For nearly a decade, Bangladesh’s leather industry has been caught in a self-inflicted stranglehold losing premium markets, fair prices and foreign currency.
A botched 2017 relocation from Hazaribagh to the Savar tannery estate was meant to fix compliance but it left tanners without the systems needed to meet global standards.
It was supposed to be a leap toward global prestige; instead, it became a dive into a “compliance black hole.”
By moving tanners into an unfinished industrial park without a functional waste treatment system, the government effectively locked them out of the high-paying Western markets, leaving a multi-billion-dollar industry begging for scraps.
The failure began when tanners left Hazaribagh before Savar’s Central Effluent Treatment Plant (CETP) and solid waste management systems were made functional.
Nearly nine years later, those systems still do not meet the requirements needed for Leather Working Group (LWG) certification.
Every year, Bangladesh churns out 250 million to 260 million square feet of leather, but local demand consumes less than a third of it.
The remaining 70 per cent is funneled into the export market, but at a heartbreakingly low price point. “We are mostly selling to China at 45 to 75 cents per square foot,” explains Shakhawat Ullah, Managing Director of Salma Tannery Limited.
He points out a glaring missed opportunity: with the prestigious Leather Working Group (LWG) certification, that same leather could command between $1.50 and $2.00.
This “compliance gap” translates to a loss of roughly $0.75 to $1.25 per square foot.
When scaled across national export volumes, the deficit balloons into hundreds of millions of dollars annually.
“We are losing billions simply because we cannot meet compliance standards,” Shakhawat Ullah laments.
The irony is sharpened by the fact that despite a massive surplus of domestic rawhide, Bangladesh is forced to import $100 million worth of LWG-certified finished leather every year to satisfy international brand requirements. As Shakhawat Ullah puts it, “My leather sits unused while manufacturers import at premium prices.”
The statistical fallout of this stagnation is stark. Raw leather exports, which once hovered between $400 million and $500 million in FY2013-14, plummeted to just $128 million in FY2024-25.
Meanwhile, the broader sector, including leather goods and footwear, has seen its growth grind to a halt. Combined exports rose a meager fraction from $1.13 billion in FY2014-15 to $1.145 billion in FY2024-25, leaving a high-potential industry essentially running in place.
According to Shaheen Ahmed, President of the Bangladesh Tanners Association, the root of the crisis is a total failure of compliance. “Our factories simply cannot meet international standards,” he noted, explaining that high-value markets like the European Union, Japan, and South Korea have slashed their imports as a result.
The crisis was exacerbated by disastrous timing: just as global buyers began mandating LWG certification nearly eight years ago, the industry was in the midst of a chaotic transition.
The relocation to Savar was supposed to be the industry’s salvation, providing a modern environment to secure these vital certifications. Instead, tanners were forced to trade the environmental hazards of Hazaribagh for an unfinished estate.
Originally launched in 2003 under the Bangladesh Small and Cottage Industries Corporation with a 2005 deadline, the project became a fiscal black hole. Its completion date was pushed back 12 times, and costs skyrocketed from Tk175 crore to a staggering Tk1,078 crore.
Despite the massive investment, the site remains a skeleton of what was promised. A Chinese contractor abandoned the Central Effluent Treatment Plant (CETP) in 2021, leaving it incomplete.
“A CETP must be properly commissioned before it can be declared operational,” said Shakhawat Ullah of Salma Tannery Limited, “but that process has never happened here.” Furthermore, he revealed that solid waste management efforts remain at “zero level.”
Without functional systems for liquid and solid waste, the path to LWG certification is effectively blocked. Shaheen Ahmed confirmed that not a single tannery within the Savar estate has achieved the certification because the facility fails to meet the standards of both the Department of Environment and the LWG.
Currently, only three full-process tanneries in the entire country are certified to produce finished leather from rawhide.
While data from the Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh (LFMEAB) shows eight facilities with some form of LWG status, these are located outside Savar and are not fully integrated operations.
While regional competitors have sprinted ahead, Bangladesh remains stuck in the starting blocks. India boasts over 334 LWG-certified facilities, followed by China with 263, Pakistan with 62, and Vietnam with 27.
In contrast, Bangladesh has only a handful. This compliance gap has forced a pivot toward less demanding markets; roughly 70% of exports now head to China, where standards are lower.
Consequently, the export mix is dominated by low-value crust or semi-finished leather (80%), with high-value finished leather making up only a small fraction of the trade.
The silver lining, and perhaps the industry’s biggest irony, is the resilient growth of footwear. Leather footwear exports surged 78%, rising from $378.54 million in FY2013-14 to $672.07 million in FY2024-25.
This growth, fueled by low labour costs and improved technical efficiency, highlights a missed opportunity: despite producing 496 million pairs of shoes in 2024, local footwear factories often cannot use domestic leather because global buyers demand certified inputs.
This forces manufacturers to ignore the local surplus and source expensive, certified leather from abroad.
The scale of the industry is vast, comprising over 3,800 enterprises, ranging from 3,500 SMEs to 100 large-scale firms, shipping goods like bags, safety shoes, and military boots to 111 global markets.
However, the “tannery bottleneck” remains the ultimate ceiling. Shakhawat Ullah suggests that a Tk300 to Tk350 crore investment to upgrade the CETP could be the key to unlocking the sector’s $5 billion target by 2030.
Without it, the industry remains trapped in a structural imbalance: exporting rawhide at a discount, importing certified leather at a premium, and staying locked out of high-end global markets.
A decade after the relocation began, the government finally admitted that the project was mismanaged, acknowledging it should have been overseen by the Bangladesh Investment Development Authority (BIDA) rather than the Small and Cottage Industries Corporation.
For industry veterans like Sakhawat Ullah, the solution is simple but urgent: “We want results. Unlocking the premium segment would bring annual gains many times higher than the total investment required for LWG compliance.”
