The leather sector has been under pressure for several years now with manufacturers unable to compete in international markets. According to the Pakistan Bureau of Statistics (PBS) data for May-18, leather exports paint a mixed a picture with some categories posting decent growth whereas others continue to struggle.
Leather garments which constitute the largest chunk among value-added leather exports posted lackluster growth of only 2 percent in 11MFY18 as compared to the previous year. A pertinent reason for lack of penetration in the international market remains the inability of the local leather industry to comply with the regulations of the international Leather Working Group (LWG).
Brands and retailers are increasingly sourcing orders from only those manufacturers which follow guide-lines of the LWG. As of now there are only three leather manufacturers in Pakistan which are members of the LWG while India and China have 88 and 76 respectively. However, the second major category, leather gloves managed to post a decent growth of 17.6 percent for the 11MFY18 period whereas leather footwear also saw an up tick of 16.4 percent during the period as compared to 11MYF17.
On the other hand, leather exports for the May-18 posted double-digit growth with leather garments increasing by 15 percent while leather gloves and footwear increased by 32 and 28 percent respectively on a year-on-year basis. The growth for both 11MFY18 as well as May-18 is volume based whereas prices have actually seen a downward trajectory. The boost might be explained by the almost 15 percent rupee depreciation over the past six months while the incentives provided under the PM Incentive Package have also provided some relief.
However, leather exporters woe the delayed processing of DLTL claims highlighting the fact that no exporter has received any DLTL claim for this fiscal year while previously these claims had processing duration of only a month. The rising cost of utilities hasn’t helped the sector either while competitors including China, India and Bangladesh have doled out generous incentives for their leather industry.