With fast-paced growth and a GDP of USD 438.79 Bn, Bangladesh has earned the 37th position in the global economy and is on track to rise to the 21st by 2039. This rising trajectory is significantly fueled by export performance, contributing around 10 percent to the total GDP, with total export receipts of goods and services of USD 45.64 Bn in FY 2023-24.  Accounting for 2.8 percent of this, leather and leather manufacture are two of the major products in the export basket of Bangladesh, with RHS (raw hides and skins); tanned and processed leather emerging with wider export potential and a portfolio of around USD 119 Mn. Tapping into this potential, RHS exports have seen an impressive 177 percent growth in FY 2023-24.

Unlocking Export Potential of RHS

The supply chain journey of raw hides and skins starts from the farmers or butchers and travels through collectors and wholesalers to the tanneries or commercial exporters. The value addition and processing begin at the tanneries and are further enhanced as the RHS travels forward in the value chain. With the emerging value-addition potential at these fundamental stages, the RHS market has also seen an increase over the past few years, with consequent addition of new destinations to the portfolio.

In FY 2023-24, Bangladesh exported RHS to 7 countries3, where Cambodia was the top destination with more than 70 percent of RHS exports, amounting to around USD 1 Mn in value. During this year, the emergence of new destinations can also be noticed as, with the exception of India, most of these destination countries received RHS exports from Bangladesh for the first in the past five years.

While the overall RHS exports have seen a rising trend, Bangladesh has been experiencing a change in its RHS destination portfolio with a promising upgrade in its export basket to many destinations. Over the past 3-4 years, the country has made little or no RHS exports to around 7 past destinations, 5 of which (China, Malaysia, Myanmar, Oman, and Pakistan) have been receiving increased tanned leather exports, indicating to the growing potential of Bangladesh in building a strong backward linkage in the value chain of leather and leather goods, especially to meet the growing demands of traditional tanned leather destinations such as China and Pakistan. It also signifies the importance of adding value to exports and rejuvenating the country’s potential in past markets.

Adding Value to Enhance Competitiveness

Through further processing of RHS to tanned or crust leather, the market potential of Bangladeshi leather expands. The past few years have seen the benefits of such value addition, where the growth of the market size in destination countries has significantly increased in FY 2023-24, in comparison to the size in FY 2019-20.  In these 4 years, the Bangladeshi tanned leather exports experienced positive export growth in many markets, with growth as high as 1300 percent in Indonesia. With such emerging competitiveness of value-added offering, the active destinations of Bangladeshi tanned leather can be categorized into four groups:

• Rapidly growing markets, with a growth rate of more than a hundred percent from FY 2019-20 to FY 2023-34, consisting of destinations such as Cambodia, China, Indonesia, the Netherlands, Pakistan, Singapore, Türkiye, and Vietnam.
• Growing markets, with a growth rate of less than or equal to a hundred percent, consisting of destinations such as India, Poland, Portugal, Taiwan, and the USA.
• Latent markets, with less frequent leather imports from Bangladesh, indicating the opportunity for unlocking the full potential of these markets, where the destinations include Bhutan, Chile, Denmark, Lebanon, Paraguay, Philippines, Macao, and Venezuela.

• Sluggish markets, with a slowing growth rate but persistently active destinations such as France, Canada, Italy, Spain, Korea, and Japan.

  

With strong strides towards value addition, Bangladesh is gradually gaining momentum in the backward market of leather, and the country’s expanding export destination portfolio bears testament to this. Recognizing this untapped potential, Bangladesh is elevating its export strategy, placing value addition at the heart of its efforts to unlock greater opportunities in the global leather industry. This forward-looking approach positions the country as a rising player in a market ripe for transformation.

The article was authored by Ainan Tajrian, Business Consultant at LightCastle Partners. For further clarifications please contact here: [email protected]