Bangladesh's leather industry is losing its foothold in global markets, with experts citing policy neglect, environmental compliance gaps, financing barriers, and weak institutional capacity as the main culprits. Once a key export sector after garments, the industry now faces declining orders from major buyers in Europe and North America.
Background
Bangladesh's leather sector has historically been a significant foreign exchange earner, particularly in shoe upper leather and finished leather. However, recent data shows a steady drop in its global competitiveness index. Orders are shifting to Vietnam, Indonesia, and Brazil as buyers seek more reliable compliance standards.
The core issue lies in policy inertia. The government has failed to introduce targeted support measures, leaving environmental infrastructure underfunded. Most tanneries are concentrated in the Hazaribagh area of Dhaka, where aging effluent treatment plants struggle to meet international standards. The EU's stringent REACH regulations have become a major barrier, as many Bangladeshi tanneries cannot prove chemical safety.
Financing remains a bottleneck. Small and medium tanneries cannot access affordable bank loans, forcing them to rely on high-cost informal credit. This slows technology upgrades and capacity expansion. Weak institutional oversight, including a lack of unified quality certification and traceability systems, further erodes buyer confidence.
Industry Impact
This decline is reshaping global leather supply chains. Bangladesh's average export price for leather has fallen about 8% over the past three years, while Vietnam and Indonesia have maintained stable or slightly rising prices. The narrowing cost gap, combined with persistent compliance issues, makes Bangladesh less attractive.
For buyers, over-reliance on Bangladesh now carries higher risk. Longer lead times, greater batch quality variability, and cargo detentions due to environmental audits are becoming more common. Some European footwear and leather goods brands have already started diversifying orders to Turkey and Pakistan.
From a regional perspective, the decline of Bangladesh's leather clusters creates opportunities for competitors. Tanneries in Chennai (India), Sialkot (Pakistan), and Novo Hamburgo (Brazil) are actively courting displaced orders, backed by stronger policy support, better compliance records, and easier financing.