AN effluent treatment plant that would give eco-friendly image to Pakistan’s leather products is to be inaugurated today by President Musharraf at Korangi Industrial Estate. Built at a cost of Rs500 million, this plant is expected to give a boost to an otherwise ailing industry that appears to have come under dark cloud since 9/11. It will cater to about 200 big and small tanneries in the area.

The first casualty of 9/11 was the Leather Show which was a regular annual business feature during the decade of 90’s and attracted a large number of foreign buyers in February every year. For last five years, the Export Promotion Bureau, now re-christened as Trade Development Authority of Pakistan (TDAP), has just forgotten if there was any such event in its calendar.

The industry remained under focus of the media for causing environmental hazards. Its image problem is one of the many factors that has adversely affected exports of leather goods. The setting up of an effluent plant is expected to be followed by installation of similar plants at other places in the country. Businessmen hope that customers around the world will now be more willingly to buy Pakistan's products.

Leather goods are the second largest foreign exchange earner after textiles but the industry, to quote a business leader, ``is treated by the government like a poor cousin of the family''. Textiles, he said, had been pampered too lavishly and far too long, by every successive government for the last about 60 years at the cost of other industries. ``Look, the government is organising Expo 2007 at the end of this month which clashes with the holding of the biggest Leather Show at Hong Kong where industry leaders from all around the world will get together'', he said.

``We just cannot afford to skip the Show as it is an occasion to strike deals and interact with the relevant people of the industry'', he pointed out to show that the TDAP Chairman wants the Pakistan Leather Garments Manufacturers and Exporters Association to set up at least 10 stalls at the Expo 2007, beginning from March 29 next. ``Not a single foreign buyer visited my stall at the Expo last year'', he recalled to emphasise that ``we suffer an image problem and because of this, foreigners will stay off''. The Association is said to have pleaded for some minor adjustments in dates of Expo 2007 so that leather industry leaders could go to Hong Kong as well as participate in the event. The plea, it is said, went unheeded.

Employing more than 200,000 persons, the industry contributes five per cent to the GDP and about seven per cent to the export earnings. There are more than 2,500 tanneries, leather garments and shoe making factories mainly clustered in Kasur, Karachi, Lahore and Sialkot. Kasur tanneries shot into prominence about 10 years ago when the world media focussed on the environmental hazards because of the industrial effluence.

With an assured supply of about 50 million hides and skin that include 20 million from the slaughtered animals during just three days of Eid ul Azha every year, the tannery industry developed as a thriving business.Pakistan remained a supplier of good quality tanned leather to Italy, Spain and other European countries during the decades of 60’s and 70’s. But value added products started figuring in the export since the beginning of 80’s. Growing at an average rate of 11 per cent per cent a year, the industry export swelled from $77 million in 1978 to $671 million in 01-02. Not only the export volume of leather surged during all these years, the share of value added goods also increased dramatically to 65 per cent.

But then the 90’s and the advent of 21st century offered new challenges. The retail business in Europe and USA is now fast changing. Small retail outlets are now being replaced by giant corporations with a massive network in many countries that promise the best quality goods at affordable prices to customers. These stores now demand from their suppliers, not only the best quality on lowest possible prices, but also social compliance, adherence to local labour laws and strict maintenance of hygienic conditions at the work places.

Social audit has emerged as a new global service. A set of such social auditors are now in the country to survey a few top leather factories that supply leather garments to Europe and USA. Obviously, the compliance of all these conditions of the foreign buyers is proving too telling for the industry that thrived too long on low cost labour, cheap raw material and relatively easy access to affluent markets with much less production cost.

Unable to withstand the mounting production cost and meet the fast changing conditions of the export market, 56 reputed leather garment factories have been closed down in the last few years. The PLMEA informed the government late last year these companies were among the 100 best exporting concerns..

The PLMEA Chairman, Fawad Ejaz complained that the government promised in May 2005 to give leather industry an incentive of six per cent Research and Development drawback incentive. ``Till today, no such incentive has been given'' he said while pointing out that leather garment is no more, a ``core business'' for him. ``I earn money from some other business'' he said adding that he was in leather business because of his long association and attachment with it. .

The Association has repeatedly pleaded with the government to give leather industry some relief so that it can compete in the export market. China is pushing out Pakistan and other countries from Europe and the USA and China is Pakistan's main buyer of leather which is converted into value added products. The closed units of leather garments are now mostly the exporters to China.

Fawad complains that not enough attention has been given to train workers so that a skill worker can prove to be more productive. He also wants concessions on import of a number of accessories needed in the garments. China has the advantage of having accessories manufacture close to garment factories. ``We have to import these and build up inventory that ties down a significant amount of cash and cause financial burden'', he added.

One way of tackling the conditions, that have raised production cost, is getting government support in the form of subsidies and rebates. But since 1995 when the World Trade Organisation (WTO, came into being, subsidies and rebates are supposed to be forbidden... Bureaucracies in India, China, Viet Nam and many other developing and even in developed countries have proved to be innovative and have drawn up new sets of concessions and incentives for their business to circumvent the WTO rules.

In Pakistan, the bureaucracy came out with research and development drawback facility for the exporters. Readymade garments and knitwear were offered six per cent research and development drawback in 2005-06. In 2006-07 this incentive was extended to other segments of textile business at different rates. The government agreed to give R and D facility to shoe makers in the trade policy. But this has been made effective only from January this year.

``We hope to raise our export from $150 million to $300 million by 2010'', Khawaja Mohammad Ali, Chairman of Pakistan Shoe Manufacturers Association informed Dawn from Multan. He said shoe making business has made a significant headway in last few years as prices in domestic market have come down because of increasing competition.

In the year 2005, Pakistan shoe makers filed a petition before the National Tariff Commission against dumping of Chinese footwear which reportedly edged out all other importers from the market and also brought Pakistan's shoe making industry under tremendous pressure.

``Shoes can be imported on 25 per cent duty which is the highest slab under WTO regime'', Khawaja Mohammad Ali said. The Shoe Manufacturers Association has given a three years action plan to the government in which a demand has been made to allow them import of 53 items from India via Wagah so that production cost is cut down.

Shoe makers in Pakistan are upbeat because European Unions has clamped down anti-dumping duty on Chinese shoe imports. Viet Nam too has been targeted by the EU to discourage dumping of shoes. Shoe makers take it as a big opportunity to enter European market and they are convinced that the six per cent R and D drawback has come at an appropriate time.

Shoe export in the last six months is not impressive and less than the same period of 05. But shoe makers are convinced that next six months export will offset these shortfalls. Reports suggest that many shoe makers out of 84 members of the Association have started booking export orders.