LEATHER INDUSTRY

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Nov 1 - 7, 2010

Leather industry is the second largest exporting industry of Pakistan after textile, which is highly dynamic and job creating industry. This industry has a work force of two lac people.

Pakistan has created its name and a separate identity in the international leather market and especially well known for leather made sports goods and sports wear. Pakistan is a leather exporting country. But, it imports some rawhide, skins and goods like handbags. Raw materials import causes hike in prices of leather good in the country.

Pakistan's leather industry may face an acute shortage of raw material as recent floods have swept away thousands of animals. Leather exports from last few years are continuously decreasing.

In 2008-09, the sector faced a sharp decline of 28 per cent in leather goods export, while Indian exports of the same commodity witnessed a 26 per cent increase in the first six months of 2009.

During 2007-08, the country's export of leather goods stood at $1.15 billion, during 2008-09 at $943 million, and during 2009-10 at $860 million. The declining trend in the exports of leather products is alarming. These garments face stiff competition from Chinese and Indian products.

During April 2010, the leather industry has maintained its third position in exports as compared to previous month. Its exports in this month amounted to Rs3,095.45 million as against Rs2,745.81 million in March 2010 and Rs1,938.34 million in April 2009 showing an increase of 12.73 per cent over March 2010 and 59.70 per cent over April 2009.

Exports of this item during July-April 2010 amounted Rs21,646.03 million as against Rs19,634.13 million during the corresponding period of last year showing a rise of 10.25 per cent.

In terms of quantity, 18,358,687 sq. meters of leather was exported during July - April 2010 as against 16,472,237 sq. meters exported during the corresponding period of last year showing an increase of 11.46 per cent. The main buyers of leather during July - April 2010 were Hong Kong (Rs6,204.32 million), China (Rs2,810.48 million), Italy (Rs2,570.86 million), Korea (Rs2,030.76 million), Germany (Rs802.66 million), Turkey (Rs785.90 million), India (Rs671.54 million), South Africa (Rs. 520.48 million) and Spain (Rs.487.61 million) whose combined share in total exports of leather was 79.09 per cent as against their combined share of 80.55 per cent during the same period of last year.

The industry used to solely depend on local raw material in past. There are over 1,000 registered and unregistered leather units in Pakistan. The shortage of raw material (hides/ skins and wetblue) occurred due to smuggling of at least 100 trucks loaded with livestock/cattle to Afghanistan and Iran. Moreover, animals are also being sent to Middle East via boats.

The quality raw material, wetblue (semi-processed leather), is being exported to China, India and other competing countries that otherwise could fetch 3-4 times more value if manufactured domestically.

Currently, this sector is contributing around $800 million to $1 billion a year but has the potential to multiply volume of exports with the improvement of quality and diversification in different range of products, especially garments and footwear.

The aggressive policies and bold steps from the government were the need of the hour to regain their lost position in global market. PTA recommended that the government should avoid increasing the cost of doing business due to global recession and federal excise duty on banking, insurance and other services like custom agents services may also be withdrawn.

LEATHER EXPORTS

COMMODITY JULY - APRIL, 2010 JULY - APRIL, 2009
QUANTITY
(sq.meters)
VALUE
(mn. Rs)
QUANTITY
(sq.meters)
VALUE
(mn. Rs)
Tanned/curst hide/skin bovine animals 1,840,730 2,224.93 1,553,421 1,921.07
Tanned/curst dress bovine animals 5,417,605 6,569.76 3,483,762 4,074.00
Tanned/curst hide/skin sheep/lamb 30,393 31.06 48,757 55.96
Tanned/curst dress sheep/lamb 2,257,134 2,338.00 1,777,770 2,080.65
Tanned/curst hide/skin goat/kids 151,737 205.64 82,544 105.25
Tanned/curst dress goat/kids 6,298,757 7,295.14 5,784,644 6,854.97

CONCLUSION

The leather finishing industries represent an important sector contributing almost more than half a billion US dollars in foreign exchange earnings. The leather industry consists of six sub-sectors namely, tanning, leather footwear, leather garments, leather gloves, leather shoe uppers, and leather goods. The tanning industry plays a vital role in the progress of these sub-sectors by providing basic material i.e. leather. Today, Pakistan is among the leading countries in the world in production of leather garments and gloves. The leather and leather made-ups industry play a significant role in the economy of Pakistan and its share in GDP is four per cent.