Compliance gaps, partial CETP, and governance issues stall sector’s true potential
Bangladesh’s leather industry holds the potential to emerge as a $10 billion export sector by 2035, but only if it receives comprehensive policy backing and targeted financial incentives similar to those granted to the ready-made garments (RMG) sector. Despite decades of promise, leather exports have struggled to surpass the $1.6 billion mark in recent years, hovering between $1.2 and $1.6 billion annually.
This ambitious projection was presented during a focus group discussion hosted by the Dhaka Chamber of Commerce and Industry (DCCI), bringing together business leaders, policymakers, and representatives from industry associations. The consensus was clear: Bangladesh’s leather sector remains underutilised, primarily due to infrastructure deficits, regulatory fragmentation, and a lack of international certification.
A key barrier to growth continues to be the incomplete functionality of the central effluent treatment plant (CETP) at the Savar Tannery Industrial Estate. Although the relocation of tanneries from Hazaribagh to Savar was undertaken to meet environmental standards and safeguard public health, the CETP still fails to meet international compliance requirements. This ongoing failure has severely hampered the industry’s ability to satisfy environmental standards mandated by global buyers, many of whom now prefer sourcing from other countries with better environmental performance.
The absence of internationally recognised certifications, such as those provided by the Leather Working Group (LWG), remains another major obstacle. Without these certifications, Bangladeshi leather products are often disqualified from premium markets, particularly in Europe and North America. The lack of compliance and traceability standards not only affects brand perception but also leads to diminished price realisation for local exporters.
Compounding these challenges is the fragmented governance structure overseeing the leather sector. Unlike the RMG industry, which operates under a relatively unified policy and regulatory umbrella, the leather industry currently falls under the jurisdiction of multiple ministries and agencies. This has resulted in inefficiencies, overlapping responsibilities, and a lack of coordinated planning. Industry stakeholders have called for the sector to be brought under a single ministry to enable focused development and more responsive policymaking.
Another significant concern raised during the discussion was the poor financial discipline among several tannery operators, particularly in relation to unpaid utility bills. Many tanneries have accumulated large arrears in electricity, water, and waste management payments. These delinquencies have created systemic operational challenges and strained service delivery within the industrial estate. Timely payment of utilities was identified as a critical step to maintaining sustainable operations and avoiding supply disruptions.
Industry leaders also noted the need for structural reform within the sector, including the facilitation of an orderly exit for struggling or disinterested firms. The presence of numerous non-compliant or inactive players has diluted the industry’s overall performance and made access to finance more difficult for capable, growth-oriented firms. Streamlining the industry through the removal of underperforming units could improve productivity, attract investment, and enhance competitiveness.
From a policy standpoint, there is growing demand for the extension of bonded warehouse facilities and other RMG-style incentives to leather exporters. These measures would allow firms to reduce operational costs, access imported inputs duty-free, and increase their participation in global supply chains. Trade associations argue that such incentives are essential for enabling the sector to scale up and diversify into higher-value leather goods, such as footwear, bags, and accessories.
Government officials present at the discussion acknowledged the industry’s concerns and highlighted steps being taken to improve the regulatory and compliance ecosystem. The Ministry of Industries has reportedly begun coordinating with other stakeholders to create a more holistic support framework for the leather sector, including technology upgrades, skills development, and environmental sustainability initiatives.
While some officials pointed out that certifications like LWG are only necessary for a specific segment of the market—approximately 17–18%—they also admitted that Bangladesh has failed to penetrate the wider global leather trade, which offers vast untapped potential. Currently, the country accounts for less than 1% of global leather exports, despite having access to abundant raw materials and a long history in tanning and leather craftsmanship.
The DCCI and other trade bodies emphasised that leather has the potential to become the second-largest export earner for Bangladesh after RMG. With its strong backward linkages, especially in the availability of raw hides and skins, the sector offers significant value addition, employment generation, and foreign exchange earning potential. However, realising this potential requires a comprehensive overhaul of current practices and a focused industrial policy.
In addition to government support, industry insiders also stressed the importance of adopting new technologies, modernising production systems, and ensuring strict compliance with environmental standards. These steps are necessary not only for expanding market access but also for protecting Bangladesh’s long-term environmental and social sustainability.
Calls were also made to integrate leather industry needs into bilateral and regional trade agreements, which could open up new markets and facilitate smoother export processes. Developing trade ties with high-demand regions such as East Asia, the Gulf, and emerging markets in Africa could help diversify Bangladesh’s export portfolio beyond traditional Western destinations.
In summary, while Bangladesh’s leather industry has remained stalled for much of the past decade, the pathway to a $10 billion export target is not out of reach. It will, however, require decisive government action, industry reform, improved compliance, and integrated policy support—elements that helped transform the RMG sector into a global success story.
