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Export potential is to cross $1 billion mark

May 13 -19, 2002

Pakistan's leather industry including tanners and leather garment manufacturers collectively does a marvellous job by retaining the top position in exports after the textile sector.

The average exports of leather, semi and finished leather and leather products earn around $600 million a year and have every potential to take the export figure to a billion dollar mark, said Tariq Ikram, Chairman Export Promotion Bureau (EPB) while talking to PAGE at a recently concluded leather exhibition held at Expo Center, Karachi.

Expressing his satisfaction over the performance of leather sector in general, he said that to fully exploit the existing potential of the leather industry it would have to move in diversified products. He cited the example of leather shoes as one of the largest exports earning items, which is exported to the tune of $6 billion every year in the world market. He said that the leather industry needs a push and guidelines to penetrate into the leather shoe segment. He agreed with the idea that international leather manufacturers can be pursued for joint ventures and international designers to grab this huge market.

The internal rift between the garment manufacturers and the tanners who export the finished leather is however giving a bad taste about the health of the industry. Under the current scenario the tanners supporting the concept of market driven policy to run the trade and industry while the garment manufacturer seeking the umbrella of protection by demanding levy of 20 per cent duty on export of finished leather from Pakistan.

Pakistan Tanners Association (PTA) has however strongly opposed the demand made by the leather garment manufacturers and exporters of imposing a duty on export of finished leather from Pakistan.

Masood Shaikh, Chairman PTA pleads that garment manufacturers enjoy the facility of duty free import of finished leather. Local finished leather is available at 10 per cent less price than the imported one.

The fact is that Pakistani leather garment manufacturers are selling their garments at very low prices and compete the cheapest garment segment with their competitors in India and China.

The PTA chairman said that garment sector being not innovative and efficient because of their dependence on the incentives and subsidy.

Out of 20 top leather garment exporters about 12 have their own tanneries and remaining have arrangements with their affiliates to et raw hides and skins tanned and finished under their own control.

While pointing out that the raw hides and skin market is dominated and controlled by the leather garment manufacturers who have created the situation that small tanneries are closing down and medium and large tanneries had to reduce their production.

On the other side, Pakistan Leather Garments Manufacturers and Exporters Association (PLGMEA) has refuted the claim of PTA that the imposition of export duty on finished leather is against the country's interest.

Fawad Ijaz Chairman of PLGMEA argues that leather exporters in Pakistan have been enjoying protection of 20 per cent export duty on the export of raw and finished leather for many years. In fact the government has given protection by imposing export duty and that is why the leather exporters were able to export finished leather in a big quantity in the past.

Fawad also refuted the claim of PTA that the export price of leather garments are low and pointed out that on average export price of leather garments from Pakistan is much higher than the average export prices of India and China.

He was of the view that if all the finished export is converted into leather garments, Pakistan will earn minimum 30 per cent more foreign exchange than being earned from export of leather and in addition to this, 40,000 direct labor force and a similar number of indirect force will also benefit from this industry.

He said loss in production of leather garments was much more than the production and export of leather. The export of finished leather increased $125 million to $167 million during July-March 2001-02 compared to the corresponding period of last year registering an increase of around seven per cent, while the export of leather garments has declined from $286 million to $244 million during the same period. This is a decline of 15 per cent over the corresponding period.

Apart from the arguments of the two factions of the leather industry, the fact remains that instead of waging a war of words against each other, the elders of the two important sections of the leather industry should sit together to reach a consensus so that the things could be sorted out gracefully.

It may be noted that recently, PTA and garment manufacturers and exporters association jointed organized a leather show in Karachi. Although Pakistan's leather sector enjoys a respectable place in the world market, yet it was shocking to see those foreign buyers and visitors avoided attending the leather show. This state of affairs indicates leather industry is gradually losing its luster to attract the foreign buyers. It is in the interest of the country as well as the trade and industry to set aside internal rifts and build an image of the country as the business friendly nation in the eyes of the comity of nations.