Leather Api 2

LEATHER INDUSTRY

PRESENTED BY: BEENISH ZUNNOON MADIHA NASIR

WHAT IS LEATHER? • Leather is defined as ‘animal skin that has been chemically modified to produce a strong, flexible material that resists decay’. • The term ‘HIDE’ is used for the skin of cattle and ‘SKIN’ is used for skin of smaller animals such as goat, sheep, and calves. • The process of using chemicals to turn skins and hides into leather is called tanning.

AGENDA  IMPORTANCE  STRUCTURE  -units in leather sector  -tanneries in Pakistan  -Raw material  GLOBAL SCENARIO  -major buyers  -Global demand  -market share  -vacant area in trade

       

Foot and mouth disease WTO Impact of wto Where does leather industry fall in wto Role of government Tax Sectoral issues Future of leather industry

IMPORTANCE • • • •

It is the 2nd largest export earning sector after textile. This sector provide employment to 250,000 peoples. The fine quality of leather produced in Pakistan is recognized worldwide. Raw material for leather industry are easily available in Pakistan that are hides from cows, buffalos, goat and sheep.

STRUCTURE OF LEATHER INDUSTRY

UNITS IN LEATHER SECTOR UNITS

NUMBER

GARMENTS

461

FOOTWEAR

524

GLOVES

348

GOODS

142

TANNERIES

725

SPORTS

160

TANNERIES RUNNING IN PAKISTAN Almost 2500 leather units are running in Pakistan. which are located in Karachi , Sialkot, Kasur, Faisalabad, Multan, Peshawar and Gujranwala. Major tanneries are located at Karachi,Kasur and Sialkot.

RAW MATERIAL • Livestock is the main source of raw material for leather products. • Skins and hide take a very low share , 4% of total value of livestock.

GLOBAL SCENARIO

MAJOR BUYERS Leather industry in an export-oriented sector and major buyer of Pakistani leather are: • • • • •

Italy Spain Portugal South Korea Germany

• • • •

France United kingdom Dubai United states of America

GLOBAL DEMAND • The demand for tanned leather is rising as the developed countries have closed their tanneries due to strict environment control laws. • The number of tanneries in Pakistan are increasing to meet up with the global demand. • India is a major competitor of Pakistan but its leather does not enjoy good reputation because their cattle's have thinner skins and hides than those of in Pakistan.

GLOBAL DEMAND (cont) • Until 1970s , Pakistan exported raw hides, skins and semiprocessed leather in the form of picked, wet blue and crust leather .Then , in 1980s finished leather and leather products became major export.

SHARE IN GLOBAL MARKET COUNTRY %AGE SHARE EXPORT VALUE (US $) China

40%

$ 8 billion

India

10%

$ 2 billion

Turkey

8%

$ 1.6 billion

Italy

8%

$ 1.6 billion

Pakistan

3%

$ 0.7 billion

Other countries

31%

$ 7.2 billion

VACANT AREAS IN LEATHER TRADE • Shoe Upper Leather (Gents and Ladies) + Children Shoes • Garment Leather (Trousers etc.) • Gloving Leather (Fashion Gloves) • Leather Goods (Purses, File Covers, Briefcases, Key Chains etc.) • Leather Chemicals (Manufacturing of Leather Chemicals locally instead of imported materials.)

FOOT & MOUTH DISEASE • The FMD resulted in the massive culling of cattle in the UK . • It meant that it would take years for the UK to rebuild its cattle stock and the resultant shortage of availability of domestic leather . • The three resulting consequences of FMD are: 1.Import leather from outside, the main beneficiaries of which can be Pakistan and India whose tanning industries have the capacity and capability to meet UK's demand in terms of quality and quantity .

FOOT & MOUTH DISEASE (CONT) 2.

UK would resort to placing direct orders for leather products.

3.

Increased joint-venture in the value-added leather products.

All three potential scenarios can help Pakistan to make a deeper penetration in the UK and also a unique chance to make it sustainable.

WORLD TRADE ORGANIZATION

WORLD TRADE ORGANIZATION  Formation  Headquarters  Membership  Official languages  Director-General  Budget  Staff  Website

1 January 1995 Geneva ,Switzerland 151 member states English, French, Spanish Pascal Lamy 175 million Swiss francs 635 http://www.wto.int/

• The World Trade Organization deals with the rules of trade between nations at a near-global level .

WORLD TRADE ORGANIZATION MISSION-

Its main mission is to ensure that trade flows as smoothly, predictably and freely as possible.

FUNCTION- It oversees the implementation, administration and operation of the covered agreements and it provides a forum for negotiations and for settling disputes.

IMPACT OF WTO  The Agreement on Technical Barriers to Trade (TBT) and the Agreement on the application of Sanitary and Phytosanitary Measures (SPS) can have significant impact on Pakistan’s ability to increase the exports in this sector .  The environmental issues related with the leather industry in Pakistan could have significant negative effects on its exports .  If the Pakistani exporter does not improve the quality of the product, the current competitive advantage that Pakistan has in this field could quickly fade away.

IMPACT OF WTO (cont)  The debate in the leather sector rages about whether unfinished leather should be exported.  The exporters of leather garments want exports of raw leather to be restricted to give them a competitive advantage of cheaper raw material. But the tanners claim every right to fetch the best price for their products.

WHERE DOES LEATHER INDUSTRY FALL IN WTO? • GENERAL - leather and leather products are covered under the general provisions of the GATT 1994.

• TARIFFS- No import tariffs are applied to raw hides and skins in Pakistan at present

.

• EXPORT SUBSIDIES- export subsidies/refunds are hardly used in the sector. However, Pakistan has given 25 % freight subsidy on exports of leather garments for a period of one year, starting from January 1 to December 31, 2005.

WHERE DOES LEATHER INDUSTRY FALL IN WTO (cont) • EXPORT PROHIBITION AND RESTRICTION Restrictions on export of raw hides and skin, wet blue and crust, are typically imposed in order to assist the development of the domestic tanning and leather manufacturing industries

• FOOD SECURITY- Provides income and is a source of employment in tanning and manufacturing.

WHERE DOES LEATHER INDUSTRY FALL IN WTO (cont) • ENVIRONMENTAL MEASURES- Tanning industry can be highly polluting. The cost of meeting environmental standards is one reason for shift of activity from developed to developing countries.

• RURAL DEVELOPMENT- important • SAFEGUARD MEASURES- limited

ROLE OF GOVERNMENT  (NILT) National Institute of Leather Technology - The only institute in Karachi which offers programs for the development of the leather sector.  No subsidiary provided by government.

ROLE OF GOVERNMENT  Leather product development center is being put under the control of NILT to facilitate better skill development. they work with provincial government to improve quality of livestock for raw material.(2004)  Trade policy (2003-04) offers consulting services for technical up gradation and marketing.  Highly trained Korean technicians are engaged by PLGEA to impart training to Pakistan labor force.

TAXES Sales tax is reduced. No quota on export. Government deduct 6% tax on export.

SECTORAL ISSUES • TANNING

• FOOTWEAR

• Shortage of local hides • fulfillment to environmental standards • High proportion of damaged hides due to diseases and improper slaughtering or preservation

• Undeveloped industry • Lack of marketing linkages • Lack of trained human resource • Non-availability of quality shoe component/accessories

SECTORAL ISSUES (cont) • GARMENT/GLOVE • LEATHER GOODS • Narrow product mix • Lack of design/development facilities • Procedural barriers in importing raw material

• Undeveloped industry • Low technology level • Lack of marketing linkages

FUTURE OF LEATHER INDUSTRY (recommendations) • • • •

Introducing Brand Names Focusing on Footwear Sector Tackling Environmental and Labor Issues Control on Smuggling & Diseases of Livestock • Reduction of Duties on Machinery