Leather Sector Of Bangladesh and COVID-19

From 2009 to 2018, the economy of Bangladesh grew at an average rate of 6.5 percent, having exports and remittances as the key drivers behind this growth. Almost 85 percent of the country’s export basket filled by the RMG sector and around 4% by the Leather & Footwear sector which was called second largest export sector of Bangladesh. Though the government has a target to export $5 billion worth of leather, Footwear and leather goods by 2021 whereas last year’s receipts amounted to $1.02 billion and it was less than fiscal year 2017-18 & according to Export Promotion Bureau (EPB) data, in July-February period of the current fiscal year, the country earned $632 million from exporting leather and leather goods, which was $695 million in the same period last year.

                    Fig: Leather & Leather Products Export Comparison Between Fiscal Years.

 

In addition, the recent Covid-19 outbreak has put the industry at peril of great financial loss. The industry players have already started to feel the turmoil of the supply chain disruption. Like many other countries, Bangladesh has already been directly affected by the lockdown through global value chains. “Leather goods and footwear exporters have faced export order cancellation of $200 million”, Md Saiful Islam, President of Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh(LFMEAB) said after the outbreak of the virus, while “the crushed leather exporters have seen another $53 million cancellation since Export-import with China totally stopped and business of the country’s leather sector came to a halt since January”, Mr. Shaheen Ahmed, Chairman of the Bangladesh Tanners Association (BTA), told to press. According to the BTA data, the sector could not ship over 250 containers of processed leather to China, causing them to count huge losses. Exporters were facing the hardest time as the global economy witnessed headwinds caused by global lockdowns to halt corona virus, they said.

 

As a result, huge amount of unsold leather now piled up in different factories, while they cannot import raw materials and accessories needed for producing finished leather goods and footwear products & due to shortage of accessories, leather goods production for local market was also being hampered. According to the sector people, there is a local market of about Tk1,000 crore during the Eid-ul-Fitr. The demand for the festival could not be met due to a lack of raw materials for leather goods and lock down situation due to pandemic.

 

Here the major defiance is the contraction of the demand for footwear by our major buyers (both domestic and international). These buyers have no choice here as well because they have to shut down their stores due to a decline in sales. For example, the global giant brand Adidas’s sales have declined by USD 1.1 billion only in greater China. Adidas reported a slump in sales in Japan and South Korea too, of USD 111 million. With industry giants such as Adidas, Nike, and Puma experiencing such declines in sales, it has proven to be considerably harder for nascent companies to sustain in the industry under current market conditions. Specifically, nascent domestic and foreign companies are coming across a major liquidity crunch because of the huge slump in sales.

 

Since the Bangladesh sector suffered huge losses and was going through severe cash crunch like others, the government should provide financial supports and stimulus package to help the industry going and a economic rescue plan from the government could only save the billion-dollar industry in this crisis period, industrial experts said. Though as a part of recovery our Honorable Prime Minister Sheikh Hasina announced bailout package of Tk 5,000 crore for the export- oriented industry to pay wages of factory workers has already appreciated the initiative by sector leaders.

 

Not only the economic rescue plan can safe our sectors as we have been fighting with an unseen enemy since March 2020 but also we have to follow the COVID-19 Management Guidance for factories in Bangladesh to safe our economy. In response to the crisis, Bangladesh (BWB) guideline on COVID 19 will help employers, worker and respective committee members responsible for managing their workplace during COVID-19, protecting workers, and answering some of the workplace and occupational safety and health (OSH) related questions that factories are facing.

 

However, this guidance is not a standard or regulation, and it creates no new legal obligations. It contains recommendations as well as descriptions of mandatory safety and health standards. Employers and workers in readymade garments and footwear factories should use this planning guidance to help identify risk levels in workplace settings and to determine any appropriate control measures to implement. Additional guidance may be needed as COVID-19 outbreak conditions change, including as new information about the virus, its transmission, and impacts become available.

 

We believe that Pandemic will not sustain forever after every bad time comes a good time.

 

Data Source: LFMEAB, EPB, BTA, Bangladesh Bank Website, Newspaper & Others Personal Sources.