Leather sector exports down by 28percent – Tanners fast losing their market to regional competitors

Karachi, August 05, 2015 (PPI-OT): The leather sector is fast losing its global market share to its competitors due to sheer negligence by the government and its subsidiaries. The Chairman Pakistan Tanners Association (PTA) S.Z, Hamid A Zahur said that the leather exports have declined in volume by 28 per cent during current year.

He said that the cost of doing business of entire leather sector including leather garments, gloves, footwear and finished leather has gone up by 12 percent. Hamid said that leather sector which has been the second largest export sector has lost its competitiveness in comparison to Bangladesh, India, China, etc. Finished leather in value is down about 11% and leather garments in value is down by about 9% as well, he added.

Hamid said that the cost of doing business has gone up by 12% to 14% mainly because of higher cost of electricity which is higher by about 30% among from regional competitors, extreme load shedding, stuck-up claims of local taxes and exports not kept zero rated, higher rates of gas and its acute shortage, stuck up of heavy amounts in genuine refunds in shape of duty drawbacks, sales tax, income tax running into billions of rupees.

This vital Industry of the country is unable to compete and fastly loosing its share of export markets and this share is being taken over by regional competitors like India, Bangladesh, Sri Lanka. In order to ratify realistically, we append the comparative chat of drawback rates offering by neighbour competition countries to their exporters:-

Comparison of Duty Drawback Rates Allowed in Pakistan, India, China and Bangladesh

S/# Article PAKISTAN India China Bangladesh

1.* Finished Leather (Sheep/Goat) 1.34%* 5.8% 7.50% 12.50%

2.* Finished Leather (Cow/Buff) 3.05%* 5.8% 7.50% 12.50%

3. Leather Garments 4.26% 9.6% 12.50% 12.50%

4. Leather Gloves 1.54% 7.6% 12.50% 12.50%

5. Leather Footwear 1.85% 9.1% 12.50% 12.50%

(*S.No. 1 and 2 Column 3 are the new rates not yet notified by FBR)

PTA chief further said that low rate of duty drawback is hurting badly the leather industries exports in Pakistan as compared to the regional countries as many of local taxes besides customs duties to the extent of about 4 to 5% are not refunded and export buyer cannot absorb such local taxes in today’s competitive international market where all regional competitors are making full efforts to increase their share.

Export rebates in regional competitors are much higher than our exports of finished leather and their products due to which their cost of doing business is lower and we are unable to compete On top of it a weaker Euro and devalued US dollar is the last nail in the coffin.

“Unfortunately, the government is not realising that due to their wrong policies industry is collapsing and incurring heavy losses and having acute liquidity crunch due to which a further huge loss of foreign exchange will occur as industry may not be able to perform in procurement of forthcoming Qurbani for hides and skins next month on the occasion of Eid-ul-Azha which may resulting in loss of employment and much reduced income for the institution collecting the hides and skins for the humanitarian purpose”, Hamid said adding that many units have already closed down and if remedial measures are not taken up by the government shortly many more units may join in this rank of closures as they are finally now on verge of collapsing.

PTA has been appealing the finance minister, commerce minister and had meeting with the ministers, FBR, Customs, sales tax collectorate in Lahore, Karachi, and Islamabad for the last six months or so unfortunately no positive response has been come out as yet. He strongly appealed the Prime Minister, Nawaz to address genuine grievances of leather sector without loss of time otherwise the export markets for the leather industries may be lost to the advantage of the regional countries competitors.

For more information, contact:
Moinuddin Quraishi
Pakistan Tanners Association
46-C, 21st Commercial Street,
Phase II, Extn., Defence Housing Authority,
Karachi-75500 – Pakistan.
Tel: +92-21-35880180, 35880184, 35899819
Fax: 92-21-35880093
Email: info@pakistantanners.org
Website: www.pakistantanners.org