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Leather Industry

Overview

Pakistan’s leather industry, including value addition, is the third top export earning sector after textile and vegetables (sector as a whole). In FY 2017-18, the sector contributed $ 948 MN volume of exports and has the potential to multiply this volume of exports with further improvement in quality and diversification in different range of products. Leather sector provides more than one million jobs to the people in Pakistan. The overall figure of about 800 small, medium and large scale tanneries is quoted by the business community, but, there are 184 registered tanneries in Pakistan. The country has been divided into two zone, the Southern Zone and the Northern Zone. There are overall 98 tanneries in corporate class while 86 in associate class. According to the Pakistan Tannery Association, Punjab has 42.39% of the total tanneries. The leather industry plays a significant role in the economy of Pakistan. According to Pakistan Tanners Association (PTA), leather industry contributes 5.6% share in Gross Domestic Product (GDP) and represents 5% of total exports of Pakistan. Industry experts revealed that Pakistan is still leading in leather technology and is of second best quality after Italy, globally. Pakistan is the only country that experienced a negative growth in exports while the regional dynamics indicated an evident growth of the regional players like India, China and Vietnam. Industry experts are of the view that the Government of Pakistan has not been following export- led policies which were imposed & enforced by the regional countries. In the federal budget 2016-17, Government of Pakistan has provided an exemption of leather industry from sales tax. In addition to this, export re-finance rate has also declined to 3% from 3.5%. The Impact of these initiatives has shown an increase in leather articles exports (3%) observed in recent financial year (2017-18). 

 

A Giant in Decline 

⦁ China is still the largest exporter in the global leather sector (36% of global exports) ahead of Italy (12%), Vietnam (11%), France (4%) and Indonesia (3%).

 • Between 2010 and 2016, China’s market share fell from 45% to 36% while, at the same time, Vietnam (the world’s third largest exporter) gained five percentage points of the market share. • This shrinkage is even more pronounced for finished products.

 • China’s loss of market share over the period 2010-2016 stands at: 

1. 11 points for footwear 

2. 13 points for leather goods 

3. 11 points for leather clothing and accessories. 

• The countries that benefited the most from this fall are Vietnam and Indonesia for footwear, Italy and Vietnam for leather goods, Italy and India for leather clothing. 

• China is facing competition from countries with cheaper workforces, as well as from countries exporting luxury articles. 

• The country’s main clients are the United States (30% of Chinese exports), Japan, Hong Kong, Germany and the United Kingdom.”

 

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