Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
cash cow
Mohammad A Razzaque
Published at 11:22 pm February 24th, 2018
A promising industry
The global LLGs market expanded from $75bn in 2000 to $167bn in 2015 –
indicating growing demand around the world and, thus, lucrative prospects for
exporting countries. During the same period, Banlgadesh’s exports expanded by
about $1bn (from $200 million to $1.2 billion). Compare that with China’s
expansion of $46bn, India’s $5.4bn, and Indonesia’s $2.7bn in leather exports. In
2015, Vietnam’s leather and leather goods exports reached almost $8bn -- up
from a very negligible amount in 2000. These countries were able to cash in on
growing opportunities by investing to further develop their domsetic LLG
industries. There has also been a shift in the export composition of the leading
exporters. The average share of raw leather in total LLGs declined from 33% in
2000 to 18% in 2015. That is, most leading exporters have shifted from raw
leather to higher value-added and more sophisticated finished leather products. In
2015, the share of raw leather in Bangladesh’s total LLG exports was 28%.
Although it has declined considerably over the years, the share of raw leather in
Bangladesh’s total leather exports is still very high. Bangladesh’s LLG exports are
highly concentrated in a few markets. It exports 44 leather product s (at the HS 6-
digit level) to 84 destinations. In comparison, Vietnam exports 59 items to 122
markets and China sends 65 products to 209 foreign markets. The share of
Bangladesh’s exports to the USA, the largest importer of LLGs, is substantially
lower than that of its competitors. While China, India, and Vietnam export 24%,
19%, and 41%, respectively, of their export sales of finished leather articles to the
USA, the corresponding figure for Bangladesh is only 7%. A comparative analysis
shows that Bangladesh exports very high quality raw leather. Although some
Bangladeshi leather articles and finished products are also of good quality, for
these products there exists a substantial scope of overall quality improvement,
which will help us to grab more market share and sell at higher prices. Particularly
in leather footwear, Bangladesh’s quality is rather mediocre, as revealed by the
unit value prices. Given the availability of local raw materials, know -how of the
supply management within the export industry, and expressed policy support, the
leather industry has a huge potential for transformation, generating billions of
dollars in additional export earnings. The realization of this potential however
depends on several factors. The second part of this article will discuss those
factors and the challenges we have to overcome. Dr Mohammad A Razzaque
is an economist. This article is an outgrowth of a project of the Bangladesh
Enterprise Institute (BEI).