Shikder Toushik Ahmed

It was reported back in 2021 that the leather industry had rebounded spectacularly to pre-pandemic levels. This is a strong indication of the industry’s resilience and its potential to establish itself as one of the leading footwear exporters in Asia. This burgeoning industry is now considered a key sector in diversifying the country’s export basket and has been labelled a high priority by the government, attributable to the industry’s prospects for growth and huge employment opportunities. The footwear industry in Bangladesh surely has the capacity to tap into global demands, bringing in significant export earnings.

As per a report published on Globe Newswire, the global footwear market was worth USD 163.20 billion. By 2030, it is expected to be worth USD 220 billion, owing to a 3.8% CAGR over the forecast period (2022–30). The size of the local footwear market in Bangladesh is around BDT 17,000 crore as of 2020, as reported by the Dhaka Tribune. The largest part of the global footwear market is athletic footwear, which is expected to bring in more than USD 100 billion by 2025. Enthusiasm for fitness and sports is growing significantly among the mass population, and consumers in developing countries are spending more on the products in this segment. Over the upcoming years, the women’s footwear market is expected to grow because women these days are looking for stylish and comfortable footwear that can be worn at both formal and casual events. Another critical factor in the growth of this segment is the growing number of working women.

Due to sluggish economic growth in the countries of Europe and North America, the global market for shoes is growing at a moderate rate. However, the footwear market is expected to grow significantly in Asia Pacific and Latin America in the upcoming years.

Contemporary Scenario

Footwear was not a traditional Bangladeshi export. The industry does not have a long history of recognition in the international market, much like ready-made garments (RMG) or the jute industry. Non-leather footwear made in China is well appreciated for its great quality all around the world. However, Bangladesh has had success in this field. According to the Export Promotion Bureau of Bangladesh, Bangladesh exported non-leather footwear worth USD 449 million in FY2021-22, a 30% increase in exports compared to FY2020-21. According to a report published by the Daily Star, Bangladesh’s leather and leather products industry grew by 17.56% year-on-year in the first five months of FY2022-23, although the world economy is in bad shape.

According to a recent publication on Prothom Alo, there are 220 tanneries and 3,500 MSMEs in Bangladesh that are active in the processing and manufacturing of leather. Most of the leather processing units and footwear manufacturers were located at Hazaribagh previously, and they were shifted to Savar later on. Most of these factories use traditional machinery and employ traditional workers with a focus on making quality handmade footwear. Facing fierce competition from major footwear exporters like China, businesses in Bangladesh’s footwear industry are aiming to create high-quality goods to meet consumers’ demand both in the domestic and international markets. Nowadays, firms emphasise on using advanced manufacturing facilities that adhere to environmental regulations.

Since the COVID-19 pandemic, international buyers have been considering shifting their dependency from China to mitigate the risks associated with a single supplier. In line with that, giant footwear companies have begun to switch their focus to manufacturing units in Bangladesh and other native Asian countries. The top non-leather footwear export destinations for Bangladesh are Spain, France, the Netherlands, South Korea, India, Germany, and Italy.

Forces Contributing to the Industry

The footwear industry has undergone massive transformations over the years, and the industry is now enjoying steady growth. There are some factors that have contributed to this feat. Firstly, Bangladesh itself produces a massive quantity of leather as well as synthetic materials, which are the key raw materials for the footwear industry. Secondly, the footwear industry is a labour-intensive industry, and the cost of labour is comparatively low in Bangladesh. The cost of labour accounts for a significant portion of total production costs in developed countries, but it is much lower in developing countries and one of the lowest in Bangladesh.

The RMG industry is strongly tied to the footwear industry. As labour skills are transferable, it is possible for large apparel manufacturers to begin footwear manufacturing operations without much difficulty. Many apparel firms are entering the footwear industry these days, which may contribute to the expansion of the footwear industry in the upcoming days.

A consistent supply of raw materials, as mentioned earlier, is also playing a crucial role in the steady growth of the footwear industry in Bangladesh. Local sourcing of raw materials is enabling the manufacturer to ensure enhanced value addition. It is to be noted that Bangladesh has some of the world’s best cattle hides, goat skins, and valuable buffalo leather.

Being a Muslim-majority country, Eid al-Adha is profoundly observed in Bangladesh. Nearly 1 crore animals were sacrificed on the Eid al-Adha day of 2022, and this figure keeps growing every year. Eid al-Adha plays a significant role in meeting the demand for raw hides, as 70% of the yearly collection of animal skins is collected on Eid al-Adha alone. Due to the cyclical nature of the footwear industry, sales of footwear also experience an upsurge during the Eid season. Domestic sellers nowadays generate a large portion of their sales online through social media and online marketplaces. Along with the rest of the world, Bangladesh has also felt the gust of wind resulting from the rapid development of technology.

Hurdles to Glory

The aftershock of the COVID-19 pandemic and rising global inflation resulting from the Russia-Ukraine conflict may lead to a potential fall in exports of leather 23 of 36 and leather products. Limited access to bank loans and lengthy procedures for setting up factories, along with poor infrastructure, are preventing businesses from investing in this sector. The drive towards compliance, the lack of experienced workers, the unavailability of training programmes, and the lack of effluent treatment plants (ETPs) are all significant barriers. Additionally, the lack of certification from the Leather Working Group (LWG) and the complexity of cross-border trade are imposing major obstacles on the footwear industry’s ability to flourish. On the other hand, managing lead time is becoming difficult due to weak backward linkage. As a result, manufacturers are then required to import raw materials, accessories, and leather from international vendors. Quality issues often arise from flaws in raw materials coupled with a lack of skilled labour. In addition to that, weak logistical support leads to an inefficient and costly production process.

It is well known to everyone that chemical waste from the leather industry poses a severe hazard to the environment. Hence, liquid wastes are required to be treated with ETP before entering rivers. As a result of non-compliance, rivers are being contaminated by the liquid wastes generated by tanneries, and Bangladesh’s tannery industry is losing international clients.

Overcoming the Hurdles

There are effective solutions to the problems facing the footwear industry in Bangladesh. Firstly, access to capital and financial literacy must be ensured to help strengthen businesses. Additionally, government support and initiatives to encourage innovation, such as partnerships with universities and research institutes, can help develop new technologies and foster collaborations between companies. Productivity and quality can be improved by applying automation and international best practices. Global companies strictly follow safety and sustainability standards. Hence, footwear manufacturers must focus on compliance issues.

With an abundance of cheap labour and the footwear industry being a labour-intensive industry, Bangladesh has the potential to become a global footwear-sourcing hub. The government is ready to cooperate with investors from home and abroad to uphold the sector and promote foreign direct investment (FDI) to develop backward linkages for the industry. The demands of the export market cannot be addressed by SMEs bringing in foreign orders, manufacturing the proper products, and fulfilling the large quantities themselves. As some compliant factories are burdened with orders, subcontracting to SMEs would be more efficient. This will create a market link, allowing SMEs to integrate into the supply chain and participate in the global value chain. Small businesses can gradually acquire skills, improve, and grow their business.

The natural contamination of leather factories can be minimised by setting up eco-friendly plants. The central ETP in the industrial areas must be functional so that contamination-related issues are solved. In order to remain globally competitive, more leather training institutions should be established in the country to train employees in this sector. An environment that is conducive to entrepreneurship needs to be created by providing incentives and resources so that it can help grow more small businesses in the sector. Additionally, investing in new digital technologies, such as 3D printing, can open up new opportunities for businesses in this sector. Finally, creating a favourable business environment by reducing red tape and improving access to international markets will help foster growth and improve efficiency.

With the aim of diversifying the export basket, the footwear industry is emerging as an eminent sector. Bangladesh can avoid being heavily reliant on the RMG sector as its core foreign currency earner by taking initiatives to develop the footwear industry. Global certifications, compliant factories, and advanced footwear design studios are essential for long-term growth. In light of the growing demand for synthetic footwear around the world, Bangladesh has the potential to be a key exporter of footwear to global markets in the foreseeable future.