Every year, during Eid ul-Adha in Bangladesh, an economic and bureaucratic crisis unfolds all over the country regarding the prices of raw hides from sacrificed animals. Recently, the minister of commerce sat with the traders and fixed the price of salted cowhide at Tk 62-67 per square foot, with little variation across regional markets and goat skins. Although this price is set to protect the interests of grassroots collectors, rural traders, and charitable institutions, mostly madrasas, the policy often fails, as previous incidents reflect. In reality, rural traders and madrasas do not receive this just price due to buyers' monopsony power, which gives them absolute control over product prices.
However, there is a structural failure in Bangladesh's leather industry supply chain. For instance, Industries Minister Khandaker Abdul Muktadir recently said that Bangladesh's homegrown hides have the potential to become a $12 billion export industry. But for a long time, the actual export earnings have been around the dismal $1.1 billion level. The question is, why does this multi-billion-dollar potential remain unutilized? The answer lies in the very unequal supply chain from the local collectors to the marketplace that is created immediately after the sacrificial slaughters.
On Eid day, the trade of raw hides is a perfect example of a decentralized market. Of the total raw material supply for the leather industry, half of the supply comes from the day of Eid-ul-Adha alone. Every year, on that day, millions of animals are slaughtered within hours in thousands of villages and urban neighborhoods.
Every year, we read painful stories about some orphanages and madrasas dumping truckloads of raw skin on highways or burying them in holes. Such incidents occur when the market price offered by buyers fails to cover even the basic cost of transporting the hides to a depot.
It is the direct result of a state policy framework that has failed to ensure basic compliance by the traders. The failure further stems from the lack of adequate infrastructure. The implications of such noncompliance by large-scale traders are not merely a mismatch of supply and demand. It is the failure of the state policy and governance to protect the marginalized. The low farm-gate price has its roots at the Bangladesh Small and Cottage Industries Corporation (BSCIC) Tannery Industrial Estate of Savar.
In 2017, the government of Bangladesh relocated the tanneries from Hazaribagh to Savar, promising a modern, eco-friendly industrial park. Unfortunately, the Central Effluent Treatment Plant (CETP) at Savar is not functioning properly. It is a structural bottleneck in which environmental non-compliance at the top of the supply chain erodes purchasing power at the very bottom, eventually leading to lower prices at the grassroots level.
The Savar CETP has the capacity to treat about 14,000 to 18,000 cubic meters of toxic wastewater per day under normal conditions. But post-Eid processing demand rises over 45,000 cubic meters of waste. Consequently, the estate cannot cope with this huge environmental load. A recent audit of 20 major tanneries in Savar found that almost none meet the strict compliance criteria of the International Leather Working Group (ILWG). Of the 1,710 total compliance points under the global standard, 300 are directly related to waste management, an area where Bangladesh's central infrastructure substantially fails.
Local manufacturers in Bangladesh are shut out of the market for finished leather to high-end Western fashion brands in Europe and the United States, as only 8 institutions in the country have formal LWG certification. Eventually, due to their weak position in the international market, Bangladeshi tanneries are forced to dump their raw and semi-processed "wet-blue" leather on the Chinese market at a lower price, at one-third of the potential global market price. Chinese factories, however, finish the leather, produce leather goods that meet global standards, and earn the huge profit margins that should have been earned in Bangladesh. This huge loss of value drags down the entire supply chain, ultimately devastating the buying power of the local orphanage and the independent rural collector on the day of Eid.
By fixing environmental compliance and protecting grassroots collectors, Bangladesh can turn the sacrificial wealth of Eid from a seasonal management crisis into a sustainable foundation for nationwide economic growth.
The writer is an Associate Professor of the Bangladesh Institute of Governance and Management (BIGM)
