Leather industry does not appeal to local labour21 March 2005
After facing deficits for a decade, Saudi Arabia has announced a balanced budget for 2005 projecting expenditure of around $74.6 billion. King Fahd, addressing the budget session of the council of ministers, announced that his government would give priority to development projects, training of manpower and repaying public debts. Saudi Arabia has been successful in training youth in many fields except leather for which no-one has come forward to join. In what is considered to be a bad smelling business, only the proprietors are Saudis while all the employees are expatriates. The classification for expatriates working in tanneries is as follows: a) technicians, experts in tanning - from Türkiye and India b) clerks and accountants - Egyptian and Sudanese who understand Arabic c) labourers from Pakistan, India, Bangladesh, Sudan etc The Arab Free Trade Zone (AFTZ) which came into force at the beginning of 2005 will give a new boost to Saudi Arabia's non-oil exports, particularly leather and leather products, as with the introduction of the new system, custom tariffs will be removed on exports and imports on a mutual basis among all the signatories to the zone agreement. There are 17 signatories to the Arab Free Trade Zone agreement at present. They are: Saudi Arabia, UAE, Bahrain, Kuwait, Qatar, Oman, Yemen, Egypt, Jordan, Syria, Iraq, Lebanon, Libya, Morocco, Tunisia, Sudan and the Palestinian Authority. Mauritania, Somalia, Djibouti and the Comoros Federation are expected to join AFTZ shortly. Algeria has not yet become a member of AFTZ. Among Saudi Arabia's non oil exports, the chemical industry is the number one exporter. Second highest export is of dates and leather comes possibly third or fourth. The industry has made huge progress during the last eight years. The aggregate exports of leather (including hides and skins, fur skins, finished and semi-finished leather and leather-made products) climbed to SR250 million last year, which represents almost 300% increase in five years (1999-2003). These exports rose gradually from SR56 million in 1999 (US$ 14.9 million) to SR176 million by 2002 and they are poised to make further progress in the years to come. Of these, finished and semi-finished leather items contribute the lion's share, reflecting the recent growth of this industry in Saudi Arabia. In 2003, exports of these products accounted for around SR212 million ($56.5 million), as compared to SR176 million in 2002 and SR151 million in 2001. Exports of leather products such as handbags, suitcases, and other leather goods (mostly re-exports) and other items stood at around SR10 million last year. In addition, Saudi Arabia also exported fur skins worth over SR2 million ($533,400) during the period. Semi processed sheep constitutes nearly half of the total Saudi exports in this sector. Last year, Saudi Arabia exported around SR111.2 million ($29.6 million) worth. Table 1 shows the official exports of raw hides and processed leather as published by the Central Department of Foreign Statistics, Ministry of Economy and Planning of Saudi Arabia. It does not include the figures of unregistered exports through the 'suitcase trade' as many buyers come to Saudi Arabia to make cash purchases. Saudi Arabia has set up a high powered Saudi Exports Forum to push up the sales of non-oil exports under the Saudi Development Centre, Riyadh. The biggest problem for Saudi Arabia is to absorb the educated youth who have graduated from local or foreign universities. The oil industry is fully mechanized. There is little scope for absorbing these educated people. Efforts are being made to open up more non-oil industries for which the government is giving land at nominal prices and bank loans with minimum charges and interest rates. In Saudi Arabia there are a dozen mechanized tanneries situated in Riyadh, Jeddah, Dahran, Taif, Medina, Khamis Mushayat (Southern Saudi Arabia). In Riyadh Industrial Area, there are three or four fully mechanized tanneries with their own treatment plants. Al-Dagal Leather Factory Al-Dagal Leather Factory in Medina is run by three brothers under the guidance of their father, Abdul Qadir Aldagal, who was a hides and skins merchant before setting up the factory. He used to export hides and skins to Türkiye over land. Road links from Medina to Istanbul are very good. Saud Al Dagal, marketing manager for exports and products, has organised his operations into four divisions. One division produces wet-blue, another division produces finished leather from the wet-blue. The third division produces chappals, shoes and garments for local use and the fourth division sells shoes and garments produced in their own factory as well as imported shoes from Italy and other countries through their own showrooms (about 40 throughout Saudi Arabia). His elder brother Talat is in charge of purchases of raw skins and hides to maintain the high quality of their production. Another brother Khalid is in charge of finances. This is the biggest chain of showrooms for shoes and garments run by one leather factory. Their showrooms have been decorated and furnished to European standards. The company produce half a million sq ft of finished leather from sheep and goat for leather uppers and lining. Saud Al Dagal told Leather International that their aim is to produce leather which can be used for the value added production of chappals, shoes and garments. Average exports are around 90 containers of wet-blue. Their customers are Italy, Korea, Pakistan, India, Mexico, Spain, Türkiye, China among others. Saud Al Dagal said that the company has embarked on a large expansion programme with between $7-9 million invested in importing machines for processing their wet-blue into finished leather and manufacturing more chappals and shoes which are in much demand locally as well as in the Gulf region. Demand for chappals goes up during the month of Ramadan & Haj when about 3 million pilgrims visit Medina and Mekkah. Their plans are to import one conveyer belt dryer suited to the local climate, two toggling machines, one splitter, one embossing machine, one vacuum dryer, one shaving and one fleshing machine. Orders for some of the machines have been placed. Saud said out of above list, three machines have already been imported. It is expected that the production of finished leather will increase by about 40 to 50%. Al Ahli Leather Factory Al Ahli Leather Factory, situated in the third industrial area of Riyadh, is one of the biggest tanneries in Saudi Arabia. Yasser M Saeed, deputy general manager of Al Ahli Leather Factory told Leather International that they produce quality leather from select skins from well known breeds of goat, Arabic, Najidi and Harri, which have a better grain for the production of quality leather. Al Ahli have modern machines using the latest technology to produce wet-blue, crust and finished leather as well as fur. They export wet-blue to Italy, Portugal, Spain, and Czech Republic in Europe, to Hong Kong and South Korea in the Far East, and India and Pakistan. Yasser M Said said they have increased the production of value added items by manufacturing chappals, handbags and shoes for the local and Gulf market. He said that Al Ahli participate in all of the world's leading leather exhibitions. Saudi Tannery A big tannery on the eastern side at Dammam is Saudi Tannery Co which processes more than 300,000 sheepskins annually out of which 150,000 skins are processed into crust and finished leather. Al Khalef, the proprietor of the tannery, said Saudi Tannery is a subsidiary of Hamood Al Group of Companies. Al Khalif pointed out that one of the major problems facing the Saudi Tannery is importing different types of chemicals for processing raw hides and skins. He added that sometimes the port authority causes unneccessary delay in the clearance of their chemicals, which affects the schedule for production and exports. New tannery A new tannery to be set up is Middle East Tannery in the industrial area of Jeddah. The tannery is being established by Nasir Omar Basahel who was a director of the Basahel tannery. Nasir Omar Basahel has also set up a shoe factory in the industrial area of Makkah. The shoe factory will have machinery from Italy.