Banning the Export of Raw Hides11 January 2001
In 2000 demand for domestically made leather continued to increase. However, the growth was deterred by the lack of raw hides. The major reason for this is the continuing export of raw hides and the reduction of livestock capita and cattle slaughtering. The livestock capita has reduced twofold since 1990 and is continuing to fall. The average weight of an animal has fallen from 390 kg to 250 kg (a 39% fall). Accordingly, the average yield of finished leather from one cattle hide has fallen from 320 dm² to 260 dm² (19% down). The conditions of keeping the cattle have deteriorated, while the level of diseases such as gadfly, scab, mange and tick has greatly reduced the quality of the hides. In up to 75% of cases slaughtering is performed on private farms without observing good slaughtering practices and the conservation of hides is limited. This results in the increase of raw hide expenditure and for one unit of production, costs have increased by 20-25%. However, about 80% of the best hides, first and second grades, are exported by commercial firms leaving only 20% of low quality raw hides for internal production purposes. Repeated appeals from regional leaders of Kursk, Tambov and Kirov regions, as well as of Saint-Petersburg, Tatarstan and others, have made the Government aware of this problem and by 1999 export duties on rawstock were introduced at a rate of 10% of the export volume. This was raised to 15% from the beginning of May. However, this measure proved to be ineffective, as demand for Russian raw hides, the cheapest on the world market, has grown by 150% in the last few months, with a consequent rise in prices. Under these conditions tanners badly needing raw materials have to purchase a certain percentage abroad, in spite of the fact that import prices for raw materials are 150-200% higher than for those produced in Russia. This is why big purchases are economically ineffective. The supply for cattle hides is 18-20% less than demand, though the export volume is quite significant. Currently the leather industry can process all the procured raw materials - 9.6 million pieces. The analysis shows that the absence of measures on limiting the export of raw leather have led in 2000 to the fall of production of finished leather. Due to export of the best raw materials the manufacturers of high-quality leathers cannot fulfil their orders. In some regions, such as Bashkortostan and the Omsk Rostov region, measures on limiting raw hides export are being taken, but they are of little effect, as it is difficult to control the process since there are no boundaries between the regions. Exporting raw hides from Russia supports foreign manufacturers. According to the statistics 40% of raw materials for leather production in Italy comes from Russia, and Italy accounts for 60% of leather produced in Europe and the average exports leather worth $3 billion annually, ie 25% of finished leather made in Europe is from Russian raw hides. However, these profits do not return to the budget of Russia. Information from China, India, Pakistan and other countries shows that the introduction of a ban on the export of raw hides helped to attract foreign investments for processing raw materials. For instance in China, the leather and footwear industry is rapidly developing owing to Italian, Portuguese and German investments. An export ban on raw hides, if introduced, will increase state budget receipts by $66.97 million, export proceeds from semi-processed goods and leather by $3.3 million, whereas returns to the budget from export of raw cattle hides in 1999 amounted only to $12 million. If a temporary ban on raw hides export is not introduced it will again result in a fall. In April-May 2000 alone, output growth rate fell by 50%. In future this could lead to a collapse of the domestic leather and footwear industry, as in 3-5 years its main assets and equipment will be impossible to restore. The introduction of a ban for 2-3 years on the export of raw hides will give the following advantages for home leather manufacturers: * 3-fold increase of semi-finished and finished leather * improve slaughter technology and conservation of hide, change the existing procurement and processing system due to joint work with agrarian sector * will attract investments into manufacture of leather and footwear * increase tax receipts * enhance compatibility of Russian goods * two-fold increase of employ ment in leather and footwear industries and in incomes of the population.