Pakistan Tanners Association (PTA) has urged the government to devise a 'Leather Development Plan' (LDP) providing a level playing field for enabling the local leather industry, to compete internationally, that has potential to double existing leather and leather products' exports.
PTA Central Chairman Agha Saiddain stated this while briefing the members of Lahore Economic Journalists Association about the leather sector issues here on Wednesday. "Our competitors are enjoying a lot of incentives from their governments while we are being deprived of what we were getting in past", he said adding that the government should give priority status for its development.
He said that Pakistan is second quality leather producer in the world after Italy but could not tap its potential mainly because of lacking prudent approach on the part of government functionaries. China, India and Bangladesh are witnessing 46.67 percent, 40 percent and 17 percent growth in leather sector export as compared to Pakistan whose exporters have declined by 14 percent.
Agha Saiddain said the leather industry of Pakistan is among top three foreign exchange earners of the country that contributes 4.42 percent to export earnings, 2.67 percent manufacturing GDP. This sector is an employment intensive providing jobs to more than one million, mostly to weaker section of our society. Pakistan is still holding number two position at global level as a quality producer of leather due to high tanning technology.
He also pointed out that the leather sector global exports increased by 40 percent from US $98 billion to US $137.96 billion while Pakistan's exports have been declined by 14 percent from US $1.220 to US $1.048 billion while Pakistan's share in the global exports was declined from 0.76 percent to 0.49 percent.
Talking about the causes of exports' decline, PTA Chairman said that decline in the leather exports were due to a number of reasons including higher cost of inputs due to high inflation rate, lack of level playing field with competing countries, lack of government support, smuggling and export of live animals, export of wet blue under misdeclartion and withdrawal of 50 percent subsidy on international fairs.
He said that leather processing is a continuous process industry but the frequent load shedding of electricity and 5-day gas suspension has increased the cost of production. Because of frequent load shedding the quality of our leather has gone down due to use of rice husk and wood in the boilers has increased contamination in tanneries and it is difficult to produce lighter shades.
He further said that following higher interest rates as compared to our competing countries India, China, and Bangladesh our cost of doing business is higher as against India, China, and Bangladesh where export refinance between 7-7.5 percent.
The high interest rate is also one of the reason restricting joint venture in the country. As many as 30 percent tanning units closed their operation due to energy crisis, as they were unable to meet their financial obligations. Besides the war on terror has directly hit our business and increased our costs of marketing, logistics, insurance and imports while the workers efficiency has also gone down due to worsening law and order situation.
Pakistani businessmen have to hold meetings at Dubai, Hong Kong, Bangkok, Singapore or Malaysia, as our customers are reluctant to visit Pakistan due to no travel advice issues by their governments. He urged the government to remove three year participation condition of TDAP and said the government should also allow 75 percent subsidy on participation of international fairs for at least 3 years with subsidy on freight of samples for such exhibitions.
To provide level playing field to leather sector to arrest present decline in the export, the government should announced leather development plan like Indian Leather Development Plans. He also suggested increasing duty drawback rates on export of finished leather to provide level playing field with competing countries India, China and Bangladesh, he said.
Agha Saiddain also urged the government to extend the incentives for matching grant for setting-up of effluent treatment plants as well as labs in individual tanneries at least for the next three years. He also stressed the need for early reimbursement of balance amount on account of effluent treatment plants and labs in Individual Tanneries, as some of the members received only 25 percent of the amount already spent on treatment plants and 10 percent on the labs.