Opportunities for the leather sector under CPEC
19 Jun , 2018
Leather and leather products are the most important industries in Pakistan and the third most dynamic industrial sector after cotton, textiles and rice. The leather industry in Pakistan includes about 800 small, medium and large industrial units and tanneries. According to the PTA, the contribution of the leather industry to GDP is 2.6%, which accounts for 5% of the country's total exports. It provides employment opportunities for more than 1 million skilled and semi-skilled workers. However, for the last five years, statistics for exports of leather goods depict a grave situation. Pakistan is drastically losing its exports share in the traditional leather markets to other regional states. Common reasons quoted by the industrialists, factory owners and the government are an increase in the cost of production, failure of domestic industries to comply with environmental standards and a decline in the supply of leather as a raw material. For the last five years, Pakistan had an export of $1.2 billion in the leather sector. This may appear reasonable; however, two things make the situation sore. Firstly overtime, leather exports are exhibiting a decking trend. As per PTA official data the leather and leather products exports recorded a fall of 6.76 percent to $0.757 billion in 2016-17 from $0.812 billion in 2015-16. Export of leather apparel and cloths declined by 8.95 percent, gloves by 5.38 percent, footwear by 6.35 percent during 2016-17 as compared to 2015-16. Secondly, share of neighboring countries in the global leather market is increasing and they are achieving double-digit growth. China’s leather export rise by 20 percent, India’s by 63 percent and Bangladesh’s 100 percent. Pakistan’s share of 0.5 percent in the global market for leather is insignificant compared to China’s 19 percent, Italy 9 percent, Vietnam 4 percent and India 2.5 percent. Increasing economic cooperation with China under the China-Pakistan Economic Corridor (CPEC) has the potential to boost the growth of Small and Medium Enterprises (SMEs) through joint ventures between businessmen of the two countries, and modernization upgrade of the existing leather industry through transfer of technology and financial assistance. There is a wide scope for joint ventures between Pakistani and Chinese SMEs, especially in the fields of leather and apparel, because China currently dominates the conversion of leather into finished leather goods; however, with rising labour costs, Chinese leather industries are willing to relocate to other developing economies. Globally, the demand for leather garments exhibit a stable trend, however, the demand for leather products continues to expand. Pakistan is well positioned in this regard because of the availability of finished leather and competitive labor costs. Growth has been restrained by an inability to meet changing customer demands including a fast turnaround for fashion items. Pakistan has the best quality of raw material (raw skin and leath...