I have at least 50 years of experience in the leather goods industry. I’ll talk about what I learned from there. I started my journey in 1972, when the economy was booming. It was the era of permits and licenses. I spent half of my time wandering the halls of the Secretariat. I spent half of my time lobbying the government to liberalize the business environment.
The Prime Minister also referred to the diversification of exports. She spoke about it several times. There has also been talk of export diversification for a long time. But for some reason that didn’t happen. Something is blocking him.
During this discussion, Dr Abed Khan said: âWhen there is a lot of profit margin in the local market, why bother focusing on exports? I don’t agree with that. You can do both at the same time. We can look at both domestic and export markets. Both markets have their advantages.
You see, if we want to make a business successful, we have to grow it. A business will die without growth. In addition, there are limits to the expansion of the market within the country. The local market is not fully open and has a limit. That’s why we have to look outside the local market, which is bigger. You can see the same thing in the western world. Let’s talk about Mercedes Benz. Only 30 percent of their products are sold in Europe. The remaining 70 percent is exported. Because their country’s market is small.
Likewise, we need to increase the size of our business. Why? Because, I think, the most important thing for any LDC or developing country is to create jobs. You have to create jobs. It would be the easiest way to reduce poverty. And the private sector must do it. Why? Because the private sector creates jobs.
You need to create jobs and you need industries to create jobs. It can be a manufacturing industry or it can be a service industry – it can be any industry. The service sector contributes 51 percent to the GDP. So we need industries. Because not everyone is qualified.
Another major weakness of ours is human resources. Thousands of foreigners work in Bangladesh. According to official estimates, they pay Bangladesh $ 5 billion every year. Then, unofficially, they take an additional $ 4-5 billion. A country like Bangladesh – in fact, any country for that matter – cannot allow foreign currency to come out like that. We must therefore diversify. We need to focus on exports.
Now we come to the leather industry. We should have been on another level. Let me give you some figures. Today, the global footwear market alone is worth $ 365 billion. By 2040, the World Footwear Association estimates it will earn half a trillion dollars. If we could capture even one percent of that export market, our footwear market would be worth $ 4 billion. That’s a lot of money.
The second thing is that this industry requires a huge workforce. The clothing industry is two-dimensional – length and width. While the shoes are three-dimensional – length, width and depth. For this reason, a lot of tooling is required. As a result, the tooling costs more. It requires a lot of technology transfer. This is why we have set up a training center, where we train totally unskilled workers and we teach them the know-how. Because, as is the case in the clothing industry, if someone teaches him to operate a sewing machine as soon as he arrives, the work can be learned, which is not possible in the clothing industry. shoe. Here you have to cut the leather. It is a natural product. Two pieces of leather are not the same. Every piece of leather is different. In short, a lot of technology is needed.
China currently leads the footwear industry. Ten years ago, China accounted for 70 to 80% of world leather production. Today it is down to 60 percent. Still, they are the biggest player. Then there is Vietnam. They started their first factory in 1990. We also established the first factory in 1990. Vietnam has more than 3,000 shoe factories. And we’re still stuck with around 200-300 factories. Vietnam’s shoe exports range between $ 16 billion and $ 17 billion. But we’re stuck at $ 1 billion. Indonesia is in third position in this sector. Next is India and they are moving very quickly in this sector. India has finally understood that it is important to focus on labor intensive industry, not just high tech and IT.
You have to build wealth even in domestic industries. If the population remains poor, what future for national industry? Where is the purchasing power of the people? So both are important.
Now, why is the leather industry not doing as well as the RMG industry? Another is the image problem. Yes, our image is much better than it was 15-20 years ago. We are not getting the benefits that the garment industry enjoys. I’m not against it, but other export-oriented sectors should have the same chance. The clothing industry receives a lot of help from the government. We are not getting equal opportunities.
Second, for the footwear industry to take off, we need joint ventures. If you analyze the shoe industry in China and Vietnam, you will see that these are joint ventures. The shoe industry in the two countries was developed by a Taiwanese joint venture. I also have a joint venture with the Taiwanese myself. I asked him, âWhy did you come to Bangladesh? He replied, âI have a factory in China, I have a factory in Vietnam. But I understand that there is no future in China. Because the Chinese government is no longer interested in the shoe industry, in the leather goods industry. Interested in high-tech industry.In addition, the one-child policy has led to a labor crisis in China.Although two children are now allowed, most Chinese do not have more than one child .
So now we have a golden opportunity. This opportunity must be seized. Now we have to set up factories with big companies. We need to take joint initiatives with Nike and Adidas. Even today, big companies like Nike and Adidas don’t invest a single dollar in an industry. They just give you work orders and you make the product.
They can be brought to Bangladesh by the Taiwanese. Why can’t we attract them when they are frantically looking for countries to set up factories? They cannot go to Thailand; wages are high. They cannot go to Laos, it is landlocked. They cannot go to Cambodia; the population is very small. Nike and Adidas cannot even go to Turkey, which is a leader in the footwear industry, due to the high cost of labor. Even Turkish investors want to come to Bangladesh. But they don’t come. Where is the problem?
I keep telling the government that it is not only labor and capital intensive, but also very land intensive. This industry takes up a lot of land space. You just need a special economic zone for the shoe industry. It can be anywhere, including North Bengal, because now the communication is improved. There will be logistical issues, but they can be resolved. And the problem of logistics is not only in the shoe industry but in all industries.
It can be a fantastic diversification of exports. We cannot be equal to the clothing industry because clothes are cheaper than shoes. However, the average price of a pair of shoes is around $ 15, compared to that, the clothes are much cheaper. Thus, the more shoes produced, the more export revenues will increase.
So, first of all, the land issue needs to be solved. Then we must guarantee services similar to those of RMG. There should be the same export policy for all industries. Other sectors cannot benefit from stepmother treatment. RMG is the government’s favorite child. But the government also has other sectors. They also need to be taken care of.
Then we have to create special economic zones. Fortunately, our Prime Minister is extremely focused on leather and footwear. I saw it with my own eyes. So we get a lot of help from the current government.
If Active Pharmaceutical Ingredients (APIs) can get a separate economic zone, why not the footwear industry? The footwear industry is even more labor intensive. And the issue of training can also be resolved. If joint ventures are created, foreign partners will bring the technology. There is no need to worry about it.
But the environment has to be created. How to create an environment? Give them the land. Give them the facilities, the incentives. The delivery time is crucial. Shoes are very fashionable items. Two types of shoes are worn in winter and fall.
But I don’t worry about it. We just need partners for joint ventures. This is the only way to do it. China has done it. Vietnam has done the same. If Nike, Adidas can go to Indonesia, then why can’t they come to Bangladesh?
But I’m not worried about all the macroeconomic issues. My thoughts are on the basics. Give us land, give us special economic zones. I have said this several times. But somehow our words get lost in the bureaucracy. Now I don’t understand why I have to pay 20% tax. 100 for technology transfer. It has to go.
Now is a good time to do these things. Because before Covid, large foreign buyers like Adidas did not even need to answer our emails. But now they are showing a lot of interest. Because they don’t want to put all the eggs in one basket. So far, all of their eggs have been in the basket of China and Vietnam. Now they are shaken up because of the Covid. So they are looking for new places.
So it’s time to create the environment. So let them come. Technology will come with them. Jobs will be created. Life will be much simpler. Thank you so much.
Disclaimer: A chat room titled ‘LDC Graduation of Bangladesh: Transformation and Preparationwas organized by the Ministry of Commerce and the Dhaka Chamber of Commerce and Industry on Thursday. Syed Manzur Elahi, former adviser to the interim government, prominent businessman and chairman of the Apex group, spoke at the event. His speech is published for readers of The commercial standard.