Leather industry face increased cost of production13 April 2007
Total exports of leather manufactured goods, including leather garments, leather gloves, and other items made from leather, stood at $261.7 million during the first six months of the current fiscal year (July 2006 - June 2007) as compared to $378.7 million in the corresponding period of the previous year. During July-December 2006 leather garment exports came down to $188.2 million from $268.8 million in the same period of 2005 which shows a reduction of 29.9%. Moreover, exports of other leather manufactured goods declined to $16.2 million from $38.2 million. During the period a decline of 18% was also recorded in leather footwear. The country exported 6.03 million pairs of leather shoes valued at $59.4 million during July-December 2005 which came down to 4.9 million pairs in quantity and $49.1 million in value between July-December 2006. The chairman of the Pakistan Leather Garments Manufacturers & Exporters Association (PLGMEA), Southern Zone, Rizwan Rashid told journalists that higher production costs are making Pakistani exporters uncompetitive in the international market and this was the main reason for the decline. 'In 2005-06 the government gave a 5.17% customs rebate which has now been slashed to 3.22%.' Also during the last fiscal year a 25% freight subsidy was extended to leather garment exporters. This has now been removed and as a result exporters are no longer competitive. The Pakistan leather industry is facing enhanced costs of production due to increases in the rates of oil and gas and this has affected exports. This was stated in an interview with Leather International by S M Muneer, a leading figure in the leather industry. Muneer has been chairman of the Pakistan Tanners Association (PTA) several times and chairman of the apex trade body, the Federation of Pakistan Chambers of Commerce & Industry (FPCCI). Muneer said that besides the increasing cost of utilities, the prices of chemicals have increased, although the prices of raw skins and hides are stable. According to Muneer there is a demand for large sized goatskins. Against this, at present, China and India are giving tough competition to Pakistan's leather industry. Muneer's tannery was originally set up by his late father S M Din about 40 years before. His father started business with the export of raw skins. Din Leather (Pvt) Ltd export finished leather worth around $25 million. Muneer said that their goat leather is considered of top quality for shoe upper as well as for lining for garments. They export to China, Japan, Korea, Hong Kong, Germany and Italy. Din Leather (Pvt) Ltd will be showing at APLF Hong Kong on Stand 2K10, Hall 2. Chinese shoes hitting local industry Two big shoe making companies are said to be getting their products made in China where they do not have to pay for their electricity and get cheap and disciplined labour. Well known Indian companies have also moved their manufacturing to China, taking advantage of free trade zones for sale of their products. To keep their business going, manufacturers of leathergoods, garments and shoes have moved to China but by this arrangement they have rendered a large number of workers unemployed. In Pakistan and India, the leather garments and leathergoods industry is run mostly in the informal sector where employed labour is not registered and there is a growing number of unemployed not included in government figures. One tanner told Leather International that the leather industry is affected by globalization and Pakistan and India cannot remain isolated. The flood of imported shoes and garments from China has impacted heavily on the industry. Some owners have survived by selling some of their buildings and surplus machines but the workforce cannot find alternative jobs. A glance at the July to November export figures reveal the declining trend in exports of tanned leather and leather garments. Hides and skins during Eid Pakistani markets are now flooded with Chinese shoes, Chinese joggers are sold at Rs300 while Pakistan joggers are being sold by some leading shoe manufacturers such as Bata and Service from Rs2,000-3,000, about ten times higher. Chinese shoes for kids are more comfortable, stylish and cheaper as compared to Pakistan. Shakil Ahmed, chief executive of Universal Leather (Pvt) Ltd and vice president of the Pakistan Tanners Association's Environmental Society, told Leather International that hides and skins collected by the tanners during the Eid season are available in substantial quantities to supplement their production for next few months, otherwise there would be big shortfall in supply of domestic raw material. Pakistan's cow and buffalo leathers have a fine grain and are in demand in the European and Far Eastern markets. However, there is a slight reduction in exports as the cost of production has increased due to high utilities prices (electricity, gas and water). The ratio of cow/bull slaughter in Pakistan is higher than goat/sheep during the Eid sacrifice. The percentage of slaughter of cows/bulls is approx 60-70% as compared to 30-40% goat/sheep. People usually prefer slaughtering cows/bulls as one cow/bull can be shared by seven people. Presently the supply of hides from Brazil and South America has increased. The skins procured from Middle Eastern and African countries, especially from Saudi Arabia and Ethiopia, are of medium quality. Renaming their tannery from Universal Leather & Footwear Ltd to Universal Leather (Pvt) Limited, Mr Shakil explained that since they no longer produce shoes it was decided to delete the word footwear. Universal Leather are a sister concern of the MIMA Group, a leading group of companies producing leather and affiliated products. Shakil said that the first effluent treatment plant is expected to be inaugurated by President General Pervez Musharraf. The plant will meet the requirements of NEQS which are in accordance with the international parameters for discharge in the industrialized world. The solid waste will be dried, pressed and treated and the sludge disposed of in the area allocated by the government. Gulzar Firoz, president, PTA (SZ) Environmental Society, and chairman, Standing Committee on Environment, Federation of Pakistan Chamber of Commerce & Industry (FPCCI), told Leather International that: 'Being associated with the leather industry, I would like to present an overview of the pollution aspects associated with the leather industry and the efforts made by the Pakistan Tanners Association (PTA) toward environmental conservation. The purpose is to demonstrate the commitment of the industry towards the environmental cause. 'The tanning industry is considered as one of the most polluting industries. Since it consumes large quantities of water and deals with animal skins and hides, the tanning process produces large quantities of wastewater, which is rich in organic content. Because of its heavy export orientation, the leather industry has always kept itself abreast of the global environmental movement. Its representative body, the Pakistan Tanners Association is the first industry association which has taken practical steps towards controlling the environmental pollution. 'The largest and most ambitious among the PTA's environmental projects is the environmental management programme for Korangi tanneries. This project is now complete and functional. Formal inauguration is expected to be held in February 2007. This plant will cater for effluent from about 170 tanneries located in Korangi. The conveyance system covering about 12km will bring all the effluent from tanneries to the plant. 'The technology is based on UASB and, therefore, the plant will also treat domestic wastewater which will be mixed with the tannery effluent in ratio 1.6:1. The total capacity of the plant is about 42,000 m3 per day. The total capital cost is about Rs492 million funded mainly by Trade Development Authority of Pakistan (TDAP), Ministry of Commerce, Pakistan Tanners Association members, Government of the Netherlands and provincial and city government. 'The management of the plant is under a separate body called PTA (SZ) Environmental Society which takes care of the implementation and management of this project. 'The experience of PTA (SZ) Environmental Society in the implementation of environmental management programme led to the following guidelines for other industrial associations in Pakistan: * Combined Effluent Treatment Plants are the mandate of industrial associations in collaboration with Trade Development Authority, local governments and international financing institutions. * Institutional arrangement for large projects should not be made in a rush, allowing sufficient time to make effective institutional arrangement pay back in the later important stages of the project. * Private sector institutions have the capability to execute large projects with proper support from the government and financing institutions. Involvement of government and financing institutions in decision-making should be on demand. 'The role the environmental service provides is preferably subordinate to the lead stakeholder institutions. The assistance of the service providers is required in three areas: project management, technical design, and construction. 'In the Korangi industrial area there is a new set up called the Korangi Industrial Trading Estate, Development and Management Company which is a private limited company. The members of the board of directors are from the Korangi industrial area. This body decided to set up a combined effluent treatment plant for Korangi based industries other than tanneries and this will be finalised by Federal Ministry of Commerce. 'A steering committee has been formed to look after this project and I have been nominated as chairman of this steering committee and very soon we will start a feasibility study of this project. 'To conclude it can be said that, whereas we should not follow a policy of industrialisation at the cost of environment, we should also be aware of the dangers inherent in following a policy of environmental conservation at the cost of industrialization. Striking an optimum balance among the two should be our recipe for achieving sustainable development over the next millennium. 'As a corollary of the above, I should add that the industry in the developing countries is equally vigilant to the state of environmental deterioration but due to economic and infrastructural problems, it needs the technical and financial assistance of the richer countries to ameliorate the state of environment. I believe that a meaningful south-west cooperation and multi stakeholder dialogue for the sake of our common future is more necessary now than at any time in the past.' Meanwhile, a three-member delegation of Biomax Environment Holding Company of China, led by Hank Huang, met Sindh Industries Minister Adil Siddiqi and expressed interest in investing in effluent treatment and recycling plants in Karachi's industrial areas. The delegation said the company was interested in cleaning and recycling the water disposed of in industrial areas. They said the company planned to invest $500 million with the city government of Karachi being the stakeholder. The delegation apprised the minister of details of the project and said that after visiting all the industrial areas of Karachi, they have reached the conclusion that millions of tons of water in industrial areas was going to waste daily yet it could be used after recycling. Chief executive of Biomex in Pakistan, Mukhtar Rizvi said most water recycling projects undertaken by this group in various countries had proved successful and now they planned to set up the plant in Pakistan. Awards to leather exporters The Federation of Pakistan Chamber of Commerce and Industry (FPCCI) recently organised a ceremony to award Best Export Trophies for the year July/June 2005/06. Four trophies were awarded to companies in the leather sector. The awards were presented by Prime Minister Shaukat Aziz: Leather garments: Leatherfields Ltd of Sialkot, exporting Rs1.8 billion; finished leather (bovine): Siddiq Leather Works Ltd, Lahore; leather gloves: Blue Horizon Ltd, Sialkot, exporting Rs457 million and Kampala Industries Ltd, exporting Rs232 million.