Developing the Leather Industry in Bangladesh

Abstract

The economy of Bangladesh grew at an average rate of 6.5% annually in the fiscal years (FY) from 2009 to 2018.1 In FY2016, the growth rate crossed the 7.0% mark, and the following 2 years saw even higher growth rates of 7.3% and 7.9%. Historically, exports and remittances have been the two key growth drivers for Bangladesh. However, one industry dominates exports, i.e., ready-made garments (RMG), accounting for over 80% of the annual export receipts. RMG also accounts for over 45% of gross value added in manufacturing. The overwhelming dependence on RMG as a source of export earnings leaves Bangladesh vulnerable to external shocks.2 The growth in RMG exports has been slowing over time, and since FY2013, the shares in the gross domestic product of both exports and remittances have been steadily declining (Figure 1). To shift the country’s economy to a higher growth trajectory and sustain high economic growth, the manufacturing and export bases need to be diversified. Leather is one of the industries with considerable potential for development, using Bangladesh’s large supply of lowcost labor and raw material. The industry has the potential to participate in global value chains, enter a new market, and serve the growing domestic demand. The leather industry has many similarities with RMG in strengths and weaknesses. With its abundance of labor and natural resources and successful development experiences in the RMG industry, Bangladesh is ideally suited for the production of leather such as high-value leather goods and footwear.