Welcome

To
The Presentation
Presentation Topic……

Potentials and Constraints of Traditional Exports of

Bangladesh:
A Case of Leather Sector
I am………
Monowara Akter
ID:
Industry Profile
The leather sector is one of the oldest traditional sectors of Bangladesh. The
first ever tannery in Bangladesh territory was set up at Narayanganj by RP
Saha sometime in the 1940s.
 It was later shifted to Hazaribag area of Dhaka, which turned into a location
that once accommodated a large number of tannery units. Now the industry
has been relocated to Savar area to protect the environment from being
polluted.
Leather Industry developed in Bangladesh on a large-scale basis from the
1970s. More than 90% of leather and leather products of Bangladesh are
marketed abroad.
the contribution of this sector is 4% of the total export earnings. In
compared to the export earnings of RMG sector, it may seem insignificant
but leather sector is ahead of RMG sector in domestic value addition. Value
addition of leather sector averages 85%, which plays a significant role in the
economy of Bangladesh
 Present Scenario of leather industry:
 At present, there are more than 220 tannery units in Bangladesh and
they use locally available raw hides and skins. Of them 114 are large
and medium units (by local standards) and are registered with the
Directorate of Industries. Others are mostly of small and cottage type
and are not on the register of the government.
Total capital invested in the tannery industry is estimated at more than
Tk 3.5 billion, of which government/bank finance is about Tk. 2 billion
and the rest is private finance.
At present the industry has been shifted to Savar and all the tanneries
are said to use the ETP ( Effluent Treatment Plant) for a better
environmental compliance.
 Export Analysis of leather products
Bangladesh exports three main types of leather products: raw leather & leather goods
and footwear. The product wise export trend per year for 10 years is shown below:
57.10%
% of Leather export % of leather goods export % of footwear export
56.05%

53.89%
51.20%

49.76%

46.87%
46.12%
45.86%

44.97%

42.80%
36.08%

35.26%

35.22%

35.16%
34.01%

33.67%
33.17%

26.81%
26.32%
25.10%
23.23%

22.04%
21.36%
20.73%

20.12%

18.66%
17.80%

15.64%

14.98%
10.03%

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Percentage of export of raw Leather, Leather
goods and footwear on total export:
1997-2001 • From the chart, we can see that,
the percentage of raw leather
export was highest in between
1997 to 2001 which is 71% of
14% % of Leather the total export. From 1997-
export
15% % of leather
2001, the percentage of leather
goods export goods export was 15% and the
71% % of footwear
export
percentage of footwear export
was 14% of the total export.
Cont’d……
2002- 2006 • From 2002-2006, we can see
that, the export of raw leather
held 69% of the total export
amount, where, the export of
leather goods and footwear held
15% % of Leather
export
16% and 15% respectively. In
16% % of leather this time period, the total
goods export percentage of leather export
69% % of footwear
export
was decreased by 2% and both
the percentage of leather goods
and footwear export was
increased by 1% from what it
was in 1997-2001.
Cont’d……

2007-2011 From 2007-2011, the export of

raw leather was decreased by a
significant percentage from what
it was in 2002-2006. It was
30% % of Leather export decreased by 16% whereas
53% % of leather goods
footwear export was increased by
17% export 15% and leather goods export was
% of footwear
export
increased by 1% in 2007-11 than
2002-2006.
Cont’d……

2012-16 But, from 2012-2016 we can see

that the export of raw leather was
further decreased by 13% from
what it was in 2007-2011. But, the
% of Leather export of footwear was increased
export
39% 40% % of leather
by 9% and leather goods export
goods export was increased by 4% than 2007-
% of footwear 2011.
21% export
 Product wise export trend: Raw Leather
RAW LEATHER EXPORT TREND
600

505.54
AMOUNTS IN MILLION USD

500

399.57 397.54
400
330.16
284.41 297.83
300 266.08 277.9
226.1
200 178.2

100

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Here we can see that the amount of export of raw leather increased from 2006-07 to 2007-08 by
Here we can see that the amount of export of raw leather increased from 2006-07 to 2007-08 by USD 18.33 million but it
USD 18.33 million but it decreased in 2008-09 by USD 106.21 million from what it was in 2007-
decreased in 2008-09 by USD 106.21 million from what it was in 2007-08. After 2008-09 leather export started to increase
08.again
Afterand2008-09 leather
was the highest export
in amount started But
in 2013-14. to increase againit decreased
after that period and was again
the highest
in 2014-15inand
amount
2015-16.in 2013-
14. But after that period it decreased again in 2014-15 and 2015-16.
 Product wise export trend: Leather Good
300
283.05
249.16
AMOUNTS IN MILLION USD

250 240.09

200
161.62
150

110.26
99.36
100 88.66 78.18 69.07
55.42
50

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
Here we can see that the amount of export of leather goods was USD 110.26 million in 2006-07 and from 2006-
Here
07 towe can see
2010-11 that
it had the amount
shown of export
a decreasing of leather
trend. From goods
2011-12 was USD
to 2015-16 110.26
the export milliongoods
of leather in 2006-07
increased
and from 2006-07each year anditthe
to 2010-11 hadexport
shownamount became USD
a decreasing 283.05
trend. Frommillion in 2015-16.
2011-12 to 2015-16 the export
ofHere we can
leather see that
goods the amount
increased eachofyear
export
andofthe
leather goods
export was USD
amount 110.26USD
became million in 2006-07
283.05 and from
million 2006-
in 2015-
07 to 2010-11 it had shown a decreasing trend. From 2011-12 to 2015-16 the export of leather goods increased
16.
each year and the export amount became USD 283.05 million in 2015-16.
Product wise export trend: Footwear:
Footwear
600

494.83
AMOUNTS IN MILLION USD

500
483.81

400 378.54
305.11
300
233.98
199.39
200
132.16 146.47
125.02
98.39
100

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Here we can see that the amount of export of footwear was increasing from 2006-07 and it kept
increasing till the end. So the export of footwear is on increase every year for the last 10 years and
it suggests that, the demand of footwear to the importers is increasing year by year.
 Functional Analysis
A regression analysis has been performed to understand the relationship between the
aggregate leather exports (which is the dependent variable) with some other independent
variables. Here, the independent variables are leather price, exchange rate of TK to Dollar,
per capita income of receiving countries, introduction of ETP and relocation to Savar.
The summery of the output of multiple regression is as follows:
Coefficients Standard Error t Stat P-value
Intercept -474.959 187.2781 -2.53611 0.024836
Price 7.17987 0.986428 7.278659 6.19E-06
Introduction of ETP 27.62745 41.09104 0.672347 0.513136
Relocation to Savar 104.5169 57.09744 1.830502 0.090188
Per capita income 0.000117 0.009566 0.012225 0.990432
Exchange rate 0.001336 3.894108 0.000343 0.999731
Xt-1 0.754754 0.068408 11.03319 5.68E-08
 Interpretation
The value of R-square of the multiple regression model above is 0.98 which suggest that,
there is a strong positive relationship between the variables of the model.
PRICE:
We can see that, the coefficient of price of the multiple regression model is positive but the
expected sign for the coefficient of price is negative as demand should decrease due to
increase in price. If we look at the p-value, we can see that the p-value is 6.19E-06 which is
significant.
Introduction of ETP:
From the output, we can see that, the sign of the coefficient of the dummy variable
(introduction to ETP) is positive and our expected sign for the coefficient of this dummy
variable is either positive or negative. The positive coefficient here suggests that, the
introduction of ETP will have a positive impact on export and export will increase due to it.
But the p-value is not significant as it is more than the significance level.
 Cont’d………
Relocation to Savar:
We can see that, the sign of the coefficient of the dummy variable (relocation to Savar)
is positive. It suggests that, the relocation will have a positive impact on export and
export will increase due to it. Also the p-value is significant at 10% significance level.
Per Capita Income:
The sign of the coefficient of per capita income is positive and the expected sign for
the coefficient of per capita income is also positive .But if we look at the p-value, we
can see that the p-value is higher than significance level which is insignificant.
Exchange Rate:
The sign of the coefficient of exchange rate is positive and the expected sign for the
coefficient of exchange rate is also positive .But if we look at the p-value, we can see
that the p-value is higher than significance level which is insignificant.
 Cont’d……
Exchange Rate:
From the output of the multiple regression model, we can see that the sign of the co
efficient of exchange rate is positive and the expected sign for the coefficient of
exchange rate is also positive .But if we look at the p-value, we can see that the p-value
is higher than significance level which is insignificant.
Destination diversity of leather industry
Destination diversity is divided into two parts. They are:
1. Continent wise diversity of raw leather
2. Continent wise diversity of leather goods

2011-12 2012-13 2013-14 2014-15 2015-16

Asia 77.59 77.64 77.59 75.86 78.24
Europe 22.22 22.11 23.08 23.87 21.01
North and
South America 0.13 0.2 0.11 0.13 0.37
Australia 0.04 0.02 0.01 0.01 0.29
Africa 0.01 0.01 0.06 0.08 0.06

From the table above, we can see that the countries in Asian continent are responsible for almost
75-78% of total raw leather export of Bangladesh in the world, which is highest for any
continent. So we can say that BD exports most of its raw leather in Asia
Destination diversity of leather industry
Continent wise export performance: Leather goods
2011-12 2012-13 2013-14 2014-15 2015-16
Asia 70.30 77.9 79.84 73.7 75.94
Europe 24.84 16.64 14.28 18.37 14.62
North and
South America 4.72 5.14 5.36 7.03 8.36
Australia 0.13 0.31 0.47 0.58 0.6
Africa 0 0 0.04 0.33 0.47
From the table above, we can see that Asian countries are responsible for almost
70-80% of total leather goods export of Bangladesh in the world. So we can say that
BD exports most of its leather goods in Asia.
Comparison between export of raw leather & leather goods to
different continents

Continents RAW Leather Leather Goods

Asia 77% 74%
Europe 22% 17%
North and South America 0.19% 5.8%
Australia 0.07% 0.41%
Africa 0.04% 0.17%

The graph clearly shows that in Asia the export of raw leather is higher than the export of leather
goods. Same thing is true for Europe as well. But in America the export of raw leather is higher
than leather goods and the same thing is true for Australia and Africa as well.
 Major leather exporting countries of Bangladesh
Bangladesh exports leather to more than 120 countries worldwide. Among them China,
Hong Kong, Italy, Japan and Germany are the top five exporting countries. The following
figure represents the total amount of leather exports in million USD to the five major
leather exporting countries of Bangladesh from 2011-12 to 2015-16.
2011-12 2012-13 2013-14 2014-15 2015-16
227.85

226.16
209.32
196.87

155.7

140.47
93.43

80.34
67.12
72.12
64.85

61.86
55.25
43.95

40.71
39.94
37.47

43.8
33.3
28.1
16.96
15.61
12.42

15.28
14.02

CHINA GERMANY HONG KONG ITALY JAPAN

 Contribution of Major Countries in Total Leather Exports Vs the
Contribution of Rest of the World
80.00%
68.78% 71.29%
70.00% 67.80% 65.90%
60.00% 54.88%
50.00% 45.12%
40.00% 34.10%
31.22% 32.20%
28.71%
30.00%

20.00%

10.00%

0.00%
2011-12 2012-13 2013-14 2014-15 2015-16
% OF TOTAL EXPORT TO THE MAJOR COUNTRIES
% OF TOTAL EXPORT TO OTHER COUNTRIES