LEATHER INDUSTRY

S.M. ABBAS ZAIDI,
Research Analyst
, PAGE
July 28 - Aug 03, 2008

Leather Industry is the second largest export earning sector in Pakistan which is producing value added products and known as job creating industry. This industry has a work force of two lac people. Pakistan has carved a respectable name and identity in the international leather market. It is known for leather made-ups, sports goods and sports wear.

The leather upper & footwear productions have witnessed impressive growth of 9 percent & 1.78 percent respectively during first Half of FY08. However, the production of sole leather has declined by 21 percent. Pakistan known as a leather exporting country besides imports of some raw hides, skin and goods like hand bags. The raw material of the leather products is imported which is the main cause of higher cost of production of leather goods.

LEATHER EXPORTS & TRADE

Leather industry maintained third position in its group during Dec, 2007. The main buyers of leather are Italy, Spain, USA, S.Africa, Germany and UK etc.

LEATHER EXPORTS & TRADE

COUNTRIES

FY05-06

FY06-07

USA

92,845

83519

UAE

94,320

21300

S. AFRICA

86287

91456

GERMANY

57,066

54,481

UK

53,469

45,302

FRANCE

41,076

39,303

SPAIN

38,420

45,667

NETHER LANDS

23,905

25,521

BELGIUM

23,564

19,509

ITALY

18,297

16,737

In Pakistan, the leather product exports have shown a healthy growth of 13 percent during the current FY08 and earned $371.140 million against $325.598 million of same period during last year. The leather tanned products export demonstrated an impressive growth of 37 percent and Pakistan earned $230.72 million of current FY08 against $167.788 million of same period of last year. In FY08 Leather garments export depicted robust growth of 31 percent and country earned $294.740 million against $224.262 million of corresponding period of last year. However, a gain of $69.574 million was recorded from export of leather gloves with 5 percent decline against $73 million of same period of last year. Again another decline of 75 percent witnessed in the export of other leather manufactures and country received only $6.826 million against $27 million of corresponding period of last year.

(QUANTITY IN SQ. METERS) (VALUE IN MILLION RS.)

COMMODITY

JULY - DEC, 2007

JULY - DEC, 2006

 

QUANTITY

VALUE

QUANTITY

VALUE

Total

10,101,295

10,324.56

8,850,148

8,992.55

Leather Cow calf

22,035

23.95

10,876

10.74

Leather cow hides

4,519,682

4,656.67

4,224,071

4,302.06

Leather buffalo hides

111,867

120.96

73,541

72.28

Leather sheep skin

4,450

3.63

22,523

21.84

Leather goat skin

4,260,922

4,292.94

3,724,619

3,788.15

Leather N.S.

1,182,339

1,226.41

794,518

797.49

RECENT CHALLENGES

In Pakistan, Leather product prices and declining productions due to domestic power shortages and escalating raw material prices can make the products less attractive for exports. Chinese leather products, being cheap and easily available, are creating hindrances for Pakistani leather exports despite of the fact that the leather industry carries great charm for investment; as Pakistani labor is quite cheap in cost and Pakistan being one of the richest cattle farming countries can produce low cost raw leather. So far, the industry is concentrated only in a few cities of Punjab like Sialkot, Gujranwala, Lahore and Multan. However, there is a wakeup call for our Govt as some renowned American and European shoe makers may wrap up their manufacturing units from China. Keeping in view the superb quality of indigenous leather and low wages rate in Pakistan, foreign shoe manufacturers could join the local leather sector by setting up joint ventures with the local shoemakers. The government must also help the industry out of the Export Development Fund for setting up of treatment plants. The government should provide financial support for research and development to get the latest technical assistance by the tanning industry because of new trends in international markets. This will also attract foreign investment in Pakistan specially in view of shifting of industries from Europe. Moreover, the government should provide regular funding to help carrying out human resource development by providing qualified faculty and laboratory of international standard. Huge funds for running of this institute are needed imperatively that ultimately will help Leather industry to improve, to hire personnel to help increase the production, efficiency and quality of products enabling the sector to use our resources and raw material in a better way. The need of the time is to enhance investment in this sector and increase its horizons within the country.

FUTURE OUTLOOK

Exports of leather from Pakistan remained encouraging during the three quarters of the financial year 2007-08, it has potential to fetch substantial foreign exchange to the country provided and some genuine demands of the industry are met by the government. Moreover, Pakistani leather sector has so far performed well amidst strong competitors like China, India, Bangladesh and Italy and registered an increase of 26.17 percent during the period of July-March 2007-08 to US $892,185 million as compared to $707.678 million dollars of the corresponding period of 2006-07. Today, Pakistan produces best quality of leather exports as its major chunk to fetch foreign exchange just below US $1 billion. The amount could be increased diversity, if special focus is given to the exports of leather products like shoe, bags, suitcase, lady hand purse and belts.