Leather industry, including leather merchandises, is the 2nd largest export-earning sector after fabrics. Presently, this sector is lending about $ 800 million a twelvemonth but has the possible to multiply volume of exports with the betterment of quality and variegation in different scope of merchandises, specially garments and footwear. The exports are besides carried out in un-tanned natural leather due to the quality and sum of farm animal available in Pakistan.
It is a job-oriented sector supplying employment to a really big section of the society besides gaining foreign exchange for the state. The leather coating and made ups industries represent an of import sector in Pakistan, lending about more than half a billion US dollars in foreign exchange net incomes to the national treasury. The leather industry consists of six sub-sectors viz. , tanning, leather, footwear, leather garments, leather baseball mitts, leather shoe uppers, and leather Goods. The Taning industry plays a critical function in the advancement of these sub-sectors by supplying the basic stuff i.e. leather. Today, Pakistanis, are among the taking states in the production of Leather Garments and Gloves. The leather and leather made-ups industry plays a important function in the economic system of Pakistan and its portion in GDP is 4 % . Ten old ages ago, it was the 5th most of import export industry in the fabrication sector, and now it is the 2nd. ( Leather analysis study leather mag, 2009 )
At the clip of independency there were merely a few tanneries bring forthing exclusive leather and that excessively at a really little graduated table. However, since so this industry has been booming. During 1950s, some well-equipped tanneries were set up at Karachi and Lahore, while during 60s and 70s more units were established at Hyderabad Kasur, Sialkot, Multan, Sahiwal and Gujranwala. Get downing with the production of picked and vegetable tanned fells and teguments, the tanneries, today, are bring forthing non merely wet blue and crust, but besides to the full finished leather.
The full production of fells and teguments were being exported in a natural signifier. Thereafter the local tanning industry devising at first semi-finished leather made rapid advancement due to favourable natural stuff state of affairs, inexpensive labour and the being of turning demand and foreign market.
Problems Faced By Leather Sector in Pakistan
Challenges and Issues
Leather and leather garment industry of Pakistan is confronted with assorted challenges to last in international market such as:
Absence of advanced engineering, deficit of human power
Absence of high tech quality merchandises and the deficit of skilled work force to provide to the demands of the universe market. There is a turning demand to fix labour force holding capacity to bring forth leather garments on scientific lines and comply with the demands of international market to vie.
High Cost of production
Cost of production is besides really high in Pakistan as compared to rivals like China and India. The high cost of assorted inputs, particularly public-service corporations and revenue enhancements make Pakistan ‘s merchandises – finished and unfinished – uncompetitive in international market and with no subsidy provided by the authorities, it merely adds to the hurdle.
Environmental Impacts of leather industries in Pakistan
Leather tanning tends to be really fouling as compared to other fabrication industries. Numerous steps are suggested to take attention of the environmental jeopardy It causes but it is non implemented due to miss of financess. At every unit of end product, the degree of toxicity is high due to the heavy hides-leather change overing procedure.
Chromium III salts are used extensively in the tanning procedure. Approximately 90 % of the leather manufactured is tanned utilizing Cr III, but misconception and ignoramus determination shapers, stop up utilizing Cr VI which is rather contrary to Chromium III
Resettlement of industries:
Local leather industry may hold to confront stiff competition in the WTO scenario as export monetary values can cut down significantly due to resettlement of industry from the developed states to Asia. The leather industry is the 2nd largest export industry of the state. During the last financial twelvemonth, leather exports stood at $ 744 million, transcending the one-year mark of $ 715 million set by the Export Promotion Bureau, ( EPB ) ( Gulf News Focus, 2007 )
Tanveer Sher in his article in Daily Times on 25 August, 2010 said that because the farm animal took a monolithic hit in the annihilating 2010 inundations in different state, the leather industry was certain to bear the brunt.
The immense desolations unfolded by the monolithic inundations are feared to take leather industry worth one billion dollars in their lap, BNA reported Monday in Times of Pakistan. Pakistan Leather Garments Manufacturers And Exporters Association ‘s Chairman Chaudhry Zulfiqar said a immense figure of farm animal were destroyed by the implosion therapy, to the consequence that hides acquisition would drop by 15 to 20 per centum. This would take a 30 per centum slack in exports. Zulfiqar Chaudhry said the already expensive leather merchandises would surge higher beyond people ‘s buying power. ( The times of Pakistan Monday, August 23, 2010 )
Government Policies Regarding Leather Export
Government revised its trade policy for the leather sector from 2009 – 2012, to stem the diminution in leather exports. Federal curate for commercialism announced these stairss, on July 26, 2009:
Facilities from Export Investment Support ( EIS ) Fund for procurance of adept consultative services, fiting grant to set up design studios/centers and constitution of research and development centres in Karachi and Sialkot.
In add-on, this sector would be able to avail EIS Fund installations that include sharing 25 per cent fiscal cost of puting up research labs and fiting grant for puting up of outflowing intervention workss.
To guarantee predictability of electricity supply, commercialism curate said, the ministry of H2O and power and electricity distribution companies will come in into understandings with bunch of industries whereby electricity will be supplied at reciprocally agreed times. The 15 understandings would hold punitory and compensation clauses and the compensation could be in the signifier of electricity charges recognition.
The undermentioned reactions arose to the policies adopted:
Chairman, leather exporters association, commended the authorities determination to let go of financess for engaging experts for research and merchandise development. He said, this will well assist in bettering exports. However, the mark of six per cent addition in exports this twelvemonth is low as the state has much more possible and the authorities should hold aimed for a higher mark.
Chairman sixpences association, termed the new trade policy to be “ hopeless for the leather sector. ” He said: our first demand was to supply discount on exports, which other regional states enjoy, for case most of our regional states get up to 15 per cent discount on all leather merchandise exports. What we get is less than one per cent discount from the authorities. ”
“ There is an immediate demand for constitution of a Leather Board in Pakistan which should run as an independent organic structure and funded by the authorities from export development fund. A individual exporting value-added leather merchandises should head the board.
Leather Export Associations of Pakistan
There is no specific association that looks after overall leather sector, except for SMEDA, the Small and Medium Enterprise Development Association, which focuses on developing more industries, but has its custodies ties due to miss of financess. The most outstanding association is PLGMEA ( Pakistan Leather Garments Manfacturers and Exporter ‘s Association ) .
The followers are the active associations providing to different parts of the leather industry in Pakistan.
Anjuman Ex-Students of I.L.T. , Gujranwala, A
Asiatic athleticss and allied industries federation
Federation Pakistan Chambers of Commerce and Industry
Leather Industry Development Organization Ministry of Industries and Production ( Industries WING )
Pakistan Footwear Manufacturers Association
Pakistan Tanners Association ( Indian Leather Portal )
World Trade Organization ‘s Role
There was a instance refering Pakistan ‘s export steps impacting fells and teguments on 7 November 1997, in which the European Communities ( EC ) were the plaintiff. Hence, EC requested audience with Pakistan at the WTO sing their determination to forbid the export of fells and teguments. This instance, although old, highlights the function of WTO in Pakistan and the engagement in the exports and imports of trade goods to and from Pakistan.
Under the WTO government, member states can enforce punishments or curtail imports from exporting states whose industries do non detect environmental/labor concerns or societal conformity, therefore meaning their function in Pakistan ‘s exports in non merely Pakistan ‘s exports non merely in the leather sector but overall exports.
WTO besides guarantee protection of trade rights as per the understanding on trade related facets of rational belongings rights ( TRIPS ) of WTO, Pakistan through Trade Marks Ordinance, 2001, provides effectual protection and rights to the proprietor of trade Markss.
As WTO sets criterions sing labour and other issues, therefore the industry needs to undertake all the labour issues to which the consumers in the importation states are sensitive to. It needs to be ensured that the leather industry in Pakistan adheres to the working status demands that have been developed by certain international organic structures, peculiarly, the associations of leather industries in the importing states of the West. ( iin.com.pk )
Export History of Leather Sector
The old ages considered in the study are 2005 – 2009. ( SBP Export Receipts )
Analysis of Export History 2005-2009
Leather export in 2009 witnessed a bead of 20 % , which was expected to lift to 25 % by the terminal of the financial twelvemonth. It was because the leather sector needed an immediate deliverance bundle from the authorities and was confronting a capital crisis. Another major ground for the autumn in export was because the conveyance monetary values had risen, which was an index of farther shut down of industries ( Chinese Leather, 2010 ) .
Industry leaders say that leather sector`s exports have suffered partially due to a lower demand amid planetary recession and partially because leather industries in China, India and Bangladesh have become more competitory on the dorsum of inducements. Leather garments exporters in China, for illustration, have 13-15 per cent responsibility drawback while their Pakistani opposite numbers get 2.4 per cent.
For past many old ages, leather industries have been importing finished leather to supplement local purchases. Harmonizing to a recent study of International Trade Organization-an affiliate of the UN and WTO-Pakistan spent $ 76 million in 2006 on imports of animals` fells and teguments.
“ So there is a strong instance for developing farm animal sector and bettering the system for roll uping, continuing and completing fells and teguments as natural stuffs for leather industry, ” an functionary commented
Makers of leather merchandises say since Vietnam`s export of footwear to the US has become duty free this excessively is aching Pakistan. To take advantage of this, many Chinese leather industries have relocated into Vietnam. “ This has made it even more hard for us to vie with Vietnam, as Vietnam is exporting really inexpensive footwear to the US taking advantage of the economic systems of graduated table introduced by Chinese companies, ” says Sheikh Javed Ilyas, a former president of Pakistan China Business Council. Since Vietnam is portion of ASEAN and its exports to ASEAN states are tariff-free, this besides frustrates Pakistan`s efforts to perforate into ASEAN markets.
Furthermore, from Yiwu metropolis in Chinese state of Zhejiang, containers of inexpensive footwear are dumped daily into Pakistani market and that excessively hurts our footwear industry. This has compelled makers of joggers and at least one manufacturer of a prima trade name of slumberers to outsource production to Yiwu and take advantage of the low cost of making concern at that place. ( Dawn Archives e-paper, 2009 )
The Ministry of Industries has funded a survey to assist the Pakistan leather garment exports to make $ 5 billion by the twelvemonth. Pakistan ‘s leather exports witnessed a diminution of 29 per cent in the financial twelvemonth 2008-09, after a decennary of changeless growing. The crisp diminution in the exports of extremely value added and labour intensive leather sector, which is Pakistan ‘s 2nd top foreign exchange earner after fabrics and employs some 500,000 workers, is a affair of serious concern, naming for immediate remedial stairss to better the industry.
Before 2008-09, the state ‘s leather sector has been witnessing an rush in its export net incomes, which increased from $ 271 million in financial twelvemonth 1990-91 to $ 349 million in 1994-95, to $ 643 million in 1996-97, to $ 938 million in 2004-05 and to $ 943.788 million last twelvemonth.
Meanwhile, the export of leather garments moved from $ 736 million in financial twelvemonth 1996-97 to $ 1,088 million in 2004-05. Although the entire export net incomes of the leather sector increased till 2007-08, the per centum portion of this sector in the entire exports of Pakistan has decreased from 10.41 per cent in 1989-90 to 7.73 per cent in 1996-97, to about 7 per cent in 2007-08, and to 5.33 per cent last twelvemonth. In the planetary leather trade of $ 98 billion, Pakistan ‘s portion accounted for 1.29 per cent.
The export dropped from $ 19.1 billion in 2007-08 to $ 17.8 billion in 2008-09. ( Analysis leather industry, leather mag 2009 )
The ratio of cow/bull slaughter in Pakistan is higher than goat/sheep during the Eid forfeit. The per centum of slaughter of cows/bulls is approx 60-70 % as compared to 30-40 % goat/sheep. Soon the supply of fells from Brazil and South America has increased. The teguments procured from Middle Eastern and African states, particularly from Saudi Arabia and Ethiopia, are of medium quality.
Leather Industry: SWOT Analysis
1. Easy handiness of natural stuff
2. Management accomplishments learned
3. Easy handiness of labour
4. Presence of institutional supports for proficient, services, planing, human power, and selling
5. Export market in Europe and
USA and far East
6. Export friendly authorities
1. Insufficient degree of modernisation and engineering up step
2. Low labour productiveness
3. Lack of assurance among SMEs for farther growing
4. Lack of skilled labour
5. Environmental jobs
6. Lack of market information ( for SMEs )
1. Room for capacities use
2. Scope for bulk supply of finished leather to large Unit of measurements.
3. Product variegation & A ; new
1. Competition from regional participants such as China, India, Turkey, Thailand, Indonesia etc.
2. New ordinances of environmental and societal conformity
3. WTO ordinances
There is no uncertainty that the leather industry needs a major pull out from the slums if it is to vie in the international trade scenario and the criterions set by the World Trade Organization. It needs to get the better of its failings, but it will merely be possible once the authorities realizes the importance of the leather sector to the economic system, there is a transparence of financess injected into the sector by the authorities and trade name names need to be introduced on an international graduated table.
An association should be set up which should concentrate on every single merchandise type and tanning procedure of leather, to carry through the communicating spread.
Leather fabrication sector in Pakistan can besides endure because of monolithic smuggling of farm animal to other states, deficit of natural stuff and absence of the organized dairy agriculture in the state. Furthermore, diseases in the farm animal in Pakistan can turn out hurdle in the fabrication and exports of finished merchandises of leather. As a consequence the unrecorded animate beings are enduring from different diseases that damage the quality of the leather and stain the image of merchandises at international degree.
The responsibilities on the import of tanneries related machinery demand to be farther reduced. The machinery made locally is technologically inferior which non merely increases the cost of production but restrains from developing at par with the international market.