by Serajul Islam Quadir in Dhaka;-
If the tannery owners do not ensure a well-planned management in using water in their factories under the Central Effluent Treatment Plants (CETP), then the government may impose tax on using water, cautioned a government leader.
The entrepreneurs in the leather sector should not expect tax protection for their products for unlimited time in domestic markets. At present they don’t need to pay any tariff for using water.
Salman Fazlur Rahman, MP, the Adviser of the Prime Minister on Private Sector Industry and Investment told the owners of the leather industry in a virtual seminar on Tuesday about “Future of Bangladesh Leather Sector” in the aftermath of COVID 19 jointly organised by Economic Reporters’ Forum (ERF), in collaboration with the Research and Policy Integration for Development (RAPID) and The Asia Foundation.
He informed the participants that the government is also trying to postpone some conditions related to graduation to developing countries from less developed countries (LDC).
“The CETP is a major concern for the sector and it is manageable only by ensuring well organized water management,” Salman said.
“You don’t need to pay any cost so you are not thoughtful and economical in using water. You must be careful and should use water in a planned manner otherwise we will impose tax on using water,” Salman added.
In regards to solid waste management he said that there was some mistake and now we are trying to solve it. “The Chinese company who was given the responsibility had not a well thought decision. But we believe that if we can put in our efforts it will be possible to solve it.”
The adviser welcomed a proposal to build partnership with Vietnam as its export from this sector is much more than Bangladesh.
“We can tell them that we have raw materials while you have infrastructure and technology, so we can go ahead as a partner. But here the question of standard set by the LWG (Leather Working Group) will arise and for that we should also upgrade and ensure that standard.”
Salman said that the government is well aware that after the graduation to a middle income country (MIC) from the LDC several benefits including duty facilities in the EU and some other international markets will be ceased and that will push our products in a sharp competition to exist. “So the relevant ministry mainly commerce ministry is working on how to postpone the conditionality even after the graduation as at the moment we have been enjoying IPR (Intellectual Property Rights) facility.
The adviser lamented over the tax–GDP ratio which is even low compared to Pakistan. “We heard that the citizens of Pakistan always try to avert from paying taxes, but still their ratio is higher compared to us,” Salman said. He said that we should raise our voice on the issue and the national board of revenue (NBR) is trying to expand its tax net instead of raising unjustified tax burdens on the honest people who willingly are paying taxes.
The adviser who is also an important industrialist said that due to the time befitting decision of Prime Minister Sheikh Hasina the economy is gradually trying to overcome the setback. “We are hopeful that a vaccine for covid-19 might be available by the middle of next year and that will be a great relief for mankind as well for the economy.”
Md Jafar Uddin, Secretary, Ministry of Commerce said that the government is working hard to achieve a $5 billion export target from this sector by the year of 2024.
“Leather is our second largest source for export earnings but the difference between the first one that is the ready-made garment sector is very big and we must narrow down the differences by raising export income from the leather sector.”
In his keynote speech Mohammad Abdur Razzaque said that the recovery of the economy may take much more time than the expectation. The pandemic cost to the world economy is at around $3.8 trillion while the export may fall between $2.47 trillion and $6 trillion.
“Europe will reduce its consumption of leather and leather products by as much as 65 percent. Leather sector is affected much more compared to other sectors especially in May, June and July this year. Prospect is very challenging in European markets.” He said that Covid-19 is causing unprecedented disruptions for global economies and Bangladesh has also been affected. Leather is one of the oldest manufacturing sectors but was beset with various bottlenecks even before Covid-19 hit the global economy. From 2018, global demand for leather started falling and raw material prices experienced decline because of reduced demand.
He said that the advent of Covid-19 has added further strain on the future of the leather sector. Various analyses reveal that it might take up to 3 – 5 years for a full recovery in major world economies. For export revival, consumer confidence in the international market will be critical. Available estimates indicate that 40 percent of European and U.S. consumers are likely to reduce household spending, but a much higher proportion of 65 percent to cut back spending on clothing and footwear. Bangladesh’s export earnings from leather and leather goods in July-August this year declined by 16.54 percent to $154.74 million from $185.41 million in the same period of last year. Under current circumstances, immediate (short-to-medium term) export prospects look challenging.
M Abu Eusuf said that Leather and leather goods exporters need to fulfill various compliance requirements as demanded by international buyers. Big brands are increasingly moving towards developing supply chains that comply with labour and environmental standards and looking for responsible sourcing options. Manufacturers producing for the domestic market do not need to meet these requirements. Also, the domestic consumer base for leather products is rapidly expanding.
He said that in fact, the leather industry’s contribution to GDP has risen despite the recent fall in exports. “Indeed, it is the case that the domestic market itself poses a lucrative option for leather manufacturers. This implies that unless the profitability from exports relative to domestic sales is higher, firms may not find it rational to export, which is a much more demanding option.”
This is particularly so when the number of suppliers in the domestic market are small. In addition to this market dynamism, a highly protected domestic market tends to encourage producers to look for sales in the domestic market. Existing import tariffs in conjunction with other trade taxes and levies (known as para-tariffs) enhance the relative profitability of the domestic market.
Shaheen Ahamed said that solid waste management is one of the significant problems for this industry.
The tannery city has been polluted and we should focus on it. Every year at least 70 thousand tones of wastage have been created and for that a very efficient management is required.
Mohiuddin Ahmed Mahin said that since 2016 the trend of the export market for leather and products is falling. “So it is very difficult to achieve the vision of the government.”
Syed Nasim Manzur said that the sector is facing severe supply side issues as prior to the relocation of the tanning industry in Savar, the leather and leather goods sector was portrayed as capable of exporting $5 billion by 2021. However, since the relocation of the tanning industry, the export performance of the sector has met with setbacks. The CETP is at the core of the relocation project of the tanning industry.
“The CETP is accompanied by other supporting components. CETP is not running at its fullest efficiency as some of the facilities are yet to be installed. The CETP lacks a full-fledged laboratory to measure all relevant LWG protocol is very dynamic, raising the requirements constantly in every revision.”
He said that to achieve the Silver and Gold standards by LWG in terms of CETP quality will certainly need more investment and strong commitments from all the concerned stakeholders. And attaining these certifications will be a big leap forward for the local tanners and open the international market for leather products made of locally processed rawhides.
Moderated by S M Rashidul Islam, General Secretary of the ERF the seminar presided by Saif Islam Dilal President of the forum. Kazi Faisal Bin Seraj, Country Representative of The Asia Foundation welcomed the participants while Dr Mohammad Abdur Razzaque, Chairman, RAPID and Dr M Abu Eusuf Professor, Development Studies, Dhaka University and Executive Director, RAPID presented the keynote paper. Md Shaheen Ahamed, Chairman, Bangladesh Tanners Association (BTA), Mohiuddin Ahmed Mahin, Chairman, Bangladesh Finished Leather, Leather goods and Footwear Exporters Association (BFLLFEA) and Syed Nasim Manzur, Managing Director, Apex Footwear Ltd participated in the seminar as the panel discussants. Md Jafar Uddin, Secretary, Ministry of Commerce spoke as the special guest.