Leather challenge for central Asian republics23 April 2002
Uzbekostam The development of the Uzbek leather industry is the most dynamic in central Asia. Following the break-up of the Soviet Union, the industry went into severe recession, due mainly to the loss of state orders, the demise of markets in the former Soviet states, the use of outdated production technologies and inefficient economic relations with distributors and end consumers. BISNIS, part of the US Department of Commerce, Washington DC, reports that the Uzbek government has separated the leather industry from the textile industry. This has been done to explicitly identify the leather industry as an important sector for development in its own right. A government decree in 2001 established a new leather development agency called the Uzbekcharmpoyabzali (Uzbek Leather and Shoe Association), responsible for the procurement and processing of leather and the development of the capacities of leather processing and shoe manufacturing plants. Uzbekcharmpoyabzali also aims to stimulate Uzbek exports of ready-made leather products and restrict the export of raw leather, in order to ensure supplies for domestic leather processing plants. The agency currently has 13 procurement branches and 111 co-operative livestock producers. It employs 1,500 people in the procurement area alone. One success that has been registered by Uzbekcharmpoyabzali is to initiate the processing of sheep and goat skins, which were not processed in the past. These skins are being processed in newly-established tanneries, according to BISNIS. Currently, there are four joint stock companies, three joint ventures and three private companies processing leather in Uzbekistan, with a combined annual processing capacity of 3.5 million skins. Uzbekcharmpoyabzali purchase skins from slaughterhouses, individuals and farmers. The Uzbek leather industry is in chronic need of new technologies, chemicals, spare parts and other equipment from foreign suppliers. Also sought is technical and scientific co-operation with foreign companies. Uzbekcharmpoyabzali is currently seeking co-operation with domestic scientific institutions to develop new products in all areas of the leather industry. BISNIS notes that Uzbekcharmpoyabzali plans to attract foreign investment in modernising various leather production facilities, notably in the Khodjaabad, Urgench and Kokand regions. All plants in Uzbekistan's leather industry are seeking foreign investment and investors are invited to participate in investment projects. The Kofra Uzbek-French joint leather footwear venture in Kokand is one venture already established with foreign funding. The plant has recently supplied its first batch of 10,000 pairs of footwear to the Uzbek market, and plans to produce one million pairs this year. It imports some of its required leather from France, but reflecting the growing dynamism and confidence of the leather industry, Kofra plans to increasingly source leather from Uzbek tanneries. Uzbekcharmpoyabzali held a major wholesale and retail contracts trade fair in Tashkent in early December, 2001. The fair mainly focused on the signing of wholesale supply contracts for goods produced by the association's member enterprises. These goods ranging from tanned leather to consumer products such as shoes. Kazakhstan The United States Department of Agriculture's Foreign Agricultural Service (USDA FAS), citing Kazakh statistics, has reported that Kazakhstan's combined cattle and sheep population increased by 1% in 1999, following years of steady decline. The pig population increased by 10%. At the start of year 2000, the total number of cattle in Kazakhstan was four million, including two million cows, of which the private sector accounted for around 92%. A further increase in cattle numbers was expected in 2001 due to stable demand from processors, but with a continuing fall in the number of cattle on state sector farms. However, poor management and a lack of investment are among the factors limiting increases in production and higher efficiency, according to the USDA FAS. In spite of an increase in cattle slaughters, the total production of bovine skins in Kazakhstan in year 2000 fell by 10% year-on-year due to poor production techniques. Around 90% of skins were exported to Türkiye and China due to low demand from domestic companies. At the start of January 2000, there were 9.7 million head of sheep in Kazakhstan, a year-on-year increase of 100,000 head. Figures released recently by the Kazakh National Statistics Agency put the number of sheep and goats at 10.4 million at the start of 2002. The number of pigs increased by 24% in year 2000 to 985,000 head, with a further increase in pig numbers to 1.13 million head at the start of 2002. Foreign investors remain to be convinced about investing in Kazakhstan's leather industry. According to the National Bank of Kazakhstan, foreign direct investment in the production of leather and leather products in Kazakhstan in the first half of 2001 was worth only US$300,000 or less than 0.1% of total foreign investment in the country during the period. With this in mind, the increase in the production of leather, leather products and shoes by a substantial 220% to a value of 2.6 billion tenge (US$1 = 152 tenge) in 2001 can be considered a major achievement by the Kazakh leather industry. Livestock production last year was 3% higher year-on-year. The Interfax news agency reports that that the Siriopet tannery in Petropavlovsk produced leather worth more than US$3 million in 2001. Siriopet are owned by the Sirio Leather Group Ltd, themselves part of the East Hides Group (see Leather International, March 2002). Siriopet have a monthly production capacity of 170 tonnes of leather and leather products. Production is mainly semi-finished chrome tanned cowhide. However, since May 2001, Siriopet have also been producing sheepskin. Siriopet are Kazkhstan's oldest tannery with a history going back to 1850. They resumed production in December 2000 after being idle for the previous five years. Their main export markets are Italy, Spain, India and Hong Kong, according to Interfax. Kazakhstan has yet to make a breakthrough on the American market with its leather and leather products. Figures supplied by the USDA FAS reveal that Kazakhstan exported hides and skins worth US$14,000 to the American market in 1996, the highest figure since at least 1970. However, there have been no Kazakh hides and skins exports to the US since then. American hides and skins exports to Kazakhstan were worth a mere US$7,000 in year 2000, with no exports in the previous four years and in the first ten months of 2001. However, US livestock exports to Kazakhstan of US$133,000 in the January to November 2001 period were the highest since at least 1970. These were no US livestock exports to the Kazakh market in the previous five years. Kyrgyzstan Kyrgyzstan's leather export sector had a highly successful time in the first ten months of 2001, according to the Interfax news agency. The country exported 16,200 tonnes of cattle hides during the period, a year-on-year increase of 70%, with 91% of exports going to China. Sheep and lambskin exports totalled 1.73 million pieces, a year-on-year increase of 23.7%, with China accounting for 67% of exports and Türkiye for 30%. Overall, ten-month 2001 exports of hides, leather and leather products increased by 30.7% year-on-year to a value of US$3.8 million. These export increases are at a time when the Kyrgyz market is fully supplied with leather and leather products. Kyrgyzstan's Ministry of Agriculture reported in early February this year that slower growth in the livestock breeding sector can be expected in the near future. The eleven livestock farms breeding pedigree cattle in the country were said to be in a difficult financial situation, having accumulated huge debts in recent years. Turkmensistan The USDA FAS reports that the US exported livestock hides and skins worth US$1.28 million to Turkmenistan in 1999. In the previous three years there were no such exports and this also the case since 1999. Turkmen hides and skins exports to the US came to a negligible US$1,000 in year 2000, the same figure as in 1996. Tajikistan The Tajik government has recently started a privatisation programme, which includes the privatisation of the Kukhandiz tannery in Dushanbe. The plant was built during Soviet times and depended entirely on shipments of raw materials from elsewhere in the former Soviet Union, according to the Interfax news agency. The plant, which employs 100-200 people, needs to be modernised and requires a sales strategy. The USDA FAS notes that the most recent American hides and skins exports to Tajikistan occurred in 1996, when goods worth US$134,000 were exported to the republic. Tajikistan exported hides and skins to the US worth a token US$1,000 in 1996 but there have been no further exports since that time.