AVN 55.47 Decreased By ▼ -1.55 (-2.72%)
BOP 10.21 Increased By ▲ 0.08 (0.79%)
CHCC 129.20 Increased By ▲ 0.37 (0.29%)
DCL 9.10 Decreased By ▼ -0.22 (-2.36%)
DGKC 104.75 Decreased By ▼ -2.84 (-2.64%)
EFERT 67.05 Decreased By ▼ -0.45 (-0.67%)
EPCL 31.75 Decreased By ▼ -0.85 (-2.61%)
FCCL 21.15 Increased By ▲ 0.04 (0.19%)
FFL 13.15 Increased By ▲ 1.18 (9.86%)
HASCOL 13.64 Increased By ▲ 0.06 (0.44%)
HBL 129.74 Increased By ▲ 5.08 (4.08%)
HUBC 82.60 Increased By ▲ 1.20 (1.47%)
HUMNL 9.51 Decreased By ▼ -0.09 (-0.94%)
JSCL 15.68 Decreased By ▼ -0.17 (-1.07%)
KAPCO 24.35 Decreased By ▼ -0.40 (-1.62%)
KEL 3.60 Decreased By ▼ -0.11 (-2.96%)
LOTCHEM 12.96 Decreased By ▼ -0.24 (-1.82%)
MLCF 33.00 Decreased By ▼ -0.65 (-1.93%)
OGDC 113.55 Decreased By ▼ -0.95 (-0.83%)
PAEL 33.35 Increased By ▲ 0.60 (1.83%)
PIBTL 11.10 Decreased By ▼ -0.24 (-2.12%)
PIOC 80.06 Increased By ▲ 3.96 (5.2%)
POWER 8.74 Increased By ▲ 0.62 (7.64%)
PPL 99.30 Increased By ▲ 0.27 (0.27%)
PSO 183.52 Decreased By ▼ -0.48 (-0.26%)
SNGP 55.85 Decreased By ▼ -0.51 (-0.9%)
STPL 11.55 Increased By ▲ 0.34 (3.03%)
TRG 48.35 Decreased By ▼ -1.41 (-2.83%)
UNITY 12.57 Increased By ▲ 0.01 (0.08%)
WTL 0.97 Decreased By ▼ -0.04 (-3.96%)
BR100 4,097 Decreased By ▼ -40 (-0.95%)
BR30 20,920 Decreased By ▼ -239 (-1.13%)
KSE100 39,578 Decreased By ▼ -294 (-0.74%)
KSE30 17,158 Decreased By ▼ -163 (-0.94%)
COVID-19 TOTAL DAILY
CASES 280,461 432
DEATHS 5,999 15
Sindh 121,705 Cases
Punjab 93,336 Cases
Balochistan 11,777 Cases
Islamabad 15,095 Cases
KP 34,253 Cases

Times have been hard for the leather industry in Pakistan over the past several years now. The recently released leather export numbers by the Pakistan Bureau of Statistics (PBS) show a mixed picture with some segments showing growth while others continue to struggle.

According to PBS data, leather gloves and leather footwear registered growth of 15 and 17 percent respectively and have been enjoying good demand in international markets especially when it comes to gloves. However, leather garments which account for the bulk of leather exports remained stagnant and posted negligible growth. 

Growth has mostly been volume based whereas prices have seen a downward trend. This could be explained by the depreciation of the rupee whereas the rebates awarded under the government incentive package might also have played a part in boosting quantities.

Leather garment manufacturing declined by 16.8 percent in FY17 as compared to decreasing by 6.5 percent in FY16. Leather gloves dived by a whopping 28.6 percent in FY16 while declining by 5.1 percent in the previous year.

Multiple factors are behind the leather sector’s dreary performance. Industry stakeholders have decried the lack of government support for the sector. The electricity and gas tariffs has been an especially painful subject with leather manufacturers pointing to at least 30 percent higher tariffs when compared to regional competitors Bangladesh, Vietnam and India.

Another important issue has been the incessant smuggling of live animals to neighbouring Afghanistan which puts pressure on supply of hides and skins to leather manufacturers.

Last year large quantities of hides and skins were damaged due to inadequate preservation mechanisms, increasing reliance on imported raw material. Note that the Eid season accounts for around 40 percent of the total raw material accumulated from local sources.

Then there is the fact that balancing, modernization and replacement (BMR) have not been undertaken by most local players citing the imposition of 4 percent custom duty as well as 17 percent sales tax on import of machinery.

This ties in with the fact that only three leather manufacturers in Pakistan are members of the international Leather Working Group (LWG) while India and China have 88 and 76 respectively. Brands and retailers are increasingly sourcing orders from only those manufacturers which follow guide-lines of the LWG.

The fall in leather prices internationally over the last three to four years has also forced leather exporters to realise large losses on their inventory stockpiles which has hampered any fresh investment or expansion. It also goes without saying that declining profitability has led banks to avoid further lending to leather manufacturers which has further constrained liquidity.

Even incentives provided to the leather industry such as the DLTL scheme are facing delayed processing. No exporter has received any DLTL claim for FY18 while before these claims were being processed on a monthly basis.

To sum it up. If the next government would like to see the leather sector turn a page, the cost of doing business needs to be brought done, incentives need to be provided on more than paper while technology investment needs to be undertaken by the private sector if they wish to remain relevant in the global leather marketplace.

Copyright Business Recorder, 2018