Bangladesh's leather industry missing out on 80% of its potential
For over a decade, Bangladesh’s leather industry has been unable to breach the $1.0 billion annual export threshold — a ceiling that sector leaders and economists attribute to chronic compliance failures, underinvestment, and systemic inefficiencies.
Industry insiders now describe the sector as “trapped in a billion-dollar cage”, with multiple structural and regulatory hurdles preventing it from realising its projected $5 billion export potential by 2030.
Key obstacles, experts say, include inadequate infrastructure, failure to meet international environmental and social compliance standards, and poor coordination among government, financiers, tanneries, and workers.
Central to the crisis is the incomplete and poorly maintained Savar Tannery Estate — the industry’s designated industrial hub — and its dysfunctional Central Effluent Treatment Plant (CETP), which continues to discharge untreated wastewater into local waterways.
This environmental non-compliance directly blocks access to the globally recognised Leather Working Group (LWG) certification, according to Md Shaheen Ahamed, Chairman of the Bangladesh Tanners Association (BTA).
“All successive governments have identified leather as a priority sector due to its high employment potential, investment appeal, and export capacity. After textiles and apparel, leather and footwear remain Bangladesh’s largest manufacturing export earners,” Ahamed noted.
“As representatives of the Bangladeshi leather sector, we bear a solemn responsibility to uphold international quality, social, and environmental benchmarks. Achieving this will position Bangladesh as the world’s premier sourcing destination for all categories of finished leather,” he added.
Historically, the global leather industry has been synonymous with pollution. In Bangladesh, numerous unorganised tanneries contribute to river contamination through untreated effluent, while improper solid waste disposal, inefficient water use, and hazardous chemicals pose public health risks.
“In response,” Ahamed explained, “our association is championing a precautionary approach — helping member firms mitigate environmental and social risks before harm occurs. Prevention, not reaction, is our roadmap to a sustainable future.”
Certification gap costs market access, premium pricing
Dr M Masrur Reaz, Chairman of Policy Exchange Bangladesh, told UNB that the absence of LWG certification remains the single most critical barrier.
“It restricts access to premium global markets and forces Bangladesh to sell raw hides at 20–30% below international prices. India boasts over 150 LWG-certified tanneries; Pakistan has more than 80. Bangladesh has none,” he said.
Despite being one of South Asia’s largest raw hide producers — and possessing abundant labour, government export incentives, and raw material supply — the sector remains stagnant.
“Bangladesh has every competitive advantage. Yet infrastructure, compliance, coordination, and investment lag far behind global benchmarks,” Dr Reaz noted.
Foreign buyers increasingly avoid Bangladeshi leather due to non-compliance and lack of certification. Consequently, the country exports large volumes of wet blue — semi-processed leather — which commands significantly lower prices than finished goods.
Many tanners also struggle to secure fair upfront pricing, as banks demand LWG certification or clean environmental records before approving loans — leaving local producers unable to compete in higher-value global markets.
Structural deficiencies compound challenges
Beyond certification, the sector suffers from a fragmented ecosystem: no centralised raw hide grading or auction system, chronic cash flow problems among tanneries, unproductive middlemen, minimal vertical integration, and few tanneries producing their own footwear or leather goods.
Brands frequently source from inconsistent, uncertified suppliers. Slow adoption of modern technology, outdated machinery and finishing techniques, environmental non-compliance, and inefficient pricing mechanisms further stifle growth.
Raw hide wastage — estimated at 15–20% during peak periods like Eid-ul-Adha — remains a critical issue, exacerbated by poor preservation, inadequate transport, obsolete technology, and weak pricing systems.
Labour rights and social compliance lag
Abul Kalam Azad, President of the Tannery Workers’ Union (TWU), highlighted that while Bangladesh’s tannery industry is over 70 years old, many workers still lack basic labour rights — including formal employment letters, identity cards, and guaranteed minimum wages — despite generally stable industrial relations.
“Owners remain rigid in granting workers their due rights — including those required for global market access,” Azad said.
The non-implementation of social compliance standards, coupled with an ineffective CETP system, prevents tanneries from securing LWG certification — causing foreign buyers to withdraw and pushing the formal sector toward informality.
Source: UNB