The Evolution of Bangladesh’s Leather Sector: Past, Present & Future

The leather industry is pivotal in Bangladesh’s economy, serving as a cornerstone for export diversification, employment generation, and industrial development. Recognized as the second-largest export earner after the ready-made garments sector, the leather industry significantly contributes to the nation’s economic landscape.

In recent years, the leather sector has consistently bolstered Bangladesh’s gross domestic product (GDP). According to the Bangladesh Investment Development Authority (BIDA), the industry is well-established and ranks second in terms of export earnings, accounting for a substantial share of the global leather and products market. This robust performance underscores the sector’s integral role in the country’s economic framework.

Employment generation is another critical facet of the leather industry’s contribution. The sector encompasses various segments, including tanning, footwear manufacturing, and leather goods production, collectively employing a significant workforce. Notably, a considerable portion of this workforce comprises women, highlighting the industry’s role in promoting gender inclusivity and socioeconomic development.

Export earnings from the leather industry have exhibited a positive trajectory over the past decades. The sector’s export portfolio includes finished leather, footwear, and leather goods, with major markets spanning across Europe, North America, and Asia. This diversification not only enhances Bangladesh’s foreign exchange reserves but also mitigates the risks associated with over-reliance on a single export commodity.

The leather industry’s significance extends beyond its direct economic contributions; it plays a crucial role in Bangladesh’s broader industrial growth. The sector’s development has spurred the growth of ancillary industries, such as chemicals, packaging, and logistics, thereby creating a multiplier effect on the economy.

Moreover, the leather industry has been instrumental in fostering entrepreneurship and small and medium-sized enterprises (SMEs). The presence of approximately 3,500 SMEs within the sector indicates a vibrant ecosystem that supports innovation, skill development, and regional economic development.

The government’s recognition of the leather industry as a priority sector underscores its strategic importance. Policies aimed at enhancing value addition, technological advancement, and environmental compliance are indicative of efforts to align the sector with global standards. Such initiatives are expected to further integrate Bangladesh into global value chains, enhancing competitiveness and industrial sophistication.

The leather industry’s multifaceted contributions to GDP, employment, exports, and industrial diversification underscore its vital role in Bangladesh’s economic development. Continued investment in this sector is essential for sustaining growth, achieving export diversification, and elevating the country’s position in the global market.

The Past: Origins & Growth

The origins of Bangladesh’s leather industry can be traced back to the British colonial era. During this period, the region, then part of Bengal, was primarily an exporter of raw materials, including hides and skins, to British industries. The colonial administration’s policies favored the extraction of raw materials from colonies to fuel industrial growth in Britain, leading to limited industrial development within the region itself. Consequently, there was minimal emphasis on establishing local leather processing facilities, and the industry remained largely unorganized.

Following Bangladesh’s independence in 1971, the newly formed nation faced the monumental task of rebuilding its economy. Recognizing the potential of the leather sector, the government prioritized its development. In the 1970s, several initiatives were undertaken to promote industrialization, including the nationalization of key industries. The leather industry experienced significant growth during this period, with the establishment of numerous tanneries and leather goods manufacturing units. This development marked a shift from merely exporting raw hides to producing finished leather products, aiming to add value and increase export earnings.

The post-independence era witnessed a notable increase in the number of domestic tanneries. Entrepreneurs capitalized on the abundant supply of raw hides from the country’s substantial livestock population. This surge in domestic processing capabilities positioned Bangladesh as a competitive player in the global leather market. By the late 20th century, leather and leather goods had become significant contributors to the country’s export earnings, with products reaching markets in Europe, North America, and Asia.

Despite the industry’s growth, environmental concerns emerged due to the lack of proper regulations and oversight. Most tanneries were concentrated in the Hazaribagh area of Dhaka, operating without adequate waste management systems. This led to the discharge of untreated effluents into water bodies, causing severe pollution and health hazards for local communities. The absence of stringent environmental regulations allowed these practices to persist, drawing criticism from environmentalists and international buyers concerned about sustainable sourcing.

Initially, Bangladesh’s leather industry was heavily reliant on the export of raw hides and skins, with minimal processing. This approach limited the potential revenue that could be generated from value-added products such as finished leather goods and footwear. The global market’s demand for high-quality finished products highlighted the need for the industry to move up the value chain. However, challenges such as limited technological advancement, lack of skilled labor, and inadequate infrastructure impeded this transition.

The Present: Challenges & Opportunities

The leather industry in Bangladesh is a significant contributor to the national economy, accounting for approximately 3% of the global leather and products market. Notably, nearly 60% of its annual output is exported, underscoring its pivotal role in the country’s export earnings. The sector also provides substantial employment opportunities, with around 110 export-oriented factories manufacturing leather footwear, including prominent companies such as Apex, FB, PICARD Bangladesh, Jennys, and Akij.

Bangladesh’s leather and leather goods are primarily exported to Italy, Spain, and Hong Kong. These markets have been instrumental in driving the sector’s growth and are considered major destinations for Bangladeshi leather products.

The industry comprises several key players, including Apex Footwear, FB Footwear, PICARD Bangladesh, Jennys, and Akij. These companies have established themselves as leading manufacturers and exporters, contributing significantly to the sector’s development and global presence.

Historically, tanneries in the Hazaribagh area of Dhaka were notorious for discharging untreated waste into the Buriganga River, leading to severe environmental pollution and health hazards. In response, the government initiated the relocation of tanneries to the Savar Tannery Industrial Estate to mitigate environmental damage and improve compliance with environmental standards.

Despite the relocation, several challenges persist. The Central Effluent Treatment Plant (CETP) in Savar has not been fully operational, leading to ongoing environmental concerns due to the discharge of untreated waste. Additionally, some tanneries have been identified as high-level polluters, facing potential closure for non-compliance with environmental regulations.

Bangladesh’s leather industry faces stiff competition from global players like China, India, and Vietnam. These countries have well-established leather sectors with advanced technologies and robust supply chains, posing challenges for Bangladesh in terms of pricing, quality, and timely delivery.

Adherence to international standards, such as the Leather Working Group (LWG) certification, is crucial for accessing premium markets. However, environmental non-compliance issues have deterred top global buyers from sourcing leather from Bangladesh, highlighting the need for improved compliance to enhance competitiveness.

The government has declared the leather sector a top priority, offering various incentives to boost production and exports. Efforts are underway to increase leather and leather goods exports to $10-12 billion by 2030, with policy support aimed at diversification and value addition.

Ensuring compliance with environmental laws remains a significant challenge. The incomplete operationalization of the CETP and non-compliance by certain tanneries have raised sustainability concerns, necessitating stringent enforcement of environmental regulations to achieve long-term growth.

Bangladesh’s leather sector has experienced notable shifts in its export dynamics in recent years. In the first four months of the fiscal year 2024–25 (July to October 2024), leather footwear exports reached $228.47 million, marking a 9% increase from the $182.11 million recorded during the same period in the previous fiscal year.

There is a growing focus on producing high-value leather goods to enhance export earnings. Investments are being directed towards diversifying product lines and improving quality to meet international standards and consumer preferences.

Integrating technology and automation is pivotal for increasing productivity and maintaining competitiveness. Adopting modern manufacturing techniques and equipment can lead to higher efficiency, better quality control, and reduced production costs, thereby strengthening Bangladesh’s position in the global leather market.

While Bangladesh’s leather industry faces challenges related to environmental compliance and global competition, opportunities exist through strategic investments in technology, adherence to international standards, and value addition. Addressing these areas can pave the way for sustainable growth and a more prominent role in the global leather industry.

The Future: Prospects & Way Forward

The environmental footprint of traditional tanning methods has prompted a global shift toward sustainable practices. For Bangladesh’s leather industry to remain competitive, adopting eco-friendly tanning technologies is imperative. These technologies minimize the use of hazardous chemicals, reduce water consumption, and lower pollutant discharge, aligning with international environmental standards. Implementing such practices not only addresses environmental concerns but also enhances the industry’s appeal to environmentally conscious markets.

Embracing circular economy principles offers a pathway to sustainability by transforming waste into valuable resources. In the context of Bangladesh’s leather sector, this involves recycling leather scraps, reusing water through advanced treatment facilities, and designing products for extended lifecycles. Initiatives like the Traceable and Circular Leather Production (TCLP) project aim to promote traceable and circular leather production, encouraging investment in waste reduction and material efficiency.

The global demand for sustainable and ethically produced leather goods presents an opportunity for Bangladesh to attract Foreign Direct Investment (FDI). By showcasing commitments to environmental compliance and sustainable practices, the country can position itself as a favorable destination for investors seeking responsible production bases. Enhancing infrastructure, ensuring regulatory stability, and offering incentives can further boost FDI inflows into the leather sector.

The government’s role is pivotal in steering the leather industry toward sustainable growth. Implementing comprehensive policies that support environmental compliance, provide financial incentives for green technologies, and facilitate access to international markets is crucial. The Leather and Leather Goods Development Policy 2019 emphasizes increasing tanning capacity and maintaining international standards to meet the rising demand for finished leather.

Diversifying export destinations can mitigate risks associated with over-reliance on specific markets. Exploring emerging markets in Asia, Africa, and Latin America can open new avenues for growth. Participating in international trade fairs, leveraging trade agreements, and conducting market research are strategies to penetrate these markets effectively.

Shifting focus from raw leather exports to finished products like footwear, bags, and accessories can significantly enhance value addition. This transition requires investments in design, branding, and quality control to meet global consumer preferences. Such a move not only increases profit margins but also strengthens Bangladesh’s position in the global value chain.

Equipping the workforce with modern skills is essential for the industry’s evolution. Implementing comprehensive training programs that cover sustainable practices, technological advancements, and quality management can enhance productivity and product quality. These programs should be tailored to various levels of the workforce, from tannery workers to managerial staff.

Fostering partnerships between industry players and academic institutions can drive innovation and research. Such collaborations can lead to the development of new materials, efficient processes, and sustainable practices. Establishing research centers focused on leather technology and offering industry-specific courses can bridge the gap between theoretical knowledge and practical application.

Challenges to Overcome

Administrative hurdles can impede the industry’s progress. Streamlining regulatory processes, enhancing transparency, and reducing red tape are essential steps to create a conducive business environment. Implementing digital platforms for licensing and compliance reporting can expedite procedures and reduce opportunities for corruption.

Achieving and maintaining environmental compliance is a significant challenge that requires continuous effort. Establishing robust monitoring systems, enforcing penalties for non-compliance, and providing support for businesses to adopt green technologies are crucial measures. Collaborative efforts between the government, industry associations, and environmental agencies can ensure that environmental standards are met without compromising industrial growth.

The evolution of Bangladesh’s leather sector reflects a journey of growth, challenges, and resilience. By embracing sustainable practices, fostering innovation, and implementing strategic policy reforms, the industry is poised to enhance its global standing. Collaborative efforts among stakeholders—including the government, private sector, and international partners—will be crucial in overcoming challenges and unlocking the sector’s full potential. With proper investments in technology, environmental compliance, and workforce development, Bangladesh’s leather industry can solidify its position as a global leader in high-value leather and leather goods, ensuring long-term economic and social benefits for the country.