, while diversification into non-leather footwear highlights the industry's expanding global presence.
Export Opportunities
Currently, 44 types of products are exported to 106 destinations. Approximately 60% of Bangladesh's leather and leather products are exported abroad. Most of these exports are directed to the EU, UK, US, Canada, Russia, Australia, Japan, Singapore, South Korea, and other countries. With a 5 % annual compounding growth Bangladeshi Leather and Footwear industry has a 241 billion Dollar Global market and a 3 billion Dollar Local Market. When it comes to footwear alone Bangladesh produces 468 million pairs each year, making it the 7th largest footwear producer in the world, 9th largest consumer market (366m pairs) and 15th largest exporter of footwear in the world.
Apart from that, competitive labor cost serves as a strong competitive advantage for all the export-oriented industries of Bangladesh. Like its predecessor RMG, competitive labor cost has and will continue to put the Bangladeshi leather goods and footwear industry in a stronger position.
Bangladesh has duty-free access to developed countries (generalized system of preferences) such as the EU, UK, Japan, Canada, Russia, and Australia. Only a few exporting nations are beneficiaries of duty-free access, thus indicating the industry’s potential to gain export competitiveness.
Many renowned brands for leather goods and footwear have experience sourcing ready-made garments from Bangladesh over the years, suggesting familiarity with such brand buyers. The positive experiences with the RMG sector are expected to pave the way to choose Bangladesh as a sourcing location for leather goods.
Already manufacturing and exporting to varying degrees, the industry is set to receive significant boosts from targeted government incentives and interventions to transform them into world-class sourcing destinations. Such as:
- Reduced CIT for 5 to 10 years depending on location
- Import duty exemption on capital machinery
- Bonded warehousing facility for large import of materials
- No VAT imposition on export goods
- 15% cash incentive on the export value. 5% on crust leather from Savar Estate
- Three industrial estates dedicated to leather and tannery industries, being set up by the government in the areas of Rajshahi, Savar and Chattogram.
Bangladesh’s leather and footwear industry holds significant potential to emerge as a global leader. By addressing existing challenges and leveraging its competitive advantages, the sector can unlock new export opportunities, contributing to the nation’s economic growth and development. Strategic investments, policy support, and a focus on sustainability will be key to achieving this vision.
